Sustainability Starts at Home

iraj ispahani sustainability starts at home

Editorial by Iraj Ispahani, Philip Marcovici and Dr Kenneth Goh

Wealth and business-owning families are uniquely placed to contribute to a better world. Able to take a long view, a well-functioning family is positioned to take action that can have real impact. But unless the family and its own wealth and business interests are sustainable and regenerative, the longer-term ability of the family to contribute to society is at risk. 

Many wealth and business-owning families have sustainability on the agenda. They discuss the family’s focus on stewardship versus ownership, with the thought that current generations will look after the business or wealth for the benefit of future generations, but are they living sustainably?

Listen to the Family Business Voice “How can Family Enterprises Empower Next-gen Leaders?” with Iraj Ispahani

iraj ispahani sustainability starts at home

Focus on the We

A sustainable mindset allows families to focus on the we – the family as a whole and the wider circles of employees, community, society and beyond – over the I. But how many families undertake regular holistic continuity audits designed to shed light on whether family assets are owned with a view to ensuring continuity regardless of any internal and external factors affecting the family? Has the family considered the importance of the economic independence of its members? Doing so can help family members develop the confidence they need to take a helicopter view and focus on what is best for the we. Asking the right what-ifs on a regular basis is key, as is taking action to address areas of internal and external risk that could compromise the longer-term objectives of the family. 

How can family members create alignment between the I and the we? There can be and often is tension between the personal agenda and the family agenda. This tension can be a significant issue for next-generation members who wish to pursue causes or hold beliefs that are inconsistent with those of their families or family foundations, which often provide the funding.

Common Interest

Instead, families must accommodate both the I and the we if they are to coexist happily and flourish. Why should individuals in a family simply subscribe to collective responsibility because it is expected? Individuation must be expected and respected as a source of identity. This definition of the common interest is vital; that it’s embedded during childhood, adolescence and early adulthood is fundamental.

What the common interest is will vary from family to family, but each family must manage its own context by asking two simple questions: “Where did we come from?” and “Where do we want to go?” As Alex Haley, the author of Roots, writes, “In every conceivable manner, the family is link to our past, bridge to our future.” 

iraj ispahani sustainability starts at home

In Harmony

At what point does the insistence on individualism threaten family unity? For example, to achieve cohesion in a family business, everyone involved needs to understand the values that underpin the family business. For there to be mutual accommodation between the I and the we, these values must be updated and redefined so that successive generations feel their relevance, or are at least reminded of them. Base your strategic decisions on these values and use them to encourage the right behaviours. Incumbent generations and their advisers must ensure that everyone is singing the same song even though they sing with different voices and parts. This harmonic differentiation is what makes the song sound beautiful.

 Embedding circular thinking in a family’s mindset and modus operandi will encourage this harmony. And more simply put, not having to choose between the individual and the family as a whole, but rather choosing both provides a refreshing approach to unity – a celebration of each individual and of the group. 

Values and Purpose

Values may evolve and change: not so long ago, the world was almost exclusively patriarchal and hierarchical; but today we have a flatter, more democratic structure, which allows and encourages more questioning. This, of course, is more the case in some cultures than in others. The younger generations are not as easily accepting of the approach of previous generations and must buy into any planned transitions within a family enterprise. If they are not listened to and their needs accommodated appropriately, they may vote with their feet and become detached from the family.

Families that are clearer on their values and whose governance frameworks embed and endorse these values together with true respect for the evolving values of the younger generation will be more successful in holding their family and business together.  

Disruption is likely to increase – geopolitically and also driven by technological advances in areas including artificial intelligence. Positive reputations for families and their businesses in this fast-evolving environment will likely be more difficult to maintain, but a shared sense of purpose can add much-needed cohesion and glue. 

Real Sustainability

Families with longevity inherently have an adaptive mindset because they have lived through and survived system shocks. However, the pace of change requires an element of rethink; simply relying on thinking and behaviours that have served the family well in the past is not likely to be enough to thrive. But how is sharedness determined?  Adopting a non-linear, circular approach that involves family members across generations will better prepare them to cope with future system shocks.

In many business and wealth owning families,  discussion takes place on the development and maintenance of family constitutions and other means of documenting vision and governance. But all too often, what is in the family constitution does not find its way into the actual ownership vehicles that are put in place for the family. Complex trust and other arrangements, possibly designed for other purposes, such as tax minimisation, may not actually reflect the better thought-out governance approaches covered in a family constitution. In the event of a family dispute, will the non-binding constitution have any impact on litigation as it relates to a particular trust deed or other arrangement? Does the family really understand and uniformly buy-in to the family constitution?  

Real sustainability for families requires that there be consistency between the objectives of the family (such as we want to be a family in business for the next 100 years and more) and what the family actually does in terms of how assets are owned and structured and how family assets, including human capital, are developed and protected. 

About the Authors

How can Family Enterprises Empower Next-gen Leaders?
Iraj Ispahani; image courtesy of Ispahani Advisory

Iraj Ispahani is the CEO of Ispahani Advisory Ltd. and is based in London. Ispahani Advisory operates internationally and advises family businesses and wealth owners on business strategy, governance, people, and education. Ispahani Advisory is recognised as a thought leader in the family business world. Iraj also serves as a Group Director and Board Member of the Ispahani Group, a family business headquartered in Bangladesh that marked 200 years in 2020.

Philip Marcovici is retired from the practice of law and consults with governments, financial institutions and global families in relation to tax, wealth management and other matters. In addition to his work the boards of several entities within the wealth management industry, as well as of entities within family succession and philanthropic structures, Philip teaches in the areas of taxation, wealth management and family governance.

Dr. Kenneth Goh is Assistant Professor of Strategic Management at the Lee Kong Chian School of Business. He is also the Academic Director of the Business Families Institute and holds the V3 Group Fellow in Family Entrepreneurship.