Today, M institute's Jyoti Banerjee will be speaking at the Family Business Network Summit in London to launch our new report Sustainable Value Creation, which is published by the Institute for Family Business. Could it be that one day all businesses will think of value creation in this way?
IFB research shows that family firms generate £1.1 trillion annually in UK revenues, 72% of family businesses have a sustainable strategy in place, and 79% of family businesses have implemented sustainable business practices. Clearly, family businesses are important for the British economy but are also increasingly moving towards a sustainability agenda to give them a competitive advantage.
A new report entitled Sustainable Value Creation, authored by M Institute, published by IFB and launched at the Family Business Network Global Summit in London this week, provides practical advice for family firms on how to create long-term value in a company through sustainable business practices.
On average, family businesses pay the greatest attention to issues related to the environment. A recent report by Credit Suisse revealed that seventy two per cent of businesses led by a second or a higher generation report having a strategy in place related to environmental, social and governance issues. Over the past three years, 79% had taken some action inside their company in terms of implementing a sustainable business such as introducing clean-tech technologies.
The M Institute report focuses on ‘four keys’ that, if introduced into the management of an organisation, can give it a structure for creating and sustaining long-term value.
Operating efficiency is a sustainable virtue
Rather than evaluating a business on just financial or physical assets, widen the operational lens to include use of sustainable and natural capital. Indeed, as companies deal with depletion of resources, materials security and environmental impacts they are seeking new and improved ways of operating. Over 40% of second and fourth generation companies have introduced clean-tech technologies in their business and 65% acknowledge a competitive advantage in product and service quality.
Sustainability attracts and retains the best people
The best employees want to work for companies they believe in. Forty per cent of family businesses cite their sustainable strategy as giving them a competitive advantage in attracting and retaining employees.
Public forums and government actions are driving sustainability
Becoming more active in engaging in public initiatives, cross industry bodies and with government to further the cause of responsible business are critical for sustainable, thriving family businesses. Thirty per cent of family businesses cite a positive impact on local community relations when they engage in this process.
Sustainability requires balancing short and long term objectives
With a tradition on focusing on the long term, family businesses have a natural advantage when it comes to being an environmental, social and governance-based business. Combining performance in the short-term and shifting long-term objectives in line with society at large can combine to bring further benefit to a business that has a wider range of values.
Mark Hastings, Director General for the Institute for Family Business, said, “Family businesses are already ahead of their competitors in understanding the benefits that a sustainable strategy can bring to their business. By publishing the new report, we want to provide a useful and practical framework for how companies can increase their commitment to a sustainable business. Companies have to find ways to make sustainability real in the context of their strategies, their operations and their relationships.”
Jyoti Banerjee, co-founder of medium enterprise think tank M Institute and author of this report said, “Many companies are trapped in an outdated approach to value creation that has focused on short-term financial performance. It is great to see that there are some businesses out there, such as the family businesses in the report, prepared to act on the understanding that sustainable value creation requires action in multiple financial and non-financial dimensions in the short and long-term.”
Ross Warburton, chairman of the IFB, called upon the Government to boost the economy by making family business its key strategic partner and helping family firms to secure jobs across the country.
He said, “Despite the challenges, family firms continue to thrive and grow and are in many cases outperforming other businesses – a testament to the strength and resilience of the family business model. But it goes beyond the balance sheet. In an age where the shock of the economic meltdown has raised questions in many quarters about corporate practice and the role of private enterprise in society, the deep rooted culture of family firms has much to offer the broader business community - built on a bedrock of strong and enduring values, a vision for and commitment to the long-term and a genuine part of and contributor to local communities. In sum, an example of what responsible and sustainable capitalism can look like.”
The report features case studies covering family and non-family businesses, including Adnams, Bruntwood, Donaldson Timber, Puma, SAP, Soneva and Wates.