The Case for Sustainable Business as Good Business

Offshore wind farm for sustainable business
Offshore wind farm for sustainable business

The notion of "corporate social responsibility" has long faced criticism for reasons that seem almost contradictory. To the critics, the idea that businesses could care about anything besides maximizing profits is either too naïve or too cynical.

It's naïve because business managers would never sacrifice an opportunity to make a profit if it ran counter to loftier concerns, no matter the lip service. And it's cynical because the idea can serve as a pretense to allow businesses to duck regulation, the only real way to keep corporate behemoths in check.

However, two noted thinkers are now introducing a refreshing line of thought into this long-running feud. And they're turning many assumptions on their head as they marshal an unparalleled amount of evidence about some of the most cutting-edge initiatives by a variety of businesses.

In Sustainable Excellence, Aron Cramer and Zachary Karabell make a compelling case for why a focus on sustainability -- whether it concerns, for example, climate change, energy consumption or labor relations -- is now a form of enlightened self-interest for businesses. For starters, commodity prices have been soaring as investors wake up to a world marked by rapid population growth and overstretched resources. The authors point out that reducing wastefulness boosts not just egos in the executive suite but also future prospects for the bottom line.

"Green Is Green"

Cramer and Karabell draw on extensive research from the front lines of the push toward sustainability to show how enterprises big and small are using it to open up new opportunities. The book goes over some of the best known players, Nike (NKE), Wal-Mart (WMT) and General Electric (GE), where CEO Jeff Immelt is fond of saying "green is green" in summing up the profit potential of sustainability. Note how GE isn't content with being a leader in just wind-turbine technology but is also pushing hard into solar electric panels, according to an announcement today.

Another example that made news today: Google's major investment in an offshore wind power project off the U.S. East Coast. Said Google (GOOG) in its release: "We believe in investing in projects that make good business sense and further the development of renewable energy." Any payoff for Google is far down the road, but the Internet giant knows well how crucial it is to have a long-term focus.

But the more under-the-radar moves by smaller players are equally fascinating. Software maker Autodesk (ADSK) is ramping up design tools that emphasize energy efficiency in commercial real estate development. China, where a breathtaking building boom is underway and environmental concerns run high, offers a big opportunity for such tools.

Or consider Indian bank ICICI (IBN), which is drawing on everything from microfinance to mobile technology in the broader goal of making society more inclusive.

An Opportune Moment

Investors, too, are becoming more attuned to the sustainability dimension. Sustainable Excellence notes the evolving efforts now underway by Wall Street powerhouses like Goldman Sachs (GS) and Deutsche Bank (DB) to quantify these elusive characteristics.

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Cramer and Karabell draw on research that is both thorough and wide-ranging, while they sidestep many of the oversimplifications and hyperbole that often come with the topic.

Sustainable Excellence also comes at an opportune moment because the usual prescription for making businesses more accountable to the societies in which they exist -- pouring on more regulation -- also has its shortcomings on full display. Major legislative initiatives in the U.S. aim to regulate finance, health care and energy have met lukewarm receptions. And these rules have proven much harder to craft than the pendulum swing back to regulation in the wake of the financial crisis may have suggested.

As businesses take on an ever-more transnational character, crafting regulation will become even harder. So, an increasing vigilance by the business and investor community could play a big role in striking a new balance. Sustainable Excellence represents a major -- and much-needed -- step in that direction.