hi Alex here how does sustainability
create value for a business this is a
critical question to answer if we are
hoping a business is going to make
positive progress on sustainability in a
previous video we looked at the work of
Bob Willard on the business case for
sustainability here is another tool that
can be helpful to answer this question
the sustainable value framework in 2003
the Journal of the Academy of management
executive published an article authored
by Stewart L Hart and Mark B Milstein
and titled creating sustainable value
while many businesses see sustainability
as a cost heart and Millstein argue that
when viewed through the right set of
business lenses sustainability can
actually help organizations drive value
creation while addressing some of our
most pressing challenges this is what
they define a sustainable value and put
together in a 2x2 matrix it is their
sustainable value framework the vertical
axis represents time with the present at
the bottom and the future at the top the
horizontal axis represents the
organization with the internal
perspective on the left and the external
perspective on the right according to
Hart and Millstein most businesses
create value in the four quadrants
defined in this matrix let's drill down
from a straight business perspective
nothing about sustainability yet
remember here is what they say in the
lower left quadrant internally and in
the near term managing costs and
reducing exposure to risk drives value
for business in the lower right
externally but also in the near term
making sure a business maintains
legitimacy and enhances reputation with
external stakeholders creates value to a
business can differentiate itself when
it has credibility with its stakeholders
moving into the upper left quadrant
innovating and repositioning itself in
light of changing conditions creates
value for the business that remains
mindful of the need to continually
create the product and services of the
future and finally in the upper right
quadrant the external dimensions of
future performance are addressed a clear
future growth path and trajectory
creates value for business by offering
new services or tapping into unserved
markets taken together these four
quadrants are one way to define how a
business creates value for its
shareholders let's see what happens when
we apply a sustainability overlay to
this business lens in the lower left
quadrant and gauging employees to find
ways to reduce waste of all kinds and
use resources more efficiently and
radically lower operating costs reduce
exposure to risk and engage and energize
the workforce in the lower right
quadrant engaging with the immediate and
extended value chain to develop product
stewardship and extend the life and
value of products and services and
enhance the reputation and legitimacy of
a business thus enhancing value creation
for the business in the upper left
quadrant applying a sustainability lens
can drive innovation and reposition the
business by helping it to develop
sustainable competency identify the new
skills
product and services that will be
required in a resource constrained
society and finally when charting a
future trajectory and communicating a
vision for the future a business can
define a clear sustainability vision for
itself thereby facilitating competitive
imagination and providing guidance
regarding organizational priorities this
in turn can help meet unmet needs and
identify new markets including those
previously under or unserved so business
is wondering if and how they should
embed sustainability into their business
strategy can use this framework to
determine their activity in each of the
four quadrants identify whether there is
an imbalance in their portfolio of
activities
where and how the firm is best
positioned to take action then I can
develop a set of initiatives designed to
balance the portfolio of activities and
create new value for the business while
responding to the sustainability
challenge there you have it
Hart and Millstein sustainable value
framework stay tuned for future videos
on additional tools to help businesses
capture the sustainability value
proposition if sustainability is
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