Environmentally Sustainable Business - Literature review Example

25-02-2007 Environmentally Sustainable Business The relationship between business and society have undergone many changes throughout from its inception. Eberstadt (1977) has studied these changes ranging from ancient Greece to modern times and he argues that today's corporate responsibility movement is an attempt to restore a 2,000-year-old tradition of businesses being connected to the community. Overtime awareness of the impact of business and its interplay with societal and environmental concerns has emerged, along with parallel growth of socio-regulatory pressures. This evolution of business and societal concern has led business to gradually re-embrace its formerly displaced social orientation and assume increased responsibility and consideration for both social and environmental well-being. Globalization and ever-changing advances in information technology and the emergence of ethical investment opportunities have resulted in an increased focus on community and business smooth relationship. Globalization resulted in cross border flow of people, products, information and money. At different level all over the world, globalization is resisted by societies or communities concerned with the social and environmental implications of large companies (say MNC's) operating throughout the world. Therefore it becomes increasingly important for organisations to attempt to be proactively responsive to social and environmental issues in order to ameliorate to social concerns (Panwar et al. 2006). Corporate social responsibilities is defined as "an obligation to pursue those policies, to make those decisions, or to follow those lines of action that are desirable in terms of the objectives and values of our society" (Bowen, 1953, P.6). However there is no universally accepted definition but several models have been developed. The Continuum model of business responsibility conveys a proportional set of responsibilities of the firm such that larger elements represent greater responsibilities. According to the model the firm's primary responsibility is economic success followed by legal, ethical and discretionary responsibilities. Ethical and discretionary responsibilities espoused by Carroll (1979) and have been further developed. Another model called the multidimensional Construct (Niskala & Tarna, 2003) is introduced by emphasizing the interdependence among economic, environmental and social dimensions in responsible business behavior. According to the World Business Council for Sustainable Development (WBCSD, 2000) Companies have a responsibility to the following stakeholders: Owners and investors- high profits Employees- consistent, fairly compensated employment. Customers- high quality products and service. Business Partners- fair, ethical treatment as partners. Suppliers- consistent customer upon which to base the suppliers business. Competitors- Maintain industry image. Government regulators- meeting or exceeding expectations. Communities- Stable employment for community members. Finally Zadek (2004) proposed 4-stages maturity model (fig.-1) having different organizational stages through which business organizational deals with social and environmental issues. The first stage is latent stage where active communities and NGO's are aware of the societal issues but generally issues are ignored or dismiss by business communities. The next stage is Emerging stage where Political and media is aware of the issues and leading business also try to deal with the environmental and social issues adopting different approaches. The third stage is consolidation stage represented by those business organizations which frame their business policies and practices around societal issues, organizations normally establish sector wise and issue base voluntary initiative which take care of societal issues. Through litigations and legal approach all the issues are addressed. In the process voluntary standards are developed and collective actions emerges. Finally the fourth stage in the organization emerges with institutionalization of social and environment issues and some system, legislations or business norms have been established. By adopted as system, the issues related to social & environmental aspects embedded in the system and act as normal parts of a business excellence model. Now we will discuss London Underground (LU) on the basis of maturity framework for its social and environmental policies. As we know LU is the oldest underground railway system began in 1863, now operates seven days a week and covers most of London. It is operating through 254 stations, carrying almost 3 million passengers on each working day and employ 13,000 full time staff. It has a separate directorate i.e. safety, quality and environment (SQE) which provides support, advice and strategic direction on Environmental matters, sets environmental management standards and advice operational managers to control environmental risk, other officers such as chief operating officer, chief program officer and engineering directorate also have defined roles directly or indirectly connected to environment aspects. As a public transporter LU trying to provide great environmental and social benefits, reducing the needs of private vehicles, which result in reduced pollution and congestion. Through LU activities also have negative impacts on environment but it always tries to maintain good environmental performance through delivering legislative compliances and best practices. If we compare LU environmental and social activities with Zadek (2004) 4-stages maturity model we can easily identify that LU stage placed at the 4th stage i.e. institutionalized stage where social and environmental issues has been very much part of organizations philosophy and embedded in its system. In LU, a well-developed and integrated Health Safety and Environmental Management System (HSEMS) exists and functioning. This system continuously tries to improve the performance of LU on environmental and social responsibility front and regularly review to take into account changes in business activities, responsibilities and legislation. LU environmental arrangement undergoing full review against ISO 14001 (the international standard for environmental management system) was conducts during the year 2005-06. The review concluded that LU has all the key processes and documentation procedures in place to meet the requirements of ISO 14001. LU performs Environment audits and comply all environmental issues. LU is trying to improve and develop robust inspection arrangements to monitor environmental performance. So Zadek (2004) 4-stage maturity system provides us in sight to evaluate LU progress through different stages and at present lies on 4th stage of maturity. Even though LU facing certain issues. Being the largest consumer of electricity which affects climate as a whole, LU have a responsibility to use energy efficiently and procure energy from less environmentally damaging sources because in future, needs for energy is expected to increase in manifolds. Technological up gradation and innovation is needed for efficient use of energy .LU is developing appropriate energy strategy with London climate changes agency and searching various options for renewable energy sources. LU carrying more and more people reduces the use of cars, results in less air pollution. So by applying & integrating various environmental and social issues in the system LU is trying to create value for its all shareholders or stakeholders. In creating value for all stakeholders the question of sustainability arises for the organization. Sustainable development" is a process of achieving human development in an inclusive, connected equitable, prudent and secure manner" (Gladwin et al., 1995). In this way sustainable enterprises, therefore is one that contributes to sustainable development by delivering simultaneously economic, social and environmental benefits so called triple bottom line (Elkington, 1994). For most of the organisations, the pursuit of enterprise sustainability remains difficult to reconcile with the objectives of increasing shareholders value some have even advocated that creating a more sustainable world will requires organisations to sacrifice profits and shareholders value in favour of the public good (Friedman, 1970). The global challenges associated with sustainability, viewed through the appropriate set of business lenses, can help to identify strategies and practices that contribute to a more sustainable world and simultaneously, drive shareholders value (Hart & Milstein, 2003). The sustainable value frame developed by Hart & Milstein (2003) creates 4-quadrants contains sustainability vision, clean technology, pollution prevention and product stewardship (integrate stakeholders views into business process) (fig-2). Now if we evaluate our organization i.e. LU on this sustainable value framework we find that LU is trying and being successful in maintaining sustainability. In one of the quadrant which focus on pollution prevention which is focused on improving environmental efficiency of today's products and processes i.e. reducing waste and emission from current operation. Less waste means better utilization of inputs resulting in lower costs for raw materials and waste disposal. If we look at LU, which also moving on the above lines LU is trying to increase its energy consumption efficiency by using various technological innovations for example light emitting Diodes long life lamps, aluminum conductor rails etc. By using energy efficiently mean less consumption and less pollution which results in better sustainability use of alternative environment friendly renewable energy sources is another area in which LU environment friendly policies moving. Similarly to reduce emission from road vehicles, improved rout planning provision for alternative fueling, Euro IV complaint and other improved technological are used. LU adopted most energy efficient ways, recycle energy, better ways to extract heat energy from tunnels etc. LU has established systems to prevent potential pollutants from contaminating the environment. It takes measure to control land and water and noise pollution and efficient implementation of waste management practices. Pollutant prevention focuses on internal operations whereas product stewardship extends beyond organizational boundaries to include the entire product life cycle. If involves integrating the voices of stakeholders into business processes. It offers a way to both lower environmental impacts across the value chain and enhances legitimacy and reputation by involving stakeholders in the conduct of on- going operations (Wheeler & Sillanpaa, 1997). LU adopted Public- private partnership involving private suppliers to improve its services and reduce environmental effects and in result improve the overall value and sustainability. LU adopted clean technology i.e. renewable less/no pollution energy resources, energy saving technologies etc. Finally LU has sustainability vision to provide 'A world class tube for a world class city' with integrated environmental and social performance make it a sustainable organization. Its significant contribution towards improving the quality of the urban environment through better resources use, reduced road congestion and reduced pollution make it sustainable organization. A sustainable business balances economic growth & viability with a commitment to address the many facets of waste prevention; integrate stewardship in business- decision making; reemission competencies to act on Emerging opportunities; and prepare for unmet needs and opportunities yet unknown (Graham & Bertel, 2004). The sustainable- value framework can be used as a simple but imported diagnostic tool. By assessing an organisations activity in each of the four quadrants of the framework one can assess the degree of portfolio balance. As we see pollution prevention, product stewardship, clean technology are well institutionalized in LU and have saved hundreds of millions of dollars. Similarly Zadek 4-stage maturity framework also provides LU on institutionalized stage where environmental and social policies are very much part of the whole system. So these frameworks have been provide us a theoretical framework on which London transport system has been developed until now and continuously been progressing. The opportunity to create sustainable value- shareholder wealth that simultaneously drives us toward a more sustainable world is huge but yet to be fully exploited. The sustainable-value-framework makes clear the nature and magnitude of the opportunities associated with sustainable development and connects them to dimensions of value creation for the organization. LU, which is focusing on improved services, also includes clean technology, technological innovations future challenges so that it could sustain and create value for its stakeholders. Figure-1 Matrix depicting organizational and issue Maturity stages (adapted from Zadek 2004) FIGURE-2 Sustainable value framework Hart & Milstein (2003) References: 1. Graham, R. and Bertels, S. (2004), A Strategic Sustainability Framework accessed from www.erb.umich.edu/news-and-events/strategic sustainability (graham+and+bertels).pdf on 22nd Feb.2007. 2. Hart, Stuart L. and Milstein Mark B. (2003), Creating sustainable value Academy of Management Executive, Vol. 17, No. 2. 3. Gladwin, T., Kennelly, J., & Krause, T. (1995), Shifting paradigms for sustainable development: Implications for management theory and research. Academy of Management Review, 20(4): 878-907. 4. Elkington, J. (1994), Towards the sustainable corporation: Win-win-win business strategies for sustainable development. California Management Review, 36(3): 90-100. 5. Friedman, M. (1970), The social responsibility of business is to increase profits. The New York Times Magazine 13 September. 6. Wheeler, D., & Sillanpaa, M. (1997), The stakeholder corporation. London: Pittman Publishing. 7. Bowen, H.R. (1953), Social Responsibilities of the Businessman. Harper & Row, New York. 276 pp. 8. Carroll, A.B. (1979), A three-dimensional model of corporate performance. Academy of Management Review 4(4): 497-505. 9. Eberstadt, N.N. (1977), What history tells us about corporate responsibilities, Business and Society Review (Autumn) In: Managing Corporate Social Responsibility. A.B. Carroll, ed. 1977. Little, Brown and Company, Canada. 351 pp. 10. Niskala, M. and Tarna K. (2003), Yhteiskuntavastuuraportointi (Social Responsibility Reporting). KHT Media. Gummerus Oy, Helsinki, Finland. 244 pp. 11. World Business Council for Sustainable Development (WBCSD). (2000), Corporate social responsibility: Making good business sense. WBCSD, Geneva, Switzerland. 33 pp. 12. Zadek S. (2004), The path to corporate responsibility. Harvard Business Review 82(12): 125-132. 13. Panwar, R., Rinne, T. Hansen, E. and Juslin, H. (2006), Corporate Responsibility Balancing Economic, Environmental, and Social Issues in the Forest Products Industry Forest Products Journal Vol. 56, No. 2 5, February. 14. 'London Underground environmental Report 2006'' accessed from on 22nd Feb. 2007. Read More