The myth of the sustainable enterprise

The sustainability of enterprises has been an important issue in business management for decades. It was talked about by management giants like Peter Drucker, where sustainability was seen in a company where there was long-term revenue over costs and depreciation. This defined the difference between entrepreneurship and business, where an entrepreneur moved into business mode when that happened.

The works of Steven Covey and Peter Senge enriched the research from the Tavistock Institute, bringing in issues of ethics, personal fulfilment, organisational learning, and wisdom into corporations in practical ways.

Environment, social, and governance (ESG) has encapsulated all of the above upon a platform concerned with climate change/global warming and politically correct or DEI based business. Thus, ESG espouses sustainability, while encapsulating the values within the ESG framework.

However, the reality is that such organisations rarely exist, and those that do aren't sustainable.

Going back to 'bread and butter' management

The bottom-line for any business, be it an enterprise, company, or corporation is the stable of products and services it has, and revenue they can generate.

However, all products and services have finite lifecycles, where product and service lifecycles today are becoming shorter than ever.

The challenge to the problem of limited product and service lifecycle is creating new products, and/or diversifying. Look at what happened to DVD rental shops and photo developing outlets. For those owning these types of businesses, there are not always new products or services available that can be developed, or new areas of diversification to keep these businesses going. They must exit and close down their businesses.

Likewise, diversification is not always a clearcut matter. Just look at the current turmoil in the automobile industry. No one for sure can predict, which direction the industry may proceed over the next decade. Technology, political narratives, consumer preferences, and brave boardroom decisions will eventually decide the industry's fate and future directions.

Through creative destruction, an industry dies and a completely new industry arises, most often with new companies and brands. Remember Singer, Nokia, IBM, and Blockbuster Video. New innovations and their sponsoring companies recentralise a new industry, and usually turn it into one with high barriers to entry for any new comers without massive capital and market/industry connections.

The only way to enter is to either change the nature of an industry through innovation, or create a completely new one. Sustainability doesn't survive in such an environment. From these perspectives, sustainability is a myth.

Long established sustainable industries are a rarity

There are very few Coca Colas or Pepsis in the world. The death of the aviation transport giant Pan Am in the late 1990s was a shock. This was soon followed by a surge in low-cost No-Frills airline business models, which turned around the industry. Household names in the finance industry like Lehman Brothers in 2008, showed that size is no protector of sustainability.

The brands we know today are most probably not around a generation ago. Just look at the new EV company manufacturers, who are taking over the automobile industry, that was considered stable. Singer could not diversify enough to remain as relevant to consumers and households today, than it did a century ago, and IBM is struggling to stay afloat in a crowded industry. Household cleaning brands that dominated global markets a generation ago like SC Johnsons, Kiwi, and Reckitt & Colman have drastically declined in their visibility.