This is an edited extract from The Adventure of Sustainable Performance: Beyond ESG Compliance to Leadership in the New Era, by Dean Sanders and Stuart McLachlan, published by Wiley. The extract is taken from page 107, and then pages 114-117.
It is now undeniable that our prevailing systems (strongholds) have been designed to assert control over the natural world. These strongholds wilfully dismiss destructive externalities connected with the ways in which we live and work and have reaped the far-reaching negative impacts we have described.
We do believe that it is possible to find operational and economic models that are infinite, where the process of sustainable performance can allow humanity to thrive indefinitely within the constraints of our planetary boundaries. We have shared an outline of an established process we use to help organisations in the pivot towards Sustainable Performance, which we call The Activator Journey. But to start, we need to step away from the deceptively stable and finite zones of the previous era into the perceived danger zone of the transition, the liminal space we are now in.
New business models
We discussed the adaptability mindset at work in Nestlé Nespresso’s coffee business model with CEO, Guillaume Le Cunff.
At Nespresso we operate a ‘Direct to’ business model that embraces full value chain integration. That sees the value chain as an ecosystem with all stakeholders being equally important. An ecosystem where customers can connect to farmers. It is these connections between our stakeholders, between farmers and customers, that makes Nespresso a real luxury brand. (Le Cunff, 2022)
Le Cunff likens the Nespresso business model to a top chef: ‘They will tell you about where the food is from, the way the animals have been kept, their diet, or how fresh the vegetables are and in what conditions they’ve grown.’ Similarly, the authentic and personal approach, knowing all the details of your raw materials, the people that work tirelessly to produce these, and each step of the process is all part of the story and the brand appeal. He describes it as ‘a passion and a duty. If you want to be a luxury brand, you need to know every step of your value chain and connect directly with each and every stakeholder in this value chain.’
The business models we choose for the new era will need to demonstrate financial performance to thrive. But they will equally need to perform in the context of their entire ecosystem of stakeholders inherent in the nature of stakeholder capitalism. As Mazzucato says, ‘The stakeholder theory of business is more than a theory of how to run a company better; it also has far‐reaching economic and social implications. It answers the question, “What makes a business successful?”’ (Mazzucato, 2019, p. 184).
Guillaume Le Cunff is pursuing such a balance, driving Nespresso to meet ambitious sustainability goals. This is captured most pertinently in their recent B Corp certification. B Corp is the international network of organisations driving systems change and a vision of an inclusive, equitable, and regenerative economy. B Corp was originally a network of smaller, purpose‐driven businesses seeking differentiation in congested markets through their public commitment to all stakeholders, but Nespresso’s certification marks a shift. The balance is fine. A business like Nespresso will struggle in the transition to immediately embrace total transformation and remain profitable, but Nespresso’s posture is facing in the right direction, and the leadership is committed to a sustainable future and with a clear vision to embrace business models that fully reflect this.
The B Corp movement and vision which drives this, contrasts with traditional shareholder responsibility models where a board of directors is elected by the shareholders to govern the management team and to make corporate decisions on their behalf. The directors have a fiduciary duty to protect and manage stakeholders’ interests in the company.
We are not proposing that we lose sight of the importance in the relationship between the directors and those who have taken a leap of faith to invest in them as a management team and the business they represent. Our view is simply that by shaking loose of this one‐dimensional obsession, and by engaging with all stakeholders within a Total Value System, decisions are more likely to be taken in line with the drivers of business success. Ultimately within a Total Value System integration model, all stakeholders should gain. This includes delivering superior long‐term returns for the shareholders.
Allison Dring is CEO and co‐founder of Made of Air, a cutting‐edge business making carbon‐negative materials to transform products in mobility, consumer goods, and the built environment. For Made of Air, planet Earth is a key stakeholder in the business and ‘taking care of that relationship is as important as the other stakeholders in our business’:
Contrary perhaps to expectation, this clause, which even in a climate‐friendly business is bound to come into conflict with economic decisions, not only didn’t put off potential investors, but for some it was the part that sealed the deal.
When the WEF stated in 2021 that the future of the economy depended on sustainability and that the money to be made in the future would be tied to sustainable measures or technologies, I think that really resonated with a lot of investors we were talking to. A lot of them could see that if you don’t get into this space and start investing in this technology then you’ll lose out. We don’t have other options. (Dring, 2022)
Delving further, we can see how embracing all stakeholders in a Total Value System might start to unsettle the given norms in how business drives value. Porter’s Five Forces model is widely used to shape most industry sectors and segments of the economy to determine weaknesses and strengths against five competitive forces that shape every industry and every market:
- Competition in the industry
- Potential of new entrants into the industry
- Power of suppliers
- Power of customers
- Threat of substitute products.
Within a model of stakeholder capitalism, the success of business enterprises operating in free markets will still find relevance in this Five Forces model. But we are starting to see divergence from it and signals of the forces that are promoting the new business models for the new era.
