Mondavi

Who should lead the change in sustainability?

Global Governance regarding Climate change was disappointing

Lets see some numbers on it !

I just read a study by McKinsey and Co on Corporate Sustainability and was intrigued by their findings. Authors Shelia Bonini, Stephan Gormer and Michaela Ballek reveal that despite the media hype and consumer interest in sustainability, corporations typically don't pay attention to it because "many have no clear definition of it. A casual wiki search of the word describes it as "the capacity to endure."Wiki

At this point I started to see how problems in definition might creep up. It does not describe what or how the "endurance" can be achieved. Going to Sustainability's website helps clear some of those problems up. Aside from the problems of definition, the McKinsey Study found that  only 27% of survey respondents said that CEO's make it a top 3 priority in everyday business.

I wonder if that is because sustainable development involves "meeting the needs of the present without compromising the ability of future generations to meet their own needs." It definitely involves some current costs either through lost consumption or in time spent generating creative solutions to the problem. But the future benefits are intangible. While the respondents of the study replied that integrating sustainability affected long-term shareholder value and the reputation of the company significantly, the benefits are not clear. Sure, we are ensuring future profitability - but by how much and by when?

The study also reveals that 74% of energy executives incorporate sustainability as compared with 53% in other respondents. I think this may be because the benefits are clearer to them. The answers by how much and by when are probably easier to answer with extensive R&D and capital at your disposal. Also - the timeline is shorter. Alternate sources of energy are either being used or are being tested today.

I argue that other industries and some developing countries do not see a well-defined numerical benefit to sustainability yet. The failure of the Copenhagen UN Climate Change conference increased uncertainty by 30% and reduced the probability of adopting it by 15%.  It is the responsibility of those passionate about environmental change to put some numbers on it. Maybe that will convince the governments and businesses that are fuzzy about the concept to be willing to innovate and implement sustainable development.

The Crisis of Ethic Proportions, or Opportunity for Social Development

Last year, Bogle referred to the financial crisis as a “Crisis of Ethic Proportions.” In his article, he asserts that the global financial crisis can – to a large extent – be attributed to “a broad deterioration in traditional ethical standards.”

While a very few would argue that the proximate cause of the financial crisis is not largely attributed to “easy credit, banker's cavalier attitude towards risk 'securitization',” increased leverage in the financial system and the failure of regulators, it is important to address his concept of “traditional ethical standards.”

Bogle presents Moral Relativism as a bad thing, stressing that “Business ethics and professional standards were lost in the shuffle.” I want to question this opinion. In an increasingly global society moral 'flexibility' is less exclusive than inclusive. I would argue that it is a natural reaction to increased wealth, increased globalisation and cross-cultural interactions.

Is devaluation of risk and increased leverage a bad thing? Economics would let us believe that the answer is - “it depends.” Obviously, it was a bad call given the circumstances; but maybe that complete breakdown of “trust” that he addresses is an exaggeration. He argues that agents now run companies for owners and are more likely to act in their own self-interest than in the best interests of the owner. He calls for greater 'fiduciary duty' between agents and owners.

Moral relativism needs to be defined here. To me, it refers to an acceptance of moral values of other cultures in their cultural context. It does not mean “if everyone else is doing it, I can too.” I would interpret it as an inclusive moral outlook equipped to combat xenophobia and protect human integrity regardless of differing cultural values.

The Crisis of Ethic Proportions was not a consequence of Economics. It was a consequence of dysfunctional Economics. Economics today stresses the importance of social capital. The “bottom-line society” must have missed the memo in B-school. More fundamentally, are we more, or less trustworthy than we used to be?

Now we measure, analyse and publish reports on trust. 'Social capital' is not longer just a buzzword. It doesn't seem likely that a society that acknowledges the importance of trust undervalues it. Perhaps our faith is shaken by the increased transparency due to ease of access to information, the Internet and a more connected world. Do we feel more screwed because we see the messes instead of having them swept under the rug?

Bogle's argument that a decline in ethical standards caused the financial crisis seems naive. He is a sophisticated man. Ignorance maybe bliss, but awareness is progress. We need to know what is going on. Increased transparency makes it seem as though we are collectively on a crash course toward moral degradation, but I argue that the converse is true.

In acknowledging the mistakes in our system, we must learn to view it as an opportunity for progress rather than a problem of moral decline. And in seizing the opportunity, we must recognise that at least we are aware now. We are less slaves to information relayed to us today than ever before. It is uncomfortable, but necessary.

Sources: 

Bogle, John, A Crisis of Ethic Proportions