Seeds for a carbon-free economy

Until recently, the first-mover dilemma was one of the main reasons for blocking companies’ decision to act more sustainably. The balance between the advantages and disadvantages, which this decision carried, often resulted in pointing out the potential loss of market share or competitiveness, hence the disadvantage side of the dilemma. Today, it is no longer a dilemma. If you don’t move towards sustainability today, you risk losing everything tomorrow.

However, there is another question that comes with the decision: Why do we want to move? This question is rooted in the core values and determines companies’ pro-environmental behavior. It reflects whether their initial stand regarding environmental governance will be pro-active or reactive. The research I’ve conducted among the largest family-owned companies shows that the predominant position is expected to be re-active concerning the Green Deal for Europe’s governance. Although most of these companies see sustainability as a competitive advantage, they still limit their action to comply with legislation. Nevertheless, some companies go beyond and perform better than the desired norm. These companies show that the reported self-transcending values lead to better pro-environmental behavior.   

The Green Deal for Europe is an excellent framework for the companies to ASK themselves WHY. It is considered a ‘growth strategy,’ decoupled from resource use, and aimed to transform the EU into a society free of GHG emissions in 2050. It will lead to €1 trillion of investments intended to guarantee the implementation of ‘unprecedented transformation.’ The Green Deal focuses on the means to accelerate the economic and industrial transition by implementing climate-related policy instruments and increasing sustainable public and private investment. It is Europe’s best opportunity to ensure sustainable development “that meets the needs of the present without compromising future generations’ ability to meet their own needs.”

Very few types of organization are aligned with this UN Brundtland Commission’s definition of sustainable development as family-owned companies are. Given some of their intrinsic characteristics and values, it comes almost natural for them to integrate it. Among the main reasons that position family-owned companies within this vision of sustainability is their intergenerational commitment with continuity and their natural tendency to measure time in generations, instead of fiscal years or quarters.

The value proposition to compete for less

Valdis Dombrovskis, EU’s Executive Vice-President, has recently stated, “putting sustainability at the heart of how we invest requires a change of mindset”. This change starts with core values. During the previous industrial revolutions, it was their long term vision, built upon loyalty and trust, which turned the family-owned companies into the backbone of growth and development in the industrialized countries. Same as other types of companies, they relied upon the self-enhancing values of power and achievement to prove competitive.

Throughout this time, technology and markets evolved continuously, giving opportunities for new company models to thrive. Still, from start-ups to unicorns, very few ‘modern’ enterprises have proven long-term stability. Within the accelerated paste of change, their vitality often succumbed under the precarious times of global crises and rapid shifts. However, despite being often considered as not ‘sexy’ enough to attract speed investments, family-owned companies are very skilled in navigating the turbulent waters. Over and over again, they show the ability to bounce back. They show resilience.

Perhaps the main element of their stability lies within what remains the central and universal social nucleus: family. It is the owning family that eventually performs as a stability element that provides long term vision even at the sacrifice of the short term results. Although the definition of family has evolved to integrate the different aspects of sexual identity and orientation, its structure remains stable. Parents and children. Present and future. Commitment and continuity. The same structure upon which sustainable development rests upon. 

Family-owned companies are aware that without continuity, there is no company. It is part of the reason why when facing ecological risks, their socio-emotional values trigger the transition to a more sustainable method, and, according to Zellweger et al. (2013), the family tends to pursue non-financial aspects that, at the same time, meet the family’s affective needs. These are some of the sources of additional incentives that the European Commission may have in mind when calling to “reflect on different forms of additional incentives for businesses to integrate SDGs in their operations”.

Among its findings, this research shows that, when compared to self-enhancing values, the self-transcending family-owned companies’ core values lead to a greater tendency to reduce CO2 emissions and energy consumption. At the same time, these tend to greater use of renewable energies. This indicates that the internalization of self-transcending values facilitates environmental governance. It has the potential to steer the business strategy towards a shift in behavior that is needed to accomplish the decarbonization goals defined by the Green Deal for Europe.

At the same time, it shows that most of the companies prefer compliance with the predefined environmental norms rather than pushing a bit further. This is understandable given the remaining structural constriction, which still operate within ‘watered-down’ first-mover dilemma. But, the ongoing transformation will provide greater opportunities to those who dare to look and go beyond the compliance boundaries. Same as it has always been, great opportunities result from entrepreneurs staying alert to possibilities. Once again it is a value proposition because, as Sarah Burch and Sara Harris would frame it, sustainability is mostly a value proposition. After all, “we make choices about how much climate risk we are willing to accept, what is our notion of progress, and what role the natural environment plays in our lives”.

Being rational actors, companies already tend to regard the excess of energy consumption or CO2 emissions more as inefficient management than the environmental hazard. Green Deal for Europe provides a framework where companies will compete to emit less CO2 and use less energy. This means that the future champions will be those that lead in the competition for less. It means that the future captains of industry will be the trustees of sustainability. These are the entrepreneurs who place nature central to business performance and learn from nature by understanding that, as Wohlleben wrote, “a tree can be only as strong as the forest that surrounds it”. This entails using those values that lead to positive pro-environmental behavior as seeds for a carbon-free economy.

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