Metrics
Sustainability

Making a full transition towards a sustainable economy ... We need to focus on the forces that shape business rather than maximising profitability regardless of the environment

Burgess COMMENTARY

Peter Burgess

Making a full transition towards a sustainable economy ... We need to focus on the forces that shape business rather than maximising profitability regardless of the environment

IMAGE Maze ... Facing energy instability and resource scarcity, governments and businesses will soon be forced to move into new directions. Photograph: Photonica

The business sector is directly responsible for around 15% of all carbon emissions in the UK, while it sells products and services to markets responsible for much of the rest. It is clear that we need a fundamental change in the way we do business today if we are to deliver a low carbon economy capable of meeting economic and environmental goals.

While some companies have developed models to align sustainability and profitability, moving away from the notion of 'making' profits, many firms are in business explicitly to meet an environmental goal. But for a majority, the pressure to generate profits often inhibits a more fundamental shift towards sustainability which may adversely affect the bottom line – particularly in the short-term.

Most business models and strategies are designed to maximise profitability. In this context, environmental considerations will be taken into account only to the extent that they positively affect profitability, whether through positive 'branding' or more directly through the efficient use of resources. However, once the cost savings from these have been accounted for, it becomes increasingly difficult to improve in sustainability terms.

So how do we promote a shift in the business sector to adopt and scale up those models and strategies that will help make a more rapid transition to a truly sustainable economy?

There are clearly certain types of business models and business strategies that make it possible to deliver a low carbon economy, but if we want to achieve a transformation of the whole economy we should concentrate on the forces that shape those strategies and models in the first place.

Businesses are the product of a mixture of external forces: the markets they operate in, regulation that governs them, consumer demand. Ultimately too, the parameters of the natural environment.

Businesses adopt models that will assure viability within a particular context. But this context can change rapidly. For example, in terms of consumer demand, what technology can deliver, shifting patterns of ownership and control, and, climate change and the availability of natural resources.

It is not always the case that businesses need to switch to a particular model in order to address the sustainability challenge – rather that the balance of external forces needs to change to make these models and strategies more attractive. A variety of sustainable business models will then follow.

Today, the main approach appears to be to encourage businesses down a 'business as usual plus efficiency gains' route; there are fewer examples of companies undergoing a full transition towards sustainability.

Encouraging a more fundamental change will require a mixture of incentives, planning reforms and regulatory changes which can lead to a realignment of the forces influencing costs and revenues. Our challenge is to ensure this process leads to a sustainable economy that delivers human wellbeing and social justice within environmental limits.

Governments hold several levers for change and as such, play a key role in driving change in businesses and encouraging a transition towards a sustainable economy. For example:

• • As procurer and major funder, using its own spending to create opportunities for sustainable businesses.
• • As a key policy player, able to influence the development of EU and international policies, and advocating the implementation of new policy measures such as, feed-in tariffs and fiscal measures to support a rapid transition to sustainable energy.
• • As a public-opinion leader, communicating that the transition towards sustainability strengthens the national and global economy.
• • As an organisation, ensuring that its own economic analysis and methods take account of environmental and social costs.

In the current context of economic crisis, energy instability, and resource scarcity, governments and businesses will soon be forced to move into new directions. But full transition to a sustainable economy will not be complete until business performance is measured in terms of returns on natural resources rather than just returns on financial capital.

Aniol Esteban is head of environmental economics at the new economics foundation.

This content is brought to you by Guardian Professional. Become a GSB member to get more stories like this direct to your inbox