Sustainability objectives & diminishing returns? Instead, super size them!

Sustainability photo bomb?

You probably are asking questions such as: "Why include photos of Nutella and Maker's Mark? What do they have to do with sustainability and diminishing returns?" Did these manufacturing lines photo bomb what could be flowers in a meadow, puffy white clouds, and birds flying overhead? To understand my choice of images, please try the following multiple choice answers:

1. Food & Beverage is the only industry affected by a connection between sustainability and the law of diminishing returns
2. Reading articles posted on LinkedIn are much more palatable with sweets in hand
3. I'm hungry and thirsty as I type this
4. In changing their product recipes, Nutella and Maker's Mark provide great parallels for how a company downsizing its sustainability objectives and limiting its definition of quality may unknowingly restrict what it can achieve and harm its brand reputation in the process (Quick sidebar: Remember the product launch fail that was New Coke?)

Okay. So I probably made this question easier by offering greatly differing answer options. Drum roll please... If you said 4, you're correct! Your bag of confetti and gold star should arrive by mail within 2-3 weeks.

My real point is that an organization cannot become an industry leader or cultivate business value without understanding the importance of establishing growth goals and taking positive actions--from daily operations to corporate sustainability, and everything in between. Therefore, companies should ask the following question of itself and then utilize the four steps below to reorient its approach to sustainability.

How should we realign our corporate sustainability initiatives in response to diminishing returns?

Step 1: Recognize the asymptotic curve of diminishing returns

Think back to Econ 102 and try to remember the concept of 'diminishing returns.' Its textbook definition is: "when any factor of production (e.g. labor) is increased, while other factors (e.g. capital, land) are held constant in amount, the output per unit of the variable factor will eventually diminish." Your professor probably demonstrated the concept with an asymptotic curve of the ratio of inputs to outputs, decreasing from left to right but never intersecting the X-axis. In laymen's terms, there's only so much blood you can squeeze from a stone before even increasing effort yields decreasing output.

Applying this concept to sustainability means that employing additional effort and resources to shrink negative footprints--whether in units of natural resource consumption or harmful emissions--will be successful early but yield smaller and smaller improvements over time. The asymptotic curve eventually will nearly flatten as it approaches zero impact but can never reach that target. There's a limit to the "sustainability blood" that you can squeeze from the efficiency stone.

Adopting eco-efficiency as the only goal for sustainability initiatives can prevent an organization from achieving positive impacts or more comprehensive notions of sustainability.

While there are gains to realize from an eco-efficiency approach, it only helps reduce unnecessary waste within a bloated system. Such savings exemplify the low-hanging fruit of sustainability. If you're not already working toward those improvements, you're unnecessarily leaving money on the table. How can real innovation and leadership arise from such a perspective?

Step 2: Envision your sustainability goals & then reenvision them

Have you ever stopped to listen and really hear the language used in corporate sustainability? Consider some examples:

• How can we reduce our environmental footprint?
• How will we be more efficient in our use of natural resources?
• Where are opportunities to decrease workplace hazards?
• What can we do to shrink our negative reputation among stakeholders?

Notice anything? There definitely is a reductionist perspective when addressing the environmental and social impacts of organizational activities--from inputs, to throughputs, to outputs. Don't we want to grow revenues, profits, customer satisfaction, product performance, the quality of service delivery, business value, and positive reputation? Can we rephrase our sustainability objectives using a growth perspective?

Step 3: Reboot your sustainability language

"Our Pathway to Zero!" How many organizations and consultants have established such a mantra for their social responsibility and environmental trajectories? Yet, we just noted how limited and uninspiring can be a Race to the Bottom. It's time to reorient your sustainability initiatives and reboot your sustainability language.

How do we flip a sustainability approach on its head and still have defined goals for which to aim?

Rather than adopting only an eco-efficiency agenda and reductionist perspective, organizations should reorient their concepts to marry eco-efficiency (of negative impacts) with expansion (of positive impacts) to prove that growth can be good, both shareholders and stakeholders can be gratified, and synergistic effects can enable 2+2 to equal 5.

To borrow from my work at MBDC, CFA Institute, and Trucost, we can rewrite our goals for sustainability, natural capital, and human capital to be growth-minded alongside our financial goals. We can revise the sample objectives above simply with a few quick edits:

• How can we increase our positive environmental footprint?
• How will we be more effective in our use of natural resources?
• Where are opportunities to enhance workplace satisfaction?
• What can we do to improve our favorable reputation among stakeholders?

I know; rocket science it's not. However, 20 years of delivering a positive, growth message around sustainability to clients, conference attendees, and other audiences have clarified the benefit of helping people view challenges as opportunities, bringing creativity and problem-solving to the fore, and turning our objectives upside down... literally.

Step 4: Super size your objectives

Linking eco-efficiency and expansion objectives for sustainability can provide the best of both worlds--and leverage one another's achievement at the same time.

In an article for GreenBiz, Tish Tablan and I recommended that companies change their view of energy consumption. Of course, energy efficiency is a valuable goal in itself--again, not wasting money and resources is a good thing--but minimizing energy consumption also should be leveraged toward maximizing the use of renewable energy. Quoting our article:

"...energy efficiency represents a vital path towards becoming renewably powered, as it reduces the amount of energy required to be 100 percent renewable."

No company wants to try to boil the ocean as part of its daily operations. In contrast, heating only a thimbleful means that the goal is much easier to reach.

Although this approach isn't radically innovative or impossibly complex, it provides a means to lead one's industry sector, create business value, save resources, and build reputation, as well as attain and clearly demonstrate the concept of 'increasing returns' through sustainability.

If you're using positive, growth goals for your sustainability initiative, then go ahead and super size them!

Back to Nutella and Maker's Mark

The decisions by Nutella and Maker's Mark to "fine tune" and water down their recipes, respectively, are a parallel to my point about sustainability and diminishing returns. These Food & Beverage companies inadvertently signaled to the marketplace that efficiency and ingredient prices eclipse customer satisfaction and ingredient quality. Unfortunately, Nutella and Maker's Mark aren't alone in such decisions.

Similarly, if a company adopts sustainability goals that prioritize eco-efficiency over positive growth, rather than linking and leveraging these related concepts, then it stands to lose business value unintentionally. Truly, downsizing your sustainability objectives and limiting your definition of quality--without including improvements to natural capital, human capital, environmental excellence, and social responsibility--can restrict what is achievable and harm your brand reputation in the process.

Ultimately, an organization cannot garner industry leadership, innovation, and business value if it doesn't first conclusively engage its stakeholders by taking expansive, positive actions and demonstrating its commitment to quality--whether in pursuit of sustainability or any other corporate priority.

Please consider reading more posts on my Sustainably Defined blog and Twitter account.