SUSTAINABILITY AND BUSINESS - Research Paper Example

?SUSTAINABILITY AND BUSINESS Executive Summary Sustainability is one of the most important issues in contemporary times, encompassing almost all businesses, industries, services, and other areas. It is being severely impacted by the demands of increased populations, human activity and business processes. This results in degradation of land, accumulation of waste, and depletion of water, oil, fuel, forests, fishing, minerals, and other natural resources. Hence conservation of natural resources is vital. Uncontrolled production of waste has to be reduced, and recycling of used products undertaken. Corporate social responsibility that advocates sustainable business practices is increasingly required. In the information-based environment business and government practices are becoming more transparent. The Triple Bottom Line of economical, social and environmental regeneration underscores corporate operations. Together with creating a more sustainable world, ethical behavior and sustainable business operations provide organizations with a competitive advantage, resulting in increased customer loyalty, greater productivity and profitability. Introduction Sustainability is defined as “meeting the economic, social, and environmental needs of the present without compromising the similar needs of the future generations”1. It is an ongoing process and includes the regeneration and equitable distribution of resources, awareness of the mutual inter-relationships between the economy, the society and the environment, prevention and control of environmental degradation, waste reduction, and the sparing use of non-renewable and renewable resources. Sustainable businesses replace nationally and internationally produced goods with products created locally and regionally; are responsible for the effects they have on the natural world; grow and develop without the need for exotic sources of capital; and use production processes that take into account the dignity and human rights of individuals and communities. Additionally, sustainable business practices result in durable and harmless products which have long-term use; and they convert consumers to customers by educating them on product purchasing2. Thesis Statement: The pupose of this report is to investigate the importance of sustainable business practices and to highlight the sustainable strategies used by contemporary global organizations to tackle the issue. Recommendations will be presented on how global businesses can improve their advocacy of sustainability. CSR Aids Economic, Social, Environmental & Business Sustainability Corporate Social Responsibility (CSR) is business’ contribution to sustainable development. Organizations in a global environment often play an important role beyond the creation of employment and wealth, to include responsibility for societal and ecological issues3. Sustainability of the environment and the natural resources of the earth is one of the most vital concerns underscoring corporate social responsibility. Another important force that drives corporate social responsibility is the practice of business ethics with transparency of information, and corporate accountability for actions taken4. To promote ethical business processes, new regional and bilateral trade treaties are focusing on human rights issues such as labor rights and fair trade5. Other major trends that drive corporate social responsibility include the greater access to information by consumers on ethical and sustainability issues. Additionally, the rise of globalization creates powerful capitalist development which calls for the harmonizing of corporate interests with the larger public interests. Moreover, the failure of the public sector necessitates the private sector to resolve sustainability issues6. Corporate social initiatives are major activities undertaken to support causes and to fulfill commitments to corporate social responsibility. Six important social initiatives are: cause promotions, cause-related marketing, corporate social marketing, corporate philanthropy, community volunteering and socially responsible business practices7. Corporate social responsibility is a holistic business strategy, providing mutual benefits to society, the environment, and the economy, as well as to business. Using a related accounting and reporting process helps to identify the net contribution to all three goals8. Research evidence reiterates the importance of a holistic integration of five leadership challenges for sustainability: “stakeholder engagement, creating the culture, organizational learning, holistic thinking, and measurement and reporting”9. On the other hand, a contrasting argument against corporate social responsibility emphasizes a potential rise in costs of doing business, or impaired performance of the enterprise due to the adoption of wider goals. For implementing best practice based on local conditions, the standards of the Organisation for Economic Cooperation and Development (OECD) should be taken as a norm10. To avoid the pitfalls of corporate social responsibility acting as corporate social control, research evidence on health promotion in work sites indicated that there is a need to critically analyse the potential risks of comprehensive health promotion programmes on individuals and societies alike. CSR activities can potentially be seen as a form of organisational control, aligning several aspects of an organization’s environment with its aims and perspectives11. The Use of Business Strategies for Achieving Sustainability Towards increasing the effectiveness of business activities, corporations today are trying to incorporate “new strategic initiatives that go beyond mere compliance to the minimal standards of health and safety regulations, environmental legislation and community expectations”12. Subsequently, there is an increasing use of a proactive approach which pursues the highest standards of corporate citizenship. The three inter-dependent streams of business activity termed as the Triple Bottom Line13 include economic sustainability through profits pertaining to the supply and demand of resources for populations and communities; environmental sustainability with “ecological considerations for air, water, and land use, quality, and preservation”14, and social sustainability in relation to communities, life style, and populations. The concerns over populations involve all the components of the Triple Bottom Line. The concept of the ecological footprint or the impact of consumption of an entity on the environment involves economic and environmental factors. Business strategies should improve sustainability of the environment through decreased use of non-renewable natural resources in the production of raw materials and manufacture of goods. Further, business tactics that help produce less waste and use recycled products. For example, BMW company has designed its own sustainability program. Adopting the agenda early, it is now a leader of activity in its sector. BMW was the first carmaker to construct its cars so that they can be deconstructed later at the end of their life and the components recycled15. The company has introduced innovations to radically curtail energy use in all its plants, a measure which included the transport of its new cars between factories by water. Further, BMW has prioritized the manufacture of cars that minimize pollution and maximize fuel efficiency. It has developed natural gas and electric cars, and perceives hydrogen-fuelled vehicles to be the long term solution to reduce transport-related pollution. Its agenda focuses on using resources in an efficient and conscious manner to protect the environment in the long term. Business strategies should promote the development of supplier communities through fair trade practices and adequate wages, uphold ethical values which are ultimately beneficial for achieving an increased clientele and business growth. Thus, “corporations which build sound, responsive relationships with all their stakeholders – including employees, suppliers, customers, investors and local communities16” tend to function successfully in the long term than other corporations. Shell is another multinational taking extensive steps to introduce sustainability thinking into its global activities. The company’s sustainability agenda is based on its responsibilities to shareholders, employees, business associates and to society in terms of human rights. The company also prioritizes business integrity, political activities, the environment and other areas; with annual progress reports from regional chairpersons ensuring accountability. Shell’s profit and principles business model is designed to help the company achieve the necessary integration for building long term value and a strong brand in alignment with its business principles and society’s expectations. The company believes that sustainability development principles lead to cost reduction, reduce risks and help to build customer loyalty. Subsequently, these elements would “improve its relations with various stakeholders, provide better access to capital and attract talent”, ultimately leading to increased shareholder value and wealth for society. The Shell sustainability plan effectively exemplifies how sustainability can be customized to reflect a company’s specific business context and goals. The model also requires detailed plans, systems, structure, and performance indicators to fuel actions for improved sustainability and financial performance17. Sustainable Practices are Key to High Performing Organizations Sustainable businesses and high performing organizations emphasize the importance of investing in people. The most critical factor to a company’s development is its human resource practices. Hence, investing optimally in people and systems is crucial for sustainable performance. In order to achieve long-term and sustained high performance, corporations should evolve into learning organizations that flexibly reshape themselves for meeting future challenges, and support this with a systematically built human and technical capital base. However, acting on this insight alone will not be adequate for sustainable performance in the longer term. In the 21st century, business success is threatening the world’s life support system, which had been taken for granted in the past18. Rethinking the approach to wealth creation is crucial. This involves “moving from an exploitative to regenerative mode, reducing resource use, recycling products and eliminating waste”19. Additionally, it is vitally important to correct the damage that has already been done to the environment and natural non-renewable resources. Undoing mistakes can be costly, for example, A$137 million was spent to clean up Homebush Bay in Sydney for the year 2000 Olympics. Businesses have to carefully plan all phases of their productive activity to ascertain that they are sustainable and compatible with maintaining a healthy workforce, community, and natural environment. By fostering sustainability, numerous corporations have increased productivity and profits four times while reducing their use of resources by half. An example is Pacific Power in Australia which owns and operates the Eraring Power Station on Lake Macquarie in New South Wales. Earlier some of the large quantities of water that it required was purchased from the local water board. The company involved its employees in identifying ways to make its operations more environmentally friendly, most importantly to reduce water usage. The use of water has been resolved, by Eraring using sewage from the area’s water treatment plant, which it filters using a Memtech filtration plant and a reverse osmosis plant installed at a cost of A$ 4.5 million. Because the filtration water is used for the production of electricity at the power station, plans to construct an expensive ocean outfall for the area have not been implemented. This has helped to create large savings for Eraring, the government and the local community; thus proving to be a winning situtation for all concerned20. The Case of WalMart is an interesting example in the sustainability context, because of its status as the largest company in the United States which has grown successfully and profitably. Sustainability efforts in the corporation began in 2005, aiming to spread the company’s presence in rural and small town America, to provide them with the quality of living of more affluent areas at a reasonable cost. The three sustainability goals that Walmart committed to include 100 percent use of renewable energy, creation of zero waste, and the selling of products that promoted environmental sustainability. Further initiatives were committed to, such as supporting the generation of technologies and innovation to reduce greenhouse gases at existing Walmart stores by 20% over the next seven years; reducing solid waste from U.S. stores by 25% over the next three years, and increasing the efficiency of its truck fleet by 25% over the next three years. Thus, 90 percent of Walmart’s sustainability footprint exists in its gigantic supply chain21. The company appears to be “making giant strides toward meeting those goals”22, through sustainability initiatives to improve the environment, health care, diversity, and sustainable sourcing. The sustainable value intent contains three essential components including vision of future accomplishment, values or shared beliefs and principles on business processes, and strategic objectives involved in the pursuit of the vision. Another example is the Dupont company’s setting of sustainable value goals23, as a part of its model sustainability program towards providing a strong return to shareholders, growing the company’s businesses and meeting the needs of societies around the world, while at the same time “reducing the environmental footprint of its operations and products”24. These goals include derivation of 25% of revenues from non-depletable resources, up from 14% in 2002; reduction of global carbon-equivalent greenhouse gas emissions by 65%, using 1990 as the base year, and the company had already achieved 72% reduction by 2005 thereby surpassing this goal. Moreover, sourcing 10% of the company’s global energy use in the year 2010 from renewable sources, reaching 5% by 2005. “This is some of the best evidence that the world’s leading companies are doing well by doing good”25. Thus, it is evident that sustainable companies are better able to beat competitors in two areas: the reduction of climate-related risks and finding business opportunities within those risks. Conclusion and Recommendations This report has emphasized the importance of sustainable business practices, and examined the sustainable strategies implemented by contemporary global organizations such as Shell, Dupont, Walmart, BMW, etc. It is clear that corporate social responsibility is vital not only for improving economic, social and ecological sustainability, but also for enhancing the company’s well-being and profitability. The use of business strategies for achieving sustainability, and how sustainable practices are the key to high performing organizations, have been presented. It is crucial to develop policies for changing the system, and promote community participation through empowerment, for achieving significant progress towards socially equitable and sustainable development. Recommedations for how global businesses can increase their promotion of sustainability are given as follows: The evidence indicates that it is essential for progressive corporations to adopt a holistic approach in planning their business activities. To reduce waste production and to promote recycling of products at the end of their use, it is necessary to introduce reverse logistics and end of life product issues into the initial planning of product design, supply chains, manufacturing process and distribution operations. It is important for companies to reduce their use of natural resources to prevent ecological degradation. Hence, corporations should change their product portfolio, incorporating more services to create revenue while simultaneously reducing consumption levels. These networks with a closed-loop approach include both forward and reverse flows in the initial design. This strategy helps to create value and sustained competitive advantage for the company over the long term. The closed-loop method promotes the development of a sustainable global society, together with ensuring “the firm’s long-term presence in the global market”26. References Colbert, Barry A and Elizabeth C. Kurucz. “Three conceptions of triple bottom line: Business sustainability and the role for HRM”. Human Resource Planning, 30: 1 (2007): pp.21-29. http://www.stakeholderresearch.com/documents/sra-three-conceptions.pdf Crews, Derek E. “Strategies for implementing sustainability: Five leadership challenges”. SAM Advanced Management Journal 75: 2 (2010): pp.15-21. http://www.freepatentsonline.com/article/SAM-Advanced-Management-Journal/233607214.html Dembach, John C. Stumbling toward sustainability. Washington, DC: Environmental Law Institute, 2002. http://books.google.co.in/books?id=dBvvQcndEVoC&dq=Stumbling+toward+sustainability&source=gbs_navlinks_s Dunphy, Dexter and Jodie Benveniste. An introduction to the sustainable corporation. In Dunphy, Dexter, Benveniste, Jodie, Griffiths, Andrew and Sutton, Philip (Eds). Sustainability: The corporate challenge of the 21st century. New South Wales: Crows Nest Publications, 2000. http://www.questia.com/PM.qst?a=o&d=102359465 Epstein, Marc J. and Marie-Josee Roy. “Making the business case for sustainability: Linking social and environmental actions to financial performance”. JCC9 (Spring 2003): pp.79-96. http://www.greenleaf-publishing.com/content/jccsampl.pdf#page=81 Ghillyer, Andrew W. Business ethics: A real world approach. Edition 2. United States: McGraw-Hill, 2010. Henderson, David. Misguided virtue: False notions of corporate social responsibility. Great Britain: The Institute of Economic Affairs Publications, 2001. http://research.dnv.com/csr/PW_Tools/PWD/1/00/L/1-00-L-2001-01-0/lib2001/CSR_kritikk.pdf Holmqvist, Mikael. “Corporate social responsibility as corporate social control: The case of work-site health promotion”. Scandinavian Journal of Management 25: 1 (2009): pp.68-72. http://www.mendeley.com/research/corporate-social-responsibility-corporate-social-control-case-worksite-health-promotion/#page-1 Kotler, Philip and Nancy Lee. Corporate social responsibility: Doing the most good for your company and your cause. New Jersey: John Wiley & Sons, 2005. http://books.google.co.in/books?id=YMHnL3N1wy4C&dq=Corporate+social+responsibility:+Doing+the+most+good+for+your+company+and+your+cause&source Laszlo, Christopher. The sustainable company: How to create lasting value through social and environmental performance. Washington, D.C.: Island Press, 2003. http://books.google.co.in/books?id=GoVYJlYi_TAC&dq=The+sustainable+company:+How+to+create+lasting+value+through+social+and+environmental+performance&source=gbs_navlinks_s Luchsinger, Vince. “Strategy issues in business sustainability”. Business Renaissance Quarterly 4: 3 (2009): pp.163-174. http://www.questia.com/PM.qst?a=o&d=5044784698 Nourick, Shari. Corporate social responsibility: Partners for progress. The United States: OECD Publishing, 2001. http://books.google.co.in/books?id=quu75-pl30MC&dq=Corporate+social+responsibility:+Partners+for+progress&source=gbs_navlinks_s Pitts, Chip, Kerr, Michael Kerr and Richard Janda. Corporate social responsibility: A legal analysis. Toronto: Lexis-Nexis, 2009. muse.jhu.edu/journals/human_rights_quarterly/v032/32.1.weissbrodt.pdf Rainey, David L. Sustainable business development: Inventing the future through Strategy, innovation, and leadership. The United Kingdom: Cambridge University Press, 2006. http://books.google.co.in/books?id=Dr0UY1JEImUC&dq=Sustainable+business+development:+Inventing+the+future+through+Strategy,+innovation,+and+leadership&source=gbs_navlinks_s Stoner, James A.F., Charles Mankel and Shaun K. Malleck. Global sustainability initiatives: New models and new approaches. New York: Information Age Publishing, 2008. http://books.google.co.in/books?id=ZtAee20rrVsC&dq=Global+sustainability+initiatives:+New+models+and+new+approaches&source=gbs_navlinks_s Read More