Creating sustainable value for a business

Hi Alex here! How does sustainability
create value for a business? this is a critical question to answer if
we are hoping a business is going to make positive progress on sustainability in a previous video we looked at the
work of Bob Willard on the business case for sustainability here is another tool that can be helpful
to answer this question the sustainable value framework in 2003 the journal of the Academy of Management
Executive published an article authored by Stuart L. Hart and Mark B.
Milstein entitled “creating sustainable value” while
many businesses see sustainability as a cost Hart and Milstein argue that when viewed
through the right set of business lenses sustainability can actually help
organizations drive value creation while addressing some of our most
pressing challenges this is what they define as sustainable value and put together
in a two by two matrix it is their sustainable value framework
the vertical axis represents time with the present at the bottom and the
future at the top the horizontal axis represents the organization with the
internal perspective on the left and the external perspective on the right
according to Hart and Milstein most businesses create value in the four
quadrants defined in this matrix let’s drill down
from a straight business perspective nothing about sustainability yet
remember here’s what they say in the lower left quadrant internally and in the near term managing costs and
reducing exposure to risk drives value for your business in the lower right externally but also
in the near term making sure a business maintains
legitimacy and enhances reputation with external stakeholders creates value too a business can
differentiate itself when it has credibility with its stakeholders moving into the upper
left quadrant innovating and repositioning itself in
light of changing conditions creates value for the business that
remains mindful of the need to continually create the products and
services of the future and finally in the upper right quadrant the external
dimensions of future performance are addressed a clear future growth path and trajectory creates value for a business by offering new services or tapping into unserved markets taken
together these four quadrants are one way to define
how a business creates value for its shareholders let’s see what happens when we apply a
sustainability overlay to this business lens in the
lower left quadrant engaging employees to find ways to
reduce waste of all kinds and use resources more efficiently can radically lower operating costs reduce exposure to risk
and engage and energize the workforce in the lower right quadrant engaging with the immediate and extended
value chain to develop products stewardship and extend the life and value of products and services
can enhance the reputation and legitimacy of a business thus
enhancing value creation for the business in the upper left quadrant applying
a sustainability lens can drive innovation and reposition the business by helping it
to develop sustainable competency identify the new skills, products and
services that will be required in a
resource-constrained society and finally when charting a future
trajectory and communicating a vision for the
future a business can define a clear sustainability vision for itself
thereby facilitating competitive imagination and providing guidance regarding
organizational priorities this in turn can help meet unmet needs and identify new markets including those previously under or
unserved so businesses wondering if and how they should embed
sustainability into their business strategy can use this framework to determine
their activity in each of the four quadrants identify
whether there is an imbalance in their portfolio of
activities where and how the firm is best positioned to take
action then they can develop a set of initiatives
designed to balance the portfolio of activities and create new value for the business
while responding to the sustainability challenge there you have it Hart and Milstein’s sustainable value framework stay tuned for future videos on
additional tools to help businesses capture the sustainability value
proposition if sustainability is important to you
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About the Author: Oren Garnes

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