Corporate sustainability

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A 2014 session by the United Nations Conference on Trade and Development promoting corporate responsibility and sustainable development. Civil Society and Sustainable Stock Exchange How Civil Society can engage with Capital Market Stakeholders to Promote Corporate Responsibility and Sustainable Development (14384579889).jpg
A 2014 session by the United Nations Conference on Trade and Development promoting corporate responsibility and sustainable development.

Corporate sustainability is an approach aiming to create long-term stakeholder value through the implementation of a business strategy that focuses on the ethical, social, environmental, cultural, and economic dimensions of doing business. [1] The strategies created are intended to foster longevity, transparency, and proper employee development within business organizations. [2] Firms will often express their commitment to corporate sustainability through a statement of Corporate Sustainability Standards (CSS), which are usually policies and measures that aim to meet, or exceed, minimum regulatory requirements. [3]

Contents

Corporate sustainability is often confused with corporate social responsibility (CSR), though the two are not the same. [4] [5] Bansal and DesJardine (2014) state that the notion of 'time' discriminates sustainability from CSR and other similar concepts. Whereas ethics, morality, and norms permeate CSR, sustainability only obliges businesses to make intertemporal trade-offs to safeguard intergenerational equity. Short-termism is the bane of sustainability. [6]

Origin

The phrase is derived from the concept of "sustainable development" and Elkington's (1997) "triple bottom line." The Brundtland Commission's Report, Our Common Future , defined sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concpets:

  1. "the concept of 'needs', in particular the essential needs of the world's poor, to which overriding priority should be given; and
  2. "the idea of limitations imposed by the state of technology and social organization on the environment's ability to meet present and future needs." [7]

The idea of meeting present economic needs without reducing the ability of future generations to meet their own economic needs became a popular approach in the business world's implementation of sustainable development, referred to as "corporate sustainable development." [8]

"Triple bottom line" proposes that business goals were inseparable from the societies and environments within which they operate. While short-term economic gains could be pursued, failure to account the social and environmental impacts of these pursuits is believed to make those business practices unsustainable.

Whether corporate sustainability can be measured remains contested. There are composite measures that include measures of environmental, social, corporate governance, and economic performance, such as the Complex Performance Indicator (CPI). [9] And there are many different definitions of sustainability applied to and used by companies. [10] It remains difficult to say whether a company or other actor is operating sustainably or not because "there is no generally accepted set of indicators that could clearly delineate a status of sustainability from one of unsustainability. Therefore, the global status of sustainability, as well as the exact status of different actors, such as countries, companies, or individuals, is almost impossible to measure." [11]

Scope

The most broadly accepted criterion for corporate sustainability constitutes a firm's efficient use of natural capital.[ citation needed ] This eco-efficiency is usually calculated as the economic value added by a firm in relation to its aggregated ecological impact. [12]

Similar to the eco-efficiency concept but so far less explored is the second criterion for corporate sustainability. Socio-efficiency [13] describes the relation between a firm's value added and its social impact. Whereas, it can be assumed that most corporate impacts on the environment are negative[ citation needed ] (apart from rare exceptions such as the planting of trees) this is not true for social impacts. These can be either positive (e.g. corporate giving, creation of employment) or negative (e.g. work accidents, human rights abuses).

Both eco-efficiency and socio-efficiency are concerned primarily with increasing economic sustainability. In this process they instrumentalise both natural and social capital aiming to benefit from win-win situations. Some point towards eco-effectiveness, socio-effectiveness, sufficiency, and eco-equity as four criteria that need to be met if sustainable development is to be reached. [14]

Theorists agree that respect for issues other than economics is an important matter. The Business Case for Sustainability (BCS) has had many different approaches for ways to approve or disapprove the economic rationale for corporate sustainability management. [15]

Principles for corporate sustainability

Transparency
proposes that by having an engaging environment within a company and within the community it operates will improve performance and increase profits. This can be attained through open communications with stakeholders characterized by high levels of information disclosure, clarity, and accuracy. [16]
Stakeholder engagement
is attained when a company educates its employees and outside stakeholders (customers, suppliers, and the entire community) and move them to act on matters such as waste reduction or energy efficiency.
Thinking ahead
Envisioning the future enables companies to generate fresh ideas for implementation. These ideas can either reduce productions costs, increase profits, or provide a better image for the organization.
Diversity, Equity and Inclusion
A a 2012 study by the University of California Berkeley's Haas School of Business found that companies with a high number of female board members were more likely to reduce their environmental impact and improve energy efficiency. [17] [18]

See also

Related Research Articles

Sustainable development is an approach to growth and human development that aims to meet the needs of the present without compromising the ability of future generations to meet their own needs. The aim is to have a society where living conditions and resources meet human needs without undermining planetary integrity. Sustainable development aims to balance the needs of the economy, environment, and social well-being. The Brundtland Report in 1987 helped to make the concept of sustainable development better known.

The ISO 14000 family of standards by the International Organization for Standardization (ISO) relate to environmental management that exists to help organizations (a) minimize how their operations negatively affect the environment ; (b) comply with applicable laws, regulations, and other environmentally oriented requirements; and (c) continually improve in the above.

<span class="mw-page-title-main">Triple bottom line</span> Accounting framework

The triple bottom line is an accounting framework with three parts: social, environmental and economic. Some organizations have adopted the TBL framework to evaluate their performance in a broader perspective to create greater business value. Business writer John Elkington claims to have coined the phrase in 1994.

<span class="mw-page-title-main">Corporate social responsibility</span> Form of corporate self-regulation aimed at contributing to social or charitable goals

Corporate social responsibility (CSR) or corporate social impact is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in, with, or supporting professional service volunteering through pro bono programs, community development, administering monetary grants to non-profit organizations for the public benefit, or to conduct ethically oriented business and investment practices. While once it was possible to describe CSR as an internal organizational policy or a corporate ethic strategy similar to what is now known today as Environmental, Social, Governance (ESG); that time has passed as various companies have pledged to go beyond that or have been mandated or incentivized by governments to have a better impact on the surrounding community. In addition, national and international standards, laws, and business models have been developed to facilitate and incentivize this phenomenon. Various organizations have used their authority to push it beyond individual or industry-wide initiatives. In contrast, it has been considered a form of corporate self-regulation for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels. Moreover, scholars and firms are using the term "creating shared value", an extension of corporate social responsibility, to explain ways of doing business in a socially responsible way while making profits.

Eco-efficiency refers to the delivery of goods and services to meet human needs and improve quality of life while progressively reducing their environmental impacts of goods and resource intensity during their life-cycle.

A sustainable business, or a green business, is an enterprise that has a minimal negative impact or potentially a positive effect on the global or local environment, community, society, or economy—a business that attempts to meet the triple bottom line. They cluster under different groupings and the whole is sometimes referred to as "green capitalism". Often, sustainable businesses have progressive environmental and human rights policies. In general, a business is described as green if it matches the following four criteria:

  1. It incorporates principles of sustainability into each of its business decisions.
  2. It supplies environmentally friendly products or services that replace demand for nongreen products and/or services.
  3. It is greener than traditional competition.
  4. It has made an enduring commitment to environmental principles in its business operations.

Sustainability reporting refers to the disclosure, whether voluntary, solicited, or required, of non-financial performance information to outsiders of the organization. Sustainability reporting deals with qualitative and quantitative information concerning environmental, social, economic and governance issues. These are the criteria often gathered under the acronym ESG.

<span class="mw-page-title-main">Carbon Disclosure Project</span> International non-profit organisation

The CDP is an international non-profit organisation based in the United Kingdom, Japan, India, China, Germany, Brazil and the United States that helps companies, cities, states, regions and public authorities disclose their environmental impact. It aims to make environmental reporting and risk management a business norm, driving disclosure, insight, and action towards a sustainable economy. In 2022, nearly 18,700 organizations disclosed their environmental information through CDP.

The chief sustainability officer, sometimes known by other titles, is the corporate title of an executive position within a corporation that is in charge of the corporation's "environmental" programs. Several companies have created such environmental manager positions in the 21st century to formalize their commitment to the environment. The rise of the investor ESG movement and stakeholder capitalism, has increased the need for corporations to address sustainability and social issues across their value chain, and address growing needs of external stakeholders. Normally these responsibilities rest with the facility manager, who has provided cost effective resource and environmental control as part of the basic services necessary for the company to function. However, as sustainability initiatives have expanded beyond the facility — so has the importance of the position to what is now a C-level executive role. The position of CSO has not been standardized across industries and individual companies which leads it to take on differing roles depending on the organization. The position has also been challenged as symbolic, in that it does not actually have the effect of increasing sustainable practices.

<span class="mw-page-title-main">Sustainability accounting</span> A term of financial accounting

Sustainability accounting originated in the 1970s and is considered a subcategory of financial accounting that focuses on the disclosure of non-financial information about a firm's performance to external stakeholders, such as capital holders, creditors, and other authorities. Sustainability accounting represents the activities that have a direct impact on society, environment, and economic performance of an organisation. Sustainability accounting in managerial accounting contrasts with financial accounting in that managerial accounting is used for internal decision making and the creation of new policies that will have an effect on the organisation's performance at economic, ecological, and social level. Sustainability accounting is often used to generate value creation within an organisation.

<span class="mw-page-title-main">Sustainability</span> Goal of people safely co-existing on Earth

Sustainability is a social goal for people to co-exist on Earth over a long time. Definitions of this term are disputed and have varied with literature, context, and time. Sustainability usually has three dimensions : environmental, economic, and social. Many definitions emphasize the environmental dimension. This can include addressing key environmental problems, including climate change and biodiversity loss. The idea of sustainability can guide decisions at the global, national, and individual levels. A related concept is that of sustainable development, and the terms are often used to mean the same thing. UNESCO distinguishes the two like this: "Sustainability is often thought of as a long-term goal, while sustainable development refers to the many processes and pathways to achieve it."

Creating shared value (CSV) is a business concept first introduced in a 2006 Harvard Business Review article, Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility. The concept was further expanded in the January 2011 follow-up piece entitled Creating Shared Value: Redefining Capitalism and the Role of the Corporation in Society. Written by Michael E. Porter, a leading authority on competitive strategy and head of the Institute for Strategy and Competitiveness at Harvard Business School, and Mark R. Kramer, of the Kennedy School at Harvard University and co-founder of FSG, the article provides insights and relevant examples of companies that have developed deep links between their business strategies and corporate social responsibility (CSR). Porter and Kramer define shared value as "the policies and practices that enhance the competitiveness of a company while simultaneously advancing social and economic conditions in the communities in which it operates", while a review published in 2021 defines the concept as "a strategic process through which corporations can turn social problems into business opportunities".

Stakeholder engagement is the process by which an organization involves people who may be affected by the decisions it makes or can influence the implementation of its decisions. They may support or oppose the decisions, be influential in the organization or within the community in which it operates, hold relevant official positions or be affected in the long term.

Sustainability standards and certifications are voluntary guidelines used by producers, manufacturers, traders, retailers, and service providers to demonstrate their commitment to good environmental, social, ethical, and food safety practices. There are over 400 such standards across the world.

Traditionally, market orientation (MO) focuses on microenvironment and the functional management of an organisation. However, contemporary organisations have widened their focus to incorporate more roles, functions and emphasis on the macro environment. Firms have been concerned with short run success and often not taken into account the long-run ecological, social and economic effects from their activities. Despite growth in the MO concept, there is still a need to reconceptualise the concept with a greater emphasis on external factors that influence a firm.

<span class="mw-page-title-main">National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business</span>

India's National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs) were released by the Ministry of Corporate Affairs (MCA) in July 2011 by Mr. Murli Deora, the former Honourable Minister for Corporate Affairs. The national framework on Business Responsibility is essentially a set of nine principles that offer businesses an Indian understanding and approach to inculcating responsible business conduct.

Corporate sustainable profitability (CSP) revolves around the idea that companies who take responsibility from an economical, environmental and social perspective can become more profitable.

Social accounting is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large. Social Accounting is different from public interest accounting as well as from critical accounting.

<span class="mw-page-title-main">Corporate environmental responsibility</span>

Corporate environmental responsibility (CER) refers to a company's duties to abstain from damaging natural environments. The term derives from corporate social responsibility (CSR).

A circular economy is an alternative way countries manage their resources, in which usage of products in the traditional linear make, use, and dispose method is not implemented. Instead, resources are used for their maximum utility throughout their life cycle and regenerated in a cyclical pattern minimizing waste. They strive to create economic development through environmental and resource protection. The ideas of a circular economy were officially adopted by China in 2002, when the 16th National Congress of the Chinese Communist Party legislated it as a national endeavor though the various sustainability initiatives which were implemented in the previous decades starting in 1973. China adopted the circular economy due to the environmental damage and resource depletion that was occurring from going through its industrialization process. China is currently a world leader in the production of resources, where it produces 46% of the world's aluminum, 50% of steel and 60% of cement, while it has consumed more raw materials than all the countries a part of the Organisation for Economic Co-operation and Development (OECD) combined. In 2014, China created 3.2 billion tonnes of industrial solid waste, where 2 billion tonnes were recovered using recycling, incineration, reusing and composting. By 2025, China is anticipated to produce up to one quarter of the world's municipal solid waste.

References

  1. ↑ Ashrafi, Mehrnaz; Acciaro, Michele; Walker, Tony R.; Magnan, Gregory M.; Adams, Michelle (20 May 2019). "Corporate sustainability in Canadian and US maritime ports". Journal of Cleaner Production. 220: 386–397. Bibcode:2019JCPro.220..386A. doi:10.1016/j.jclepro.2019.02.098. S2CID   159125203.
  2. ↑ Purkayastha, Debapratim (1 February 2019). In Search of the Triple Bottom line – Case Studies in Corporate Sustainability. IBS Case Research Center. ISBN   978-81-314-2847-4.
  3. ↑ Grimm, Jörg H.; Hofstetter, Joerg S.; Sarkis, Joseph (20 January 2016). "Exploring sub-suppliers' compliance with corporate sustainability standards". Journal of Cleaner Production. 112: 1971–1984. Bibcode:2016JCPro.112.1971G. doi:10.1016/j.jclepro.2014.11.036.
  4. ↑ Ashrafi, M.; Adams, M.; Walker, T. R.; Magnan, G. (17 November 2018). "How corporate social responsibility can be integrated into corporate sustainability: a theoretical review of their relationships". International Journal of Sustainable Development & World Ecology. 25 (8): 672–682. Bibcode:2018IJSDW..25..672A. doi:10.1080/13504509.2018.1471628. S2CID   158792026.
  5. ↑ Hirst, Scott (2016). "Social Responsibility Resolutions". The Harvard Law School Program on Corporate Governance Discussion Paper (2016–06): 8.
  6. ↑ Bansal, Pratima; DesJardine, Mark R. (February 2014). "Business sustainability: It is about time". Strategic Organization. 12 (1): 70–78. doi: 10.1177/1476127013520265 . S2CID   154779480.
  7. ↑ World Commission on Environment and Development (1991) [1987]. Our common future. Oxford University Press. ISBN   0-19-282080-X. OCLC   15489268.
  8. ↑ Bansal, Pratima (2005). "Evolving Sustainably: A Longitudinal Study of Corporate Sustainable Development". Strategic Management Journal. 26 (3): 197–218. doi:10.1002/smj.441. ISSN   0143-2095. JSTOR   20142218.
  9. ↑ Dočekalová, M. P.; Kocmanová, A. (2016). "Composite indicator for measuring corporate sustainability". Ecological Indicators. 61: 612–623. Bibcode:2016EcInd..61..612D. doi:10.1016/j.ecolind.2015.10.012.
  10. ↑ Montiel, Ivan; Delgado-Ceballos, Javier (June 2014). "Defining and Measuring Corporate Sustainability: Are We There Yet?". Organization & Environment. 27 (2): 113–139. doi:10.1177/1086026614526413. ISSN   1086-0266. S2CID   145688373.
  11. ↑ Hahn, Rüdiger (2022). Sustainability management: global perspectives on concepts, instruments, and stakeholders. Fellbach: Hahn Rüdiger. ISBN   978-3-9823211-0-3. OCLC   1302310975.
  12. ↑ Schaltegger, Stefan; Sturm, Andreas (1998). Eco-Efficiency by Eco-Controlling: On the Implementation of Emas and ISO 14001. vdf, Hochschulverlag AG an der ETH Zürich. ISBN   978-3-7281-2415-9.[ page needed ]
  13. ↑ Dyllick, T.; Hockerts, K. (2002). "Beyond the business case for corporate sustainability". Business Strategy and the Environment. 11 (2): 130–141. doi:10.1002/bse.323.
  14. ↑ Young, William; Tilley, Fiona (November 2006). "Can businesses move beyond efficiency? The shift toward effectiveness and equity in the corporate sustainability debate" (PDF). Business Strategy and the Environment. 15 (6): 402–415. doi:10.1002/bse.510.
  15. ↑ Salzmann, Oliver; Ionescu-somers, Aileen; Steger, Ulrich (1 February 2005). "The Business Case for Corporate Sustainability:: Literature Review and Research Options". European Management Journal. 23 (1): 27–36. doi:10.1016/j.emj.2004.12.007.
  16. ↑ Schnackenberg, A.; Tomlinson, E. (2014). "Organizational Transparency: A New Perspective on Managing Trust in Organization-Stakeholder Relationships". Journal of Management. 42 (7): 1784–1810. doi:10.1177/0149206314525202. S2CID   144442748.
  17. ↑ "Development Solutions: How to fight climate change with gender equality". European Investment Bank. Retrieved 17 September 2020.
  18. ↑ Tom, Pamela (15 November 2012). "More Female Board Directors Add Up to Improved Sustainability Performance". Haas News. Berkeley Haas.

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