Zhu Dajian: Sustainable Business Models’ “Four Traits” and “Four Changes”
Wed, Sep 13, 2023
“Sustainable development” refers to a development philosophy and strategy adopted by the United Nations and recognized by many countries throughout the world. In order for human society to develop sustainably, economic prosperity should coexist with considerations for social justice, resource conservation, environmental protection, cooperative governance and others. This multi-goal, balanced, and coordinated development model conflicts with and challenges the traditional enterprise development model of “profit maximization” in Western economics. Many leading enterprises have begun exploring alternative paths for sustainable development since the sustainable development strategy was proposed. What is the “new sustainable business civilization” and its general characteristics? In this regard, Zhu Dajian, professor at the Department of Public Administration of Tongji SEM and Director of the Institute of Sustainable Development and Governance at Tongji University, has proposed the “four traits” of sustainable business and leading enterprises, and from these, derived the “four changes” in corporate management. The following information is excerpted from Professor Zhu Dajian’s speech at the Third Future Management Forum held in Beijing.
“Sustainable development” refers to a development philosophy and strategy adopted by the United Nations and recognized by many countries throughout the world. In order for human society to develop sustainably, economic prosperity should coexist with considerations for social justice, resource conservation, environmental protection, cooperative governance and others. This multi-goal, balanced, and coordinated development model has sparked a powerful commercial revolution.
The “profit maximization” model proposed by the new classical economist Milton Friedman has long served as a standard model in Western economics and commerce, guiding corporate development for years. The single-goal traditional enterprise model is in direct contradiction with and challenged by the multi-goal vision of sustainable development. However, after decades of practice, many enterprises have gradually overcome this dilemma and blazed new paths towards sustainable development. From strategic vision to resource allocation, organization and implementation, sustainable enterprises today strive for multidimensional development as well as profit maximization. In my view, new enterprise models under the “sustainable business” civilization exhibit four notable “traits” in economic, social, environmental and governance dimensions. These “four traits” are bringing out four important changes in how enterprises will think strategically and manage themselves in the future.
The first change occurs in overall corporate goals and governance from “short-termism and profit maximization” to “long-termism and value maximization”.
The second change occurs in the relationships between objects and economic dimensions from “treating business value and social issues as separate” to “finding business opportunities from social issues”.
The third change occurs in the importance between subjects and social dimensions from “focusing on enterprises themselves” to “focusing on enterprises’ integration with stakeholders”.
The fourth change occurs in material and value flows in the process and environmental dimensions from “minimizing individual links and operating costs” to “maximizing value throughout the lifecycle”.
I hope my speech will get you thinking. Sustainable development is not just a meaningless “slogan”. It is influencing how different organizations operate, and is a crucial tool for enterprises to think strategically and manage themselves during future transformation.