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Can Rapid Growth be “Sustainable”?

Rick Ridgeway Patagonia

Rick Ridgeway of Patagonia speaks to finalist teams at the 2018 Patagonia Case Competition at Berkeley Haas, April 2018.

Written by Maxwell Kushner-Lenhoff, CRB Student Advisory Board, CRB Fellow & MBA ’18 Candidate

“What’s your advice for fast-growing companies looking to do so sustainably?” I asked climbing legend and Patagonia Vice President of Environmental Affairs, Rick Ridgeway, at Berkeley Haas last week.

His answer: “Don’t grow fast.”

That was a tough response for me to hear. As an aspiring business and sustainability leader, I have long been convinced that the rise of fast-growing, more sustainable companies like Tesla can make a positive impact on their industries and the world. My logic goes something like this: as long as companies consider their broader impacts and stakeholders as they grow, they can do so sustainably. Consider Tesla, which has set a mission of “accelerating the world’s transition to sustainable energy,” or Lyft, which recently invested to make all of its rides carbon neutral, or even Apple, which has made significant efforts to improve its environmental footprint in recent years.

However, Rick has a point: there is a lot of risk associated with growing too fast, especially when it comes at the cost of long-term value for shareholders and stakeholders alike. Importantly: many implications of our decisions cannot be properly accounted for until after we have already made them.

As a chemist, I know this all too well. During World War II, DDT was a lifesaver for troops on the front lines across the pacific, killing mosquitos and reducing death rates due to rampant malaria. Only later, with the publication of Rachel Carson’s Silent Spring, did the world realize that DDT was also a persistent environmental pollutant. The chemical has been found in birds around the world even in recent times.

But the drive towards fast growth is not going away. Public markets demand rapid growth in revenues and profits alike, and companies will continue to provide it. The real question is: “How can we provide this growth more sustainably?”

For companies like Patagonia, the answer is to stay private. Patagonia’s unique ownership structure and its status as a Certified B Corporation allows it to focus on its double bottom line of expanding its apparel business while also “doing no unnecessary harm.”

But even companies without this option have ways to step up their “sustainable growth” game.

One solution is to put in place strong norms around sustainability disclosure and clear goals on how to improve your company’s environmental footprint over time. Consider Cisco, which has worked over time to reduce greenhouse gas (GHG) emissions and drive product returns to enable a circular economy. This year, the company’s efforts earned it the top spot in Barron’s sustainability ranking.

Another approach is to orient your entire company towards a sustainability goal. Surprisingly, this approach is becoming more common. Having started with companies like Tesla, this paradigm shift has since spread to include even the most resource intensive extractive industries. Shell Oil has emerged as a leader in their field after putting out a report predicting that our world needs renewables growth of 50 times over the next four decades if we are going to reach the Paris 2 degrees Celsius warming target as a planet in its “Sky” Scenario. The Company is beginning to invest accordingly.

And all companies have the option of putting in place internal mechanisms that incentivize managers to consider the long-term implications of their actions. According to McKinsey, firms that do so “exhibited stronger fundamentals and performance than all others in the last 15 years.”

So, Rick, while I agree that “not growing fast” might be the ideal scenario. I would argue that “growing fast more sustainably” might be a promising alternative to help get us there.


About the Author

Max Kushner-Lenhoff

Maxwell Kushner-Lenhoff is a Fellow at the Center for Responsible Business and a full-time MBA student at Berkeley Haas. Prior to business school, he earned his BS/MS in inorganic chemistry at Yale focused on renewable fuels production. He then spent four years in the Office of the CEO at The Dow Chemical Company, where he worked on the company’s 2025 Sustainability Goals, among other projects. Max spent the summer as an R&D Finance Associate at Genentech.

 

One Response to “ Can Rapid Growth be “Sustainable”? ”

  1. JIm Rossi said:

    May 11, 18 at 5:02 pm

    Great article short article, Max (disclaimer: Max is my good friend & former schoolmate!). I appreciate the succinct & nuance description of DDT’s ambivalent history – lifesaver with profound unintended consequences. I disagree with Mr. Ridgeway if he’s saying companies should not grow fast as a general rule. Fortune tends to favor the bold, and I think that applies to both protecting nature as well as capturing marketshare.


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