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Fashion-wise speaking: Sustainability and the Business Case

Sustainability Business Case Talking about why it is of interest for businesses to behave more responsibly – or sustainably if you prefer the term – is a discussion that usually end up in one of 2 corners of the proverbial boxing ring: one the one hand are those that argue along the lines of ‘the right thing to do’; and on the other are those that focus on tangible benefits for behaving in a certain way.

Sustainable business case - battle of words The typical outcome of these verbal battles tends to be a ‘Check Mate’, whereby the pending argument is that of precisely how tangible the benefits could, would or should be. In other words: It is ultimately an argument about THE business case of responsible/sustainable/ethical business strategies and behaviour.
Fashion business and the fashion industry as a whole is no different to that. Maybe even worse as if with the excuse of ‘consumer requirements’ and ‘the current fashion trends’ many a discussion is pre-empted before it is even had.
Known cases such as Marks & Spencer – well analysed even from an academic point of view – are usually face as much praise as critique as was the case at their latest AGM in June 2013.

Let me hence ask the question: What do we know – not imagine or conjure – about the facts on the business case for sustainable/responsible/ethical business?

Status Quo: Facts about the business case for responsible business

The questions:
Does sustainability, or not, impact share price? Does it, or not, make for a profitable bottom line business case? Does it, or not, help increase efficiencies? Does it, or not, positively influence all those pesky production variables, that are so important to an industry that mistakenly takes growth in turn over and production quantities for ‘sustainability’ in their business models and strategies?

Fact No. 1:
The answer to all these questions is a decidedly undecided ‘it depends’. ‘It depends’ on whether we look for the generic answer, applicable across industries, and valid for pretty much every business we can think of. If that the mere additional benefits created for the bottom line were the measure, the answer – this has been researched over and again – would be: ‘A little bit’, but not a lot. According to the latest meta-evaluation, the statistical correlation is only around 0.13. In plain English this means that yes, the correlation between sustainability in strategy and operations and the bottom line profits does exist, but it is very weak.

Doughty Centre - The Business Case for being a responsible business

Cover of the Doughty Centre report 'The business case for being a responsible business'. Click on the picture to download.

Fact No. 2:
The answer changes dramatically, however, if we look at the larger picture, and consider other aspects than just the additional bottom line benefit. Many of which have very real, very tangible, and rather important financial impacts on the bottom line.
A report published in XXX by Cranfield University’s Doughty Centre (in collaboration with Business in the Community BITC) and entitled ‘The Business Case for being a responsible business ‘ – the academic paper of which is expected to be publish in late 2013 or early 2014 – found the following results:
Overall, we identified over 60 business benefits from the research which, when sorted by relevance and description, was clustered into seven key business benefits from being a responsible business.

  1. Brand value and reputation
  2. Employees and future workforce
  3. Operational effectiveness
  4. Risk reduction and management
  5. Direct financial impact
  6. Organisational growth
  7. Business opportunity

The order of this list represents the frequency with which these benefits were cited from both business
examples and academic papers – i.e. Brand value and reputation was most often cited, Business opportunity
least often cited.
We identified two business benefits that have only recently started to emerge and are more prominent in
companies that have already started the journey to being a responsible business. The criteria for these future trends are that they only recently started to be cited but have grow in frequency of citation each year since. We therefore suggest these benefits can be better realised as companies become more sophisticated in their efforts to be responsible:
We can say with confidence that the seven current benefits and two future trends are what most businesses are realising as they become more responsible organisations.

What does do these results mean?

One of the interesting details that is not apparent in any of the above documents, and stems from a personal conversation with Nadine Exeter – one of the researchers behind the Doughty Centre report – is: most of the companies they analysed originally embarked on their journey for one of two reasons:
One – out of conviction (aka ‘doing the right thing’), hoping to make some money off their activities that would at least result in a black zero over all.
Two – they were following leaders in their industry and had come under pressure, either by stake- or shareholders.
All of them expected but one benefit from it all – which one would depend on the company – but surprisingly found that ‘unexpectedly’ they got results in HR, in operations, in product innovations and other areas.

With that, the discussion about the business case for corporate responsibility should hence come to an end.
There is one caveat however: None of this works within what common reporting terms are (3, 6, 12 months), which – typically and for example may be aimed at turning a company around, from losses suddenly into profits.

The research has looked at actions that have been put in place successively over a relatively long time-span: 2001 to 2011 – hence a decade.
This said: The companies in question have generally outperformed their peers from the 2008 recession onwards … but this doesn’t hide the fact that it is a stable commitment that is a prime ingredient in making responsibility/sustainability/ethics work and profitable.

In other words: it is the values that are lived and breathed within the company that ultimately are the make or break factor in this context.

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