Like other ‘black swan’ events, such as the 2008 recession or 9/11, the coronavirus pandemic has stormed in unexpectedly and ensued sweeping economic impacts – meanwhile seeming predictable only in hindsight. Miami Herbert’s David Kelly, professor of economics, underlines the importance of sustainable business, which emphasizes the need to prepare for such challenges.
What is a sustainable business today?
A sustainable business conducts strategies that take environmental and social wellbeing into account, and hence attenuate external risk factors, to ensure the company’s longevity. Managers regularly evaluate familiar risks such as debt incursion or production missteps, but for long-term survivability, decision-makers must also study dangers posed by periodic black swans.
How should businesses prepare for a black swan?
Though companies bear no responsibility for the disruption, they must contend with its effects on employees, communities, suppliers, and all various stakeholders. Managing with an eye for sustainability prompts decision-makers to strategize according to the ways that stakeholders affect the business. For instance, practices that prioritize employee health improve performance because healthier workers are more productive. By doing the same in areas such as supply chain and production processes, managers may use sustainable practices to identify and potentially mitigate risk factors associated with far-reaching and consequential events.
Is there a conflict between growth and sustainability?
The evolution of sustainable business over the last ten years provides an important lesson: sustainability practices benefit company growth and stakeholders alike. In the airline industry, for example, saving on fuel also lowers costs. Managers that evaluate operations for sustainability inevitably discover ways of supporting the environment or society while fulfilling stakeholder interests and increasing profits. Long-term risk management signifies one such way that sustainability may help achieve a win-win situation. Companies with only a short-term focus may pay the price during crises, whereas those with attention to sustainability build resilience and become better equipped to weather the storms.
For additional COVID-19 Thought Leadership and business resources from Miami Herbert Business School faculty, visit https://www.bus.miami.edu/thought-leadership/covid19-thought-leadership/index.html.