Is the Future Viability of Your Enterprise at Risk?
The definition of social, environmental and financial viability for our enterprises changes over time. It is not fixed. It was different in the past from how it is today. And, it will be different in the future from how it is today.
Behaving as if this were not the case is risky; it risks the future viability of your enterprise.
In this blog post I’m going to unpack why and how the definition of viability changes over time, and propose an approach to enable your organization to remain viable, based on defining a purpose for your enterprise.
Three Factors Define Viability Today: Money, Law & Morals
To remain viable it is necessary for any enterprise – for-profit or not-for-profit – to consider three viability factors: financial, legal/regulatory, and whether or not they have a ‘social license’ to operate.
For example, today:
(1) The people an enterprise owes money to will not allow it to continue to operate if it cannot pay those debts – we call this situation insolvency (which may lead to bankruptcy).
(2) There are many laws and regulations that a business must comply with concerning social and environmental factors: from minimum wage requirements to pollution control regulations. Failure to meet such laws and regulations can also lead to the business being forced to halt operations (or at least face a fine and perhaps legal proceedings).
(3) Do the stakeholders of the business find its products and operations morally acceptable? In other words do the enterprise’s products and operations behave in an ethical way based on societies current moral standards – socially, environmentally and financially? Does society grant the enterprise a ‘social license’ to operate? Yes, some of the ethically unacceptable behaviours will have a legal or regulatory penalty if they occur. But, in many cases, society will penalize a business for transgressing an ethical boundary, even if it is technically legal. For example, consider the working conditions in clothing manufacturing plants in South-East Asia. In many cases the conditions faced by the employees were and are legal, but yet some customers of the clothing manufacturers are mounting campaigns to force those companies to improve working conditions. As another example, consider that a legally correct proposal for a mine may be objected to by a local indigenous population, perhaps partnering with an environmental NGO, such as Greenpeace.
Thinking About Future Viability
But what about remaining viable in the future? Is it sufficient to continue to behave in the ways that enable viability today? Is it sufficient to plan to have the same products and operations that meet financial expectations, legal, compliant with regulations, and socially acceptable, as today?
The answer to this question is a clear ‘no’. Just maintaining financial, legal/regulation and social actions will almost certainly, over time, lead to the enterprise becoming unviable.
Why is this? It is because everything around an enterprise, and the enterprise itself, changes over time. The expectations of owners/shareholders of an acceptable level of profitability change. The laws and regulatory environment change. What stakeholders, such as customers and suppliers, consider ethically acceptable change. And employees expectations of their employer change.
Consider, just a few decades ago, in the Global North, it was socially acceptable to dump huge amounts of pollutants into the environment. Then the environmental movement, based on its ethics (and informed by science), decided that morally this was unacceptable. They mounted campaigns that led to laws to protect the environment and halt some types of pollution. Enterprises that continued to pollute were suddenly faced with new laws and regulations. Their definition of what constituted their viability changed.
Looking into the future, we already see examples of nature being granted personhood under the law [1]. Perhaps this is a first step in normalizing the idea of social and environmental bankruptcy?
Enterprises that are not preparing for possible future definitions of viability, will have their ability to continue to operate, to continue to be viable, called into question.
Co-Creating New Value
The fact there is a risk to ignoring how viability changes, suggests there may be opportunities if an enterprise were able to anticipate how viability may be different in the future. It suggests that innovative new strategies may be possible that would enable new flows of value to be co-created with all an enterprise’s stakeholders.
Consider what new value could be co-created with stakeholders if it were possible to anticipate, or even shape, market conditions, consumer preference, future law or regulation? What if it were possible to anticipate or even be part of the conversation to decide what is morally acceptable behaviour for an enterprise?
Fortunately humanity has three significant sources to help us imagine futures environmentally, socially and philosophically.
First, here are our various ethical and moral codes. There are many sources for these: spiritual and other traditions; global collaboration proceses (e.g. the UN Declaration of Human Rights, the UN Declaration of the Rights of Indigenous Peoples, the UN Convention on the Elimination of All Forms of Discrimination Against Women); and arguably, philosophy, that amongst other things, considers what is ethical behaviour, and what systems of morals could and should guide our society.
For example: The UN Declaration of Rights of Indigenous Peoples was signed in 2007, and amongst other things, lays out the required duties towards indigenous peoples. However, today many of these rights are not being respected. When imagining the futures, how might viability change if a more complete implementation of these rights was normalized?
Second, there is humanity’s deep indigenous wisdoms. Some of these wisdoms are still applied every day by indigenous peoples around the world, despite systemic attempts of colonialism to devalue and destroy such wisdoms. But many wisdoms have been lost, particularly in places which modernised the fastest and most comprehensively. Other wisdoms are rapidly fading as the processes of modernising globalism continue.
For example: Indigenous traditions include their own ways-of-knowing about the environment, society and their interrelationships. These are deep wisdoms developed and handed down over the millennia. When imagining the future, how might viability change if it became normalized for such indigenous wisdoms to be applied by society when making decisions?
Third, there is the scientific process. Examining the past, using the natural sciences, builds and improves our understanding of how our natural environment operates, and hence helps us understand how it may operate in the future. A similar process takes place in the social sciences – building and improving our understanding of how societies operate, and how the well-being of society and its members may be improved.[2]
For example: The scientific knowledge of the significant negative impact of pesticides was published around a decade before it became legally unacceptable to use those pesticides due to the shift in what people considered morally acceptable; in turn this led to changes in viability for businesses operating in this sector. When imagining the future, what recent scientific knowledge has emerged that could drive future shifts of what is considered morally acceptable and hence future shifts in the definition of viability?
So, an organization that is familiar with the appropriate ethical systems, deep indigenous wisdoms and scientific knowledge has the possibility to anticipate what will be considered socially acceptable, and potentially controlled by regulation or law. As a result possible changes in market conditions, consumer preference, law and regulation can be explored. And hence, the financial impact of changes to what the organization may do and how it will do it in the future can be investigated and prepared for.
Planning for the Changing Future: Purpose is the Foundation
So, if the definition of viability changes over time, sometimes quite dramatically, and if ethics, deep indigenous wisdoms and scientific knowledge can help us imagine possible and/or desirable futures, how can an organization effectively plan for those futures? How can it develop strategies to, not only remain viable, but improve its viability over time? How can an enterprise become future-fit – ready for inevitable change?
In my opinion the best approach to start to develop future-fit strategies is to set a purpose for the organization. This purpose is not to be profitable, that is a result. A purpose answers the question “Why does this organization exist?”, “What vision of the future is this organization pursuing?”, or “What does this organization believe?” This purpose needs to be something that won’t change often, if at all, to serve as a solid foundation for every other aspect of the organization’s mission, strategy and operations. [3]
But how to do this if everything changes? I believe that to choose a purpose for your enterprise that is as fit for the future as possible, it should be grounded in the latest philosophical thinking: what is the reason for us to exist on this planet? And, it should be framed by what the ethics, deep indigenous wisdoms and natural and social sciences have to say about how one might behave to live up to such a vision.
Such purposes can then act as the North Star guiding the organization into the changing future, helping to set strategies that are grounded in a strong ethical position and more likely to enable viability socially, environmentally and financially.
Purpose Informed by Ethics, Wisdoms and Science
As I explore in these two blog post Why Flourishing and Six Reasons for Enterprises to Aim to Flourish, I believe the best possible purpose an enterprise can adopt is to “sustain the possibility for human and all other life to flourish on this planet for generations to come” (John Ehrenfeld, MIT). Purposes based around enabling sustainable flourishing create a powerful North Star to guide organizations into the changing future, enabling them to design strategies that are more likely to enable future viability socially, environmentally and financially.
How to Proceed on Your Journey to Future Viability
The Future-Fit Business Benchmark, along with the Flourishing Business Canvas, can be used to create such North Stars. Together they help define the specifics of a vision of a far-future where sustainable flourishing, not sustainable development is the norm. From visions of sustainable flourishing, enterprises can plot their strategic journey towards retaining and improving their viability into a changing future. (For more on the shift in worldview to move to sustainable flourishing from sustainable development see this blog post).
As a leader, entrepreneur, or an advisor to leaders and entrepreneurs, how are you working to ensure the future viability of your enterprises? Are you ready to choose purposes aligned with enabling sustainable flourishing? Are you ready to dig into the ethics, indigenous wisdoms and science of sustainable flourishing?
I will write in more detail on how to do this in a future blog post, where I will explore how established enterprises and startups can proactively create their strategic journeys to future viability using a technique called backcasting against future-fit principles. Backcasting[4] means starting with the end in mind, starting with the organization’s purpose and imagining a world where that purpose is realized, a world where sustainable flourishing is the overall objective of society.
Footnotes
[1] https://earth.org/nature-rights/
[2] Three important caveats about the scientific process: First, We need to be careful not to equate scientific knowledge with “the truth”, since the scientific process is always on-going, always seeking to deepen our understanding. But, there is very strong evidence that the scientific process yields knowledge which is better at helping us understand our world as it is and may be than any other approach. Second, we must also always be careful to bring an ethical lens to the scientific process. In its pursuit of knowledge the scientific establishment, in all disciplines, has made and continues to make some dreadfully poor choices, causing significant violence to many – often in support of modernizing processes such as colonization. And, three, at any time there are competing theories being proposed via the scientific process, each awaiting data to support or refute them. In particular today the data available is strongly suggesting that new theories, and the resultant knowledge, arising from a systems approach, provide a more useful understanding of the complexity of our world
[3] Simon Sinek, in his recent book, the Infinite Game, refers to such a purpose as the “just cause” for the organizations existence
[4] Compare this to forecasting where we look into the past to project the future, and the ultimate destination is not considered.