21st Century Sustainability Speaks the Language of Natural Sciences

WE NEED TO ESTABLISH A NEW PARADIGM ON WHICH TO BASE COMPANIES, EXTENDING THEIR RESPONSIBILITY BEYOND TRADITIONAL PROFIT BOUNDARIES, AIMING FOR RESILIENCE AND USING BUSINESS MODELS THAT ARE IN BALANCE WITH ECOLOGICAL CYCLES

by Stefano Pogutz, Dept. of Management and Technology, Bocconi
Translated by Richard Greenslade


In 2019, what does it mean for a company to face the challenge of sustainability ? Since the United Nations Conference on Environment and Development in Rio, back in 1992, the business world has been called to play an active role in reorienting production and consumption patterns, so as to reduce environmental and social externalities. The issue of sustainability has in fact turned into a major and strategic corporate issue, which today’s chief executives and business leaders have put at the top of the agenda.
 
Despite their efforts, the glass remains more than half empty. Climate change, biodiversity loss, acidification of the oceans, but also workers’ exploitation and wealth inequality, and especially human rights failures and violations. We are not winning these challenges. We must acknowledge that the efforts made to date have not significantly altered the DNA of business companies: short-term orientation, zero-sum competitive logic, and the spasmodic search for profitability remain the rule. In spite of good intentions, sustainability has not led to a transformation of the ways in which companies are organized and managed and perceive their mission in society. Similarly, the market mechanisms which regulate the use of natural resources have not been altered. In fact, the economic system still operates as if it were isolated from the materiality of nature, and thus works as if it ignored the finiteness of environmental resources and planetary constraints. Thus if firms and the disciplines that study them have not been able to provide adequate solutions, where should we look for answers?
 
We need to look beyond the roots of economic thinking. Modern ecology and the science of sustainability offer new and interesting theories to reinterpret the relationships between individuals and organizations, society and nature. The idea that human beings, private companies and public institutions are interdependent and co-evolve as part of wider socio-ecological systems is a staple of environmental science today. Introducing this approach also in economic and management theories means taking note of the fact that companies are embedded in a multi-dimensional system: they generate physical impacts through the transformation of raw materials and other natural inputs, but above all crucially depend on the availability of the services that ecosystems perform (from climate regulation to stable fish stocks in the oceans, from bee pollination to the fertility of soils). At the same time, accepting these conditions must lead us to study of socio-ecological systems to develop new modes of production and consumption which respect the properties, dynamics and limits that characterize these systems. For example, ecological phenomena develop at spatial and temporal scales that are of a different magnitude with respect to the time horizons of managerial organizations and financial markets.
 
Maintaining diversity and attention to connectivity between the elements of the system are in contrast with the objective of productivity maximization and the principles underlying the globalization of markets. Consider the case of the plastic pollution of the oceans. The accumulation of pollution by micro-plastics is the result of the evolutionary dynamic of complex systems emerging from the interaction between local and global processes within short and long time-scales. Our economic and business paradigm has driven the making of this socio-ecological disaster, without enabling us to understand environmental risks, map their evolution, and identify solutions.
 
Resilience is one of the most important and distinctive properties of socio-ecological systems. Basing corporate sustainability on the concept of resilience means rethinking strategies and operations in a much more radical way than what has been achieved to date. It is about extending the responsibility of the company beyond traditional boundaries, by embracing the entire value chain and cooperating with those operating upstream and downstream in the production and logistic networks, because that’s where the most significant environmental and social problems are generated, and, last but foremost, by developing innovative business models that are in actual balance with ecological cycles. Sustainability in the 21st century therefore requires a profound transformation of the economic and managerial paradigms that today guide corporate behavior and economic decisions, by incorporating the systemic vision proposed by the natural sciences.