Systems Thinking and its Role in Understanding Corporate Sustainability Challenges

(por Kaidi Eddie-Obiakor)

It is no news that discussions around sustainability have always revolved around the interconnectedness of the economy, society, and the environment; emphasizing the fact that there is an undeniable relationship between these three elements and that for either element to thrive it must be in parallel to the other two. For example, it is almost impossible to talk about the profitability of a business without referring to people in the society who are able to patronize the business or even envisage the potential growth of a business without underlining its ability to access raw materials from the environment to facilitate its growth. This notion is one of nature’s important lessons and the sooner we accept its veracity the easier it is for us to slowly become integrated into the world of systems thinking.

Systems thinking is an approach to viewing an element or an issue in relation to other elements to which it interacts. Being that every societal element forms part of a social system, in order to learn more about any one element it is important to observe how that element reacts when combined with other elements. For example, human beings have the tendency to elicit different reactions based on interactions with various personality types and in different situations. To a large extent, these reactions provide alternative perspectives on a subject matter and enable us to appreciate the level of robustness a systems visual provides.

Why is this important and how does it work?

As an aftermath of the global financial crises, emerging economies have been repositioned as the world’s economic growth engines. Not prepared to decrease momentum, their rapid growth has been supported by newly created opportunities for servicing new customers and markets with refocused products. GDP growth, financial returns and positive outlooks are a few of the rewards that participating economies have received but what may not be apparent is the level of stress caused on local environment and social structures due to aggressive business practices.

Without doubt, two main factors are responsible for the growth and sustenance of business: consumption and available resources. For a business to effectively cater to its consumers, it must ensure that its human and natural resources are optimum. Also, for a business to realise profit, it must ensure that consumption levels does not decline. This cyclical relationship between businesses and consumers, however, exists within a larger social system where other variables such as the government regulations, social issues, climate change, changing consumer needs must also be considered.

For example, strict environmental regulations have the ability to reduce a business’ access to raw materials. In 1956, the Brazilian government put in place a Forest Code to regulate the use of land for natural vegetation and those available for industrial activities. These land sharing practices greatly influences the production capacity of any manufacturer or any other entrepreneur.

Diagram: Illustrative

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Additionally, social challenges such as lack of infrastructure, health care services, education and transport systems, amongst others, are also potential constraints to operating a seamless business. For instance, Nigeria’s education system has suffered a setback due to poor investment and corrupt practices a result of which the sector is reported to be churning out candidates that are unskilled for its job market. Considering the fact that the country is in the running for a spot amongst the top global economies by the year 2020, it is difficult to see how an unskilled labour force, poor R&D investment or inefficient skills transfer can support business continuity, especially in the private sector.

Another variable to consider is the impact of climate change. In northern China, higher-than-normal temperatures have negatively affected crop production while infrequent rainfall has significantly reduced soil fertility in many areas. Even as these episodes are sure to leave rural farmers who are dependent on natural irrigation methods vulnerable, without doubt manufacturing companies that purchase raw materials directly from affected farmers will equally be left vulnerable. In addition, we can also consider the impact of this event to other variables such as domestic availability of food crops, local food prices, supply of plant stock for livestock rearing, trade exports, etc.

From the above illustrations, the level of complex interactions associated to each business activity becomes clearer. A business works within a dynamic social system and as such is highly vulnerable to any changes that many occur to other elements that make up the social system. Once we accept that business cannot stay independent to vulnerability in environmental, social and economical factors, the easier it is for us to design the most effective strategies to enable us stay ahead of impending situations.

Steering through corporate sustainability challenges

Firstly, we must sidestep traditional means of analysing business sustainability issues that focus on the addressing glaring traits without looking beneath the surface. As in the example above of dilapidating education systems, it is not enough for businesses to tackle this issue by donating equipments, providing monetized scholarships to less than 1% of a graduating year or refurbishing distressed buildings given that these actions will have little impact on improving the employability of the 400,000 graduates that are exposed to the job markets each year. Already, systems thinking provides us the bigger picture of how a low talent pool can negate business goals in the future and this should spur a greater incentive to take proactive steps that may include introducing and funding vocation-based courses in tertiary institutions that are aligned to present business needs and market realities, providing R&D funding for greater integration of professional courses in  bid to strengthen specific sectors or industries, financing infrastructure for implementing an online education platform for excluded persons, amongst others.

Secondly, globalisation has made business issues more far reaching as such businesses cannot continue to adopt solutions that used to work in the past. With challenges taking up more complex forms, our approach must also be dynamic enough to employ multiple approaches.  Taking a leaf from China, the government (in collaboration with financial institutions) took adequate precaution to roll out innovative small scale irrigation facilities to address the stress of climate change on agricultural productivity. Parallel to this, steps were taken to increase R&D on seed samples better suited to provisioned temperature fluctuations while farmers were supported financially and technically by NGOs and private organisations to adopt new farming and crop selection techniques.

Thirdly, the influence of multiple elements on any business issue makes it difficult to continuously adopt a soloist problem-solving approach. We must seek to involve various parties in the problem solving process after all a problem shared is a problem half solved. None of the business challenges mentioned above is likely to be addressed, successfully, by any one organisation. New relationships with government, civil organisations, other businesses and local communities that cut across sectors and boundaries must be formed to provide a more robust competency pool of resources. Still, using the Chinese example, implementing either solution would be impossible without the assistance of private research institutions providing data on climate change impact, government providing enabling policies and funds to support crop selection and farming practice adaptation as well as private sector organisations/ NGOs gaining farmers trust prior to providing the required technical support.

Fourth and arguably the most nascent perspective is attempting to evolve from addressing vulnerability challenges to spearheading societal transformation; an attempt to collectively design lasting solutions to social issues that promote sustainable growth.

Evidently, whether in the financial, FMCG, manufacturing, extractive or power sectors, systems thinking represents a more evolved and promising tool for measuring the complex nature of of sustainability issues that are likely to affect your product or service delivery. But even more important is its ability to assist business owners to project potential issues and create a range of solutions towards solving them.

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Kaidi veered into Sustainability Consulting after starting her career as a Management Consultant in a global Advisory firm. This decision was prompted by her desire to use private sector projects to address societal challenges. As an important part of this decision was to connect with people of similar mindset and learn how this goal is being achieved in both developed and developing societies, she went ahead to pursue a double Masters degree from both HEC Paris and FGV Brazil, while partaking in sustainability focused projects. Like many forward- thinking ambassadors of Africa, she believes in the continent’s capacity to achieve sustainable growth and promotes the idea that the private sector and civil society hold the key towards effecting accountable and responsible business and public governance practices. And through her present and future projects she hopes to align this vision with reality.

Outside her career, Kaidi loves hip-hop and fitness dance and listens to a mix of Indie Pop, Soft Rock, Folk, Samba, Reggae and various African music genres. She adores the concept of book clubs…even though this is dying tradition, and hopes to own a Pug and a Dalmatian in the future.

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