Large companies at the forefront of the sustainability challenge

As we have already crossed several planetary boundaries — beyond which we risk irreversible environmental changes that could compromise our access to clean air, water, and food — it is probably time to embrace new business models.

‘The rhetoric around mission-driven companies has started a conversation around the importance of having an impact beyond profits or shareholder returns. This is a positive signal and is essential. But in terms of global practices, this approach is not sufficient to transform companies in a way that truly realigns their operations to stay within planetary limits,’ says Thomas B. Long, an Associate professor at EDHEC and an expert in strategy, entrepreneurship and sustainable business models.

These planetary boundaries define a space for humanity’s development based on nine biophysical processes that regulate the stability of the planet, ranging from climate change to biodiversity loss and ocean acidification. To address these, it is not enough for a company to
be “mission-driven”: This term has been diluted by marketing strategies, while applications of
corporate social responsibility (CSR) often focus on a narrow set of rules and practices or philanthropy, sometimes ignoring the tensions between mission and profit that undermine long-term sustainability goals.

The Idea of a Net-Positive Impact Company

To achieve real change, large companies can rely on academic communities, which are already doing the work of envisioning how to pivot towards new business models.

One of these is EDHEC’s research centre, dedicated to “net positive impact.” Its underlying concept is to ensure that a company has a positive global impact through its operations, products, or services. In this way, a company aims to give back more than it takes from nature and society.

This breaks with the traditional business vision, where the primary goal of a company was to maximise shareholder returns, which were ‘often supported by attempts to externalise as many costs as possible, leading to harmful consequences (such as poor labour practices or dumping waste into rivers or CO2 into the atmosphere),’ explains Long.

Like any theoretical model, the net positive impact company will face challenges, starting with
the difficulty of measuring and verifying a company’s impact, particularly regarding rebound effects - i.e  he fact that certain environmental benefits resulting from more efficient resource management or technical advancements are largely reduced or even canceled out by an increase in consumption or a change in usage patterns.

It will be necessary to ensure that environmental gains in one area don’t lead to increased consumption elsewhere, negating the initial benefits. For instance, energy savings in manufacturing might lead to lower product prices, stimulating sales and thus increasing overall resource use.

This logic also applies to profit allocation: How profits are used can exacerbate the company’s negative externalities on the environment, moving it further from its net positive goal. ‘This demonstrates the systemic and interconnected nature of the problems we face,’ Long continues.

Towards a Regenerative Economy Model

Shifting to a net positive impact model to fit within planetary boundaries must therefore be coupled with macroeconomic thinking. Translating these ideas at the company level is certainly complex, but it’s essential to account for real ecosystem impacts and then set relevant goals.

By aiming for net positive impact, companies must commit to going beyond offsetting, actively reducing their carbon footprint while investing in regenerative practices that restore
and enhance ecosystems. ‘This can include initiatives such as reforestation, renewable energy projects, and circular economy practices that minimise waste and resource use,’ Long explains.

There will also be a need for new business models based on principles of sufficiency, such
as exist in the sharing economy. These models must be designed to actually reduce consumption. This is not the traditional mindset observed in business, where companies
want to sell more, since the more they sell, the more money they can make.

Working Against a Deadline

One unknown remains: how much time companies have left to achieve these transformations. ‘The real question isn’t how long we think companies need or will need to make the paradigm shift, but how urgently we need them to do it, given the climate crisis and other sustainability issues,’ warns Long.

Moreover, the next decade will be crucial for making significant changes and avoiding the most devastating impacts of climate change. All sectors are involved, and while the transition may be more complex in some areas than others, it is possible through innovation.

For example, in steel manufacturing, the focus will need to be on reducing demand and finding substitutes (improving recycling processes and promoting the circular economy).

For coal, gas, and oil, a real transition will likely require their gradual replacement by other
energy sources and diversification into new areas of activity.

New Leaders for New Business Models

Finally, these radical changes depend on a paradigm shift in investment decisions, which will not happen without an evolution in leadership.

The example of Patagonia’s former CEO is a perfect illustration of this shift: Yvon Chouinard donated his company to the planet, transferring 100% of Patagonia’s shares to a trust responsible for upholding the brand’s ecological values, as well as to several environmental protection organisations.

Thinking beyond financial performance to a better allocation of resources for employees, communities, and more broadly the planet requires just such courageous choices. It also involves fostering leaders capable of deep reflection on the alternatives being offered, ensuring they are truly beneficial for all stakeholders.

A prime example is the electric vehicle: ‘Leaders will need to have different goals — and also different principles. This will require much higher levels of coordination throughout the value chain, which is probably incompatible with more traditional views of competition and business strategy. Leaders are facing new challenges and will therefore need new skills to manage both technical and human factors,’ concludes Long.

• To read the EDHEC Vox Mag #15: click here

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