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Sustainable Business Practices are ways of doing business that are Socially, Environmentally, and Ethically Responsible (also called the S.E.E.R. Model). Companies that operate using sustainable business practices are worth watching, as they frequently have better long term results than companies that focus on profits alone. Why? Because profit-centered thinking often results in a short term focus at the expense of long term growth. A recent study reports that 86% of CFOs would not make a long term investment that would result in a NPV (Net Present Value- a measurement of all cash inflow, minus all cash outflow) gain in 3-5 years if it hurt quarterly earnings. To put that in layman's terms, most CFOs in this study said they would sacrifice long term profits (if you want to consider 3-5 years long term) in order to look good in the present quarter. This type of thinking is absurd, and reflects individualistic thinking in which leadership is only concerned about increasing their wealth, getting a golden parachute, and then exiting the company before profits go down.
Thankfully, there are signs that times are changing, as more business schools emphasize theories of the firm like the S.E.E.R. Model and encourage sustainable practices that consider all stakeholders, rather than just focusing on shareholder wealth (a shareholder is a person who owns stock in a company. A stakeholder is a person who is somehow affected by a company, including stock owners, employees, business partners, local community, suppliers, etc).
Body Glove is a prime example of a privately owned company that operates with sustainable business practices, although here I want to focus on just one. When Body Glove first started selling wetsuits online, their salespeople were concerned about the potential loss of commission. When they mentioned this to Body Glove's president, Russ Lesser, he designed a system that would not only continue paying commission to salespeople, it would also pay commission to local stores within the zip code that the wetsuit was shipped to, in the form of account credit. The result was a win-win-win-win scenario:
-Customers were able to buy online (win!)
-Salespeople continued to make commissions (win!)
-Retailers received account credit (win!)
-Body Glove made online sales, increased brand loyalty with retailers and salespeople, and because retailers had account credit to spend, they sold more inventory (win!)
Had they focused solely on profit, Body Glove would likely have lost salespeople, and potentially retailers and even customers. By showing commitment to their shareholders and creating a cutting edge sustainable business practice, Body Glove has taken steps to ensure their ongoing competitiveness in an increasingly crowded marketplace.