A recent report by the consulting firm A.T. Kearney found that “companies who show a ‘true’ commitment to sustainability appear to outperform their peers in the financial markets.”
Two key takeaways for me were the advantages derived from long-term thinking and that this premium value is only created by a “true” commitment to sustainability.
Long-term thinking was 5+ years for public companies. I guess that is an improvement for business leaders who have been primarily focused on quarter to quarter results. But is this really the appropriate time horizon for sustainability? No way!
I caution people about the use of the term sustainability. It is a goal to strive for, but I believe true sustainability needs to be determined over the course of at least a few generations, if not centuries or millennia, and it is therefore misleading to say ______ IS sustainable.
Canada and many other countries actually have standards related to environmental claims. Here is the standard for Canada:
The concepts involved in sustainability are highly complex and still under study. At this time there are no definitive methods for measuring sustainability or confirming its accomplishment. Therefore, no claim of achieving sustainability shall be made.
CAN/CSA-ISO 14021, Clause 5.5
According to Arie de Geus in his book the The Living Company, the average lifespan of Fortune 500 companies he studied was 40-50 years. From birth to demise, whether the end comes in the form of failure, merger, being acquired or broken into pieces, the average was under 50 years. It is well known that start-ups have an even higher mortality rate. One study of Japanese and European firms, regardless of size, indicated an average life of just 12.5 years. How sustainable are those numbers?
The book went on to highlight the attributes of companies who have been around for over 300 years. There are actually companies operating today who have been around for over 700 years! Now that is starting to look sustainable.
In studying these long-lasting companies, four common traits emerged as important factors:
1. They were sensitive to their environment
2. They were cohesive, with a strong sense of identity
3. They were tolerant
4. They were conservative with their financing
That last one seem particularly important right now.
Tomorrow I’ll comment about the report’s findings on the commitment to “true” sustainability.