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The Next Phase of Business Sustainability

Business sustainability has come a long way. From the dawn of the modern environmental movement and the establishment of environmental regulations in the 1970s, it has become a strategic concern driven by market forces. Today, more than 90 percent of CEOs state that sustainability is important to their company’s success, and companies develop sustainability strategies, market sustainable products, and services, create positions such as chief sustainability officer, and publish sustainability reports for consumers, investors, activists, and the public at large.

This trend will not abate anytime soon. Surveys show that 88 percent of business school students think that learning about social and environmental issues in business is a priority, and 67 percent want to incorporate environmental sustainability into their future jobs. To meet this demand, the percentage of business schools that require students to take a course dedicated to business and society increased from 34 percent in 2001 to 79 percent in 2011, and specific academic programs on business sustainability can now be found in 46 percent of the top 100 US master of business administration (MBA) programs.

For all this interest, we should expect the world to become more sustainable. But problems such as climate change, water scarcity, species extinction, and many others continue to worsen. Sustainable business is reaching the limits of what it can accomplish in its present form. It is slowing the velocity at which we are approaching a crisis, but we are not changing course. Instead of tinkering around the edges of the market with new products and services, businesses must now transform it. That is the focus of the next phase of business sustainability, and we can see signs that it is emerging.

The first phase of business sustainability, what we at the University of Michigan’s Erb Institute call “enterprise integration,” is founded on a model of business responding to market shifts to increase competitive positioning by integrating sustainability into preexisting business considerations. By contrast, the next phase of business sustainability, what we call “market transformation,” is founded on a model of business transforming the market. Instead of waiting for a market shift to create incentives for sustainable practices, companies are creating those shifts to enable new forms of business sustainability.

Enterprise integration is geared toward present-day measures of success; market transformation will help companies create tomorrow’s measures. The first is focused on reducing unsustainability; the second is focused on creating sustainability.1 The first attends to symptoms; the second attends to causes. The first focuses primarily inward toward the health and vitality of the organization; the second expands that focus to look outward toward the health and vitality of the market and society in which the organization operates. The first will help future leaders get a job in today’s marketplace; the second will help them develop a target for a lifelong career. The first is incremental, the second transformational.

Changing the way we do business is essential to addressing the challenges of environmental degradation. The market is the most powerful institution on earth, and business is the most powerful entity within it. Business transcends national boundaries, and it possesses resources that exceed those of many nation-states. Business is responsible for producing the buildings we live and work in, the food we eat, the clothes we wear, the automobiles we drive, the energy that propels them, and the next form of mobility that will replace them. This does not mean that only business can generate solutions, but with its unmatched powers of ideation, production, and distribution, business is best positioned to bring the change we need at the scale we need it.

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