The world is changing. Challenging economic times, volatile world events, a deteriorating environment, a growing social divide and fast-changing technology are leaving businesses more vulnerable than ever. There is an urgent need to adapt to risks that are inevitable (such as those linked to climate change). But, it is harder to predict where new risks may come from.
Future-proofing is the process of anticipating the future and developing solutions to minimize the negative effects while taking advantage of the positive effects of shocks and stresses due to future events. At the heart of any future-proofing strategy needs to be a commitment to contributing to the sustainable development of our planet.
The process of starting a business has become much faster, but the mechanisms of failure operate more quickly as well. Through social media, you can effectively communicate about new products and services. Yet those same channels will even more quickly spread news about consumer dissatisfaction, corruption scandals, environmental destruction and community conflict.
Overwhelming research evidence now confirms the fact that sustainable business is good business and can create value for society at the same time as increasing profits. At the centre of that relationship lies innovation and companies that want to create profits with purpose will recognize the need for ongoing innovation.
Indeed, innovation around sustainability can provide companies with a new competitive advantage at three possible levels: products, processes, and business models.
- To create value, the focus needs to be on sustainable alternatives based upon customer or societal needs and aspirations, resulting in new business opportunities for innovative products and services.
- Companies that have redesigned their processes focus on improving their entire operation (including the whole value chain) with an emphasis on efficiency, competitiveness and inclusivity.
- Sustainable business models, on the other hand, will significantly impact the way business is conducted and, the company’s ability to deliver new solutions, aligned with a new business philosophy.
Whatever approach you take, the key to staying in business in the long run is innovation and risk management. Yet, in many organizations, innovation often remains incremental, rather than fundamental and systemic. But, as social and environmental issues continue to increase in importance, incremental innovation will become less effective in enabling companies, industries and economies to successfully adapt and survive in the future.
Many organizations have elements of environmental, social and governance (ESG) risk management in place. But, they are often not as robust as they need to be to deal with risks that are much less predictable. Too often they focus on the extrapolation of past risks, rather than predicting future possible risks.
There is a need for companies to take a much broader perspective to risk, moving from being reactive and compliance-driven to being proactive and predictive.
Thinking strategically about risk and taking a broader, deeper, more rigorous approach to risk can create agility and focus, both in the way you respond to risks and the way you innovate to exploit opportunities. This will bring competitive advantage and, with it, the ability to plan ahead with more certainty, in turn, future-proofing your business.
Companies therefore, need an approach that can anticipate ESG risks and at the same time build innovation structures. This is the only way to future-proof sustainable business. Businesses need an approach to manage this process that will feed into a future-proofing strategy.
At the heart of any future-proofing strategy needs to be a commitment to contributing to the sustainable development of our planet.
Here is my top ten list for developing a strategy to future proof your business:
- Establish a social purpose: Companies that will survive in the long run will have to do more than make profits. Stakeholders want to see societal contributions and shared value. Embed a social purpose into the company’s competitive positioning. Align your assets and expertise to meet social and environmental needs. Make sure that you are known not only for the products and services that you provide but also for the contribution you make to people, communities and the environment.
- Zoom out and track the trends: Some of the trends that are shaping the future are not difficult to see. Climate change, water, labour issues and human rights have consistently ranked highly in the annual research “Tracking the Trends” undertaken by CSR Asia. Stay on top of these big issues since they tend to have a huge influence on regulation, consumer sentiment and the campaigns of big NGOs. Periodically zoom out from the running of your business to looking at the issues shaping the future.
- Track influencing factors and predict future demands today: Be aware of the triggers and the stakeholders that can impact changing societal expectations. Social media has resulted in habits changing dramatically and this has affected lots of different businesses. You need to watch out for such influencing factors and influencing people that can indirectly impact your business. Make yourself aware of the developments happening around you even if those are not related to your industry. People cannot always tell you what they want, you have to anticipate change. This needs some imagination and experience with the trends of industry you work in.
- Listen to your stakeholders, but don’t always believe them: Ongoing stakeholder engagement is key to uncovering the aspirations of people for the future. Take time to talk to younger people, in particular. Always take what your stakeholders tell you seriously and respond to their aspirations. But don’t believe them when it comes to predicting the future. Get to know your stakeholders well, with deep insights into how they think, and then try to imagine how they may behave in a very different kind of future world.
- Evaluate risk in the future: You won’t be able to predict the problems that might occur in the future but you can certainly take some steps to better prepare yourself. Find the risks or possible point of failures for your business. These risks could be in areas like people, systems, legal compliance or governance. But even more difficult to predict are the risks that arise because of changing aspirations of young people, conflicts over resources, runaway climate change and human rights abuses. Develop scenario planning techniques and try to be your own futurologist.
- Create a favourable place for innovation to thrive: You cannot win by following the leaders, you have to innovate. Innovation requires creativity and trying out new ideas for products, services, processes and business models. That means encouraging new ways of meeting societal needs and new ways of operating, and it means not punishing mistakes that occur as the result of much needed experimentation. Create agile management teams that thrive on change.
- Develop strategic partnerships for co-creation: Work with external partners, with particular expertise where this can create synergies. Recognize that impact is most likely increased when people work collaboratively rather than competitively. Identify opportunities for collective impact. Contribute to multi-stakeholder initiatives that can focus on creating systemic change that can create value for businesses and societies.
- Bring in outsiders to challenge your world view: The greatest risk to any business is institutional blindness, becoming seduced by one’s own views and opinions. Seek out advice from experts, consultants, innovators – people who think very differently to you and others in your company. Include them in key strategy discussions. Create future oriented workshops to make sure your business increases its chance of surviving into the future.
- Shape your own future: You do not have to stand-by and watch the world change around you. There is a role for businesses in being a change agent. This means focusing on your social purpose, developing a theory of change, communicating through bold thought leadership and being part of shaping those future trends. You too can be an influencer.
- Move from the brand and back to the purpose: Just because a brand has been around for decades doesn’t mean that it’s right for today’s marketplace. Change has never been so fast. But you need to make a contribution to sustainable development by managing ESG risks and creating innovative, profitable solutions. After all, the best way to become a billionaire is to help a billion people.
The 2017 CSR Asia Summit, taking place 26 & 27 September has as its theme “Future Proofing Sustainable Business”. You can hear about many of the issues raised in the article from leading practitioners and thought leaders. You can find more details by visiting the Summit website here.
Richard Welford is chairman of CSR Asia. This article is republished from the CSR Asia blog.
Thanks for reading to the end of this story!
We would be grateful if you would consider joining as a member of The EB Circle. This helps to keep our stories and resources free for all, and it also supports independent journalism dedicated to sustainable development. It only costs as little as S$5 a month, and you would be helping to make a big difference.