The sustainability – short-termism paradox
As we have entered the post credit crunch era, entrepreneurs face new challenges demanding a move away from short-termism to a sustainable social, environmental and financial performance (cf. the triple bottom line), and face the uncomfortable tension between the long term focus needed for sustainable development and the prevalent short-termism (investors returns on investment requirements, etc.). So what are you going to do about it? Blame the investors? You better not: Although short-termism may be fueled by investor pressure, it’s equally true that investors select companies for their time frames (read more here).
We say that entrepreneurs can control this paradox through an agile approach to management and proactive communication with stakeholders. An agile approach involves higher priority to disruptive thinking and value chains build around ecosystems / partnerships.
Entrepreneurs can take control
With respect to managing resources as a whole entrepreneurs must develop their ‘agility’ capabilities to manage volatility, uncertainty, complexity and ambiguity; promote longer-term and life cycle approaches for sustainability initiatives so that they might outlive normal CEO cycles.
Further more, managers can take actions and structure their communications to offset short-term tendencies – vis-a-vis the capital markets (there even seems to be a spin-off since companies exhibiting short-term behavior is more volatile than the market as a whole, and the cost of capital for those firms is higher (0.42%) than average) as well as internally by implementing the management control measures that will bring to surface the signs of progress at a stage where financial measures reveals nothing.
The next gen entrepreneurs must act across diverse dimensions from the consumer, customer and product to the triple bottom line (social, environmental, and financial). Next gen entrepreneurs must pursue more radical solutions and create more impact through disruptive models. And next gen entrepreneurs must view development of ecosystems and partnerships deeply integrated into the business models – cross-sector linkages as well as public-private partnerships – critical to accelerating solutions and access to new markets (read more here).