Corporate Sustainability: a new norm?
Before jumping straight into the jungle of corporate sustainability, I feel it is important to explain the buzzwords so that to be on the same page.
What is sustainable development and what does ‘sustainability’ really mean in the corporate sector?
The term ‘sustainable development’ in its contemporary sense appeared in 1987 during the United Nations World Commission on Environment and Development where the report Our Common Future, also called the Brundtland Report (by the name of Norwegian Prime Minister at that time Gro Harlem Brundtland), was released.
In short, sustainable development is a development that ensures that the use of resources and the environment today does not compromise their use in the future (according to the UNEP definition).
It is worth mentioning, nevertheless, that the idea of Sustainable development originates from sustainable forest management, and was developed in Europe during the 17th and 18th centuries; first appeared in the essay of English gardener, writer, and diarist John Evelyn Sylva in 1662 (!).
Applied to the corporate sector, sustainability indicators represent the 3-dimensional impact of the organization’s activities:
1 — economy
2 — people
3 — environment
The World Summit for Sustainable Development (WSSD) held in Johannesburg in 2002 stated that sustainable development is built on the same three interdependent and mutually re-enforcing pillars — economic development, social development, and environmental protection — that must be established at local, national, regional and global levels.
This establishes linkages among poverty alleviation, human rights, biodiversity, clean water and sanitation, renewable energy and the sustainable use of natural resources.
The balance between economic progress, social responsibility, and environmental protection, sometimes called a triple result, can lead to a competitive advantage.
We all know that the primary goal of any business is to make money and to be profitable, the business owners usually want to clearly understand what is the financial benefit of a sustainability implementation in their organization.
These benefits can be quiet substantial. Down the road, we will look at the real-life modern day examples of successful companies.
For now let’s recall that the assessment of social, economic and environmental impacts, discussed last time here of the measures that organization undertakes is necessary for the adoption of effective operational and capital investment decisions that positively affect the goals of the organization as well as of its’ various stakeholders.
Key aspects of Corporate Environmental Sustainability
For the organization to become a leader in the sphere of sustainable development, it is crucial to:
1. Clearly define clearly state what sustainability is,
2. Develop processes that will promote resilience & sustainability throughout the corporation,
3. Measure productivity based on sustainability, and ultimately
4. Link it with corporate financial performance.
For corporate sustainability to be efficient, useful and long-term, it has to be representative and integrated into day-to-day corporate activities.
If sustainability is seen only as an attempt to ensure effective public relations, it does not create long-term value and may even serve as a value destroyer. On top of it, an organization’s attempt to perform a ‘short-cut’ is felt by the community and stakeholders, and usually, it not met favorably.
Once again, the key to success is full integration of sustainability into business decisions, definition, measurement and reporting (both internally and externally) of current and future impacts of products, services, processes, and activities.
Integration of corporate sustainability, of course, has its own road map and set of rules. But we better call them PRINCIPLES, it sounds more elegant and noble, and you will see, this how they are.
9 PRINCIPLES OF SUSTAINABILITY
1. Ethics: The company establishes, promotes, controls and maintains ethical standards and practices in relations with all stakeholders of the company.
2. Management: The company manages all its resources conscientiously and efficiently, recognizing the fiduciary duty of corporate boards and managers to focus on the interests of all stakeholders of the company.
3. Transparency: The company ensures timely disclosure on its products, services, and activities, which allows stakeholders to make informed decisions.
4. Business relations: The company engages in fair trade with suppliers, distributors, and partners.
5. Financial income: The company compensates capital providers for the competitive return on investment and protection of the company’s assets.
6. Community involvement / economic development: The company develops mutually beneficial relationships with the community, especially if it’s sensitive to the culture, context and community needs.
7. Cost of products and services: The company respects the needs, wishes, and rights of its customers and seeks to provide the best prices for goods and services.
8. Employment practice: The company participates in human resources management that promote personal and professional development, diversity and empowerment.
9. Environmental protection: The company seeks to protect the environment and promote sustainable development through its products, processes, services and other activities.
The notion of ‘corporate sustainability’ is closely related to the notion of ‘stakeholders’ — you might have noticed it in the first 3 principles of sustainability. So, who are these mysterious stakeholders?
A stakeholder is anyone who is interested in, impacted by, or voluntarily connected to your company. It can be an individual, or a group, NGOs, or government in any form, employees, current and even potential clients.
Knowing your stakeholders and their expectations is like winning a jackpot. They are at the same time your organization’s drivers for change and its reasons to become better. Stakeholders help you answer the questions–why & for whom. They also connect you to one of the three pillars of sustainable development–people.
Developing relationships with stakeholders, engaging stakeholders is necessary if the company wants to grow, progress and be up-to-date with the contemporary world.
Also, don’t forget that employees are also the companies’ stakeholders. In an article on companies’ journey to sustainability, MIT lecturer Otto Scharmer mentions that a CEO of one of the Unilever Asian branches was surprised to see how the commitment to sustainability served to uplift employee morale. By becoming more sustainable, Unilever made employees feel part of a larger story and increased their engagement with the company overall.
COMPONENTS OF CORPORATE SUSTAINABILITY
Leadership
Any company or organization is a mirror of its leader(s) values, culture and approach, therefore soft, or informal, components, such as organizational culture, leadership, and people nurture a company’s drive for sustainability. Everything is possible when the executives recognize the importance of corporate sustainability, social and environmental responsibility.
Companies with successful corporate sustainability story believe that it’s very important to get people with appropriate ‘’let’s make it happen’’ approach in the decision-making roles. Leadership support in promoting sustainability in a company is of great importance.
A highly productive top-management achieves 3 main goals:
1. Provides top strategic guidance to ensure the growth and prosperity of the company;
2. Ensures corporate responsibility to stakeholders, including shareholders, employees, customers, suppliers, regulators, and the community;
3. Ensures that the company manages a highly skilled team of executives.
Reputation
…is another component of corporate sustainability.
Rarely a company takes reputation in the account when thinking about sustainability implementation. And in vain so.
The reputation of the company partially depends on its reputation among stakeholders. The thoughts of stakeholders are based on their perception and expectations of what companies do.
Perception of stakeholders is usually based on these 6 pillars:
1. Emotional attractiveness
2. Products and services
3. Vision and leadership
4. Working environment
5. Social and environmental responsibility
6. Financial indicators
Want it or not, the stakeholders do play visible or invisible roles, and they do estimate your company by what you do in terms of your social and environmental concerns, and they want to see you are doing good things.
WHAT DO THE COMPANIES DO ALREADY?
A study described in ‘Implementing Sustainability: The Role of Leadership and Organizational Culture’ by Marc J.Epstein, based on 4 companies: Nike, Procter & Gamble, The Home Depot, and Nissan North America, showed that whenever an environmental or social issue becomes important to the customer or the public, it becomes important to the company too, and addressing it becomes a win-win situation.
Speaking of the economic component, implementing sustainability reduces waste and emissions, that, in turn, saves both company costs and environmental damage. Using environmentally preferred materials may increase some manufacturing costs, but by reducing waste, the companies decrease costs.
At Nike, for example, costs are reduced via Considered Design, which is Nike’s program to improve product sustainability by focusing on design.
Procter & Gamble improves the efficiency of the entire product life cycle from cradle to grave, Nissan North America declares focus on energy-usage reduction.
The companies notice certain market benefits, that sustainability brings along, that include:
- Increased sales due to increased market demand;
- Increased prices due to improved quality and reputation;
- Reduced costs due to increased efficiency;
- Improved productivity;
- Reduced potential costs associated with environmental clean-up, internal control, and ethics violations, as well as problems of employees and clients associated with lack of social sensitivity.
SUCCESS STORIES
General Electric was a pioneer in the corporate environmental expansion strategy, starting their “Ecomagination” program in 2005.
IBM later announced “Smarter Planet”, after they recognized the potential of their expertise in information technology to contribute to sustainable development and social progress.
In 2011, Honda Motor Co. created the Environmental Business Development Office (EBDO) under American Honda Motors, the office’s aim was to “increase strategic coordination of environmental matters across organizational functions and, looking across various product lines, to propose new environmental products and business strategies.”
In 2013, HP adopted the HP Living Progress framework. According to the 2017 HP Living Progress Report, this program embodies how HP thinks about how they do business. One example of a product that came out of the HP Living Progress framework is the HP Moonshot server system. This server consumes 89% less energy and uses 80% less space while costing 77% less than traditional server systems.
Another game-changing product that HP developed in collaboration with Conservation International is HP Earth Insights. This solution uses HP’s access to big data to collect and deliver information about biodiversity loss in tropical forests. This product, an early warning system for threatened species, provides data and rapid analytics on the trends and health of forests and their inhabitants.
Adidas’ ambition is to be a sustainable company.
As simple as that.
They have created a greener supply chain and targeted specific issues like dyeing and eliminating plastic bags.
Nestlé took a major commitment in areas such as product life cycle, climate, water efficiency. Nestlé is a member of the ISO Water Footprint Working Group (ISO140046: ISO/TC207/SC5/WG8) and waste, as well as packaging and product labeling.
Some of the aforementioned companies, like GE, Nike, and Unilever are among nine Green Giants, according to Fortune.
Green Giants are businesses with a billion U.S. dollar or more in annual revenue that can be directly attributed to a product, service or line of business with sustainability or social good at its core.
Their success proves sustainability not only does not contradict with profits, but it is the driving force of their business that generates value socially, environmentally and economically.
They integrate sustainability as part of their business vision and mission. It is a part of every facet of their business, it is essentially the culture of the company.
The sustainability strategy is what differentiates these companies from others. Not a short-term plan, not one-time actions. Then, with time, ideally, the sustainability strategy becomes a business strategy.
Sustainability issues were not considered serious back in the 1980s and climate change was not something people considered as a foreseeable threat to future generations. Nowadays, sustainability is clearly a trend and demand for businesses to be incorporated into their business model, especially if it’s no longer a marginal or money-losing activity.
HOW IS YOUR COMPANY DOING?
Author: Anna Chashchyna
Editor: Maria Isabel Acosta Lopez
