Corporate Sustainability: A Vital Key to Long Term Success

Corporate sustainability is more than just a trendy concept in today’s corporate environment. It is a strategic requirement. It’s a call to action for businesses that are leading the way in making sustainability a top priority for the future, including Walmart and McDonald’s.

The phrase “corporate sustainability” refers to a method of conducting company that creates long term value for customers, employees, shareholders, and society as a whole and is supported by ethical business practices.

The three pillars of a company sustainability strategy: environmental, socially conscious, and economic are examined in this article. These pillars also referred to as ESG (Environmental, Social, and Governance) practices form the basis for sustainable objectives.

Explanation of the Environmental, Social and Governance (ESG) Criteria.

Corporate sustainability practices are often encompassed under the term ESG, or environmental, social and governance practices (basically, the three pillars). Companies apply ESG to reduce their environmental footprint or achieve other objectives that can benefit society. From an investor’s point of view, this relates to SRI, or socially responsible investing.

Sustainability is no longer about doing less harm. It’s about doing more good.

Jochen Zeitz, former CEO of Puma

Understanding Corporate Sustainability

Corporate sustainability is often defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs. Generally speaking, a company applies sustainable practices by reducing its consumption of limited resources or finding alternative resources with, for example, fewer environmental consequences.

The three main pillars of sustainability are environment, social responsibility and economy (these three pillars are also known informally as people, planet, purpose and profit).

It is helpful to understand the terms that are sometimes used in place of the three pillars. People refers to being aware of the impact of operations and products on employees, customers and the community at large. Planet refers to protecting the world that sustains us and, if possible, improving its condition.

Purpose refers to the reasons why a company operates as it does and whether the mission continues to make sense given the new priorities of the three pillars. Profit encourages companies to assess the viability of their management, operations and projects.

The Environmental Pillar

The environmental pillar often receives the most attention. Many companies focus on reducing their carbon footprint, packaging waste, water consumption and other environmental damage. In addition to helping the planet, these practices can have a positive financial impact. For example, reducing the use of packaging materials can reduce waste and improve fuel efficiency.

For example, Walmart focused on packaging through its zero waste initiative. It drove packaging reduction throughout its supply chain and the use of recycled or reused materials to a greater extent.

One of the challenges of the environmental pillar is that the full cost of a company’s impact is often not calculated. This means that there are externalities that are not reflected in consumer prices. The full costs of wastewater, carbon dioxide, land reclamation and waste in general are not easy to calculate because companies are not always responsible for the waste they produce.

Benchmarking practice seeks to quantify these externalities so that progress in reducing them can be tracked and reported in a meaningful way.

According to the US Sustainable and Responsible Investment Forum (US SIF), between 2020 and 2022, assets in sustainable investments fell from $17.1 trillion to $8.4 trillion, a 51% plunge. This was due in part to regulatory proposals aimed at addressing misleading claims by some companies about their environmental efforts/performance (also known as greenwashing).

The Social Pillar

The social pillar is related to the concept of social license. A sustainable business must have the support and approval of its employees, stakeholders and the community in which it operates. How to gain and maintain that support varies, but it boils down to treating employees fairly and being a good neighbor and member of the community, both locally and globally.

For employees, companies can refocus on retention and engagement strategies. These can include more tailored benefits, such as better maternity and family benefits, flexible schedules, and training and development opportunities. To engage with the community, companies have devised many ways to give back, such as fundraising, sponsorship, scholarships and investing in local public projects.

On a global social scale, a company must be aware of how its supply chain operates. Is child labor involved in the manufacture of products? Are workers paid fairly? Is the work environment safe? Many large retailers have struggled with this in the face of public outrage over labor related tragedies (such as the Bangladesh factory collapse) that may reveal unaccounted for risks.

The Economic Pillar

The economic pillar of sustainability is where most companies feel they stand on firmer ground. To be sustainable, a company must be profitable. That said, profit cannot trump the other two pillars. In fact, the economic pillar is not about profit at any price.

It is about compliance, proper governance and risk management. While most North American companies tend to incorporate these activities, they are not the global norm.

This pillar is sometimes referred to as the governance pillar (as in the acronym ESG). It refers to the alignment of boards of directors and management with the interests of shareholders, as well as those of the community, value chains and the company’s customers.

For example, investors may want to be sure that a company uses accurate and transparent accounting methods, and that shareholders have the opportunity to vote on important issues. They may also want assurances that companies avoid conflicts of interest in their choice of board members, do not use political contributions to obtain unduly favorable treatment and, of course, do not engage in illegal practices.

It is the inclusion of the economic pillar (and the acceptance of profit) that makes it possible for companies to consider and accept sustainability strategies. The economic pillar serves as a counterbalance to the extreme measures that companies are sometimes pushed to adopt, such as abandoning fossil fuels or chemical fertilizers instantly rather than in phases.

The Impact of Corporate Sustainability

The main question for investors and executives is whether or not sustainability is an advantage for a company. If applied correctly, it can be. Sustainability strategies have been borrowed from other successful business movements, such as Kaizen, community engagement, BHAG (Big Hairy Audacious Goal), talent acquisition, etc.

Sustainability gives companies a broader purpose and some new outcomes to aspire to. It can help them renew their commitments to core objectives such as efficiency, sustainable growth and shareholder value.

More importantly, a publicly shared sustainability strategy can bring hard to quantify benefits, such as public goodwill and an enhanced reputation. If it helps a company get recognition for things it is already doing, why not?

For some companies, sustainability represents an opportunity to organize diverse efforts under one umbrella concept and get public credit for it. For other companies, sustainability means confronting business practices that could ultimately have a negative impact on their operations.

For companies that cannot point to a global vision for improvement with respect to the three pillars, there are, so far, no real consequences for the market.

However, sustainability and public commitment to their core business practices may come to equal the importance of compliance for publicly traded companies. If this happens, companies without a sustainability plan could be penalized by the market.The U.S. SIF found that, in 2022, 349 money managers and 1,359 community investment institutes in the United States used ESG criteria in their investment decision making.

How to Implement Corporate Sustainability

In today’s complex and challenging world, corporate sustainability can be a worthwhile goal, given the potential benefits to a company, its employees and customers, its shareholders, the wider community and the planet.

As you consider the topic, reflect on the four P’s mentioned above: people, planet, purpose and profit. They have become interchangeable with the three pillars. In fact, they may be more useful in explaining sustainability because they break down the broad categories of the pillars into more descriptive and meaningful keywords.

The original three Ps of people, planet and profit were created by corporate sustainability advocate John Elkington in the 1990s. They were a way of emphasizing the growing importance of the triple bottom line, rather than the conventional bottom line of profits.

The term “purpose” has been added in recent years to reflect the interest of an increasing number of consumers in a company’s organizational purpose and the difference it wishes to make in its community (or the global community at large) in terms of social and environmental impact.

The following general points can serve as a guide when planning a corporate sustainability program or project.

• Familiarize yourself with the fundamental principles of people, planet, purpose and profit and be prepared to incorporate them into your company’s culture.
• Assess the current state of your business needs, goals and opportunities. Review company professionals and decide which sustainability goals are appropriate.
• A mission statement that aligns with sustainability goals can help underscore the direction a company should take.
• Be sure to get buy in from senior management and leadership.
• Invite stakeholder input. Shareholders, employees, suppliers, other partners, customers and even the community at large should understand the potential benefits of a more socially conscious way of doing business.
• Establish strategies to help you achieve your sustainability goals.
• Select a monitoring method (and the staff who will manage it) to measure change and results. Consider performance incentives for results related to the four principles.

Wrap Up

Corporate sustainability is a developing idea that pushes businesses to reconsider their current methods and give long term value development priority above immediate profit. It is a well rounded strategy that integrates economic success with social responsibility and environmental preservation.

In conclusion, sustainability in business is more than just upholding one’s advantage over rivals or satisfying stakeholders. It involves accepting accountability for the company’s influence on the world and actively working to make improvements.

Every step taken in the direction of sustainability, whether it is lowering carbon emissions or enhancing labor practices, can have a big impact.

The ability of businesses to incorporate sustainability into their fundamental business operations and make a sincere commitment to the challenges ahead will be the true test.

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