Michael Lenox and Stuart MacDonald discuss the relationship between sustainability and profitability.
Stuart MacDonald (00:10):
If we considered sustainability in the context of environmental, social, and governance, that is to say, threats from climate change and the loss of biodiversity and extreme poverty, the widening social and health inequalities that we see globally organizations, if they commit to help solving these problems, won’t profits follow as a natural extension of those commitments.
Michael Lenox (00:49):
I think it’s, but it’s perhaps more complicated, right? There are no free lunches. We have to be careful, there’s a whole vast academic literature on “Does it pay to be green or pay to be sustainable?” I’ve long argued, it’s the wrong question. It’s wrong for a couple of reasons: One, there’s too much anecdotal evidence to suggest that never investing in sustainability won’t have a positive payoff. That’s just simply not true. We know that, but the opposite is also likely not true that every investment that you could possibly make to support the environment or support social causes has a positive economic benefit. That that seems highly unlikely as well. So what you’re talking about ultimately is a balancing act here between broader societal goals and the need, as an organization, especially for-profit organization, to generate net income. And so I think at the end of the day, the way I like to think about it is one, understanding those trade offs and trying to balance those, but then also looking for solutions that could get you out of those constrained worlds. And this is why, again, I put such an emphasis on innovation. If you look at the world, as it stands, now there’s maybe limits to what you could do to make sense to address some of these. But the beauty of innovation is that opportunity to create a new opportunity that doesn’t have those same inherent conflicts associated with them. I don’t want to suggest that there’s free lunches out there, but innovation is a way to break through some of these inherent trade offs that we see.
Lenox is the Tayloe Murphy Professor of Business Administration, Senior Associate Dean, and Chief Strategy Officer at the University of Virginia Darden School of Business.
MacDonald is the Senior Vice President of Product Development at Minneapolis-based 2DegreesCooler™.