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.

The suburban dream of owning a sundry shop, hardware store, or bakery, are challenged and crowded out by chains owned by super-conglomerates. Today, access to massive amounts of capital both creates and dominates any identified market opportunities around communities.

Nothing can be sustainable

The most likely scenario for nascent entrepreneurs today is like the following example. A person may obtain a contract to lay fibre-optic cables for a telco, and build a medium sized business fulfilling the contract. After all the cable has been laid, they newly developed company runs out of revenue and just disappears. The company borrows to buy vehicles, hires workpeople, and the owners enjoy the good times, adjusting their lifestyles around theit success. When it collapses, they must look for a completely new business opportunity.

An individual today must train up with skills for something, and then be retrained two, three, or even four times in their lives to survive. The hope that when their market opportunities evaporate, they are not in too much debt and can quickly exit the industry and find a new one to enter.

Markets open, grow, and quickly collapse, and the process is ongoing

This changes the whole concept of small to medium business, as well as the requirements for business education. People must be taught how to enter and exit industries rapidly, a number of times during their lives. They must be willing and able to take on new technologies, quick learning, the nature of new industries, and advance a new enterprise within this environment.

The key to this ability is possessing an entrepreneurial mindset. Maybe this should just be called being 'street smart'. Education is not designed to develop 'street smart' graduates, who can take on quickly emerging opportunities. They must also be prepared for these same opportunities to disappear just as quickly as they emerged.

This doesn't allow for sustainability.

The key here is developing the ability to learn how to acquire skills (both business and technical), being able to acquire the right set of capabilities to run the business, acquire the resources on a shoestring to do so, and find and develop stakeholders and business networks of influence that make things happen.

People have to quickly learn how to solve the industry-centric, as well as business-centric issues, the problems they will face. That's what people need today, not an ESG framework that won't solve these problems. Successful businesses must be driven by entrepreneurial intelligence, coupled with 'street smartness'.

Shrewdness is probably one of the most important attributes within the paradigm of entrepreneurial intelligence.

Future markets and business

Markets are changing rapidly in their basic nature. Traditional sales and supply channels are primarily moving online. Very soon businesses in many countries could be hit with decrees and demands forcing companies to conform with ESG guidelines. These channels are under the control of governments working with Big Tech. They decide who can and can't participate.

Artificial intelligence (AI) is already destroying the careers of people and changing the nature of how work is being done. The ability of MSMEs to use AI in marketing and administration may yet be outside the bounds of use. Governments may not assist MSMEs, thus this sector may not get enough assistance from government to adapt and could fall further behind large corporations in competitiveness. Bureaucrats in policy making may fail to understand needs here.

This could further squeeze MSMEs and their abilities to set-up to conduct business in the first place.

Unlike the past, proprietors cannot afford the luxury of being emotionally attached to their own businesses. Lifestyle type businesses may become a thing of the past. Proprietors will have to be continually in entrepreneurial mode, where sustainability will take a back seat, as people try to make their businesses viable.

Its one thing for the investment groups talking about ESG, and another to get the MSME sector to take ESG onboard.