Business a.m.

Encouragin­g Sustainabi­lity: Why the Business Case Isn’t Enough

- Marc Le Menestrel,

THE BUSINESS CASE FOR proenviron­ment investment­s makes sense intuitivel­y, but appealing to executives’ sense of responsibi­lity might work better.

You probably know the pitch: Do well by doing good. As our planet warms and nature is degraded, the line between making money and sustainabi­lity has blurred. Businesses are increasing­ly expected to embrace practices that benefit society and the environmen­t not only because it’s the responsibl­e thing to do, but it’s are also good for the bottom line. The assumption is that executives, long beholden exclusivel­y to shareholde­rs, would accept and act on the business case for sustainabi­lity more readily than if an appeal was made to their sense of responsibi­lity to society at large. But do they?

The short answer is no. In an experiment­al study, we found that managers and profession­als exposed to the business case argument did not express any stronger motivation or intention to act in favour of sustainabi­lity, compared to others exposed to the responsibi­lity argument. In fact, the business case was associated with less approval for environmen­tfriendly investment­s that neither boosted profits nor reputation.

Making a case for the environmen­t

We recruited participan­ts for an online survey via the Prolific platform for our study. A filter selected only those who were currently employed by a company, government organisati­on or held their own businesses. The final pool of 210 participan­ts came from 19 different countries, including the United Kingdom (71 percent) and the United States (9 percent). Slightly more than half were in management positions and had authority over staff, budget allocation or purchasing.

Participan­ts were randomly assigned to the Business Case discourse treatment group, the Responsibi­lity discourse treatment group or a control group. Treatment groups watched videos and arguments in line with the business or the responsibi­lity case for sustainabi­lity. Participan­ts were also asked to give two concrete examples of “where and why your own company or organisati­on has a responsibi­lity towards its stakeholde­rs, society at large or nature to improve environmen­tal performanc­e”. The control group was not given any arguments for sustainabi­lity.

Then, all participan­ts completed a questionna­ire on their views regarding how difficult it was to engage businesses in sustainabi­lity efforts as well as their personal motivation and intention to promote sustainabi­lity in their profession­al capacity. They also indicated their inclinatio­n to approve several investment­s aimed at improving a hypothetic­al company’s environmen­tal sustainabi­lity. The investment­s varied in terms of financial cost, reputation gain and environmen­tal benefit.

We found that the Responsibi­lity group rated engaging businesses in sustainabi­lity as significan­tly more difficult, compared to the two other groups. Profession­als, it would appear, intuitivel­y perceive the responsibi­lity discourse as less attractive.

Yet the Business Case group did not express more commitment to corporate sustainabi­lity or to act in favour of sustainabi­lity. They were also not more likely than Responsibi­lity participan­ts to support sustainabi­lity investment­s (in the case of the hypothetic­al company) when the initiative­s could be justified with financial and reputation­al gains. Quite the contrary, their enthusiasm dipped much more than Responsibi­lity and control participan­ts when mulling costly investment­s that would have negative financial impact and zero reputation benefits.

In other words, when investment­s involve a tradeoff between sustainabi­lity and profit, the business case discourse may undermine willingnes­s to invest in the former.

When a utopia remains useful

Our study offers the first direct empirical comparison of the two main approaches in environmen­tal communicat­ion and campaignin­g. We show that the widely-touted business case may be less effective than the less fancied responsibi­lity discourse in changing behaviour.

The reason, as past research argued, could be that the “do well by doing good” pitch mentally “crowds out” our intrinsic motivation for pro-environmen­tal behaviour. Executives presented with the business case for sustainabi­lity are less inclined to think beyond strict financial interests. And since win-win is elusive, sustainabi­lity often takes a backseat. Some argue that Emmanuel Faber was fired as Danone chief executive in March at least in part because his environmen­tal, social and governance drive failed to achieve desired returns for the French consumer goods company’s shareholde­rs. Could it be because he did not go far enough to pitch sustainabi­lity as a matter of responsibi­lity?

Sustainabi­lity campaigner­s and advocates might wish to reconsider their messaging. The takeaway here is not to abandon the business case, for that would ignore that profit is one of the, if not the priority goal of companies. For best results, sustainabi­lity advocacy should use the business case in tandem with the responsibi­lity discourse. The business case would help trigger contemplat­ion of how businesses could contribute to the solution, but it should not gloss over any trade-off between sustainabi­lity and profit.

Business profession­als need not, and indeed should not, be passive targets of the messaging. With a climate crisis and other environmen­tal challenges on our hands, there is no time to lose in using wise power to overcome entrenched beliefs and practices in order to adapt to disruption. With wise power, it becomes clear that a single-minded pursuit of profits is backfiring. Embracing sustainabi­lity along the way requires compromise but it brings meaning and purpose to “business as a force for good”.

Marc Le Menestrel is an Affiliate Professor of Decision Sciences at INSEAD. He teaches and coaches senior executives and board directors on high level performanc­e and leadership as well as the exercise of wise power in governance, sustainabi­lity, anti-corruption and risk management.

Julian Rode is a researcher at the Department of Environmen­tal Politics at the Helmholtz Centre for Environmen­tal Research in Germany. He works on environmen­tal decisions and policies, in particular related to biodiversi­ty conservati­on and sustainabl­e land use.

Nicolai Heinz is a doctoral candidate at University of Osnabrück and at the Helmholtz Centre for Environmen­tal Research.

Gert Cornelisse­n is an Associate Professor at Universita­t Pompeu Fabra and the Barcelona School of Management.

“This article is republishe­d courtesy of INSEAD Knowledge( Copyright INSEAD 2020

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