Resilience and Sustainability
The concept of resilience provides a fresh and useful perspective on sustainable development – the notion that industrial development today must not jeopardize well-being of future generations. Multi-national corporations are under increasing pressure to couple economic growth with social responsibility, including respect for human rights and traditional cultures. Likewise, they are expected to take greater responsibility for their ecological “footprint”, including reduction of toxic emissions and resource conservation. These issues are often described as “corporate sustainability”.
How does the concept of resilience square with current definitions of sustainability? The Dow Jones Sustainability Indexes (DJSI) defines corporate sustainability as “a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.” This language is very similar to the above definition of resilience, and suggests an adaptive approach toward enterprise management. One might argue that resilience provides an operational tool for recognizing, improving and measuring corporate sustainability.
Yet there is a paradox in the DJSI definition – it does not directly address the overarching societal goal of sustainable development (SD). A corporation that is sustainable in the business sense is not necessarily “sustainable” in the broader sense of contributing to global SD. DJSI appears to rely upon socio-economic forces, e.g., stakeholder pressures, to create expectations for companies to pursue SD. The questionnaires used in the DJSI evaluation process provide a checklist of “best practices” in areas such as corporate governance, performance measurement, and stakeholder engagement, but it remains challenging to assess the actual positive impact of these practices upon SD.
We contend that there is a more direct approach for businesses to both achieve sustainability and contribute to SD. This requires viewing the enterprise as a system that is closely coupled with social, environmental, and economic systems at different scales, ranging from the individual product or process scale to the enterprise-wide scale to the regional or global scale. In this view, resilience is a universal characteristic that captures the sustainability of both natural and anthropogenic systems. Moreover, companies can enhance their own resilience by influencing the systems in which they operate.
Overcoming the Barriers
Leading corporations have adopted sustainability principles, recognizing that this will protect their reputation and license to operate. Nevertheless, most have found it difficult to translate broad goals and policies into day-to-day decision-making. Progress has been incremental, and global environmental threats such as climate change, soil erosion, and depletion of natural resources have not abated. One of the greatest barriers is simply language. A “sustainable business” is supposed to grow, but the environmentalist notion of sustainability seems to imply resource constraints and maintenance of status quo, rather than opportunities for continued innovation, growth, and prosperity. DuPont, for example, has addressed this problem by adopting the term “sustainable growth.”
Another, more challenging problem is relevance. The notion of protecting future generations seems remote in the face of contemporary business pressures. The popular metaphor of the “triple bottom line” – combining economic, environmental, and social performance – remains difficult to grasp. The typical manager or employee has trouble understanding the connection between avoiding child labor and promoting biodiversity, let alone relating these issues to his or her own job. Everyone knows there is really only one bottom line, and many fear that expenditures on sustainability will have a negative impact on profits. Although it has been shown repeatedly that economic, environmental and social progress can be mutually reinforcing, the business case for sustainability rests heavily on enhancing intangible value drivers rather than directly generating cash.
Sustainability is often misinterpreted as a goal to which we should collectively aspire. In fact, sustainability is not a reachable end state; rather, it is a fundamental characteristic of a dynamic, evolving system. Long-term sustainability will result not from movement along a smooth trajectory, but rather from continuous adaptation to changing conditions. We cannot assume that nature will be infinitely resilient, nor can we presume to foretell what cycles of change will occur in the future. A sustainable society must be based on a dynamic world-view in which growth and transformation are inevitable. In such a world, innovation and adaptation will enable human societies – and enterprises – to flourish in harmony with the environment.
We can overcome many of the barriers to sustainability by using a new language that is relevant to business interests, rather than relying on stakeholder pressures and moral arguments. Resilience, as defined above, offers an intuitively satisfying motivation for businesses to both achieve sustainable shareholder value and contribute to global sustainable development. This requires viewing the enterprise as a system that is closely coupled with a variety of social, environmental, and economic systems. The key to sustainability of these systems is resilience, the ability to resist disorder. Thus, an enterprise can focus on being “sustainable” by enhancing its own resilience relative to the systems in which it operates. Indeed, the “triple bottom line” can be seen as a multi-dimensional assessment of resilience:
• Economic resilience
Reflects the financial strength and stability of the enterprise, including the economic vitality and diversity of the communities in which it operates, the supply chain that it rests on, and the markets that it serves.
• Social resilience
Reflects the “human capital” of the enterprise, including the capability, teamwork, and loyalty of its workforce, the strength of its relationships and alliances, and the political and cultural cohesion of its host societies.
• Environmental resilience
Reflects the operational efficiency and effectiveness of the enterprise in terms of resource utilization and waste minimization, as well as its ability to protect and nurture the natural ecosystems in which it operates.
Thus, enhancing resilience will not only improve financial performance, but will also strengthen many of the intangibles that are recognized by investment analysts as drivers of long-term shareholder value, such as reputation, employee motivation, and process excellence. In short, an enterprise that contributes to sustainable development enhances its own sustainability as a business. And resilience can provide a common language for measuring enterprise fitness, social vitality, and environmental health and safety.