Knowing how to grow any company sustainably is essential because it helps avoid the common mistakes that effectuate business failures, such as over-expansion, unrealistic growth targets and inadequate planning.
Research published by Harvard Business Review found that companies that invest in employee training ... [+]
These adverse outcomes occur when leaders don’t consider the necessary factors for growth. As a result, they often become overwhelmed, make impulsive decisions and engage in risky behavior.
To avoid these pitfalls, leaders must focus on sustainable growth—expanding in a manageable way without straining their resources or forgetting their core values. Growing sustainably means being aware of the needs of future generations and making decisions accordingly. “Companies can no longer expect to focus on narrow economic growth at all costs,” said Terence Mauri, MIT’s mentor-in-residence, in an email. Instead, he believes that long-term sustainable value is created by focusing on a broad set of stakeholders with a distinct purpose, to sustain the business for the long term.
Research published by Harvard Business Review concludes that companies that take sustainability seriously deliver significant positive financial performance, inferring that commitment to sustainability makes good business sense. This perspective is supported by a study from the University of Oxford, which found that organizations with strong environmental, social, and governance practices outperformed those without such practices by 2.5% per year over 20 years—a notion that will be discussed at the APEC Economic Leaders Week from November 14th through 19th. World leaders will attend to discuss inclusive growth—a topic that is defined by the OECD as “sustainable economic growth that creates opportunities for all segments of society, improves living standards, and reduces poverty and inequality.”
So, while the benefits of sustainable growth are clear, how can companies achieve them? Here are a five steps to keep in mind:
1. Have a clear vision and purpose
Before you grow sustainably, you need to have a clear vision. What are your long-term goals? What kind of impact do you want to make? What difference do you want to see in the world? Once you understand your vision well, you can start making decisions that will help you achieve it. “The first step in any journey is to know where you’re going,” said Mauri. “Set your goals high and think long-term.” For example, consider investing in renewable energy if you seek to reduce your carbon footprint. Or, if you want to support local farmers, buy from companies that source their ingredients from nearby.
2. Consider all stakeholders
When making decisions about your company’s future, it’s essential to consider all stakeholders involved—including employees, customers, suppliers, investors, and the community. Each stakeholder group has different needs and concerns, so consider them all. “You can’t make everyone happy, but you need to elicit everyone’s interests,” said Mauri. His view aligns with research from Ivey Business School, which found that companies that take a “stakeholder orientation” are more likely to be successful, inferring that businesses need to create value for all their stakeholders, not just shareholders.
3. Be transparent
To gain the trust of all stakeholders, you need to be transparent about your plans and decisions—which means being open and honest about what you’re doing and why you’re doing it. It also means providing regular updates and communicating any changes. According to an MIT Sloan School of Management study, companies that are more transparent about their environmental and social practices are more likely to receive a positive reaction from investors. Moreover, as Mauri concluded, “transparency builds trust, which is essential for any relationship.” After all, if stakeholders don’t trust you, they won’t support you.
4. Make sustainable choices
When it comes to growing your business, you need to make many choices—everything impacts, from your products and services to your operations. Therefore, carefully considering and choosing the suitable business model for your company is a critical step in your journey. What exactly is a business model, you ask? It’s how you do business—how you generate revenue and make a profit. Therefore, choosing a model that will work well for your company and help you achieve your business goals is essential. For example, if you’re starting a new business, you may want to choose a model that will allow you to grow quickly and scale up your operations. On the other hand, if you’re an established business, you may choose a more stable and less risky model. There are many different business models to choose from, so it’s important to do your research and select the one that is right for your company.
5. Invest in the future
Finally, one of the best things you can do for your company’s future is to invest in it—including research and development, new technologies, and employee training. Mauri believes companies that invest in their employees are more likely to be successful. “Investing in your employees is investing in your company’s future,” he said. Mauri’s view is consistent with research published by Harvard Business Review, which found that companies that invest in employee training are actually more likely to be profitable, inferring that the more you invest in employees, the more they’ll contribute to your company’s success.
In summary, growing a sustainable business takes time, effort, and commitment. But it’s worth it and means making choices that will help you achieve your long-term goals while considering the needs of all stakeholders. When done correctly, sustainable growth will help leaders avoid the common mistakes that often lead to business failure while also increasing the likelihood of creating a successful and long-lasting company. And, after all, isn’t that what you want for your business?
