Climate change, conflict, and COVID-19 are exposing countries and companies to the reality of just how unstable their supply chains can be in the face of global disruptions. These disruptions also highlight the importance of enterprise sustainability, and the economic opportunities and stability that come with it.
In a webinar presented by MIT Sloan Global Programs and the Queensland University of Technology Business School, MIT Sloan professorand QUT’s Sagadevan Mundree outlined three considerations for leaders who want to build a sustainable enterprise.
“It’s about people, it’s about partnerships, it’s about the products” — that is, the origin of goods and services that consumers have become concerned about, said Mundree, the director of QUT’s Centre for Agriculture and the Bioeconomy.
Here are three takeaways.
Enterprises need to set meaningful goals and measure themselves
Stakeholders care about environmental, social, and governance issues. Misbehavior related to those issues comes at a cost, Rigobon said. It might not be immediate, but eventually bad actors will have to pay.
“We are at a stage in which we have to think about how to measure ourselves,” Rigobon said. “Think about what are the best practices within your industries and those industries that think about all the issues that we care about as a society.”
Pick seven of those issues and practices to focus on, not 64, Rigobon said. Then force disclosure. Make sure everyone in your industry follows that disclosure, because that’s how ESG ratings agencies will be able to properly assess enterprises.
Speaking to the audience in Queensland, in the northeast region of Australia, Rigobon explained that with the urgency to scale mining worldwide in order to collect metals like lithium and cobalt — which are needed for decarbonization efforts — Australia’s mining sector leaders need to decide on best practices and disclose them. That way consumers can compare the country’s mining practices against competitors’. While Australia’s best practices might be more expensive, “you will be seen as responsible,” Rigobon said.
Consumer preferences are influencing markets
People are growing more knowledgeable about sourcing and ingredients, particularly when it comes to food.
“The consumer is becoming quite cognizant of nutritional profiles, and claims that are made without being validated by legitimate organizations are not just taken for granted,” Mundree said. “Whether it’s generational [or] accelerated by the pandemic, there’s that behavioral economics that’s actually guiding and influencing what’s actually being offered to our consumers.”
The internet and technology also help with providing information that consumers care about, Rigobon said. Now when someone wants to know whether the coffee they’re buying is organic, there’s likely an online verifier that can provide the answer.
Or consider a company that excessively pollutes or generates waste. While the “crime” might not be as binary as something like using child labor to make clothing, Rigobon said, “behaving like a jerk tends to be a bad strategy.”
If those behaviors are disclosed, some consumers might still buy those goods or services, Rigobon said, but “some will decide not to purchase, and that’s a permanent loss for the firms.”
Sustainable enterprises need management and technology
When it comes to sustainability, government and industry enterprises need to understand that there are consequences to their behavior. That’s where both management and technology come into play.
“I don’t think anyone can actually solve the problem just with one,” Rigobon said. “In COVID, the lockdown is management, the vaccine is technology, and then the changes in practice about our behavior — that’s management.”
In Bangladesh, water quality is low and requires multiple filtering rounds to reach potability. But it’s also a country that produces a lot of rice, Mundree said.
“We could take all of their rice husks, convert it into graphene-like carbon” — which can in turn be used to filter contaminants from water sources — “and in one passing create drinkable water,” Mundree said.
That means access to technology, Mundree said, but also an investment at various levels — not just from corporations, but from governments prioritizing and ensuring funding for research and development.
“We need strong leadership,” Mundree said. “We need at least to be on the same hymn sheet and set the targets. They could be aspirational, but at least we know that we are actually moving toward dealing with them.”