Value creation should be the guiding logic behind how companies operate and how financial markets function. Only then will we have a sustainable economy that cares for people and the planet.
Católica Lisbon School of Business and Economics, in partnership with the Santander Foundation, organized the 2nd edition of Lisbon Sustainability Week (LSW) from June 30 to July 2, a global gathering for reflection on how to integrate sustainability into business strategies and the financial system.
It was interesting that this major event took place in the same week that a heatwave of unprecedented severity swept across Europe, causing thousands of deaths above the normal levels for June.
Although sustainability seems to have slipped off political agendas, given the difficulty of building global consensus and politicians’ focus on geopolitical and competitiveness issues, the truth is that climate change is happening faster than scientists expected. Business leaders recognize this, identifying climate and nature-related risks as the main long-term risks to their businesses.
Organized by the teams of Católica’s Center for Sustainable Finance and Center for Responsible Business, LSW brought together hundreds of very different people: academics, business leaders, entrepreneurs, public policy actors, management gurus, technologists, and renowned economists, including a Nobel laureate. People with different paths, but with something in common: united by the purpose of building a sustainable economic model that cares for people and the planet.
The first day was dedicated to business leaders, investors, and entrepreneurs. We shared how large companies are integrating sustainability into their business models, how entrepreneurs are developing innovations for sustainability, and how companies need, and must, decarbonize their operations.
It is also possible to reduce the carbon footprint of fossil fuels, even though they remain critical to energy security. In this context, the massive investment in and deployment of renewable energy, with global investment currently twice the amount invested in fossil fuels, as well as the growing electrification of mobility, give us hope for the future.
One of the keynote speakers was John Elkington, who has worked for more than 50 years on integrating sustainability into business strategies and is famous for his concept of the Triple Bottom Line, in which he proposed that companies should seek to achieve objectives linked to the “3 Ps” simultaneously: Profit, People, and Planet. John also became known as the only management thinker to have issued a “recall” of his own ideas, in a famous 2018 article in Harvard Business Review. He explained that he did so because he felt the concept was being used by companies as a way to find compromises between objectives seen as conflicting, rather than to create synergistic models across the various dimensions. More ambition and vision were needed.
Instead of the “3 Ps,” John proposes that companies in this next cycle embrace the “3 Rs”: Responsibility, Resilience, and Regeneration.
Responsibility means that, as business and finance leaders, we need to move from a vision of serving shareholders and even stakeholders, who are those who ask the most and sometimes shout the loudest, to becoming stewards of organizations’ resources and capabilities. On our shoulders rests the well-being of others in both the short and long term. Companies remain the most important engine of economic and social progress. They will be able to fulfill this role well if they consider the positive and negative externalities of their actions and seek to manage them responsibly.
Resilience means that we need to evolve from an approach focused on optimizing the efficiency of value chains, the logic that guided management decisions during the globalization era between 1990 and 2020, toward a focus on the resilience of value chains and economic systems in the face of different shocks. Indeed, efficiency works in a world of stability, where change is predictable, but resilience is the ideal strategy in a world of unpredictable shocks such as those we have increasingly faced in recent years: from the unpredictability of the American administration, to geopolitical rivalry, war, pandemics, and extreme climate events.
Regeneration means a radically new approach to people and the planet. It is no longer about “doing no harm,” reaching net zero, or not discriminating on the basis of gender, race, religion, or disability. These are linear approaches based on a logic of concessions and trade-offs. Regeneration consists of using innovative approaches that generate economic wealth while enabling people and the planet to flourish and recover. New types of agriculture, the integration of circular thinking into economic and business models, the pursuit of synergies between areas, and the adoption of a systemic vision rather than a strictly organizational one are all part of this approach. Regeneration challenges us to think about “nature-positive” strategies and approaches, which was precisely the theme of the second day of the conference, while the third day focused on climate cities, in partnership with Instituto Superior Técnico.
In summary, the “3 Rs” lead us to adopt a logic of value creation. And in this context, I leave a note of warning shared by several speakers.
The world is undergoing profound political and technological change, and it throws at us many different and not very sensible narratives. Investments in AI seem excessive, and American financial markets are assuming high stock-price valuations and enormous credit risks. They are selling overvalued shares to investors while offering them to insiders with few rules and criteria, as if tomorrow did not matter. But tomorrow always comes, because in economics there is no such thing as a free lunch. We therefore need to develop a strong intuition for what truly creates value versus what is pure speculation and will destroy value. Value creation should be the guiding logic behind how companies operate and how financial markets function. Only then will we have a sustainable economy that cares for people and the planet.
I leave here a final tribute to Professor Luís Caeiro of Católica-Lisbon SBE, who passed away last week. Luís was an exceptional educator who, for 53 years, taught and inspired thousands of students in his classes and training modules on Leadership and People Management. He taught the first undergraduate students in Business Administration at Católica in 1972. Since then, Luís never stopped teaching and writing books, including three books in the last three years. He was a man deeply concerned with responsible leadership and people’s well-being, who inspired and empowered present and future generations to become better business leaders. Thank you, Luís, and our deepest gratitude.
Filipe Santos, Dean of Católica-Lisbon SBE