Embedded sustainability: a revolution in business
Chris Laszlo and Nadya Zhexembayeva provide fresh insights from Embedded Sustainability: The Next Big Competitive Advantage, a book described by one CEO as “a magnificent and highly readable tour de force of business strategy and innovation that shows how sustainability is a natural and important progression in thinking about business value”.
Embedded Sustainability: The Next Big Competitive Advantage, by Chris Laszlo and Nadya Zhexembayeva (Greenleaf Publishing and Stanford University Press, 2011)
More information and buy online… (for a 30% discount, enter SD1605 at the checkout)
In recent years, three big sustainability trends – declining resources, radical transparency, and increasing expectations – have redefined the way we do business. With these new pressures on our hands, what is business to do?
Too many managers still go with familiar approaches to sustainability, treating the new pressures as annoying obligations and merely tipping their hats to corporate social responsibility. While many more now recognize social and environmental performance as business opportunity, most continue to “bolt it on” to existing strategy and operations. Remember all those solar panels and two-sided copying promoted at the office headquarters of a dirty manufacturing business? Way too often we just keep bolting it on!
Only a handful are choosing to embed sustainability into the very DNA of what they do, incorporating environmental, health, and social value into core business activities with no trade-offs in price or quality. The Nissan Leaf, a 100% electric car named World Car of the Year 2011, offers features at a price found in most gasoline powered cars. Combined with the emerging infrastructure to recharge electric cars, Nissan’s multi-billion euro investment is driven by the quest for industry leadership, not selling eco-cars to environmentalists.
Unlike the omnipresent bolt-on approaches, embedded sustainability requires a fundamental shift across every dimension of the business system:
Bolt-on vs. embedded sustainability: key dimensions
| Bolt-on Sustainability | Embedded Sustainability | |
|---|---|---|
| goal | Pursue shareholder value | Pursue sustainable value |
| scope | Add symbolic wins at the margins | Transform core business activities |
| customer | Offer ‘green’ and ‘socially responsible’ products at premium prices or with dminished quality | Offer ‘smarter’ solutions with no trade-off in quality and no social or green premium |
| value chain | Manage company’s own activities | Manage across the product or service life cycle value chain |
| organisation | Create a ‘scapegoat’ department of sustainability | Make sustainability everyone’s job |
Leading companies such as Unilever, General Electric, Clorox, HSBC and many others are learning to leverage global challenges, such as climate stability, for enduring profit and growth. The key to making it work is innovation – in product designs, processes and business models – enabling these companies to create even more value for their customers and investors than they otherwise would.
New reality, new competencies
Four new management competencies are essential for the new era of declining resources, increasing expectations, and radical transparency. Yet, these competencies are rarely valued in today’s corporate world: Design. Inquiry. Appreciation. Wholeness.
Design is first and foremost an attitude or mode of thinking. At its core is an assumption strikingly different from the one that underlies the typical business decision. If decision-making is all about making a hard choice between easy-to-identify alternatives, design attitude assumes an easy choice between difficult-to-create alternatives. Tim Brown, CEO and President of IDEO, ranked among the ten most innovative companies in the world, illustrates this point in the following way:
“a management philosophy based only on selecting from existing strategies is likely to be overwhelmed by new developments at home and abroad. What we need are new choices – new products that balance the needs of individuals and of society as a whole; new ideas that tackle the global challenges of health, poverty and education; new strategies that result in differences that matter and a sense of purpose that engages everyone affected by them. What we need is an approach to innovation that is powerful, effective and broadly accessible. Design thinking…offers just such an approach.”
The next two competencies – Inquiry and Appreciation – build respectively on what is possible and on the existing strengths present in every business system. We have had the privilege of working closely with Professors David Cooperrider and Ron Fry, co-originators of Appreciative Inquiry, a change management methodology that, as its name implies, has these two competencies at its very core. Appreciative Inquiry has enabled managers at leading firms such as Hewlett-Packard, Walmart and McKinsey to discover the best of their shared experiences and tap into the larger system’s capacity for cooperation. Efforts to discover and elaborate the positive core – the past, present and future capacities of the whole system – lead to innovations that integrate societal stakeholder issues that are often excluded from consideration in conventional approaches to decision-making.
Wholeness is the final skill needed to master the complex challenge of embedding sustainability across entire business systems. It requires an ability not only to see the big picture, but also to understand the linkages within the system. Donella Meadows, the systems scientist, quotes an ancient Sufi teaching that captures this focus:
“You think because you understand one you must understand two, because one and one makes two. But you must also understand and.”
Learning systems tools such as feedback loops, lifecycle analyses and stakeholder value maps can help managers develop solutions that are less fragmentary and contradictory than bolt-on sustainability measures developed in isolation.
From bolt-on to embedded: a growing competitive advantage
We know how to meet the demands of shareholder value – years of managerial excellence testify to this achievement. We know how to create stakeholder value: traditional approaches such as CSR and philanthropy that predictably lead to added costs. We also have a growing number of bolt-on sustainability efforts producing fragmentary and symbolic wins at the fringes of the company.
What we are still discovering is how to meet both shareholder and stakeholder requirements in the core business – without mediocrity and without compromise – creating value for the company that cannot be disentangled from the value it creates for society and the environment. Embedded sustainability is just such a strategy, one that will only grow as today’s global challenges continue to deepen.
Read more on the Embedded Sustainability website.
Embedded Sustainability: The Next Big Competitive Advantage, by Chris Laszlo and Nadya Zhexembayeva (Greenleaf Publishing and Stanford University Press, 2011)
More information and buy online… (for a 30% discount, enter SD1605 at the checkout)
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