This series provides an overview of the concept of sustainability, why family businesses need to think differently about it, the powerful benefits of corporate sustainability, and some concrete steps that family businesses and rising generation leaders can take.
For family businesses, there are myriad benefits to implementing a corporate sustainability strategy. When integrating sustainability practices, a family business should consider the quadruple bottom line—economic success, social responsibility, environmental sustainability, and generational continuity. Taking this approach can spur innovation, generate greater business value, and positively impact family unity, among other benefits!
Below are examples of individual actions family companies have taken on corporate sustainability.
#1 – Explore family values
Encourage all generations to participate in reflecting on their family values. What does sustainability mean to the family, its investments, the core business, and to the greater community?[1] This will help nurture family unity across generations and promote long-term success.
Estée Lauder is a 3rd generation, American multinational manufacturer of skincare products. The family is focused on its responsibility to the next generation and holds its family values of ethics, integrity, generosity of spirit, and commitment to the communities where they work as central to their business. In thinking about future generations and what sustainability means to both the family and its business, The Estée Lauder Companies created a Citizenship and Sustainability strategy. The company is committed to sourcing responsibly, reducing its water usage and waste production, and reaching a net zero carbon goal by the end of this year. [2]
#2 – Develop responsible sourcing and resilient supply chains
6th generation American agricultural products business, Cargill, has invested in technology development and partnered with farmers to develop sustainable agricultural practices to build resilient communities and support the next generation of farmers. This has resulted in data-driven techniques to advance seed production and crop yields.[3]
To address threats related to climate change in their supply chain, 4th generation American confectionary, food and pet care company, Mars, invested in Rainforest Alliance certification to assist farmers with climate volatility, decrease land degradation, and develop resilience to droughts, which ensures the enduring supply of their agricultural commodities. Furthermore, certification improved land productivity and increased net income.[4]
#3 – Invest in energy efficiency, regenerating natural resources, and renewable energy
4th generation German multinational automaker, BMW Group, has sustainable energy projects around the world that contribute to its top ranking in the Dow Jones Sustainability Index. The BMW Group currently meets 51% of its global energy needs through renewable sources.[5]
Swedish company, IKEA, the world’s largest furniture brand now in its second generation, has committed to becoming climate positive, meaning that the company will remove more carbon from the atmosphere than it produces, by using only renewable electricity and heat in its operations and by producing renewable energy.[6]
#4 – Reduce material waste
Ayala Group, in its 8th generation, is the Philippines’ oldest and largest conglomerate with a portfolio of diverse businesses, including water infrastructure. Ayala Group worked with Metro Manila’s water distribution system in a private-public partnership to reduce waste in the Manila Water business and provide quality water to the most vulnerable populations in the Philippines. Through this initiative, the company achieved $364M in revenues and $132M in net income.[7]
2nd generation American sports apparel company, Nike, embedded sustainability into its innovation process when it launched the $1 billion-plus Flyknit line in 2012. Flyknit reduces waste by 80% compared with regular manufacturing processes for footwear, requires minimal labor, and generates large profit margins. Since 2012, Flyknit has reduced 3.5 million pounds of waste and substituted recycled polyester for yarn, diverting 182 million bottles from landfills. Nike has scaled the Flyknit platform to generate over $2 billion in revenue.
#5 – Shift to new business segments
G1 co-founder of the 5th generation American forestry and logging company, Port Blakely, advanced the practice of sustainable forest management in the 1940s. Continuing in this tradition, in the Winston Creek Forest Carbon Project Land trees are harvested at 70 years instead of 35 years. Only 1.5% of the land is harvested to maximize each tree’s carbon sequestration ability. This creates long-term cost efficiencies, environmental benefits, and a new product (carbon credits) that the company can monetize, generating several millions of dollars for the company in return.[8]
#6 – Create a new business model
A 3rd generation family member of the Jebsen & Jessen South-East Asia (SEA) manufacturing company studied how to transform his family business into one that embraced environmental management. In 1995, with the support of his family, G3 joined the company; today, he is its Chairman. In 2011, the business was the first in the region to achieve carbon neutrality, to invest in renewable energy to power their manufacturing plants, and to make the change to LED lights in their offices.[9]
#7 – Give the next generation opportunities to explore new sustainable ventures
A 3rd generation family member of the German meat production company, Recker Convenience, founded LikeMeat, a vegan meats brand, within his family enterprise. He believed he could create a line of business that was environmentally sustainable, used fewer natural resources, polluted less, and was more lucrative to produce than traditional meat. With the support of his family, the vegan meats venture allowed him to create a new, lucrative business for his family enterprise. LikeMeat products are now in over 4,000 supermarkets in Europe.[10]
G1 of the Singbee Group, a crystal manufacturing company in China, discovered that the family’s core business of crystal glass production was increasingly polluting its hometown. Therefore, the founder decided to diversify into manufacturing LED lighting, which does not contain toxic chemicals and is clean to produce. He brought his daughter into the business to further explore this sustainable venture. Due to the environmental externalities of their original core business, crystal glass production, the Chinese government eventually shut down most of their crystal operations. Fortunately, the family transitioned into its new environmentally friendly Singbee Lighting business.[11]
Conclusion
Corporate sustainability has a role in every family business. Strategically, it can help stimulate innovation, drive growth, strengthen public image, decrease environmental impact, increase social responsibility, and support generational continuity. There are a multitude of benefits and opportunities for next generation family members by engaging in corporate sustainability, including:
- Opportunities for meaningful contribution to the Family Enterprise
- Building leadership and teamwork
- Fulfilling family core values
- Supporting Family Enterprise mission and vision
- Exploring new ventures
- Reinforcing stewardship with a focus on purpose and adding societal value
[1] Dannis Jaffe, Isabelle Lescent-Giles, Jamie Traeger-Muney, “Social Impact in Hundred-Year Family Businesses: How Family Values Drive Sustainability through Philanthropy, Impact Investing, and CSR,” Merrill Center for Family Wealth, July 2019, 74.
[2] Nancy Mahon, “Citizenship and Sustainability at The Estée Lauder Companies,” May 1, 2017, https://medium.com/@cecptweets/citizenship-and-sustainability-at-the-est%C3%A9e-lauder-companies-2a3919f4059a.
[3] Ram Nidumolu, C.K. Prahalad, and M.R. Rangaswami, “Why Sustainability is Now the Key Driver of Innovation,” Harvard Business Review, September 2009, https://hbr.org/2009/09/why-sustainability-is-now-the-key-driver-of-innovation?referral=03759&cm_vc=rr_item_page.bottom.
[4] Tensie Whelan and Carly Fink, “The Comprehensive Case for Sustainability,” Harvard Business Review, October 21, 2016, https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability.
[5] Here are two examples of the company’s sustainable energy projects. In South Carolina, USA, a methane biogas plant supplied by a local landfill supplies 50% of the production facility’s energy needs. In 2016, energy savings totaled $3.5 million per year. In Pretoria, South Africa, BMW Group operated the first profitable biogas power plant in Africa in partnership with a local organic cattle farm, which generates 30% of the energy needs for its local production facility.
[6] “Business unusual: the shift to ‘carbon neutral,’” United Nations Environment Programme, accessed May 22, 2020, https://www.unenvironment.org/news-and-stories/story/business-unusual-shift-carbon-neutral.
[7] This was not a corporate social responsibility project or a philanthropic endeavor but a corporate sustainability strategy that was economically viable and addressed social and environmental challenges. The Manila Water business more efficiently distributed water to those in need while reducing water waste.
[8] “Winston Creek Forest Carbon Project,” Port Blakely, accessed May 12, 2020, https://portblakely.com/assets/uploads/Winston_Creek_Forest_Carbon_Project.pdf.
[9] “Polaris – Building a Flourishing Family Business: Volume 2 – Ideas, Innovations & Inspiration from our Network & Beyond,” Family Business Network, p. 20-23, November 2016, https://www.fbn-i.org/sites/default/files/2019-05/FBN-2016_FA_210x285mm_Single-Pages_HR.pdf.
[10] “Polaris Resource Kit: Volume 1 – Tools and Inspiration from Across our Network for Building a Sustainable Family Business,” Family Business Network, p. 30, 2015, http://www.fbnsummit.org/2015/montreux/wp-content/uploads/Resource-Kit_8Octv2_Web_LR_FINAL.pdf.
[11] Ibid, p. 32-33.
An international champion of a low-carbon future and a net zero economy, Ana Tavares Leary is a published expert in climate change, international business, and sustainable development. For over 10 years, she has made a significant impact as a consultant managing over 60+ international projects for family-owned businesses, biotech, and environmental sciences.
