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.

tragedy of the commons

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The tragedy of the commons is a phenomenon that was first written about by Garrett Hardin in 1968. In his article published in Science he describes a dilemma in which multiple individuals acting independently and solely and rationally consulting their own self-interest will ultimately destroy a shared limited resource even when it is clear that it is not in anyone's long term interest for this to happen.

Central to Hardin's article is an example, a hypothetical and simplified situation from medieval land tenure in Europe, of herders sharing a common parcel of land (the commons), on which they are each entitled to let their cows graze. In Hardin's example, it is in each herder's interest to put the next (and succeeding) cows he acquires onto the land, even if the carrying capacity of the commons is exceeded and it is damaged for all as a result. The herder receives all of the benefits from an additional cow, while the damage to the commons is shared by the entire group. If all herders make this individually rational economic decision, the commons will be destroyed to the detriment of all.

This concept that the 'commons' is available to everyone to use and abuse without regulation is the primary stumbling block towards a sustainable future. The abuse of the commons is being seen in many environmental scenarios like destruction of land resources, deforestation, air pollution, overfishing etc. Due to the lack of ownership, there is also a lack of conscience. Increase in population only increases the pressure on the commons.

I have previously argued that the definition of sustainability itself lends itself to an anti-growth model because it assumes that we are compromising the future generations' ability to enjoy the level of comfort that we do and because our current consumption patterns means that resources will run out. It does not address the issue of employing a new business model in order to overcome the tragedy of commons.

Businesses traditionally considered pollution and other abuse to the commons as an externality - a phenomenon that occurs during the normal course of doing business. Now however, there is a stark realisation that the environment can no longer be considered an externality. In fact any business model that still operates on this precept is ultimately an anti-growth model.

Business as usual needs a total reorganization in the way it operates. The age of big businesses and the off shoots of globalization like off-shore manufacturing is part of the redundant business model which still does not negate the tragedy of commons. It only makes the problem their problem but what it fails to recognize is that ultimately it is our problem.

A model of new-age business with sustainability at its core depends on social development and a bottom-up approach to knowledge transfer and horizontal management. This is done through the involvement of the community in community projects and allocation of the commons so that it is no under common jurisdiction but individual responsibility.

The backbone of every big business should be based on social development if it is to thrive. Social development is not just a localised 'small-time' tool. It can be as big or as small as one envisions. One of the biggest dairy companies in India, Amul uses this as a philosophy. Corporate social responsibility becomes an empty sentiment if it is not fully integrated into the daily workings of the business in question.