Business at a Tipping Point

In his best-selling book, The Tipping Point, author Malcolm Gladwell describes the tipping point as "that magical moment when an idea, trend or social behavior crosses a threshold, tips, and spreads like wildfire." Business is edging toward such a tipping point, where a new model for business is about to catch on. It’s a model in which sustainability, social responsibility and governance are integral components of business strategy. And corporate performance is measured by more than just financial results.

According to Gladwell, a number of factors converge to cause something to tip and become an epidemic. I believe that is what’s causing companies to embrace sustainability and corporate responsibility. Three areas of growing concern are converging to pressure businesses: 1) Corporate scandals have brought ethics and governance front and center in recent years; 2) Realization that global warming is a serious threat has heightened public concern about the environment; and 3) Escalating turmoil in the Middle East is driving home the perils of our dependence on oil and raising concerns about energy costs and supply.

The media is giving all these issues extensive play and people are starting to pay attention. Businesses cannot avoid the responsibility to do their part to mitigate these risks. But it’s not just about doing the right thing, it’s also about creating corporate value through sustainable business performance. And an increasing number of CEO’s see sustainability as vital to success.

"At Ford Motor Company, we have made sustainability a long-term strategic business priority. The reason is simple: we are a 100-year-old company, and I want us to become a 200-year-old company. Sustainability is about ensuring that our business is innovative, competitive and profitable in a world that is facing major environmental and social changes."   — William Clay Ford, Chairman

Ford Motor Company is an icon of American business but today they are struggling. And they clearly understand that "business as usual" is not an option. But should a company in trouble be thinking about the next 100 years? I think so because I believe that too narrow a focus ultimately leads to failure. The healthiest companies are those that are built to last. A company in trouble cannot ignore its immediate problems, yet to survive it needs to strike a balance between short term goals, such as quarterly earnings, and long term objectives like new product development. A more holistic view of business is in order. That is, to recognize that a business does not exist in a vacuum … a business depends upon the communities in which it operates for customers, for employees, and for infrastructure. Accordingly, it is in the best interest of any business to operate responsibly and sustainably.

That may sound good in theory but the conventional wisdom says we need to establish a quantifiable business case to support it. Reduce the costs and benefits to dollars and cents and prove that a focus on sustainability is the key to success. As a CPA, it may be heresy for me to suggest this, but I think we sometimes spend too much time and effort fiddling with financial models when a little common sense will do. If business and community are linked, then a business is compelled to contribute to the well-being of its community to help ensure its own well-being. As such, it should be the mandate of every corporation to strive for sustainable business performance. Building sustainable businesses will promote sustainable communities and, in the broadest sense, a sustainable world. We all win. Forgive my simplistic view but I think that’s the business case.

So are we at a tipping point? Are we ready to model today’s businesses to serve the interests of all stakeholders, not just shareholders? Will the issues of sustainability, social responsibility, and governance be integrated into core business strategy? Will environmental and social performance be uniformly reported with financial results?

As you know, we’re not there yet. But leading companies and thought leaders are showing the way. Our mission with this blog is to put you on the forefront of new thinking on the subject of sustainable business performance. We’ll provide relevant, practical information that you’ll want to know. After all, it’s going to tip and you want to be ahead of the curve.

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