19 November 2009

changing perception of business

Growth at current rates cannot be supported on the precept of development. The definition of sustainability does not offer any explanation as to how this rate of growth can be supported because it assumes that resources are running out and that we are compromising the future generations’ ability to enjoy the current quality of life that we have. What it also fails to address is how sustainability can be a business model.

Businesses are equated with profit which is equated with growth. All growth demands destruction. The definition of sustainability in itself is anti-growth, which is why the incorporation of the concept of ‘sustainable growth’ becomes difficult. The previous generations were used to unprecedented rates of growth with little or no concern towards environmental issues.

The ominous environmental constraint that we feel now is changing the way we think about ‘business as usual’. The global impact we have on the environment is slowing making the phenomenon of globalization and by proxy its downstream implications like, off-shore manufacturing a redundant concept. The realization that there is a difference between ‘price’ and ‘cost’ is hitting all businesses hard.

We have effectively managed to push economic growth, societal well-being into a corner and using the concept of sustainability as the life-ring to ensure that business as usual can proceed. The concept of big business is on its way out. The new business model is one that consists of social entrepreneurship at its core, both in the service and manufacturing sector.

For a concept to be truly sustainable, it requires the involvement of the people in the grass-roots. Business decisions can no longer be made in the board-rooms of the world; it requires involvement from people on the ground in massive scales. This concept has long been idealised as social development. This is the concept that is going to be the future of business. Social development negates the phenomenon of the tragedy of the commons which is the root of environmental problems. If people are involved in the building of something, they will not destroy it. It encourages the exchange of technological advances and traditional knowledge. It is a concept that has a bottom-up escalation of ideas and encourages horizontal management.

In the traditional model of economics, pollution and thereby destruction of these was considered a ‘negative externality’. Now we know that the true cost of doing business also factors in this externality; in fact any economic model that still regards the environment as an externality is ultimately an anti-growth model. The time now is to devise concepts that will pioneer a new business model of true sustainability where the barriers between the developing and developed world are broken down and there is exchange of ideas between both.

The world of the future will consist of increasing population putting pressure on available resources. The challenge would be to ensure employment, education, accommodation, nutrition and health care at the basic level. Increase in level of prosperity and the rise of the middle class in countries like India and China will see further increase in energy consumption patterns. In order to meet soaring demand for commodities, the new business model will first have to address the question of supply in relation to price of products. Secondly it has to address whether cheaper manufacturing is necessarily better manufacturing and whether the price of goods today is worth the cost of resources tomorrow. Finally it will have to decide the kind of services that will enhance quality of life and ensure environmental protection and disabuse. In order to rebuild the world for a better future, it is not possible to be merely idealistic but also have a business idea to offer that is employable and benefits people of various regions.

In order to rebuild the world for a better future, it is not possible to be merely idealistic but also have a business idea to offer that is employable and benefits people of various regions. It is crucially essential now, to do business for the world.

1 comment:

Sandhosh said...

Quoting a speaker in a recent entrepreneurs conference "do not create a business to make money for you WILL certainly fail, create a business to help society and you WILL automatically make money". I think the corporates and new businesses realize the value and are certainly moving towards this model. Let's hope the best for the future.