A Quality Approach to Sustainability

By Vincent McCarthy, CFA
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Corporate culture has been engrained over decades so strong characters, with character, need to step forward. If you don’t question things, then nothing will ever change.

At an underlying company level, more and more CEOs are talking about the importance of sustainability and ESG. Investment managers are adapting their funds or creating new funds, as we continue to see record inflows into ‘sustainable funds’. Advisors, lawyers, accountants, and other professional services firms are all recognising the need to fill the ESG gap. And quickly. 

The easiest and quickest way is to start with the marketing of their products or services. For some, a little bit of creative design, grandiose statements, believe your own hype and the transformation to sustainable leader is complete. The prevalence of greenwashing – the mischaracterisation of green credentials – shows that the allure of the easy path is hard to resist.

Individuals, the ultimate architects of a company and its culture, will need to be honest with themselves and choose whether they want to focus on appearance or substance.  Corporate culture has been engrained over decades so strong characters, with character, need to step forward. If you don’t question things, then nothing will ever change.

As consumers and investors become more informed – which is a priority – then we should see a natural weeding out of the charlatans and a gravitation towards the sustainability leaders. Just as is the case when consumers and investors differentiate on the basis of quality, based on their experience of a product or service.

It not about perfection, it is about being authentic with respect to products and services being offered. When individuals and companies choose the easy path – creating the appearance of caring about sustainability – rather than the more difficult path – embedding sustainability into their business model – we all lose in the long run.

For companies who are serious about being sustainability leaders, I think there is a lot to be taken from how Steve Jobs approached quality at Apple. These are three key things that could be applied in almost any company when approaching sustainability:

  1. Don’t start with marketing, improve your product or service.

“It is funny the group of people that do not use quality in their marketing are the Japanese. You never see them using quality in their marketing. It is only the American companies that do. And yet if you ask people on the street which products have the best reputation for quality, they will tell you the Japanese products. Now why is that? How could that be?

The answer is because customers don’t form their opinions on quality from marketing, they don’t form their opinions on quality from who won the Deming award, or who won the Baldridge award, they form their opinions on quality from their own experience with the products, or the services.

And so, one can spend enormous amounts of money on quality, one can win every quality award there is. And yet if your products don’t live up to it, customers will not keep that opinion for long in their minds. And so, I think where we have to start is with our products and our services, not with our marketing department.  And we need to get back to the basics and go improve our products and services.”

  1. Listen to clients, to deliver the right product/service at the right time.

“Now, again quality isn’t just the product or the service, it’s having the right product. Knowing where the market is going and having the most innovative products is just as much a part of quality as the quality of the construction of the product when you have it.

And I think what we are seeing is the quality leaders of today have integrated that quality technology well beyond their manufacturing, now going well into their sales and marketing and out as far as they can to touch the customer and trying to create super-efficient processes back from the customer, all the way through to the delivery of the end product, so they can have the most innovative products, understand the customer needs fastest etc. etc.”

  1. Ask why. Believe in people, to empower creativity and innovation.

“In most companies, if you are new and you ask “why is it done this way?”, the answer is “because that is the way we do it here”, or “because that’s the way it has always been done”.

And in my opinion the largest contribution of much of this quality thinking is to approach these ways of doing things, these processes, scientifically, where there is a theory behind why we do them. There is a description of what we do and most importantly, there is an opportunity to always question what we do.

And this is a radically different approach to business processes than the traditional one, “because it is always done this way”. And that single shift is everything in my opinion because in that shift there is a tremendous optimistic point of view about the people that work in a company. It says these people are very smart, they are not pawns. They are very smart and if given the opportunity to change and improve they will. They will improve the processes if there is a mechanism for it. And that optimistic humanism I find very appealing, and I think we have countless examples that it works.”  

Companies have a choice. They can focus on perpetuating the illusion of being a sustainability leader – through marketing and self-promotion – or they can spend their efforts on empowering employees to bring real change, to deliver more sustainable products and services for clients. Using the word company makes it impersonal, but it is the people inside the company who need to decide what they stand for and whether they want to be part of the problem, or the solution.

For consumers and investors, quality may be easy to discern in products and services, but we need to make it much easier for them to differentiate on the basis of the sustainability impact. That way, as people become more informed, the real sustainability leaders will be the companies who win long term and the greenwashing gets eradicated naturally.   

End

Vincent McCarthy, CFA

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