Is Greed Sustainable?

One of the greatest impediments to corporate management adopting sustainable practices is the belief that it can’t afford to adopt them. But the reality is quite different. Companies that take sustainable practices seriously are seeing the interconnectedness and interdependencies between different parts of their business. The view of their business changes, it begins to look more like a system - embedded in other systems – the local economy, the global economic system and the earth’s ecosystem. It becomes clear that for a business to be sustainable it must align with the workings of the systems of which it is a part and upon which it depends. When this begins to happen, the consequences of efficiency, lower costs, transformed organizations and increased profits emerge.

Recently however there's been a lot more said about greed and lot less about sustainability. Interestingly greed and sustainability are not unrelated.

Gus Levy, one of the legends of 20th Century finance and an icon in the growth of Goldman Sachs, in response to a question about his firm’s motivations once said “Yes at Goldman we are greedy. But we’re long-term greedy.” Levy saw Goldman as a process – a complex system of interrelated and interdependent parts in the service of an aim. While the system made its partners fabulously wealthy that was never the aim. The aim was to serve clients and do it better than the competition. Don’t just meet their needs, delight them and be loyal to them and provide them with the best advice - that was the roadmap to their success. Profitability was the consequence, not the aim - getting rich became the reward for managing well the system that was Goldman Sachs.

That appreciation for a system made Goldman a stand out - a very distinctive place to work, a place of excellence and of legend.

To build a sustainable enterprise, profitability is a necessity. But profitability itself must be sustainable, and can only be so if the enterprise is well managed from a systems perspective. Greed ruins an appreciation for business as a system and thus is not sustainable. There is a gap between the current ways of management and those that will be required to take a system for sustainable practices and nurture it into a long-term competitive advantage. Greed only contributes to the widening of that gap. Greed does not nurture, it destroys.

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The Sustainability Gap

Many issues can come up in a conversation around sustainability. The following 25 topics are just a few:

Climate Change • Cap-and-Trade • Carbon Sequestration • CO2 • Greenhouse Gases • Burning Coal • Peak Oil • Energy Efficiency • Clean Energy • Clean Tech • Green Jobs • Water Resources • Agriculture • Livestock • Fisheries • Waste • Pollution • Toxins • Health • Growth • Profit • Employees • Customers • Brand • Shareholder Value

The seemingly jumbled basket of issues being framed by sustainability puts the term itself in danger of becoming meaningless. Yet one consistent theme of sustainability is the idea that what someone does in one place and at one time has an impact – immediate or delayed, minor or major – on other people, places or things. Sustainability then has embedded within it the idea of interconnectedness and interdependence. Interconnectedness and interdependence are characteristics of systems. So sustainability is ultimately about an appreciation for business as a system.

Today most sustainability initiatives within corporations are characterized by multiple disconnected initiatives targeting products or facilities here, employees or customers there. These initiatives tend to be defensive and tactical rather than strategic. They bring about incremental rather transformational change to the organization.

This is The Sustainability Gap. Corporations know they have to act, they may even know what has to be done, but the training, incentives, habits and practices of management are holding back the achievement of sustainability in its fullest sense.

In order to bridge the sustainability gap and transform the organization into a fierce global competitor in the 21st century management must begin viewing the entire business enterprise as a system - an interconnected and interdependent system embedded in a global economic system, which in turn is embedded in the earth’s ecosystem. Adopting such a view will bring about the kind of transformation in management that will make genuine sustainability possible.

Some great resources for this kind of thinking include – The Ecology of Commerce by Paul Hawken, Mid-Course Correction by Ray Anderson, Biomimicry by Janine Benyus, Profit Beyond Measure by H. Thomas Johnson and The Fifth Discipline by Peter Senge.

But perhaps the granddaddy of all books on sustainability and management is an unlikely choice - The New Economics by W. Edwards Deming. Some may remember Deming as the man who taught Japan about quality, or as the father of TQM. But Deming never defined himself that way. He once said that rather than having taught the Japanese about quality “I introduced them to the principles of a system.” And the Japanese showed their appreciation – Deming was awarded the Second Order Medal of the Sacred Treasure from the Emperor. In addition, the highest business honor in Japan – The Deming Prize – was named for him.

Deming’s ideas included an appreciation for business as a system, the importance of alignment to system aims, the need for constancy of purpose, seeing profit as a consequence of the system rather than its aim, and understanding that what can not be measured is often more important than what can. Indeed the most urgent gaps in addressing sustainability – as reported in the Fall 2009 MIT Sloan Review – were the very issues that Deming had been urging management to consider decades ago.

But how does this relate to addressing any of the issues on the list above? Deming did not talk about issues of climate change or clean energy or cap-and-trade. He only began talking about the environment late in his life and mentions it in passing in his book. However his framework leads to the thinking that every business is a subsystem within the global economic system and certainly we are seeing all too clearly how the global economic system is a powerful subsystem of the Earth's biosphere. Every subsystem needs to in some way align with the aim of the overall system. The consequences of not aligning are sub-optimization, decay or in the worst case the ultimate destruction of the system. If sustainability is about aligning business and the global economy to the workings of the biosphere - then Deming may well have been the father of sustainability management.

The task ahead to bridge the Sustainability Gap is the task of transformation of the training, incentives, habits and practices of management. It will be the challenge of the next decade of global business.

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