“It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest,” wrote Scottish economist Adam Smith in The Wealth of Nations.
Self-interest has always been the key driving force for economic activity. Out of individual actions borne of self-interest, society benefits.
For businesses, the meaning of self-interest has traditionally been straightforward: keep production costs as low as possible and maximise profits. Defined in such narrow terms, corporate self-interest has often meant obtaining the cheapest labour and raw materials, while minimising associated expenditure.
The result of this model, globalisation, has been prima facie positive: for the first time in 10,000 years, 3.8 billion people—slightly over 50 percent of the world’s population—are now middle class or wealthier, according to the Brookings Institution.
But this zero sum business model that emphasizes maximising profits over all else has also left in its wake not only a similar number of poor/vulnerable people, but also a rapidly warming planet on the brink of epochal catastrophe.
Human (economic) activities are estimated to have caused approximately 1.0°C of global warming above pre-industrial levels, and at the current rate global warming is likely to reach 1.5°C between 2030 and 2052. Global warming, needless to emphasise, continue to magnify risks to health, livelihoods, food security and economic growth. Meanwhile, the global economy loses up to Sh2 trillion to corruption.
Business as usual
The traditional definition of corporate self-interest has caused considerable harm to the global society—environmental degradation, human rights violations, declining labour standards and corruption, to name a few. As such, businesses have a huge social responsibility to remedy the situation and place the world on a more sustainable footing.
But beyond social responsibility, corporates have a fundamental self-interest in securing sustainable future. Why so? No business can succeed in a society, environment or an ecosystem that is failing. Business as usual is no longer tenable.
Sustainability, as codified in the Sustainable Development Goals, must therefore become a defining feature of contemporary business strategy and operations.
No business can be competitive in an ecosystem fueled and sustained by corruption: there’s an estimated 10 per cent average increase in cost of doing business due to corruption.
Upholding fundamental labour standards is the surest approach to attract and retain talent. Adopting environment-friendly policies increases resource efficiency, lowers insurance costs and improves supply chain reliability.
And according to the Business and Sustainable Development Commission, sustainable business models could open economic opportunities worth up to $12 trillion and create 380 million jobs by 2030.
Put simply, sustainability is profitability. It is success not just for shareholders, but also other stakeholders including employees, supply chains, governments, and the planet.
For instance a Financial Times study showed that 66 per cent of global consumers say they’re willing to pay more for products and services provided by sustainable companies. The implication for businesses is clear: redefine self-interest, or perish. – The Writer is executive director, Global Compact Network Kenya—[email protected]