Sustainable Business Model: Recognising the Relations

A first step in developing a sustainable business model is being able to see business for what it is. If we conceive of a business in monetary terms - as monetary accounting and finance does - then we fail to recognise the rich set of non-monetary relations that are essential to maintaining a business.

In the past when businesses were conceived in only monetary terms and their success was measured crudely as extra money created, business managers and owners could become systematically blinded to the social and environmental harm their businesses caused. Back in 19th century Victorian England when the country was being industrialised, the negative social impact of business was so bad that Karl Marx dedicated his life to fight against business, the capitalists as he named them. Marx of course developed a political ideology to which China still adheres.

In our own times, businesses that do not recognise their social, environmental and ecological impacts are a major cause of unsustainable development. This is a well known fact. There are many initiatives that try and make businesses formally recognise more of the relations upon which their (and our) long-term survival depends - whether the managers and owners see the relations or not. These initiatives include: the Global Reporting Initiative, Environmental Management Accounting,  the UN Global Compact 2010-2012, KPMG Sustainability Reporting Guidelines, SustainAbility 2008 Guidelines and the growing number of sectoral reporting schemes in such as Mining and Metals, Food Processing, NGOs, Airports, Apparel & Footwear, Construction & Real Estate, Events, Logistics & Transportation, Media, Oils & Gas, and Telecommunications.

This approach is to be admired since it marks a potential sea-change in the way we assess and value business performance. However this approach does not get to the root cause of the problem. It does not provide an alternative conception of what business relations really are: instead this approach attempts to take the traditional narrow monetary concept of a business and add-on other relations. This creates many problems among which the question of boundaries is paramount.

If we do not provide a fresh core-concept of what a business really is and attempt to advance sustainability by reporting alone, then we loose sight of what the business boundaries are. This is an inevitable consequence which is analogous to trying to alter the direction airplanes take by looking at and reporting on their slipstreams.

What are the boundaries of business sustainability reporting?
(Van Wensen et al. 2011, p. 108)

Instead of “chasing tails” and trying to make the world more sustainable with reports alone, we can redefine a business at its core. We can rethink what we now know about business activity - and add back those relations that were not recognised in businesses 200 hundred years ago when their foundations were laid. We can now recognise that a business, any business, is part of complex social, environmental and ecological relations as well as economic; and we can redesign a business so that it does - as a matter of routine - add value to all these relations.

Reference

Van Wensen, K., Broer, W., Klein, J., and Knopf, J. (2011). “The State of play in Sustainability Reporting in the European Union.” CREM B.V. and Adelphi Consult., Brussels: European Union.