Sustainable profit

Tim Cook told climate-change denying investors to sell their Apple stock

In the same week that Apple CEO Tim Cook told climate-change denying investors to sell their Apple stock, strategic advisors lavery/pennell publish an interesting, and challenging, report.  They suggest that a new, sustainable profit model for industry has emerged.  The report estimates it to be worth €100bn in additional profits for European companies. This approach also has the potential benefit of creating 168,000 new jobs and, most importantly, a 14.6% reduction in greenhouse gas emissions.

Sustainable profit model

The new model is a response to today’s business challenges involving three stages:

1) Improve non-labour resource efficiency.
2) Reinvest some of these efficiency savings in sustainable inputs (materials & renewable energy).
3) Develop innovative new products and grow market share.

The report cites a carpet tile manufacturer (Interface) as evidence of the success of this approach. The company has cut its energy use by 40 percent since 1996. They also recycle 43 percent of their raw materials.  It has reduced its emissions of carbon dioxide by 90 percent, sends zero waste to landfill, and recycles all its water. As a result, Interface is now the largest carpet tile company in the world, with revenues of $1 billion.

Strategic implications

Large corporations, such as Unilever, are also pursuing a goal of delivering sustainable profit, but there seems to be a long way to go.  Our strategy courses explore Richard Rumelt’s contention that ‘bad strategy’ is often no more than a set of, what he describes as, vaporous goals.  Our strategy consulting practice builds on his ideas to help organisations focus and coordinate their policies and actions on their biggest challenge, which is a good way of developing ‘good strategy’.  Organisations that are serious about achieving sustainable profit must put this goal above all others if they want to succeed.

Intuitively, this kind of approach makes sense, but intuition is a bad guide when faced with important decisions.  This report is a valuable contribution to building an evidence base.  It helps demonstrate the value that well-planned and executed ‘green’ initiatives can have.  The benefits will be felt by people and the environment.  The interesting incentive is that they might also build business models that can deliver sustainable profit.  This is an area that needs more evidence to help inform public policy as governments struggle to reconcile the need for long-term investments with demands for immediate fixes.