Sustainable Business | Frank Wijen | TEDxErasmusUniversityRotterdam

sustainability is a hot topic these days it used to be the Reaume of the occasional tree hugger and bird lover but it seems that today everybody has embraced sustainability be it firms governments citizens everyone is talking the sustainability buzz in the context of business sustainability is also known under one of its many related terms such as corporate responsibility shared value creation inclusive capitalism social plant enterprise and so on and so forth as an academic you might expect me to disentangle all these different terms but I would just say for forget about the academic crap because

in essence all these terms boil down to sustainable development a term that was coined in 1987 by the United Nations Commission held by Gro Brundtland defining sustainable development as meeting the needs of the present without compromising the ability of future generations to meet their own needs in other words you can have your share of the pie but you should also leave enough for others so that they can have theirs as well sustainable development is sometimes misinterpreted as saving the planet forget about that the planet will easily outlive humanity it is rather about us saving us

from ourselves by wisely managing natural resources sustainable development is also about social inclusion making sure that marginalized actors the have-nots will have equal access to job opportunities and they'll be elevated out of poverty so sustainable development as development has both an environmental and a social dimension now at a higher level this may seem quite obvious or appealing but what if we want to translate these principles into actual practices as an academic research for management I've been trying to get my head around the question for the past 20 plus years and I must admit I haven't

managed to do so properly and this just freaks me out it drives me crazy what is on the line this difficulty to come to practical terms with sustainable business in essence it's a combination of three factors sustainable business is fairly Laden or normative it is about what is good what is bad and who decides what's good and what is bad it is complex there is a multitude of interactions among and between actors and factors and this dynamic is a moving target hard to catch and this combination of factors Rannells it so damn hard to operationalize

sustainable business this has not been though that we should give up on our ambition to come to terms with it or that all interpretations are equally imperfect some are clearly better than others let me give you a few examples of bad interpretations I was recently in a hotel that proudly served Fairtrade shampoo from Mauritius an island of the South East African coast and at first sight you would say that's a great idea you give a decent price to these poor farmers so that I could can sustain a better life a live Lee hood so who

would be against that but if you think more carefully about it what about the carbon footprint of bringing the ingredients all the way from reaches to the Netherlands now what about the plastic disposable packaging of that shampoo how sustainable as that another example in a related vein is the use of microcredit these small loans given to marginalized actors so that they can have access to credit and to develop some business in itself this can be an effective tool to pull marginalized actors out of their poverty cycle however the popularity of microcredit has led to a

genuine proliferation of schemes and sometimes flooding markets such as Kenya and India and the combination with a social pressure of local communities who are jointly liable for individual micro loans this has sometimes led desperate defaulting micro borrowers in India to commit suicide how sustainable is that we are finally sort of collectively understood that we need to move away from fossil fuels towards more renewable types of energy and in the domain of mobility electric cars are a very promising contribution to that energy transition there are though a few tiny problems with electric cars at this at

this moment in particular the batteries they have some issues the production of battery is extremely energy intensive where does that energy come from is there from renewable sources what about the recharging of the batteries does that come from renewable energy the batteries themselves they contain all kinds of toxic materials you too rather not be exposed to what about their sourcing what about the use including the possibility of the release of these toxic chemicals during the car accident what about their disposal after the useful lifetimes furthermore these batteries contain the cobalt and other rare earth minerals

mined from conflict-ridden areas such as Sudan and Democratic Congo what is the impact of this mining on the local sometimes armed conflicts the mining itself furthermore literally devastates the local landscapes so how sustainable is that fortunately there are also better interpretations one is oddly enough in the domain of child labour to be sure in an ideal world there is no child labour kids should go to school that should play they should relax be kids and when I was first confronted with child labor I was marketing manager frequently traveling to Africa I was really shocked and

I thought we should ban child labour for sure but if you think more closely about this what if you ban child labour and there's no better alternatives what happens to the fate of these kids that might actually end up in worse outcomes such as prostitution such as mining and their families might further impoverish that is why certain companies rather than washing their hands in innocence have taken bold step forward to address this problem heads on IKEA teamed up with UNICEF accepting child labor and the production of Indian carpet manufacturer drug manufacturing provided there would be

structural solutions including schooling including access to credit facilities for their parents so that the deaths of their parents which are in India often a root cause of child labor could be addressed and that if the kids would have prospects of a brighter future you might have heard of sustainability standards these are for example ecological labels social schemes signaling that certain products have social and/or environmental benefits the American non-governmental organization rainforest alliance issues such standards and the nice thing about their work is they have differentiated standards per region and per group of users for example they

have different water management practices prescribes for dryland farming than for agriculture in tropical rainforests and they have different standards for smallholder farmers than for larger more industrially operating farmers because the local needs and possibilities are different per region there are different per group and by matching these needs and possibilities with the prescriptions they come to more effective solutions I'm a chocolate lover and apparently I'm not the only one because the demand for cocoa beans a major ingredient of chocolate has been on the rise for years the supply of cocoa beans fluctuates depending on the harvests

but we can see that structurally speaking it is sort of stagnating why 60% of the cocoa bean production originates from Ghana and Ivory Coast and due to unsustainable agricultural practices in the past the soil had been eroded and it was impossible to increase the production volumes therefore Mars the chocolate bar producer set up a scheme whereby technology was transferred and farmers were schooled in order to enrich the soils and to come to more sustainable solutions for the long run speaking about the long the Dutch government Believe It or Not as sometimes proceeded from simply buying

products towards procuring services in a traditional tender the government would simply buy from the lowest bidder meaning that companies will be incentivized to offer and fear your products and a new system that works quite differently rather than simply buying the goods they would tender the services take the example of a road construction company the company would not just sell a rota to come to the government no instead it will build a road but also maintain that piece of road over a period of 20 years maintaining it and therefore the company is obviously incentivized to use

very durable materials this is one example of a circular economy where we move away from a system of frequently procuring using and discarding of resources to its closing the loop and using and reusing resources over and over and over if you take the good and the bad examples what are some lessons we can distill what are some key principles to effectuate more sustainable practices first we need to see the bigger picture rather than focus only on specific issues say carbon footprint say direct farmer income we need to see all the different issues combined we need

to see not only the direct effects but also the indirect effects think of addressing the problem of child labour where there might be a sort of a loophole if we don't have better alternatives we should think not only of the short-run outcomes but also of the longer-run outcomes think of the short-run effect of direct access to credit versus the possibility of over indebtedness if you want to avoid such situations we need to see that bigger picture now obviously this is easier said than done it's quite complex but fortunately with the advancements in information technology think

of big data think of artificial intelligence this should become increasingly feasible how sustainable could that be second we need to contextualize actions we need to move away from broad-brush Universal one-size-fits-all solutions towards more contextualized solutions that fit with the needs of local regions and local groups think of dryland farming versus rainforest farming and also think of the needs of small farms and the managerial practices and resources they have versus large more industrially operating forms if you contextualise actions looking on a case-by-case basis what are the most optimal practices you can apply we can make bold

steps forward how sustainable could that be thirdly we need to align incentives we need to ensure that the short-term incentives for individual producers and consumers become aligned with a longer-term collective interests that we all cherish and this means that we need to redesign the game structure think for example of moving away from linear towards more circular solutions also think in terms of moving away from short-term agricultural practices exploiting the soil degrading it towards longer run solutions incentivizing people to work towards the sustenance of their agricultural so if you combine these three principles what can be

infirm I think it's fair to say that sustainable business will to a certain extent always remain somewhat context it because we all have different values and interests and we all have an imperfect understanding of reality we can though surely make both steps forward if we live up to their three principles of seeing the bigger picture of contextualizing actions and of aligning incentives sustainable business should not be about quarrels of the use of the right terminology neither should it be about good intentions and bad practices but it should definitely about moving towards more effective solutions that

were both locally and globally for sure this will be a demanding but also a very important and a fascinating journey and I invite you to join me on that journey thank you you