Over the past few years, the UN, the World Economic Forum, and leading financial thinkers have all stressed the need for sustainability and a focus on sustainable development globally.
Upon arrival in Indonesia, I had the opportunity to have a conversation with several Indonesian delegates that were present in the 2020 World Economic Forum meeting in Davos. The theme this year was Stakeholders for a Cohesive and Sustainable World. The outcome of the 2020 WEF was to strengthen sustainability criteria in 2020-2021. This is not a new trend, and sustainability can no longer be considered a new, trendy buzzword. There has been a global acknowledgment of ESG (environmental, social, and governance) performance metrics for over a decade now.
A lot of business cases have been argued against corporate social responsibility (CSR) and sustainability in the past; arguing that CSR may impose unnecessary costs to a firm (1) and thus hinder its ability to access capital. However, Harvard and London Business School researchers (2) provided evidence in 2010 that in fact the reverse is true: firms with better CSR performance face lower capital constraints. The next argument I expect to hear is that this is only true for developed and Western countries, but the work conducted by Cheng and team actually drew from global data that included representation of nearly 2000 Asian firms. The story is global, better responsible business practice lead to more access to capital resources.
I’m glad that there is ample evidence that responsible business practices have been proven to create stakeholder engagement, better transparency, and increased visibility in firms. However, there is still a huge global problem. The UN sustainable development goals have not been achieved and there is a growing need for social innovation. Social innovation has been defined by the Stanford Center for Social Innovation as the process of developing and deploying effective solutions to challenging and often systemic social and environmental issues in support of social progress.
I’ve been working in green and sustainable supply chain strategies for over a decade now. With the widespread adoption of ESG strategies by leading companies in the US and Europe, it is easy to believe that we are on our way to innovating and incrementally improving global problems. BUT upon arrival in Indonesia for the third time, I worry that instead of solving global issues, we are merely solving western issues. Instead of fixing the problem by innovating and creating a better solution for all of society, maybe we are exporting our problem and creating a solution that is best for us and our nearest neighbors.
We gain from the lower manufacturing laws in other countries and export smog and pollution to the lowest bidder. Over the past few weeks, we have seen the smog recede and build up around Jakarta. It is accentuated by the clear days when panoramic mountain views surround us. We were in Indonesia for two weeks before we saw the mountains!! I’ve been reflecting on this proverb over the last week:
Do not withhold good from those to whom it is due
when it is in your power to do it.
I consider the possibility that it might be within our power to pay a little more for some products. We benefit from the mass production of electronics, consumer packaged goods, and clothing. We have so much variety provided to us so cheaply that we can now treat many of these products as disposable goods.
I think about my grandparents’ generation. My sister recently “inherited” my grandparents’ old radio/record player. It is a beautiful piece of furniture the size of a buffet. My grandparents owned one beautiful stereo system that works nearly 70 years later. Admittedly, I have a box in a closet in my basement that holds an old Sony surround sound system that may or may not work with our new smart TV, old walkman’s that are no longer viable, and an old boombox… yep, a boombox. Technology is changing at a faster pace and, in many cases, getting better (better sound quality, access to more, cheaper, faster), but I sort of wish I had an option to pay a little more for a device that was fashioned with quality workmanship that could provide value to my family for three generations.
At low-tide the beaches around Indonesia reveal the ease with which we can dispose of products that we no longer want. Albeit, you can see in the pictures below how much the goats love the low tide selection of chewables! It’s not that the discarded products don’t work or can’t provide value. We just don’t need them as we buy the newest thing. The other challenge is the monumental amount of packaging we are currently using to move products into the market in pristine form.
We have waste systems and magnificent infrastructure in the US that eliminates our waste from our sight efficiently every week. In a nation with 17+ thousand islands, infrastructure is a challenge in Indonesia. Its a challenge for delivering products. Everyone is focused on overcoming the delivery challenges because this is where there is an opportunity to make a profit. Reverse logistics (waste management) remains an afterthought. This is why we need social innovation. Social innovation is not focused on solving the problem of maximizing profit margin, it is focused on maximizing impact economically, socially, environmentally, and with proper governance.
People of faith have a clear call to steward this garden we’re entrusted with. As Christians, we also have an even more challenging call to love others not just as we love ourselves but also as Christ loved us! This means that we are called to look for solutions where we can benefit others wherever we have the power to do so! As a people called to redemption and restoration, perhaps social innovation is an opportunity for faith to be put into practice. If anyone on earth has a call to find solutions that meet a social need and create value for society, indeed that is our call if we are truly a people of faith.
1 – Galaskiewicz, J.,1997. An urban grants economy revisited: Corporate charitable contributions in the Twin Cities, 1979-81, 1987-89. Administrative Science Quarterly, 42(3): 445-471. Clotfelter,C.,1985. Federal tax policy and charitable giving. Chicago: University of Chicago Press, United States. Navarro, P.,1988. Why do corporations give to charity? The Journal of Business, 61(1): 65-93.
2- Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate social responsibility and access to finance. Strategic management journal, 35(1), 1-23.