The Moral Challenges For Young Leaders Commerce Essay

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The issue of sustainability has been in the limelight of late, owing to the recently concluded Copenhagen summit. One of the main reasons why the Copenhagen summit was a failure or at the very least wasn't as successful as was expected was due to the complex nature of sustainability. One must view sustainability through the prism of the conflict between the need to protect the environment and the demand for economic development which can consequently improve human condition. Owing to the inequity in global wealth distribution, almost three quarters of the world's population live in the 'developing countries', and their first priority is to bring about an improvement in their living conditions, even at the cost of the environment. For those millions of people who don't have access to the basic necessities of life like food, clothing and shelter, sustainability is the last thing on their minds. On the other hand the 'developed' nations have reached a state of well being where they can afford to give priority to the protection of the environment. However, they are not willing to contribute sufficient funds to enable the 'developing' nations to implement technologies and processes that will ensure their development is sustainable. This basic conflict of interest is what prevented a consensus at Copenhagen. The only solution to bride this dichotomy is through innovation.

The root of the problem lies in the fact that we are heavily dependent on non renewable resources to meet our energy needs. Not only are these resources scarce with their stocks rapidly dwindling, they are also a major source of carbon emissions. These carbon emissions have increased carbon in the atmosphere to its highest level in nearly 400,000 years. As a result the global surface temperature is increasing and will soon reach alarming levels. This will have several disastrous consequences like rising sea levels, submergence of low level islands, extreme weather conditions, shift in global precipitation patterns etc. Moreover we are utilizing renewable resources at a rate that is far greater than their rate of renewal. Such is our predicament that, owing to our burgeoning population, our demands our constantly increasing while the supply of resources is decreasing. The only way out of this situation is to either decrease our population/consumption or to devise innovative technologies and processes that will meet our needs. Ideally, we should use a combination of both these methods but in reality it is extremely difficult to reduce our population/consumption. Thus the challenges posed by the scarcity of natural resources can only be met by devising innovative solutions.

Necessity is indeed the mother of innovation. In this case, the innovation is being driven by sustainability. But in order to understand how sustainability can drive innovation, we need a deeper understanding of both these terms: innovation and sustainability. The Organization of Economic Cooperation and Development (OECD) defined innovation as "an iterative process initiated by the perception of a new market and/or new service opportunity for a technology based invention which lead to development, production, and marketing tasks striving for the commercial success of the invention". According to the 'triple bottom line' approach of J Elkington, sustainability is concerned with three dimensions-people, planet and profit. Here people represent the social component, planet the environmental component and profit the economic component. Thus innovation for sustainability must strike a balance between these three aspects of sustainable development.

For example, given the dwindling crude oil reserves and the energy crisis in nations across the world, the need of the hour is the adoption of technologies which can provide clean renewable energy at a cheap cost. At present green technology has a high initial cost which makes it prohibitive for large scale implementation. This is where innovation comes in. If we can find innovative ways to make green energy cheap and cost effective, it will then be possible to rapidly scale up green initiatives and thereby we can solve the problem of power shortages. The key point is that we are taking into consideration all the three aspects of sustainable development, viz. social, environmental and economic in order to arrive at an equitable solution. This task, although difficult, is not impossible. The cell phone revolution is a case in point.

According to the GSM association, the numbers of mobile phone connections have increased from 100 million a decade ago to over 4 billion today. This is primarily because governments, especially those of developing countries like India, implemented market reforms that opened up the telecom space to regional and international competitors. This competitive environment triggered a wave of innovation, with each player trying to gain greater market share by developing cheaper and better handsets and providing services that were cheaper and of a higher quality. In addition to this a lot of these firms also had access to unrestricted capital either in the form of venture capital or by raising equity and this enabled their R&D centers to come up with more innovations.

As a result, the cell phone has undergone a transition from being a privilege of the rich, to an instrument of daily use for the masses. Today almost everybody has a cell phone as opposed to only a handful in the early eighties. Moreover cell phones today perform so many more functions, ranging from accessing the internet to playing various media, apart from the basic function of making and receiving calls that they were originally designed for. The main catalysts for this transition were political will/leadership and competition.

Thus there is a direct correlation between innovation and competition. Innovation thrives in a competitive environment and also makes the creation of such an environment easier. The creation of a competitive environment can only be achieved by providing a fair and level playing field to all the players concerned. To achieve this we require tremendous political will and leadership. Leadership is not restricted to the political space alone. There must be effective leadership from all the players concerned. Such leadership is not easy to achieve as it entails the sacrifice of short term gains for long term ones.

Reverting back to the energy crisis scenario, at present there are a lot of companies and institutions trying to harness alternative sources of energy like solar, wind, geo thermal etc which require a huge initial investment. Although in the short term there will be substantial losses, in the long term investing in such initiatives will reap rich dividends. For example companies like Suzlon, which is the fifth largest wind turbine manufacturer in the world, have been posting losses in the past few quarters. However, in the long run it is these companies that shall prove profitable.

If there is considerable investment (ideally a combination of venture capital and government funding) in a sector such as solar energy, companies in that sector will compete with each other to come up with cheaper and more efficient solar cells. As long as the political leadership provides them with a fair and competitive environment vis-à-vis the conventional energy sources, these companies will come up with innovative technologies that will make such solar cells cheaper. Consequently more and more people/companies will use these technologies further leading to more innovation which subsequently lowers the prices again. Such a virtuous cycle will result in an energy revolution on a scale much bigger than the telecom or dotcom revolution.

Innovation is not restricted to technology alone. Integrating this technology with innovative processes like the development of green supply chains also contribute substantially to ensuring that development is sustainable. In fact a lot of global corporations are already working towards achieving this end as they believe it will provide them with a competitive advantage. At their helm is Wal-Mart, one of the largest companies in the world. Wal-Mart's success can largely be attributed to their supply chain management which is their primary competitive advantage in the retail store industry. They have one of the most efficient distribution systems in the world and this in turn has enabled them to sell products at very low prices. Now Wal-Mart is focusing on greening their supply chain. Their strategy is proving successful and there are several important lessons that can be learnt from it.

In a speech made in October, 2005, Lee Scott, CEO of Wal-Mart, committed the company to three ambitious goals: to be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain Wal-Mart's resources and the environment. Towards this end Wal -Mart has created 14 "sustainable value networks" comprising of suppliers, company executives, environmental groups and regulators. Each of these groups has a focus area, ranging from logistics to textiles and climate change to china. These groups are broadly classified under three main categories: renewable energy; zero waste; and sustainable products. The objective of each group is to come up with reforms for sustainability and efficiency. In the long run, this will further improve efficiency and drastically cut costs. In the words of Lee Scott, "Being a good steward of the environment and being profitable are not mutually exclusive. They are one and the same".

In fact, within a year of his making this announcement, the program started reaping dividends. For instance, Wal-Mart started producing hybrid diesel-electric trucks and refrigerated trucks with the help of inputs from the Rocky Mountain Institute (RMI), an organization with a focus on profitable innovations for energy and resource efficiency. These trucks were fitted with a small power unit for cooling so that whenever the truck was stopped, the engine could be switched off. In the first year alone, the fuel efficiency improved by approximately 25%, which translated to about 75 million dollars in annual savings. This also reduced carbon emissions by 400,000 tons!

Some of the other green initiatives include the introduction of double sided cash register receipts in order to save paper and embedding motion sensors in freezers so that the lights are switched on only when customers approach. Wal-Mart has also introduced a new process called the sandwich bale, which was developed by Rocky Mountain Recycling, which it uses to transport and bundle plastic shopping bags. These bags are sandwiched between corrugated cardboard and baled into bundles which are transported to some nearby recycling facility where they are turned into plastic pellets and sold to manufacturers. Wal-Mart is also aggressively promoting the sales of CFL bulb which consume 75% less energy as compared to 60 watt incandescent bulbs. The company is also increasing the number of organic products in its stores. It is now the largest purchaser of organic cotton products and the biggest seller of organic milk in the world. These are but a few of the several initiatives undertaken by Wal-Mart.

In the first year of implementation of their sustainability strategy, Wal-Mart generated profits roughly equivalent to that of several Wal-Mart supercenters. What distinguishes their strategy from other companies is the fact that they do not consider sustainability as a separate issue isolated from the rest of their business. This is in stark contrast to most other companies which consider sustainability as part of their CSR(Corporate Social Responsibility). In Wal-Mart's sustainability report for 2009, Lee Scott states that, "Sustainability is built into our business. It's completely aligned with our model, our mission and our culture."

Other companies like FedEx, Unilever, and AT&T too have jumped onto the sustainability bandwagon. Fed Ex for example is replacing their old aircraft with newer fuel efficient ones which reduce fuel consumption and increase capacity. They are using solar energy systems at their distribution hubs and have replaced more than a quarter of their fleet with fuel efficient vehicles apart from using hybrid vans. All this has enabled them to achieve substantial reductions in fuel and transportation costs.

Apart from greening their supply chains, companies are also developing green buildings and workspaces. For example the Leadership in Energy and Environmental Design (LEED) Green Building Rating System provides a suite of standards for environmentally sustainable construction. Since its inception in 1998, LEED has grown to encompass more than 14,000 projects in the United States and 30 countries covering 1.062 billion square feet (99 km²) of development area. In fact, the number of LEED rated and registered buildings in India have been steadily rising in the recent past. It may come as a pleasant surprise to note that quite a few of these buildings belong to public sector undertakings. For instance the Delhi, Mumbai and Dehradun offices of ONGC, the Railways Officers' guest house and the Tamil Nadu State Legislature building in Chennai and the Commissioners' office in Bangalore are some of the LEED rated buildings in India. The only drawback is that constructing a green building to LEED specifications is a lot more expensive than constructing conventional buildings.

In a welcome change, companies across the globe are slowly beginning to realize that sustainable innovation can substantially improve efficiency and increase profits in the long run. However these sustainable initiatives have a high initial cost and require considerable investment over a period of time. According to estimates, Wal-Mart spends about 500 million dollars every year on its green initiatives. A lot of companies will find it extremely difficult to justify this sort of investment to their shareholders. Also, many company executives will not be willing to risk such a large investment in something that does not provide immediate returns. This is the principal deterrent that is preventing a lot of companies from undertaking green initiatives. Consequently these companies/institutions are not taking any steps aimed at reducing their carbon footprint, building greener offices and manufacturing plants, recycling of waste material, increasing their usage of renewable resources or even reducing emissions for that matter as all these activities entail a lot of extra cost in the short term. Little do they realize that in the long term, all such measures shall not only result in substantial savings but also ensure that their development is sustainable.

Thus the moral challenge for today's young leaders is essentially one of choice. They can choose to invest in programs and practices that will yield benefit in the long term, but incur considerable expenses in the short term. This is quite difficult as it calls for some sacrifices in the short term and would require visionary leadership to implement. Or they could choose the easy way out and settle for short term gains with the possibility of putting not just our environment but our very future at risk in the not so distant future. This conflict between long term and short term interests is not new in our history. For centuries mankind has been faced with this dilemma. Henry Hazlitt, in his book 'The Foundations of Morality', argues that ," We should be moral because being moral is following rules which disregard apparent self-interest in the short run and are designed to promote our own real long-run interest as well as the interest of others who are affected by our actions. It is only from a short-sighted view that the interests of the individual appear to be in conflict with those of "society," and vice versa." Thus it is quite clear that the morally right course of action is to ensure that all measures are taken to foster innovation that is driven by sustainability.

In order to achieve sustainable innovation, we need visionary leaders who can inspire the people around them to make some short term sacrifices in order to achieve long term goals. They should be able to convey the bigger picture to the rest of the employees, so that everyone is aware of the significance of the goal. We need leaders like Lee Scott, who can inspire confidence in investors and workers alike, that the path they have chosen is the right one and that their efforts will reap rich dividends in the long run. As Jack Welch said," Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion". It is critical that leaders have a strong sense of social responsibility and environmental commitment. The task of ensuring the transition of our economy from a high carbon one to a low carbon one is daunting to say the least. It will require the collective efforts of all stakeholders involved to achieve this transition. Since our present high carbon economy has been around ever since the advent of industrialization, the transition will be difficult. According to Joseph Schumpeter, innovation leads to gales of "creative destruction". Therefore we will need competent leaders at the helm to make sure this transition is as smooth as possible. This is where the concept of mindful leadership comes in. A mindful leader is one who is aware of not just his own needs but also the needs of the people around him and the environment. It is only with such a mindset can we satisfactorily resolve the problems that would inevitably crop up in our quest towards sustainability. This is because leaders must be capable of devising sustainable solutions that compromise on the needs of neither the society nor the environment.

Ultimately, it is up to all of us, collectively as a society, to choose our future course of action. We must choose between maintaining the status quo, which requires very little effort, and bringing about a green revolution that will require tremendous effort, sacrifice, will power and faith. We can either be guided along by fate and let nature take its own course or we can write our own destiny and usher in a new era of peace and prosperity. Whatever our decision may be, the time has come to choose. Although our choice may not affect our generation directly, it definitely has the potential to alter the lives of our future generation. The world they inherit tomorrow will depend on the choices we make today. The very definition of sustainable development is "meeting the needs of the present without compromising the ability of future generations to meet their own needs". What we do with the world we have inherited is the legacy that we shall pass on to the future generations. We are therefore obliged to provide the future generations with adequate resources to meet their needs. What we require now is the tremendous will power and visionary leadership, which we have demonstrated on many previous occasions, which will enable us to embark on the path of sustainable development. We must do it not merely because it is the right thing to do, but, given the circumstances, it is the best thing to do.

As Barack Obama said in his inaugural speech, "Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends - honesty and hard work, courage and fair play, tolerance and curiosity, loyalty and patriotism - these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths."