| | By Mick James
Round about the
millennium, one of the
business magazines did a
calculation of how much
money you would have
made if you had
re-invested $100 in the
most successful sector
every year since 1900.
The sum was literally
astronomical – there
wouldn’t be enough stuff
on this planet to
express your wealth,
you’d have to own parts
of the solar system as
well.
But if you’d spread
your wealth among the
top companies of the day
and left it there, it
would be a very
different story – much
of your wealth would be
vested in ancient share
certificates: in the UK
fully half of your
portfolio would consist
of railway stocks.
It’s easy to spot
success – Tom Peters did
a great job of it in his
seminal book In Search
of Excellence. But it
only took a few years
before many of those
“excellent” companies
were in dire straits.
What these companies did
not have was the
sustainability of their
business growth,
particularly important
for the longer-term | |
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| | investor.
Sustainability has
recently become a
buzzword for the
environmental lobby, but
environmental
sustainability is only
one aspect – if an
increasingly important
one – of what allows a
business to prosper over
the long-term. It’s a
concept that has
concerned Tony
Czarnecki, managing
partner and founder of
business sustainability
consultancy Sustensis,
for a very long time.
Czarnecki compares
the philosophy of
business sustainability
with the investment
policy of Warren Buffet,
looking beyond the
financial measures of
turnover and profit at a
company’s true health
and so-called intrinsic
value. That is the
long-term value that the
company has, but which
has not been reflected
in its share value.
“For a company to
survive in the global
marketplace its business
must operate around the
long-term growth balance
as closely as possible
to reduce the overall
business risk,” says
Czarnecki. It is a
reflection that was born | |
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| | out of some very
unbalanced times.
“I was a zealot of
business reengineering,
which later on became
BPR,” he says. “I did
about 20 projects and
burnt my fingers – but
in a positive way. BPR
brought very fast
benefits but the
long-term price paid by
companies was very high.
Companies did not want
to bother with the
necessary “business
re-orchestration”, with
realigning employees’
skills or how it should
be reflecting the
expectations of the
wider community.
In 1994, working with
the Royal Society of
Arts (RSA)’s Tomorrow’s
Company programme,
Czarnecki picked up on
the notion of a more
balanced and inclusive
approach, which began to
look at sustainability
in terms of balancing
the long-term interests
of all stakeholders. And
while he welcomed the
development of the
Balanced Scorecard, he
felt it didn’t go far
enough, founding
Sustensis in 1996 to
develop an approach,
which would give a far
more rounded picture of
a company’s
sustainability.
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One of Sustensis’
services reviews
companies' growth
potential and long-term
investment risk using
116 non-financial
criteria. Since 2004,
the company has been
monitoring over 100
large companies to help
them understand these
longer-term drivers of
their growth. But
Sustensis still remains
a relatively small
consultancy: “We have 20
services that are
integrated and we could
employ thousands of
consultants implementing
them,” says Czarnecki.
“But we prefer to work
with the larger
consultancies: offering
joint services and joint
marketing is the most
promising way for a
small company to advise
large companies.”
He says the dramatic
events of recent months
have led to a sudden
upsurge in interest in
Sustensis’ services.
“People aren’t
investing right now
because they don’t know
how to assess the value
of a company using
purely financial
criteria,” he says. “We
have an index of how
competitive these
companies are in | |
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| | non-financial terms –
and that’s real.”
Czarnecki believes
that we are on the brink
of a shareholder
revolution. “The current
crisis has shown who
suffers most: it’s the
shareholders,” he says.
“Why have shareholders
allowed the board to run
away with its own
agenda?”
Shareholder pressure
will need a new business
transformation agenda.
“The entire picture
of the marketplace will
change dramatically,” he
says. “There will be a
huge market for
consultants in business
transformation to
overhaul companies’
business from a
short-term focus to a
long-term, sustainable
growth.”
If the current crisis
has any positive
aspects, it will be in
the lessons learned,
says Czarnecki:
“Companies became so
bullish because they
were doing well,” he
says. “They forgot they
were living in very
unique times.” | |
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