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5 Steps business families can take to boost sustainability

5 Steps business families can take to boost sustainability

By SMU City Perspectives team

At the core of every family business is the need to nurture an enduring legacy for future generations. But besides maintaining a financially viable business that thrives across several generations, family business leaders are also bestowed with the responsibility of creating sustainability in every sense of the word.

As SMU Professor Emeritus of Operations Management Arnoud De Meyer remarked during his keynote address at the 2021 Business Families Institute (BFI) conference “Building a Sustainable World – The Role Business Families Can Play”: “Besides the wealth you’ve earned, will you also be proud of the legacy you leave behind for your children? What stories (with great pride) will your children tell about you? Will you leave the world slightly better than you found it? In other words, are you a steward leader?”

City Perspectives learns more from Prof De Meyer about how stewards of family businesses can evolve business values and missions to create meaningful impact for the long term:

1. Recognise triggers for sustainability in business

Even those living in a self-imposed Covid-19 bubble would have heard about the impact of this year’s COP26 — or the 26th UN Climate Change Conference — in Glasgow. The watershed event saw G20 nations recognise the importance of strengthening national climate action this decade, and commit to revisit and further enhance their 2030 emission reduction targets where necessary. If the pledges are met, research has shown that global warming can be limited to 1.7 degrees Celsius this century.

The widespread spike in interest in environmental sustainability has also been reinforced by the pandemic, which has shone the spotlight on companies around the world and their ability to exercise responsible leadership.

“Governments demand from them that they be a good steward of all the resources that society makes available to companies to pursue their mission,” noted Prof De Meyer. For example,  when governments were asked to help companies bridge the crisis, the latter have to commit to improving workers’ health and safety, investing in human capital through skills enhancement, reducing environmental impact and energy consumption, or strengthening the robustness of supply chains.

2. Adopt a mindset shift on natural resources

Rather than consider themselves owners of natural resources, companies need to change their mindsets: Instead, they should view themselves as custodians of Mother Nature’s bounty. Today, some communities require companies to restore or replenish resources back to their same or improved form. For example, ecopreneurs have been called upon to find solutions for conserving and restoring the Amazonian bioeconomy.

“Avoiding air or water pollution, implementing reverse logistics and closed-loop supply chain will become ‘de rigueur,” noted Prof De Meyer.

With the rise in e-commerce purchases and global consumption, questions have also been raised about the sharp increase in shipping and logistics that were a consequence of global production networks. Global citizens will expect companies to make forms of contributions to society beyond producing goods and services and returning dividends to shareholders, and for the latter to be good corporate citizens.

3. Reap the benefits of a sustainable business

While family businesses may experience pushback from stakeholders or short-term challenges in implementing sustainability initiatives, the medium and long-term early adopters of good stewardship will be better off and stand to gain from commercial opportunities.

“Organisations that make stewardship a priority benefit from a greater acceptance by their environments,” added Prof De Meyer.

“They have an easier way to operate and will have to overcome less resistance. That ultimately will benefit them in creating new opportunities for business and lowering their costs.”

Prof De Meyer, who was the President of SMU from 2010 to 2018, has also noticed a trend of independent shareholders demanding a greater commitment to stewardship from large public companies, in particular their commitment to environmental, social and governance issues (ESG). In the case of Big Oil companies, for example, Exxon Mobil had to accept the appointment of two activist directors when it faced serious opposition from a large group of shareholders; and Total (now Total Energies) received a 90 per cent vote of support from shareholders for its energy transition programme.

4. Adapt best practices to a local context

The good news is that businesses in Singapore and Southeast Asia can learn from the successes of sustainably-minded peers in Europe and, to some extent, the US. While such learnings are useful, Prof De Meyer emphasises the need to be able to adapt these good ideas into local contexts.

“For example, we have many more government-linked companies that, in their mission statement, contribute to the development of the societies in which they operate,” said Prof De Meyer.

“And we also have many more first-generation family-owned companies that are rapidly maturing. We will see in the coming 10 years a wave of transitions to the next generation throughout the region.”


5. Align objectives throughout an organisation

Boosting sustainability takes more than the adoption of a strong position at the strategic apex of an organisation. It requires the alignment of incentives and rewards with its ESG and stewardship commitments, and the buy-in from middle and junior management on the processes and procedures that guide decision-making. The four core values developed by the Stewardship Asia Centre’s Stewardship Compass can also be a valuable tool in steering family business leaders: For example, reconciling the interdependence between our actions and society needs with personal and organisational objectives.

The Stewardship Asia Centre is a non-profit centre established under the Temasek Trust to help business leaders, investors and individuals activate stewardship practice.

Based on this set of values, business stewards will then have to define a purpose for their organisations that “creates a better future for a variety of stakeholders and society at large and with which your stakeholders can connect emotionally,” said Prof De Meyer.

He concluded that stewardship is not just about protecting natural capital, it also includes managing social and cultural capital. Only by adopting a responsible approach to ESG issues, family values, steward leadership and investment portfolios, could family businesses attain a long-term sustainability mindset.

ESG Stewardship Compass