Sustainable Business and Management - Essay Example

Sustainable Business Business sustainability can be defined as a management practice that enables companies to manage social, financial, environmental hazards, opportunities and responsibilities. A sustainable business is the one that can be able to cope with issues associated with healthy economic, environmental and social systems, therefore, contributing to healthy ecosystems and strong societies (PwC, 2013). A sustainable business should be able to “meet the needs of the current generation without compromising the potential of the future generation to satisfy their own needs.” This paper explores on significance of social, economic and environment sustainability in business and how they handle challenges. It is necessary to understand the business stakeholders and how they benefit and suffer from business decisions and sustainability. The investors are very necessary stakeholders because they invest their resources in the business in order for the companies to continue with their operations (Del Pino & Perera, 2013). Any decision taken by the management will affect stakeholders’ resources either at present or in the future. Managers and employees depend on business for wages, and business decisions may result to increase or decrease in the managers and employees income. Customers depend on business for the supply of goods and services; therefore business sustainability will affect the future supplies of those products to the consumers. Government depends on the business for tax revenue and economic growth because of employment opportunities the business offers to its citizens. The state is responsible for making policies to regulate business operations thus determining how the business activities. Therefore, sustainability of the business will affect the economic growth by increasing or reducing the state revenue and employment opportunities in the future (The Prince’s accounting for Sustainability project, n.d). The community around the business is a key stakeholder and can determine the future of the business. The community gets donations from the organizations, jobs, supply of products, and is also affected by business activities such as environmental pollution. According to PWC (2013) companies are engaged in decision making regularly in order to meet the growing market demand for their products, be able to sustain the ever increasing wages for their workers, meet the state taxation requirement and even more important remain competitive in the business. These decisions could be a plan to develop business operations in order to meet new market demand, installation of a new machine or construction of a new building to expand business operations, opening a new branch in a potential area, retrenching of redundant workers to increase business profitability or any change in the business. Business decisions have both negative and positive impact on the stakeholders of the business and may result to improved performance of the business or may result to closure of the business (Del Pino & Perera, 2013). Most of the business decisions are aimed at increasing stakeholders’ earnings, but in addition they may result to social, environmental or economic issues that should be addressed first before a decision is taken. However, at times the actual impacts of the decisions are not sure at the time of decision is made. According to Perera and Pino (2013), most business managers make decisions about the projected revenues and cost and they do not budget for the environmental, social or risks and benefits. A business plan may appear lucrative and simple to implement at present, but in the future it may cause serious environmental and social problems that may lead to that project being discontinued and may even attract legal penalties from the environmental agencies (Cabot, et.al, 2009). In the instances, the business may incur a lot of expenses in order to meet sustainability requirement. For example, if the business is involved in mining activities the management should set aside additional funds to mitigate the environmental hazards and acquire the authorization certificates before continuing with the operations. This requirement is only possible where the risk associated with the plan is known with precision. In case of a risk whose consequences is unknown is likely to occur, this may impact the business decision making process and may result to management abandoning of the plan (Cabot, et.al, 2009). For example, a mining company may result to emission of poisonous chemicals with devastating effect on the workers. This situation may disrupt the operation of the business due to social impact it may have on the community living around that place. Consequently, the community may boycott the products of the company or workers may strike due to adverse effects of the business thus resulting to closure of the business (The Prince’s accounting for Sustainability project, n.d). Although there is assurance that such a situation will arise, some stakeholders may shun investing their resources in such a business for the fear that such a peril occur and disrupt the entire business. Another way of examining how business sustainability may affect decision making process of the business is by assessing the limitations that may hinder smooth operations of the business due to environmental and social structural changes (Cabot, et.al, 2009). For example, when setting up a business that require a lot of water for its operation, the management should consider the opportunity for future water scarcity. The previous model focused on the issues of business to the environment and the society. In this instance, a business that relies heavily on water supply cannot continue its operations in the future in case the water scarcity occurs (PwC. (2013). A good example in this scenario is a hydropower generating business or an irrigation scheme. If due to climate changes serious scarcity of water occurs and force the business to close this will have a lot of negative impacts in the society. For example, there will be a loss of jobs for the people working in that business, loss of revenue for stakeholders and loss of government revenue in the form of taxation. When making decision as whether to run such a business, the management should consider the opportunity for such occurrences and take precautionary measures in advance or look for another option Cabot, et.al, 2009). For example, the business may consider using an alternative source of energy for power generation such solar or wind energy in order to ensure sustainability of the business in the future. For a business to achieve sustainability, the stakeholders must observe specific practices in order to take the direction towards development and avoid conflicts that may otherwise lead to serious business risks (Cabot, et.al, 2009). A sustainable business can attract the best workforce, reduce risks and penalties as a result of the violation of existing regulations and is able to build its name hence it becomes more competitive. Business requires decisions at various levels to achieve specific goals. Therefore, it is vital for the management to explore all risks associated with the decision they intend to make and ensure the strategy they use is sustainable. It is necessary to note that before taking any major decision in business, the management should engage all stakeholders in decision making in order to avoid putting business into a serious crisis. The stakeholders should be able to explore all possible risks associated decision and determine whether that decision is worth the risk involved and how they can be able to mitigate that risk. Another essential business practice of ensuring sustainability is the adoption of standards of reporting and disclosure of business information. Therefore, the management should be very honest with the information they collect and disseminate to the public or shareholders. In addition, the business should initiate environmental management systems to ensure that all their activities do not violate environmental regulations (The Prince’s accounting for Sustainability project, n.d). Finally, the management should conduct lifecycle analysis periodically to ensure the products or services they offer do not have any environmental or social consequences to the users. The biggest concern for most business managers is how to sustainable business development. Sustainable business development implies the means by which the business continues to expand its capacity to meet the needs of the current and the future generation (Del Pino & Perera, 2013). In order for a business to achieve sustainable development, the management should adopt a holistic approach to risk management. The management should engage all stakeholders or their representatives in decision making process in order to ensure that all potential risk aspects of the business have been considered in the business decision. The essence of encouraging holistic approach is to ensure the outcomes of the business decisions are acceptable by stakeholders in order to avoid conflicts in the future. According to PWC (2013) development and measurement of effective impact assessment methods would assist business to get an insight on they build and demolish societal, economic and environmental value, while still accomplishing their primary objectives of creating sustainable monetary return for their investors. The business management should gather all necessary information for decision making. This is a very costly process, but it is worth the risk involved in making decisions without adequate information (Cabot, et.al, 2009). However, if the management makes use of efficient tools and techniques for gathering data, analyzing and reporting the outcome there is be a significant reduction in business risk and a growth in business performance. Apply the best metrics for assessing business growth and the risk of every proposed decision in the business. The use of right metrics is all about using appropriate data that can establish a variation of sustainability (Cabot, et.al, 2009). This will reduce the flaws that would otherwise arise due to inadequate measurement of risk and business opportunities both at present and in the future. Businesses face a lot of risks that may reduce the future income of the business such as depletion of investor’s resources, negative impacts on the environment, failure to nurture employees’ talents and probability of abandoning of customers (Del Pino & Perera, 2013). However, it is the duty of the managers to create future value of the investors’ resources by integrating good management strategies in business operations. Despite the changing business environment, sustainability remains the only key to unlock business potential for to generate more revenue, reduce cost of operating a business and enhance business performance. In conclusion, for business sustainability the management should take into consideration the impact on economic, social and environment at present and in the future. The managers should use holistic evaluation of all possible risks and involve all stakeholders in the decision making process. Failure to promote business sustainability can affect the business negatively and affect the stakeholders’ resources adversely. In addition, negative impacts of the business on the society and environment can result to closure of the business due to rejection by the community (social boycott) or conflicts with environmental regulatory authority. References Cabot, J., Easterbrook, S., Mazon, J., Horkoff, J., Liaskos, S. & Lessard,J. (2009). Integrating Sustainability in Decision-Making Processes. Del Pino S. P. & Perera, A. (2013). Factoring Sustainability into Financial Decision-Making PwC. (2013). Measuring Total Impact. Decisions. Salzmann, O. Ionescu-Somers, A. Steger, U. (2005). The Business Case for Corporate Sustainability. European Management Journal, Vol. 23(1), pp. 27–36 http://f2.washington.edu/fm/sites/default/files/Business%20Case%20for%20CSR%20Literature%20Review.pdf The Prince’s accounting for Sustainability project (n.d). A4S Report: Future Proofed Decision Making Read More