Positive Thought Four: Embrace your best business skills to achieve sustainability

Hamleys, the big toy shop in London where I worked for 6 months, was a personal revelation. Their “can do, get it done” business attitude, especially getting the job done as best you can on they day rather then a endless search for perfection was a refreshing change from the methodical, evidence-centric world of science I had been living in.

My role at Hamleys was overseeing the telephone, mail orders, and shipments.  Combining toys, Christmas, and shopping is a great formula to learn about people and getting things done. I learned more about people through the selling of teddy bears and jigsaw puzzles than I did as in six years as academic studying marine worms, geological strata, and other workings of the undersea environment.

The relationship and tension between peer-reviewed scientific academia, and the results focus of retail provided me with a solid foundation to combine the best of both in corporate sustainability. The academics seek out and try to understand complexity. Businesspeople just work from what they want, seeking a particular result. Sustainability has plenty of the former, but not enough of the latter. I think sustainability, therefore, has a lot to learn from shop-keeping or in fairness any business.  

Some will find my idea of giving credit to good shop-keeping as a model for sustainability annoying because, at one level at least, it is shopping-related consumption that is seen by many to be the root of  unsustainability. Shops encourage the desire for ‘stuff’, and generally rely on the exploitation of natural resources to make it. I do not deny those negatives, but I’m referring here to the attitude and skills that shop keepers have developed to manage supply, delivery, and customer focus which I believe could be better applied to our planet-scale problems.

To many, shop-keeping and retail add up to nothing more than, “stock it, sell it, and enjoy the profit”. It is, however, quite the opposite, and very complex. Hidden from the customer is the complexity of inventory management, logistics, overseas sourcing and high finance The apparent simplicity of a store is what makes it compelling to the customer. The clearer and more inspired the retail format, the more successful it is. What a lesson for sustainability!

Let us now look at ’sustainable development’. To many, it is the balance of environmental, social, and economic issues.  This is correct – but balance is not a call for action.

What does that balance look like in the ‘shop window’ of sustainability? It is unclear what it is people are being asked to do. If only we could make sustainability more action-focused.

Instead of selling sustainability as ‘balance’, why not say instead that it is, “a way we can feed, house and support all the people who live on the planet, without destroying that planet!”? That, now, is something people could be persuaded to ‘buy’.

Could it be that simple a proposition?  That is why the shop keeping metaphor is compelling – shop keeping provides us with the stuff, of life, and so does sustainable development.  Good retailers nurture their supply chains, bard ones harm them.

So if the shop-keeping model can bring some good, can it bring more good? What if a shop keeper was asked to run the biggest shopping challenge facing mankind: creating the right supply chains to feed, clothe and enable contentment for the billions of people who will inhabit the planet in the future?

I believe it is time to strip ethics and judgement from business and make it practicable by posing the ultimate challenge through the language of retail. If a group of people had to run the planet and help resolve the current issues of poverty, over consumption, pollution and declining life satisfaction, which group has the best skills to achieve this; scientists, or business people like shop keepers?

Naturally, the answer falls at some mid-point where everyone has a contribution. I suspect, however, that most gurus underestimate the potential contribution of shop-keepers and other business leaders. I will build the case that business people have a lot to offer by asking one simple question: what if shop keepers were asked to resolve the planet challenges of consumption, climate change, poverty and declining wellbeing?  In other words…

What if retailers were asked to run the planet?

Imagine yourself as the Managing Director of Wal-Mart or the CEO of Save on Foods or TESCO or President of Home Depot. You can get drills, saws, and lumber from around the world. You can source Halloween costumes from China. You can meet timelines, make money, create lots of jobs, and give customers what they want. How would you apply this knowledge and skill-set for the whole planet – the ultimate shop? We’ll be out of stock on some key items – water in some places, food supplies, raw materials, and uranium to run our MRI machines, for example – soon. Can you do something about this, please?

A good retail CEO would pull together his leadership team and advisors and develop a focused brainstorm.

These always start with a proposition (remember, we are running the planet as a shop and a business). I think the proposition, or mission, she would suggest would be something like:

“ We will provide; food, shelter, homes, and  wellbeing for people everywhere, forever”

So the next stage of a sound business activity is to start looking at the numbers – the basics, like customer count and volume demand.

Mankind appeared 160,000 years ago. There was  steady organic growth in customer count through the 160 millennia until the mid 18th century, when population started to grow dramatically from a few 100 million, to the first billion by the turn of the nineteenth century, two billion by the 1930s, and 7 billion on Halloween day in 2011. The forecast is for 9 billion persons by 2050. 

160 millennia  is a lot of years to comprehend.  If we condensed the 160,000 years down to just 30 years – the average life of most companies the scale of the ask becomes clearer.  Squeezing that 160,000 years in to 3 equates to a growth of  3,000% in customer count in the last quarter of those 30 years. Name one business that delivered such growth in its 30th year!

The amount each customer buys is known as “volume“ or, in retail speak, “sales per transaction”, or even “basket value”. At the dawn of civilisation (ignoring the odd Pharaoh), the ask of the planet from each customer was a few logs for kayaks, fish for food, and iron ore for weapons. Three hundred years ago, sales per basket was still low– there were tall hats for some, leather leggings and carts and horses, there were some cooking items, and a lot of vegetables and fish. Quite a small number of transactions per customer back then, but by 2012, they are buying the plasma TV lifestyle. So we have larger volumes, growing very fast, with higher turnover of goods and higher value sales producing higher potential profits. We are increasing the customer count and volume simultaneously.

An exciting new customer base, but scary in terms of our ability to deliver products. The challenge for us is making sure the supply chain is right.

Sustainability is a supply chain challenge – 9 billion modern lifestyles by 2050.

Are our supply chains capable of delivering all of this? According to the World Wild Fund for Nature (UK) Living Planet Report, published in 2002, the global average consumption of natural resources (what’s known as our ecological footprint) is 2.3 hectares of natural resources per person, per year.  In the developed countries of the Western world, this figure rises to around 5 hectares. As a result, the WWF states: “if everyone around the world consumed natural resources at the rate that we currently do in the UK, we would need three planets to support us.”

No retailer could sustain sales of an item if the supply base could not replenish the inventory at the same rate of sales. That is very basic retail.

Are we looking after the supply chains? There are some sixty or more products produced from forested lands, ranging from textiles, to pharmaceuticals, to wood for framing houses, to bio-fuels for fuelling aircraft, cars and trucks. But they also supply mankind with soul and spirit.  We like to walk in them, to see animals graze in them; we see them as a place which birds can be safe, and as places that can sequester carbon. We ask a lot of forests, and a retailer skilled in supply chain management would nurture the assets they provide.

It would do this through audits and pricing. Most retailers audit their factories to ensure that they have the operating standards to meet quality and volume projections. If Wal-Mart used its audit methods to audit the entire world’s forest estate’s ability (under the current management regime) to provide all the desired needs in 2050, would the global forest estate pass or fail?

Do we value nature in our supply chain enough? How should the global supply chain value a bee? Bees provide pollination for free – so they are a good low-cost part of our supply chain. Imagine if we had to replace the bee with people or a machine. In China, they are – they are paying people to do the work of the bees they have lost.

Imagine this: you are going into a major supermarket tomorrow and you’ve heard they’ve got this really crazy promotion on – everything in aisles 1-15, you pay for normally, but in aisles 16-20, everything’s going to be free. Just take as much as you want. What will that store look like in the first hour of the shopping experience? Then think about the images you often see of the Amazon rainforest. Because we don’t place a realistic value on what nature is able to provide for us, we have a major challenge with our rainforests.  By placing a value on forested lands for all of the ‘services’ it provides (which are known as ecosystem services) we can best assess how to price access to forested lands. Retailers are already good at getting the price right – we can learn.

Let’s go back to the proposition – the delivery of wellbeing.

People are getting heavier. Almost one in four adults in Britain is classed as obese. This figure could rise to eight out of 10 men and seven out of 10 women by 2020, according to recent reports. A new Statistics Canada study suggests one in four Canadian adults is clinically obese, compared with one in three in the United States. Among men in both Canada and the US, the increase was highest among those aged 60 to 74, while in women, obesity increased the most among those aged 20 to 39. So perhaps, despite the great products we provide people for the modern lifestyle, we need to help reverse some habits to help people look after their health. If not, the retail value proposition will not be delivered.

Retail brands are made or broken on the delivery of customer satisfaction. In our metaphor, customer satisfaction equates to life satisfaction, or happiness. Some governments have started to measure life satisfaction  of its citizens and the message is not good.

Despite considerable economic growth over the last fifty years around the world, people are no more happy now than they were shortly after Truman came to power in the United States, as the graph below shows. Happiness remains largely flat as per capita GDP grows exponentially.

Figure 1: Happiness (Dots) vs GDP Growth (Solid Line)

In summary – our imaginary retailer (let’s call it Planet Earth Retail Chain) needs a turnaround strategy related to  these key points:

  1. Massive and rapid growth in customer numbers
  2. Massive growth in transaction value per customer
  3. Pending ‘out of stocks’
  4. Declining quality of supply base
  5. Poor cost and pricing
  6. Inconsistent delivery of the wellbeing proposition
  7. Declining customer satisfaction

These are the seven symptoms, any one of which can cause the downfall of our retail chain.  Many business have uncovered such trends in their backyards, reversed them, and have since flourished. Can we do this for Planet Earth Retail Chain?

Staying with this analogy of the planet as a shop, sustainable development requires us to run the planet with the same rigorous discipline as we manage a successful shop!  I sometimes laugh when companies ask me, “What is the business case for sustainability?”  I suggest to them:

You invented it. It’s discipline. It’s governance. It’s managing your growth in a way that enables you to deliver it. Basically, businesses have failed because they haven’t followed the principles you were taught in your business schools, and by your experiences.

Sustainable development is no different. It requires us to apply the principles of sound global retail business to managing the planet and the supply chains to feed, house, and clothe 9 billion people.

This analogy works for other sectors:  would a financial institution bankroll planet earth? Would an insurance company underwrite it?

Different companies can apply their own contexts to the planet-scale challenge, and the result would be the same. Business discipline applied at a planet level could deliver a lot of what sustainability requires. At its most basic, any company can multiply its average transaction by the 9 billion they might one day be expected to process, and data will reveal the challenge within their own sector. If their sector cannot not even service 9 billion, what hope is there for all the other sectors?  The answers lies in a can–do approach, innovation, and the re-engineering of supply chains.

Rethinking Corporate Sustainability – If Only We Ran the Planet Like a Shop! (374.8 KB)