What do we mean by a "business case" for sustainability?
Happy Friday. I am pretty fired up about this whole business case thing....
Mountains have been written and oxygen expended lauding the importance of the "business case for sustainability". It has become a cheap rhetorical device to whoo audiences. It has become devoid of meaning and is bantered about without much thought. (Like the brazenly overused word "strategy" which Smeal's own Don Hambrick finally defined in his seminal work on the topic). The next time you hear it at a meeting or conference, please ask the person a follow up question: "what do you mean by 'business case'? Can you define that for me?"
Research of 60,000 business people and interviews with 150 executives suggests only 25% of companies have developed a business case for sustainability (see graphic below, MIT Sloan/BCG, 2017).
Perhaps part of the problem is that we haven't defined what we mean by a "business case." (Hint: if you think it's just ROI, IRR or NPV you are only partially correct).
We need to define what we mean before applying it to a sustainability-derived project or anything else. In fact, thinking of this has gotten me so wound up...I am declaring next week International Business Case Week and will outline a step-by-step process for developing a business case for sustainability (or anything else).
What is a business case? Evidence to Support Sound Judgment
Business case....let's start briefly with the word case. The Merriam Webster dictionary features many interesting dimensions of this word. The definition of greatest interest to us is:
"evidence supporting a conclusion or judgment" and
"a convincing argument"
But the other definitions also provide important clues:
a set of circumstances or conditions (example: "this seems to always be the case")
a situation requiring investigation or action (example: "the police were looking into the case of the house fire"
So this would suggest that a business case is:
the presenting of evidence accurately representing a set of circumstances developed for a particular audience through an investigative process in support of
a profit-making commercial enterprise
What is the goal of a business case?
Most might say it is to get a "YES". That is not true.
The goal of a business case should be to enable your company and leadership to make an informed investment decision.
So if the answer is NO or YES, the measure of your success is how well you have fully informed your leadership of the costs and benefits of different alternatives, including doing nothing.
More Like a Swiss Army Knife than a Hammer
So a "business case" is less like a hammer and more like a Swiss army knife. There is no single nail to hit with your business case hammer. It's a Swiss army knife (or like my favorite Leatherman tool) and you have know what parts to use in what circumstance and with what audience.
The Harvard Business Review Guide to Building Your Business Case by Raymond Sheen explains that all great business cases start with a problem: what is the "business need you're trying to solve"? And what is the proof that this problem is really a problem? And finally, what is the root cause of this problem? The "right argument" has to focus with great precision on a specific business need.
The evidence you and your team collect, the argument you put together, and the investigative process you follow, has to resolve a real, persistent pain for the company and/or its customers. Or else you will endeavor to make a great case to solve a problem that doesn't exist.
A business case is a convincing argument made to a particular person or group. So your business case must meet the unique, particular interests and requirements of that person or group. A good business case for one audience may not be so for another. So each business case will be a little different while also possessing some similar elements.
Finally, a business case happens during a particular point in time in the life cycle of a business and during a particular "season". Your timing and your sensitivity to the current business climate, market conditions, the last financial report, etc. will determine your success.
Key elements of a business case
A business case can take many forms and includes many elements. The Project Management Institute (PMI) provides several examples of types of business cases as well as the ingredients that make up a business case*:
• ROI (Return On Investment): Spending time and money in development is expected to deliver far more money than went into the project.
• Strategy/Mission: The project supports the Organization's Strategy and/or Mission (which may not always be about short-term, or dollar-for-dollar returns).
• Investment: Developing new products in the laboratory, for eventual expansion into money-making products and/or new markets
• Values: This is a variation on Strategy/Mission—where the organization's social values are agreed, as part of the corporate culture, to be one of the organization's common expectations and goals.
• Research: “We'll probably lose money on this project, but we will learn a lot that will help us set the organization's future direction.”
• Efficiency: A variant of ROI, the project is done to improve the organization's operational processes.
• Compliance (Regulatory/Statutory/Fiduciary): A project is required for the organization to comply with external regulations.
*Source: Herman, B. & Siegelaub, J. M. (2009). Is this really worth the effort? The need for a business case. Paper presented at PMI® Global Congress 2009—North America, Orlando, FL. Newtown Square, PA: Project Management Institute.
This post just introduces the concept of a "business case" and hasn't yet applied it to sustainability.
Look for posts next week as I break down How to Really Create a Business for Sustainability. We also need to create the Sustainability Case for Business....but more on that later.