By Sam Kimberley
There’s no such thing as sustainability.
Not the kind of statement you expect to have at the World Business Council of Sustainable Development- rather controversial in fact. But speaking with the delegate who dropped this bomb was a breath of fresh air. Tony Henshaw wasn’t giving me a ‘jack it in’ opinion, he is crystal clear that businesses can be sustainable. He argues our perception of what sustainable practice looks like needs to shift rapidly.
Tony posed the scenario:
In the 1900, England produce a product for £15 for internal consumption, yet India can produce the product for £5 hence England shift to importing the product from India to increase the profit margin made.
Previously we placed no other requirements on the product that India produced however now India to give their workers pensions, use materials that are sustainably sourced and meet satisfactory carbon emission targets.
This doesn’t work! -the product will no longer be cheap meaning that if India meet the requirements the price of the product will rise to £15 consequently meaning that production should have simply remained in England.
I.e. Sustainability does not make economical sense as those who adopt will loose out. Hence if we continue with the current models we have, we just recreate the current business model as once we have exhausted all the locations that can produce cheap products until increase workers standard of living we will have to establish a new way of generating the products we need.
Introducing an alternative model that replaces balance sheet decision making with risk reduction decision making. Tony suggests that the business objective should be to remain in the ‘funnel’ that is constantly becoming narrower.
There are 4 integral loops to the funnel; firstly, the legal standards which provide restriction that all companies must operate in. Insightfully, he explains how using a balance sheet decision making process in describing a project i.e. incremental cash flow assumption is useless. He provides an example of a business that produces a product in plastic bags; it may be cheaper to produce by say 3p a bag yet if in 10 years plastic bags will become banned then the cost to change the infrastructure will cost more than it benefits. Contrary to the theories that I currently study at university, business cannot necessarily assume going concern! Instead, project adoption should be evaluated based on risk analysis, requiring accurate knowledge of governmental and sectorial regulation. The second loop; International standards often indicates such regulation to follow plus negatively incentivises business to conform.
Best practices today and 2030 legal standards further tighten the area of sustainable business practices to reach the 2050 legal standards needed for a sustainable world. Tony recognises that businesses that fall out of the funnel can (to an extent) pay to re-enter the funnel. He concludes the model simply explains the formation of the winning businesses.
Closing in conversation Tony discussed his retirement plan, yet don’t be deceived; this CSO is the self-made millennial that inspirational speakers are paid big bucks to cultivate. Agree with him or not, he is bringing sustainability into the 21st century. Yet perhaps the real identifier in Tony Henshaw is he is walking the walk that he talks-a lesson we all need to consider