Tuesday 1 December 2009

Put sustainability into your business strategy

As global leaders converge in Copenhagen for the United Nations Climate Change Conference, we cannot deny that the issues surrounding the sustainability of this planet would become more critical. Like it or not, this is the only planet that we have and share with the rest of the world.

Continued population growth alone would cause severe stress to the ability of earth to self-heal, what more when humans behave indiscriminately to pursue their worldly wants without consideration of the consequences.

The recent Commonwealth Heads of Government Meeting (CHOGM) in Trinidad & Tobago had come out with the Port of Spain Climate Change Declaration which calls for a comprehensive, substantial and operational legally-binding agreement out of the Copenhagen conference.

Given that the Commonwealth nations represent a third of the world’s population, such a call is very much welcome.

The climate change and sustainability agenda cannot run away from detractors. The recent so-called “Climategate” controversy where it was claimed that scientists massaged data to support a particular position would certainly be the talking points in Copenhagen.

Some even argue that climate change is about the redistribution of wealth from rich countries to poor countries. As some of the measures considered in reducing the risk of global warming require change in the ways we live, such resistance is not unexpected.

There is concern among developing and least developing countries that the climate change agenda could be hijacked and turned into another non-tariff barrier to trade, especially from the developed economies.

Our prime minister recently reminded the Commonwealth leaders in Port of Spain that the climate change agenda must be consistent in making global trade and investment open and free and should not result in new trade barriers.

Even the Port of Spain Climate Change Declaration calls for inclusive global solutions, not one-sided solutions which benefit the richer countries which could use their financial strength as carrots in any global deal.

Irrespective of the divergence in views, Malaysian companies should consider sustainability as something which could have strategic implications to their businesses. Externally, there would be more pressure for businesses to be conducted in more “sustainable” ways. Access to certain markets would only be allowed if the products are certified to be environmentally and socially friendly.

A case in point is the issue of how sustainability is defined by the European Union (EU) in determining access to the European market. By increasing the coverage of the definition, products entering the market must fulfil more criteria.

When areas with high biodiversity and peatlands are linked to the definition, exporting countries would be facing hurdles that might not be overcome in the short term.

Palm oil is contributing significantly to the economies of Malaysia and Indonesia. This industry appears to be under immediate threat if the issue with the EU is not resolved amicably through a fair solution. In fact, the palm oil industry is quite pro-active in pursuing issues that relate to sustainability.

The Roundtable on Sustainable Palm Oil, for example, is an initiative where industry players along with the supply chain and the non-governmental organisations try to achieve viable ways of producing palm oil that are sustainable.

The presence of Malaysian companies in this initiative is pretty strong. There are issues that remain unresolved but the subject of sustainability is not something that is won at a single negotiation.

As Malaysians appreciate the consequences of climate change and how our own sustainability would be affected, the demand for more sustainable business practices would increase in this country. This would increase the tension between the interest to maximising profit and the protection of the well-being of our society.

There should not be a conflict in the first place if businesses realise that their ability to continue to operate will be further enhanced if the outcome of their business conduct is in line with the best interest of the people at large.

This means sustainability has to be smack in the middle of corporate strategy and not just to ensure minimum compliance of licensing requirements or as an afterthought when something goes wrong.

Companies in industries which are environmentally sensitive should start assessing how their operations through the whole supply chain affect the sustainability of this planet.

Unless this is done, an enterprise may not appreciate how much it has contributed to climate change or the degradation of the environment and the opportunities to put things right.

Without sustainability being part of corporate strategy, such initiatives may not happen as they require mandates from the top and financial resources.

Sustainability sometimes can turn us into frogs. Like the frog that enjoys the warmth of the water as it is slowly being heated up, it continues to be business as usual for us without much consideration to the environment and our future generations.

Hopefully, we will all be able to wake up before it is too late, unlike the frog that ends up being cooked in the boiling water!

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