Sustainability in a millennial age | Deloitte UK has been saved
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Sustainability is a business theme that, while being universally accepted as a good thing, has come to have a variety of meanings. From sourcing, environmental impact limitation and working towards the UN’s sustainable development goals (SDGs) to simply ‘continuing to do what you do’, sustainability has become a starting gun and a benchmark for discussions about the future of a business.
But for family businesses, sustainability has an extra level of meaning – and importance. Not only is it about ensuring the business is in a position to continue successfully, it is also about addressing the inevitable pressures and tensions that come with generational change and succession.
The Deloitte Family Business Symposium explored the issue of sustainability with a number of leaders of major family-owned businesses, highlighting a range of opinions and degrees of engagement. ‘Sustainability,’ said one business leader, ‘now permeates every aspect of our business, from ethical sourcing and manufacture to delivery and disposal from an environmental perspective. It has become a non-negotiable.’
While embedding sustainability can mean understanding the environmental impact of your sourcing and distribution activities, it can also mean a recasting of relationships with suppliers. One business leader referenced his family’s decision to insist on an overseas supplier paying its local workers the living wage rather than the minimum wage; in effect, a decision to pay more than was strictly necessary because doing so aligned with the family’s values.
Inevitably, in some cases there will be tension between the drive for profit and for responsible business. However, it can be argued that, in the future, sustainability and profit will become so closely intertwined as to be all but inseparable.
There are already instances where sustainability is an integral part of operating efficiency. For a simple example, instead of manufacturing inefficiently and then having to pay for the subsequent disposal of resulting waste, sustainability can be about driving that waste out of the manufacturing process. At the very least, awareness of sustainability should be pushing businesses to focus on making profit from delivering solutions to problems, not making more problems to be solved.
Sustainability is driving a fundamental ‘rebooting’ of the way businesses view what they are here for – what their purpose is. This overlap between sustainability and purpose – a topic that was also covered explicitly at the symposium – may be best approached by identifying ways that you can influence the world and then being specific about what that means and how it can be realised. Stakeholders are likely to be more interested in and engaged by the impact you have through your products and services than by the way you go about it.
Another theme to emerge from the discussion was the importance of education as part of succession planning. With sustainability growing in importance and relevance, the next generation of business leaders, themselves millennials, need to have a developed appreciation of what the businesses they are taking over are doing to become more sustainable. For some businesses, this equates to a specific education programme on responsible business ownership and the realignment of philanthropic activities with both sustainability and purpose.
Family business leaders are also keen to highlight the importance of building employee engagement with sustainability and, in particular, their philanthropic activities and how they align to the businesses’ values. This can help to build employee engagement, both with the cause and with the business itself, and also help to amplify the impact of philanthropic effort as employees undertake fundraising and volunteering activities in support of the businesses’ commitment.
For some this leads, perhaps inevitably, to the subject of impact investing – investing the family’s money in areas and initiatives that themselves have a positive impact on the world by focusing on environmental, social and governance issues.
One conclusion is that sustainability may no longer be the right word to encapsulate this debate, given the multiplicity of meanings and associations it has acquired. If what we are talking about encompasses environmental impact, continuing to be attractive and relevant to a generation that regards responsible behaviour as natural or expected, and also preparing for generational change in ownership, perhaps we should be thinking in terms of resilience and durability instead.
As sustainability enters the mainstream and becomes ‘normal’, terms like this will give it a harder edge and more accurately reflect its existential relevance. Put simply, in the near future, when millennial concerns and behaviours dominate, businesses that fail to adapt to the sustainability imperative – that fail to hardwire sustainability in processes and behaviours – won’t be businesses for very long. If that sounds ominous, it should because it’s a challenge that is not going to go away. But, it should also be seen as an opportunity. Family business leaders that we have spoken to who have embraced sustainability have found it to be a galvanising force, engaging stakeholders and delivering satisfaction along with profit.
Claire is an experienced Private Client Tax Partner and leads the Deloitte Private practice in the Midlands which focuses on providing expert, multi-disciplinary advice to privately owned businesses and their owners. She has over 25 years’ experience of advising business owners, entrepreneurs and other high net worth individuals on all aspects of their tax affairs. She has been trusted advisor to several of The Times rich list entrants including the top 100 and has worked with them across the tax spectrum on matters such as advice to them and their family offices on structuring investments and divestments both in the UK and internationally, advice to UK based and offshore trustees, family governance, tax and succession planning, advice on domicile, structuring lifestyle assets, landed estates and philanthropy. Standing alongside advisory work, she is also expert in managing the UK personal tax compliance cycle for individuals with complex affairs. In previous roles she has also worked in both corporate tax and M&A at various points in her career and this sets her in good stead to provide holistic advice to shareholders. Claire was recently named as one of the 2020 eprivateclient 50 Most Influential private client advisers.