What does sustainability mean from a business perspective?
Sustainability management is the practice of considering social, environmental, and economic impacts and a longer time horizon in business planning and management to enhance the value, profitability, and resilience of an organization.
What drives companies to develop a sustainability strategy?
Typically it is in response to one or more of the following pressure points:
- Customers are demanding it
- Competitors are doing it
- Investors are asking about it
- The CEO is interested in it
- Employees (current and prospective) care about it
- A new market demands it
- There is a growing perception that risks, such as resource scarcity, waste, climate change, conflict minerals, or supply chain management, impact your business, now or in the future
What do you mean by a “sustainability program”? What activities fall under the umbrella of “sustainability”?
A comprehensive sustainability program will assess and manage the social, environmental, and economic impacts of an organization. Within Sustrana you are guided through assessing five core sustainability aspects to determine what impacts to address:
- Resource Use & Waste
Examine all of the physical inputs (such as materials and energy) and outputs (such as waste and pollution) related to business activity. Consider the entire value chain, including practices of a company’s suppliers, the procurement process, as well as recycling and disposal practices. Analyze what materials, supplies, and equipment that are used are made of, how they are made (or extracted), where they come from, and what happens to them at the end of their useful life.
- Human Assets
Focus on the well-being and potential of the individuals who work for, or are in the supply chain, of an organization and increase productivity, loyalty, and team spirit. Develop employee engagement strategies to involve employees in/by sustainability initiatives. Leverage the workforce to crowd-source innovation and diverse ideas.
- Social and Economic Value
Explore the impacts an organization has on society, both positive and negative. Positive impacts include areas such as community-needs based economic stimulation. Negative impacts encompass aspects such as child labor within supply chains. Assess societal impacts of businesses and identify opportunities to create profitable strategies that also improve the quality of life of key stakeholders.
- Innovation & Systems
Review existing business systems and processes – such as strategic planning, budgeting, procurement, training, and new hire orientation – for ways to embed sustainability management concepts. Look at systems through a sustainability lens to identify opportunities to innovate. Change existing, or develop new, products and services to meet society’s increasing demand for environmentally friendly and socially responsible products and services.
Evaluate how sustainability management is used by leadership to guide the organization. Look at how sustainability concepts are integrated within the policies and management structure of an organization. Good corporate governance practices and strategies integrate sustainability management into the decision making process and promote general accountability and transparency within the organization. Set the right tone with policies such as a Code of Ethics and Supplier Code of Conduct.
Implementing a sustainability program requires time and money. Do the benefits really outweigh the costs?
Sustainability programs will directly benefit the organizational bottom line if they are developed using a strategic and intentional process. By helping companies manage risks and leverage opportunities resulting from four distinct megatrends (see below), sustainability programs work to reduce expenses and increase revenue over time. These efforts build resilience and create business value for the company. Sustrana provides you with research that supports these statements.
More specifically, a well-designed sustainability program will boost organizational value through better understanding and management of:
- Resource use and waste
- Future regulatory requirements
- Supply chain risks and opportunities
- Stakeholder perspectives
- Brand and reputation
- Employee engagement, wellness, and productivity
- Opportunities for innovation
- New market barriers and enablers
Why has sustainability become such a hot topic?
Several emerging megatrends are driving consumers, investors, regulators, and businesses to pay greater attention to sustainability. They include:
- Growing awareness and concern about climate change and its current and future impacts on society
- Growing awareness of spiking growth in population and the global middle class that is driving up consumption in a world where most everything is produced with finite resources
- Increasing organizational inter-dependence and network complexity, leading to greater risk all along the value chain, especially with respect to compliance with legal requirements and ethical mandates
- Increased demands for accountability and transparency, fueled by social media and widespread internet access by consumers and public interest organizations
What is a “strategic” sustainability program and how is it different from “going green”?
Research shows that companies with more strategic programs reap greater bottom line benefits from sustainability.
Most businesses start off their sustainability journey being compliant. They comply with social, economic, and environmental regulations, but have few, if any, voluntary sustainability activities. As they move along their journey, they become more tactical and focus on risk mitigation, short-term planning, and low or no cost projects – typically in just the environmental area of sustainability.
Companies that start out with “greening the office” or “going green” fall into the tactical category. These activities are opportunistic in nature and aim at reaching industry best practices for operational and product related sustainability. A tactical focus is positive, but it does not yet connect the sustainability program to the overall business strategy. Moving from tactical to strategic is where the real benefits of sustainability management are derived.
Companies that evolve to the strategic level align their business goals with their sustainability goals. They establish a process to identify sustainability risks and opportunities, set goals and targets, and actively invest resources in the sustainability program. They have a longer-term time horizon for planning and are intent on improving long-term institutional value. They assess value along a triple bottom line (social, environmental, economic) and are more transparent and forthcoming about their sustainability program to the public.
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Questions? We've got answers.
Our Sustainability Manager's Blog is designed to help sustainability managers in small and medium sized organizations create and manage highly effective sustainability programs.
Learn More about Sustainability:
The following articles and books are a great place to start to learn more about the application of strategic sustainability in a business context.
"Joining Forces: Collaboration and Leadership for Sustainability," MIT Sloan Management Review, The Boston Consulting Group and the UN Global Compact. (January 2015)
“Walking the Walk: Driving Competitiveness Through Ethical Supply Chains,” Accenture Strategy. (accessed July 30, 2015).
Kurt Kuehn and Lynnette McIntire, “Sustainability A CFO Can Love,” Harvard Business Review. (April 2014)
“Sustainability’s Next Frontier,” MIT Sloan Management Review, The Boston Consulting Group. (December 2013)
Lubin, David A., and Esty, Daniel C., “The Sustainability Imperative,” Harvard Business Review. (accessed August 28, 2012)
Winston, Andrew S., The Big Pivot: Radically Practical Strategies for a Hotter, Scarcer, and More Open World (Harvard Business Review Press, 2014)
Lazlo, Chris and Judy Brown, Flourishing Enterprise: The New Spirit of Business (Stanford Business Books, 2014)
Willard, Bob, The Sustainability Advantage: Seven Business Case Benefits of a Triple Bottom Line (Gabriola Island, BC: New Society Publishers, 2012)
Savitz, Andrew, The Triple Bottom Line (Jossey Bass; John Wiley & Sons, 2006)
McDonough, William and Michael Braungart, Cradle to Cradle: Remaking the Way We Make Things (NY North Point Press, 2002)
Anderson, Ray, Mid-Course Correction: Toward a Sustainable Enterprise (Chelsea Green Publishers, 1999)