The Sustainability Spectrum
By Chris Crowell
In most jurisdictions in the western world, there are two types of legally recognized corporations – for-profit and not-for-profit (NFP); delineated by the pursuit of economic gain for shareholders versus creating benefits in the broader community.
Accordingly, we have adopted common attitudes that have supported these traditional constructs. Governments provide tax breaks to NFPs and provide further incentives to those NFPs we deem to be pursuing charitable ends. Many for-profit entities provide discounted rates for products or services to NFPs. Employees seem to generally accept that salaries will be lower if they are working for a NFP rather than for a for-profit or public sector organization.
Conversely, a for-profit entity is constrained by its pursuit of profit as narrowly defined by economic gain. Modern computerized markets and the twenty-four hour news cycle have enhanced this pursuit, amplifying the demand to improve short-term performance on a quarter-over-quarter basis. In this environment, long term investments and initiatives that measure success holistically face economic discounting.
If we were to plot these two traditional constructs on a business-society axis, they would represent the two end points on a sustainability axis. The mid-point represents equilibrium between the two; where profit on one end and community interests on the other are in balance. The mid-point is ideal sustainability.
As sustainability pressures mount on these two traditional constructs, we are seeing a weakening of the polarity of this axis. The result is the formation of two operational ranges:
- Sustainable Business Range – Between the for-profit endpoint and the midpoint is what we refer to as the sustainable business range. Organizations in this space are still profit focused, but have incorporated corporate social responsibility (CSR) programs into their business models and culture in significant ways. Ethics led businesses, such as Body Shop or Mountain Equipment Co-op, would be close to the sustainability mid-point and companies like Starbucks and Loblaws that boast established, integrated CSR programs would be a mid-range sustainable business. A company such as PepsiCo, with its new and innovation Pepsi Refresh program, would be closer to the traditional profit end-point of the range.
- Social Enterprise Range – Between the NFP endpoint and the midpoint is the social enterprise range. As public funding and private donations become increasingly scare, cause-based organizations are placing increased focus on developing new revenue streams to support their operational requirements and are potentially moving closer to the midpoint. In Canada, new legislative constructs are emerging to support this, such as Nova Scotia’s Community Economic Development Investment Funds (CEDIFs) and the proposed establishment of Community Interest and Low-Profit Limited Liability Companies in Ontario. These constructs would be close to the midpointNFPs are also hedging towards the midpoint by forging strong ties with for-profit entities, not based on the traditional approach of seeking funding, but in search of partnerships that provide reciprocal value.
By understanding that there are no longer simply two polarized models that corporations to fit into, we allow managers to consider a broader range of sustainable options and facilitate benchmarking and best practice comparisons in sustainability. It also draws further attention to the fact that further legislative evolution is required, especially with respect to issues of taxation, to recognize the reality of this emerging spectrum of sustainability.