The ‘profit-at-all-cost’ business model is fast becoming an out-dated one. Companies operating in today’s world can ill afford to ignore the increasing expectations by society for a more sustainable way of running a business, at the expense of their long-term profitability and longevity. Far-sighted companies such as Unilever, then, will have to craft new business models that incorporate profit and sustainability; with positive impact on people and the planet. Read more

By Nitin Paranjpe for Entrepreneurs in Forbes (8 April 2013):

We Need Business Models that Blend Profit and Sustainability

How do we deliver healthcare, education, nutrition, financial inclusion and other social goods in a sustainable manner to the populations that need them most? This article is part of “The Art and Science of Delivery,” an anthology of essays published by McKinsey & Company in honor of the 10th Anniversary of the Skoll World Forum—to be live-streamed April 10-12. It is the most recent installment of McKinsey’s ongoing series, Voices on Society, which convenes leading thinkers on social topics.

There was a time when the word “green” referred mainly to the environment. Today that canvas has grown to encompass a host of issues beyond resource utilization, including fairness, transparency, and equity. This green dynamo is gathering strength in the hearts and minds of millions, including many who are economically deprived and do not have access to better standards of living.

The international community has struggled to address these widespread concerns. We hear plenty of rhetoric about the importance of sustainability but do not get nearly as much action. Many companies and sovereign nations have remained passive because they fear that action will cause them short-term, personal pain in exchange for nebulous and generalized gains sometime in the distant future.

This tendency has produced a widening gap between how businesses work and how society increasingly expects them to work. It’s no surprise that surveys across the world indicate a rapidly declining public trust in business.

The 2012 Edelman Trust Barometer reported that fewer than one in five respondents believe business leaders will act ethically when confronted with difficult issues. The Occupy Wall Street movement, which emerged from the heart of the capitalistic world, is another indicator of the deep divide that has taken root.

At Unilever we recognize that existing models of economic growth are becoming increasingly unsustainable because we lack the resources to power them endlessly. Yet we must grow to meet rising demand as millions of formerly impoverished consumers start exercising their right to better living standards. Their needs cannot be brushed aside just because more developed segments of the global economy have overused or exploited the environment.

The answer lies not in condemning and slashing consumption but in finding new sustainable ways to meet demand. The new path must balance rising demand, scarce resources, and the growing power of consumers to hold companies accountable for their actions. The change will come sooner than we think. Who could have imagined that the frustration of a fruit-and-vegetable vendor in Tunisia would topple dictators in four countries? As our global CEO Paul Polman has noted, if national power structures can fall in a matter of days, brands and companies can disappear in nanoseconds.

Business leaders have every incentive to create sustainable growth models now. If we don’t do it, we’ll sink. Moreover, we believe companies that figure out how to grow sustainably will have a real competitive advantage. We have no reason to believe that pursuing sustainability is bad business. It can be a driver of huge success and simultaneously have a positive impact on people and the planet.

That’s why Unilever articulated the Sustainable Living Plan, which committed us to developing a new model of business that would decouple growth from resource use and have a positive impact on society.  The plan commits Unilever to growing our business while:

•          Halving our environmental impact

•          Encouraging a billion global consumers to adopt healthier, more hygienic lifestyles

•          Ensuring that 100 percent of our agricultural raw material comes from sources that independent agencies have certified as sustainable

When these goals were first announced in late 2010, they generated great excitement within Unilever—but also a degree of nervousness and concern. Many of us wondered how we would get there. Others feared that these commitments would act as constraints that could compromise our competitiveness.

But our plan was public; the commitments had been made. This created a sense of urgency and a new mind-set. More than two years into the journey, we are convinced that it’s indeed possible to do good business and also achieve our broader societal goals. Today, our teams are more energetic and enthusiastic than ever.  We are selling more Lifebuoy soap than before while promoting good health. By fighting preventable diseases, we are giving our businesses a new sense of purpose and direction.

The success of Hindustan Unilever’s Pureit range of water purifiers shows that it’s possible to build an entirely new business segment by providing cheap, clean drinking water to millions of consumers who lack electricity or a flowing tap. Both Unilever and our customers profit as a result. The Shakti program is expanding our reach in the media-dark hinterland and also providing a livelihood to women who take our brands to remote villages, selling our products and building a new market.

But this is only the beginning. We need many more such examples, and we must find them faster while at the same time delivering growth that is consistent, competitive, and profitable. We can find the right answers. The question is whether businesses can find the right leaders to push for those answers. We need leaders with the courage and conviction to take bold action ahead of others.

Nitin Paranjpe has been the chief executive officer and managing director of Hindustan Unilever Ltd. (formerly, Hindustan Lever Ltd.) since April 2008. Paranjpe also serves as an executive vice president of Unilever companies in South Asia.

Source:  www.forbes.com