Sustainability 2.0

What is “Sustainability 2.0″

Well it is not yet an established concept. It has popped up from time to time over the last few years. But from the glimpses I have seen, it represents a profound change in the way we think about sustainability.

Two of the more authoritative pointers that form the concept, are the book Sustainability 2.0 by Ernesto van Peborgh and the late, great, C.K. Prahalad’sSeptember 2009 Harvard Business Review article. Van Peborgh’s book links sustainability 2.0 to the radical societal changes driven by Internet 2.0 and 3.0 – the participative web.  The book’s case studies of companies pursuing sustainability, use three categories: pioneer companies, companies that change and sustainable companies. Companies that change, appear to typify Sustainability 1.0 – companies originally motivated to adopt sustainability as a response to some public relations crisis caused by unsustainable practices.

In the HBR article Why Sustainability Is Now The Key Driver of Innovation,C.K. Prahalad and his co-authors clearly articulate the change to what we might call sustainability 2.0. Companies move from risk aversion to aspiration. The authors claim “in the future, only companies that make sustainability a goal will achieve competitive advantage”. Thus, sustainability becomes a catalyst for rethinking business models, products, technologies and processes.

We are very near the beginning of this bell curve. Companies that position sustainability central to strategy are still rare. Prahalad asserts that most European and American executives believe that moves towards sustainability will erode competitiveness. “That’s why most executives treat the need to become sustainable as a corporate social responsibility, divorced from business objectives”.

Five Stages of Sustainability

  1. View compliance as an opportunity.
  2. Making value chains sustainable.
  3. Designing sustainable products and services.
  4. Developing new business models.
  5. Creating next-practice platforms.

(Nidumola, Prahalad & Rangaswami)

The new frontier is wide open. Prahalad calls sustainability the “motherlode of innovation”. It may well be the dominant driver for business development and opportunity over the next few decades. Some big players are taking full advantage and also driving sustainability through to their suppliers. Walmart announced sustainability 2.0 in 2008. That year Walmart directed more than 1000 Chinese suppliers to achieve sustainability targets.

This video shows how Walmart is applying Sustainability 2.0 to its massive fleet.

Prahalad and his co-authors outline five stages of sustainability that each offer opportunities to innovate. The article provides inspiring examples of how companies are exploiting these opportunities and finding new market niches in a recession. The stage 5 concept of next-practice, where businesses create new practices that transcend and displace current practice, infer a paradigm shift. The smart grid, where diverse electricity inputs and outputs move around a locality to maximise efficiency and minimise energy imports is cited as an example. At present we are so conditioned to remote distributed networks, that we take them for granted.

New language and new tools

New movements require new language and new tools. Corporate social responsibility infers guilt and reparation whereas corporate sustainability is more future-focussed. Sustainability reporting is a tool designed for justification and to assuage guilt. Energy invested in sustainability initiatives is better spent pursuing innovation than pursuing a ranking on a reporting league table.

Of the sustainability tools on hand, stakeholder engagement appears more relevant to sustainability 2.0 than sustainability reporting. Stakeholder engagement is more future-focussed as it seeks to find the pathway forward in dialogue with stakeholders. Stakeholder conversations are where innovative ideas are likely to arise.

In conclusion, this blog is a tribute to C.K. Prahalad’s acute vision and humanity. In the article referred to here, and in his other recent work such as The Fortune At The Bottom Of The Pyramid, he has helped to open vistas where businesses can prosper, and importantly, we can collectively create a prosperous, just and sustainable world.

Comparing Sustainability 1.0 and Sustainability 2.0

This table summarises key differences between sustainability 1.0 and 2.0. Of course, in reality many companies will have characteristics of both.

Sustainability 1.0 (e.g. CSR) Sustainability 2.0
motives include risk aversion and reputation management motives more likely to include innovation
contribute to stakeholders through corporate philanthropy focus on creating shared value with stakeholders
external communication is dominated by public relations external communication is driven by engagement
sustainability is conceived as a cost sustainability is conceived as competitive advantage
If you have suggestions to add to this table, or any other ideas to share, please leave a comment.
  1. Excellent summary of the sustainability 2 concept!

    I’m interested in the role of business in global systemic change; the question of what to do to trigger ‘sustainability that actually happens everywhere fast enough to matter’. This is kind of a separate conversation from what businesses do and their impacts, though there are nice synergies.

    Would this big picture engagement be sustainability 2 or something else please?

    • peter says:

      Hi James,
      Thanks for the feedback. I am not confident that the changes that you are looking for will happen fast enough. But they are happening. I am impressed with the changes companies such as WalMart have initiated – and they are an agent of massive change as they can drive their sustainability aspirations through their supply chain of over 60,000 suppliers. They are a long way from being sustainable – but it is heading in the right direction.

      For rapid change to happen we need mass adoption of new technologies, such as electric vehicles – and this will take a Henry Ford like innovation to make EVs cheaper than existing options. This would be great in my country (New Zealand) because about 74% of our electricity is generated from renewables.

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