We need a new business model focused on sustainability

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Over the past 50 years, we have seen dramatic and unprecedented advances in human indicators, and the market system has served us well in many ways. But deep fractures are starting to appear. Income inequality has increased in almost all countries, although at different rates. At the same time, we are seeing record degradation of the environment, loss of species at an unprecedented rate – around 200 per day – severe stress on food and water systems, deforestation massive and climate change. Today the markets are not viable.

We need a new business model – one that benefits people and the planet.

Last month, 200 CEOs redefined a company’s purpose: shareholders would no longer have primacy. Businesses must be run for the benefit of all stakeholders: customers, employees, suppliers, communities and shareholders. It’s the same idea – the multi-party theory – that underpinned the founding of the World Economic Forum in 1971. As we face an unprecedented environmental crisis, the idea is gaining momentum. A recent survey of CEOs found that 90% of them believe sustainability is important to the business success of their business. Behavioral economists now believe that the whole premise of classical economics – that people will always act in their own best interests – is wrong.

This is an annual meeting showcasing the best examples of public-private cooperation and Fourth Industrial Revolution technologies used to develop the sustainable development agenda.

It runs alongside the United Nations General Assembly, which this year hosts a one-day climate summit. This is timely given growing public fears – and citizen action – about weather conditions, pollution, the health of the oceans and dwindling wildlife. It also reflects the understanding of the growing business case for action.

The UN Strategic Development Goals and the Paris Agreement provide the architecture to resolve many of these challenges. But to get there, we need to change the way we produce, operate and consume.

The work of the World Economic Forum is essential, with the summit providing the opportunity to debate, discuss and engage on these issues at the global political level.

This is the good news. Hearts and minds change. A growing number of millennials, business leaders and women in particular are calling for a new kind of market: a sustainable market, an inclusive, fair, green and profitable market where sustainable principles drive growth, generating long-term value. term through the integration and balance of natural, social, human and financial capital.

To capture this momentum, HRH the Prince of Wales, with support from the World Economic Forum, has formed a Sustainable Markets Council. This Council will bring together a unique coalition of businesses, governments and multilateral financial institutions to galvanize the commitment, action and strategic leadership needed to transform our market mechanisms to work for, not against, sustainability.

Building sustainable markets requires changes in three main areas: a change in corporate business models, a reoriented and engaged financial system, and an enabling environment that promotes regulation and prompts action. We are already seeing change. Today, global estimates suggest that the sustainable home appliance market, reflecting consumer demand, is $ 546 billion and continues to grow. As another example, the Boston Consulting Group estimates that $ 23 trillion in assets under management around the world is in funds focused on environmental, social and governance criteria.

How large investors can have a big impact on society and sustainability

Image: Boston Advisory Group

But there are dangers as well as opportunities – dangers of greenwashing, dangers of misaligned tax and incentive regimes, dangers that the plethora of sustainability initiatives fail to reach scale or critical mass.

As businesses, we need to move beyond corporate social responsibility as a business adjunct (and to be honest, more and more are doing this) to onboarding and transforming businesses to align strategy, structure and other activities to ensure long-term added value for stakeholders. to financial returns. The lack of universal measures to transparently define goals and assess progress is a concrete challenge. Global standards, backed by regulators, will be a game-changer.

We also need a financial system adapted to its needs. We need to address flawed pricing systems in capital markets that result in relentless allocation of capital to short-term and unsustainable uses. We need financial regulation and reporting that integrates sustainability with global standards and mandatory disclosure.

Global economies are already absorbing the costs of climate change and an obsolete “business as usual” approach. Scientific evidence and the dislocation of people highlight the urgent need to create a sustainable, inclusive and climate resilient future.

This will require nothing less than a transformation of our current economic model into one that generates long-term value by balancing natural, social, human and financial conditions. Cooperation between different stakeholders will be vital to develop the innovative strategies, partnerships and markets that will lead to this transformation and allow us to raise the trillions of dollars of necessary investments.

To meet these challenges, Financing of sustainable development is one of the four focus areas of the 2019 World Economic Forum Sustainable Development Impact Summit. A range of sessions will highlight innovative financial models, pioneering solutions and scalable best practices that can mobilize capital for the Global Sustainable Development Goals. It will focus on the conditions that public and private institutions should create to enable large-scale financing for sustainable development. It will also explore the role that governments, businesses, investors, philanthropists and consumers could play in coming up with new ways to finance sustainable development.

Finally, we must recognize that what governments do and do not do is essential. Incentives can attract or repel investment, taxes can promote or suppress energy choices, and information, such as food or product labeling, can gain or lose customers. We need to move towards sustainable stakeholder capitalism. A good first step would be to end perverse subsidies in agriculture, fisheries and fossil fuels.

Consumers also have the power to persuade boards and firms to rethink policies and re-examine results. Controlling around 60% of global GDP, citizens and consumers can change the market. We are already seeing it happening.

The time has come. But we will only grasp it if we recognize the choice we face: continue on our current path or move to a more sustainable path. This choice brings a huge opportunity. Place people and the planet at the heart of the creation of global value. Create new markets and technologies. Explore innovation and breakthrough solutions to meet our toughest challenges. Develop new partnership models that produce faster and longer lasting results. And to ensure that human aspiration can be sustained for millennia to come. We have to make that choice now.


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