Business trends come and go. Yet every once in a while, a concept comes along that fundamentally shifts how companies operate and compete. Mass production, total quality management and globalization are a few of yesterday’s examples. Sustainability, “the key driver of innovation,” has been called the “megatrend” of our time. [i]
Last Tuesday in Dr. Sroufe’s Sustainability Theory and Models course, members of the class faced off for a full-scale debate – complete with judges and rebuttals – of the traditional business model versus the sustainable one.
For those (like me) who didn’t realize that “shares versus stakes” was so contentious:
- The traditional shareholder model insists that the only purpose of business is to make a profit.
- The stakeholder model speculates that creating value through ethical management of social and environmental resources will result in financial prosperity.
As our opening statements unfolded, it became clear that shareholder versus stakeholder proponents have very different views. One side was rooted in “whatever-it-takes” to deliver quarterly profits and shareholder dividends, while the other saw business as a zero-impact machine for creating sustainable wealth. Nevertheless, as advocates of each model responded to questions and challenges from the other, they found some common ground.
The stakeholder advocates warned of long-term collapse without environmental constraints and social responsibility. The shareholder team responded that, regardless of the business model, neither side is promoting unethical behavior. The shareholder model, they explained, was the simple act of fulfilling the demands of consumers to return a profit for the shareholder.
That’s when it hit me (a political science undergrad). Regardless of your business model, consumers decide which companies prosper. As customers demand socially- and environmentally-responsible goods and services, shareholder-driven businesses must adapt or lose money, while stakeholder-driven businesses enjoy a competitive edge ahead of the curve. In short, sustainable business models just make sense. Leveraging sustainability for innovation – before rather than after your competitor does – is today’s key to tomorrow’s success.
[i] Harvard Business Review, September 2009