What does growth look like?
Growth - always a force for good?
The world craves growth. The developing world needs growth to pull people out of poverty. The developed world needs growth to tackle mounting unemployment and large government deficits.
But is the growth we’re pursuing doing more harm than good? Rapid booms are followed by shattering busts. Pollution is escalating. Precious resources are being drained away.
If we do need to look at growth in a new way what would it look like?
Does the world need growth?
Growth sounds good. But is it always good?
Is growth good when it eats up resources and the community pays a bigger price (e.g. through adverse impacts on health) than the financial gain it generates? Is growth good when one company’s gain in market share is another’s loss? Is growth good when overall wellbeing does not change or there is no increase in GDP?
Good growth is real, inclusive, responsible and lasting. Good growth benefits everyone – consumers, communities, the economy and shareholders alike. Good growth makes good business sense as companies perform better in communities that are stable, healthy and prosperous. So, what do we mean?
Real growth generates wealth rather than simply shifting market share from one company to another (what’s called ‘zero sum growth’). Innovation drives ‘real’ growth by providing solutions that meet people’s needs and aspirations e.g. affordable sanitation for the urban poor creates new a win:win for the company and the community.
Growth that benefits a few at the expense of many just isn’t good. Inclusive growth benefits everyone. For example, mineral rich economies need to balance creating an environment in which businesses thrive with a desire to make sure communities benefit too.
Responsible growth looks at the total impact of doing business, rather than just the profits from business. Financial return can’t be gauged in isolation from the tax contribution, environmental impact and the effect on community stability, health and prosperity.
Lasting growth invests in the future and considers returns over the long-term. For some, meeting short term targets (e.g. based on share-price increases or dividend payments), shows that a company is in good shape and on track. But if this means investment opportunities are being missed, others will think it short sighted. If we only look ahead six months or three years, who will commit to investment that sees strong returns over ten? Who has the confidence and the vision?
But what do you think makes for ‘good growth’?
Can we really have it all or will we have to accept trade-offs and sacrifices? How will we know that we’re doing the right thing?
What is the risk of doing nothing?
Future proofing your business
“My primary responsibility is to my shareholders. If they’re happy then I’m doing well”. But how well are you doing? Could you be failing in your duty to protect shareholder interests if your business is not sustainable over the long-term? What about your responsibilities to the customers that buy your products, your suppliers that provide components or raw materials, and communities that supply your workforce?
Do you need to think about your business in a different way? Your business generates value that extends beyond its share price, when things go well or not it’s not just shareholders who feel it. So what are the risks of ignoring the developments that are reshaping how businesses operate and how they measure success?
- The materials you use could run out. Resources that were once taken for granted, notably water, now have a price. Plants have had to close and even whole industries may now be at risk as water scarcity becomes an increasing problem. Smart businesses are transforming the way they manage their supply chains and use of resources.
- If you don’t contribute to the communities in which you operate, they might not have the skills or financial resources to work for you or buy your product. Smart businesses engage with their neighbourhoods, investing in, for instance, education and health initiatives.
- Your licence to operate depends on the good will of all your stakeholders (your customers, communities, employees and governments). In the era of social media and heightened consumer activism, customers could turn their back on your products if you fail to meet your basic social, environmental, economic and tax responsibilities or governments might not give you a permit to operate.
Business needs to look at the big picture – open the curtains wide and take in the whole view. There’s a growing need to understand an organisation’s footprint, how its activity has an impact on the environment, society and economy.