in Product/Business Models
John Paul Kusz, MBA, MFA, Center for Sustainable Enterprise | Stuart Graduate School of Business
Sustainability Is on the Agenda
Developing a sustainable enterprise is the seemingly elusive dream of both the ecologist and the economist. To the ecologist, whether inside or outside of the company, the notion of a sustainable enterprise is typically rooted in a belief system that balances the need of the business entity to create a benefit and secure profits while maintaining the integrity of the environment in which it operates as it assures the equitable treatment of the people in that environment, both today and in the future.
To the economist the notion of “sustainable enterprise” may have much less to do with environmental integrity or societal and cultural equity than it does with the metrics that deem an enterprise economically viable for the long term— or at least until an exit strategy has been executed. Management strategies attached to variable inputs such as materials and labor are designed to minimize cost and maximize the benefit— profit— born of enterprise activity. These activities are typically contained within a fixed investment— plant and equipment— that is valued by its potential to generate a return on investment (ROI) over time.
Paying close attention to maintenance and longevity of the plant and equipment are key to realizing a healthy return on investment. It is in the very best interest of the enterprise to keep these fixed assets healthy and productive for as long as possible, maintaining, improving, and restoring them as necessary. The stream of revenue derived from fixed assets that are healthy and productive are, in essence, an annuity— an annuity that can markedly increase with the eclipse of the break-even point on the investment in the asset; that point in time when the investment obligation, if any, is fulfilled in the form of financial capital. Financial capital, discussed later, is presented here as a construct that is the surrogate and metric for the real wealth it represents. The real wealth is embedded in the physical, human, and natural capital of the enterprise.