Al Jalil International General Trading Est.

The Next Phase of Business Sustainability

The era of corporations integrating sustainable practices is being surpassed by a new age of corporations actively transforming the market to make it more sustainable.
Business sustainability has come a long way. From the dawn of the modern environmental movement and the establishment of environmental regulations in the 1970s, it has become a strategic concern driven by market forces. Today, more than 90 percent of CEOs state that sustainability is important to their company’s success, and companies develop sustainability strategies, market sustainable products and services, create positions such as chief sustainability officer, and publish sustainability reports for consumers, investors, activists, and the public at large.

This trend will not abate anytime soon. Surveys show that 88 percent of business school students think that learning about social and environmental issues in business is a priority, and 67 percent want to incorporate environmental sustainability into their future jobs. To meet this demand, the percentage of business schools that require students to take a course dedicated to business and society increased from 34 percent in 2001 to 79 percent in 2011, and specific academic programs on business sustainability can now be found in 46 percent of the top 100 US master of business administration (MBA) programs.

For all this interest, we should expect the world to become more sustainable. But problems such as climate change, water scarcity, species extinction, and many others continue to worsen. Sustainable business is reaching the limits of what it can accomplish in its present form. It is slowing the velocity at which we are approaching a crisis, but we are not changing course. Instead of tinkering around the edges of the market with new products and services, business must now transform it. That is the focus of the next phase of business sustainability, and we can see signs that it is emerging.

The first phase of business sustainability, what we at the University of Michigan’s Erb Institute call “enterprise integration,” is founded on a model of business responding to market shifts to increase competitive positioning by integrating sustainability into preexisting business considerations. By contrast, the next phase of business sustainability, what we call “market transformation,” is founded on a model of business transforming the market. Instead of waiting for a market shift to create incentives for sustainable practices, companies are creating those shifts to enable new forms of business sustainability.

Enterprise integration is geared toward present-day measures of success; market transformation will help companies create tomorrow’s measures. The first is focused on reducing unsustainability; the second is focused on creating sustainability.1 The first attends to symptoms; the second attends to causes. The first focuses primarily inward toward the health and vitality of the organization; the second expands that focus to look outward toward the health and vitality of the market and society in which the organization operates. The first will help future leaders get a job in today’s marketplace; the second will help them develop a target for a lifelong career. The first is incremental, the second transformational.

Changing the way we do business is essential to addressing the challenges of environmental degradation. The market is the most powerful institution on earth, and business is the most powerful entity within it. Business transcends national boundaries, and it possesses resources that exceed those of many nation-states. Business is responsible for producing the buildings we live and work in, the food we eat, the clothes we wear, the automobiles we drive, the energy that propels them, and the next form of mobility that will replace them. This does not mean that only business can generate solutions, but with its unmatched powers of ideation, production, and distribution, business is best positioned to bring the change we need at the scale we need it.

OPEC is in ‘whatever it takes’ moment to prop up oil prices

OPEC hasn’t even started implementing its new six-month agreement to cut output, and already members responsible for most of the reductions have pledged to extend or even deepen it.

Officials from Iraq, Kuwait and the United Arab Emirates agreed with Saudi Arabia’s expectation that the group, along with Russia and other oil producers, will extend the agreement for another six months. The U.A.E.’s energy minister, while stressing that the 1.2-MMbpd cut will clear an inventory buildup in the first half, hinted additional curbs could be discussed.

“The planned cuts have been carefully studied, but if it doesn’t work, we always have the option to hold an extraordinary OPEC meeting and we have done so in the past,” Suhail Al Mazrouei, who is also OPEC president, said in Kuwait. “If we are required to extend for another six months, we will, if it requires more, we always discuss and come up with the right balance.”

Last week, oil capped its biggest weekly decline since 2016 on concerns that weakening economic growth and surging U.S. supply will lead to a surplus next year, overwhelming OPEC’s efforts to stabilize the market. The slide continued even after the Organization of Petroleum Exporting Countries and its partners surprised traders with the size of the supply reduction announced on Dec. 7.

Futures sank 11% last week in New York, the most since January 2016. The benchmark Brent crude traded below $54/bbl, the lowest since September 2017.

At a press briefing in Kuwait, Iraqi, the U.A.E. and Algerian energy ministers took turns repeating the message that OPEC will deliver its 800,000 bpd cut and continue their cooperation with other producers to balance supply and demand.

Iraq’s oil minister Thamir Ghadhban said his country’s new membership into the OPEC+ monitoring committee “indicates that we are serious about meeting our commitments that will exceed what we’ve complied with in the past.”

OPEC cuts may end up being deeper than agreed because of planned maintenance and production snags in some member countries, Al Mazrouei said. Conflict, sanctions and aging oil fields have been factors that dragged on output in Libya, Nigeria, Iran and Venezuela in recent years.

Saudi Arabia has volunteered to take the lead in trimming production by more than it has agreed. The world’s biggest oil exporter plans to pump 10.2 MMbpd in January rather than the 10.3 MMbpd allotted to it in the OPEC+ agreement.

“Over-conformity is not new to Saudi Arabia,” said the kingdom’s OPEC governor Adeeb Al Aama. “Our conformity with the previous cuts was 120 percent between January 2017 and May 2018.”