Family Business Sustainability: What Does It Mean For My Business?
10th September 2015
Sustainability has become something of a buzzword in the corporate sector in the past decade. From an early emphasis on social responsibility and community investment, the concept has expanded and matured, as globalization, resource scarcity, supply chain complexity and social media transparency have all contributed to the strategic need for more contextually conscious and adaptive market responses. Sustainability is no longer a ‘nice to have’. Rather, as many businesses are discovering, it’s become a necessary lens through which to re-imagine what a business exists to do, its purpose in effect, how it operates and how it frames its core relationships. From product design to supply chain management to consumer engagement, sustainability now provides an opportunity and an imperative to re-conceive every facet of business practice. Applied wisely, its main tenets and underpinning philosophy can accelerate innovation and efficiency, catalyze new markets and build employee and social capital.
In the simplest terms, a sustainable business is one designed to be around for the long-term. It contemplates a time horizon of decades not quarters and operates not only to be fit for purpose, but to be socially fit for purpose, recognizing the benefit of providing services that generate wider social as well as economic value. Family businesses have a head-start here. Some of the core principles of sustainability are likely encoded in the business DNA. Thinking inter-generationally for example. Multi-generational family firms are far more likely to take the long view, with a focus not just on wealth creation and preservation today but transfer of that wealth to future generations tomorrow. A sustainable business that ensures prosperity for generations to come has to be built on an operating model that renews rather than depletes resources, that balances the will to growth with the need to conserve, that provides stability whilst adjusting rapidly to changing market conditions. With that longer view may come a stronger sense of stewardship, care for employees and stakeholders that reflects the values of familial loyalty and responsibility, as well as greater sensitivity to the social and environmental footprint of the business. Not being driven by the perceived demands of shareholder return, a family business has more freedom to develop its vision and design its strategy from these key principles.
There are therefore clear opportunities for family business to benefit from the principles and indeed the values of sustainable business practice. But there may be challenges too. Good governance and stakeholder relations increasingly demand transparency through public disclosure on indicators ranging from greenhouse gas emissions, materials provenance, water and waste through to diversity, community engagement and supply chain policies. Such disclosure may not come naturally to businesses that are used to protecting their privacy. The initial cost of gathering the data may appear prohibitive. Yet those businesses that do invest in such a ‘drains-up’ exercise typically find the immediate rewards in efficiency savings far outweigh the cost. And by identifying material risks through the sustainability lens, the longer-term business model and risk governance process may be tested and upgraded. Risk appetite can be a contentious issue in family business, with personal differences writ large. Yet the less partial risk assessment that a good third party materiality process produces can help in navigating any sensitive family dynamics that accompany debates on risk and capital management.
Engaging with sustainability is a considerable journey for any business. Creating policies for suppliers, energy consumption or waste are the easy end of the spectrum. Far harder is to engage hearts and minds, embedding the values of being ‘socially fit for purpose’ into the culture and operations of a business. Family businesses have a clear advantage here, with values of long-term thinking, stewardship and responsibility built in. And although sustainability may challenge them, demanding more transparency, more risk literacy and more monitoring, through improvements in governance and process they can reap the rewards there too.
Join us in London on 29th September for a workshop with Dr Stubbings and Trevor Rees exploring how to identify what sustainability means to you, how to recognise what you are already achieving, and how to inspire others to join you. Find out more here.