The Role of Sustainability in Business Viability - Coursework Example

The Role of Sustainability in Business Viability Introduction Businesses exist for the needs of the present generation as well as those of the future ones. Sustainability means that businesses as well as other institutions utilise resources in such a manner that does not compromise the ability for the future generations to meet their needs. Such an approach ensures that businesses remain viable in their operations. Sustainability entails three basic aspects: environmental, social and economic. In meeting the expectations of the society, businesses seek to satisfy their relationships with employees, participate in local community initiatives and to get involved in social projects. Corporations also play a key role in environmental conservation because they are the largest contributors to environmental degradation. By applying innovative solutions and initiatives, business corporations contribute to ensuring environmental sustainability and, in the process, assure their viability. Further, the primary role of business corporations is to operate profitably. By seeking initiatives that reduce costs, cut losses and increase profits, corporations enhance their own viability. This paper explores the role that social and corporate sustainability plays in ensuring the viability of business corporations. The notion that the only way in which corporations can assure their viability is through creating a sustainable business and social environment is explored at length. An overview of how firms adapt to changes with regard to social and economic sustainability is given, followed by a brief examination of the link between the circular economic model and sustainability as defined in corporate social responsibility (CSR) frameworks of corporations. Corporate and social dimensions of sustainability The term sustainability emerged between the 1980s and 1990s as part of the concept of sustainable development that emerged in that period (Galea 2004, p. 34). Earlier focus on development had laid much emphasis on the importance of economic growth for both governments and corporations. Growth was seen as the main driver of development under the global development agenda. However, this model of development failed to solve the core social, economic and environmental problems of both corporations and governments. On the contrary, it created new ones. The problems of environmental degradation, deforestation, depletion of reserves of natural resources and social unrest resulting from widening income disparities created the realisation that economic growth does not necessarily equal to equitable distribution of resources. Widespread social unrest led to the conclusion that unbridled economic growth, which had been the main focus of the global agenda for the last fifty years, was the main cause of social, environmental and economic destruction of resources, leading to many social consequences, particularly in developing countries (Galea 2004, p. 34). It is against this global backdrop that the word sustainable development was adopted at the expense of growth-driven development as it had been conceptualized earlier. Leading international organisations later adopted the term sustainability to highlight the need to address emerging problems across national and regional borders that resulted from the need to ensure that the growing global population has access to basic needs like food, water and clothing. The need for social and corporate sustainability cannot be overemphasised. It is argued that over 80% of the global resources are controlled by a paltry 23% of the population in the world. In agreeing with this proposition, Schroyer and Golodik (2006, pp. 188-190) state that growth in the physical scale of the economy under the prevailing regime of economic globalisation has been the main cause of rampant depletion of resources, destruction of world vital and delicate ecosystems, increased the level of natural waste, obliteration of subsistence cultures in the world and unequal distribution of wealth and income in the world populations. Sustainability is therefore the answer to turning the economy around in order to foster economic growth without causing the harmful effects that have been discussed before. The word sustainability has been defined in several ways, each connoting a different perspective or the whole concept of sustainability. In essence, sustainability entails actively managing and enhancing five key types of assets as follows: the environment, people, social relationships, assets and finance. According to this definition, sustainability or sustainable development takes into consideration several aspects of key concern to any organisation. Included in this list are human, social, financial, natural and economic capital. According to Dillard, Dujon and King (2008, p. 2), sustainability is composed of three mutually depended and overlapping goals: to live in a way that is environmentally sustainable or viable over the long term, to live in a way that is socially sustainable for now and for the future; and to live in a way that is economically sustainable and stable enough to maintain living standards for a long time. From these dimensions, it can be seen that sustainability entails three core dimensions: social, economic and environmental. Just as environmental sustainability entails use of natural capital for the future generations and economic sustainability involves wise use of financial capital for the future generations; social sustainability involves the utilisation of social capital in a manner that allows future generations to utilise the same resources for productive purposes. The corporate dimension of sustainability arises from the fact that corporations can play a key role in enhancing global sustainable development agenda. This is so because of the prime role that domestic and multinational enterprises play in implementing their business models. Economic sustainability primarily focuses on how firms can achieve long-term sustainable competitive advantage in their operations (ElMaraghy, p. 423). For instance, the need for businesses to engage in environmental sustainability initiatives is underscored by the fact that business corporations remain the largest producers of causes of environmental degradation. They are therefore morally responsible to ensure environmental sustainability. However, it is observed that sustainable practices, according to corporations, are ones that involve cost-cutting measures. However, other aspects of sustainability like social and non-economic aspects may not be profitable; this calls for the participation of other non-business actors like governments and non-governmental institutions in attaining the global agenda of sustainability (Galea 2004, p. 38). Corporations enhance sustainability through CSR, corporate governance and relationships with corporate stakeholders. The need for corporate and social sustainability The need for sustainability has been steadily growing in the recent past. It has been realised that the viability of businesses depends not only on their adoption of sustainable business practices but also on sustaining the social structures within the community in which they operate. In pursuing sustainability goals, corporations encounter three other communities: the business community, the social community and the regulators. The interaction between these three entities shapes the nature and way in which corporations interact with each other and pursue their sustainability agenda. These three elements play different roles in making businesses viable. This is achieved by making the businesses adopt sustainable practices in their operations. According to Fisher (2009, p. 34), the need for corporate sustainability is created by the challenges of the new integrated economy of the 21st century. This global thinking has created two contradicting situations: new opportunities for corporations and new dynamics and challenges for both corporations and other social institutions that are not directly involved in business. In such a situation, organisations are faced with the need to adopt new methodologies that enable them to attain sustainability and viability in the current business environment. Corporations are therefore forced to innovate in their core functions and process like of management systems, workforce models, employee relations, corporate policy changes and the diversity of the stakeholders of the business (Dunphy, Griffiths & Benn 2003, pp. 119-120.) Further, this situation has driven businesses to adopt sustainable practices. Firms, in interaction with the legislation and the wider social community, seek to attain and maintain sustainability in a number of ways. First is, by ensuring that diversity is embraced in the core operations of the business. This implies that businesses strive to satisfy the need of embracing diversity in all their dealings with employees. This is seen in terms of hiring, promotion, training and reward systems for the employees of organisations. Second, businesses seek to develop governance and leadership philosophies that promote sustainability throughout the organisation. Such philosophies are meant to guide the leadership of the organisation in such a manner that sustainability is ensured not only within the organisation itself but also in all other organisations that are aligned with it, key among them being the networks of suppliers and customers of the business. Third, corporations seek to attain financial viability in their operations. In doing this, there is need to balance the short-term and long-term needs of an organisation in order to attain desired profitable levels which can be maintained over the long-term (Dunphy, Griffiths & Benn 2003, p. 121). Fourth, corporations seek to meet the corporate needs of the present leadership without compromising those of the future. This implies that corporations are driven by the need to ensure that the future generation of leaders can maintain stability within the organisation in terms of economic, environmental and social concerns of sustainability. Lastly, the need for corporate sustainability is driven by businesses developing processes that ensure sustainability in their products and services throughout the organisation. According to Hawkins (2006, pp. 1-4), sustainability in businesses and the society is a product of the activities of three distinct groups: the business organisation (which involves investors and the management of the business who are involved in the process of producing products and services for the market), the customers and the entire consumer community which is served by the business and finally, the government organisations which provide the necessary legal framework and enforcement for the successful operation of business practices. All the three groups play distinct roles in enhancing sustainability. For instance, governments adopt relatively short-term measures and legislations that affect business for a long time thereafter. Governments establish the regulatory frameworks that guide business operations within a society. They also focus on providing services to the community and being channels for driving social change in the community. Apart from the push for greater regulation, governments also compel corporations to employ better assessment and measurement techniques in sustainability-related activities. This has enabled the evolving of sustainability targets, indicators and reporting requirements, thus effecting change in corporate behaviour (Boeger, Murray & Charlote 2008, p. 34). Corporate sustainability and circular economy In working towards corporate, social and environmental sustainability, businesses can adopt the concept of circular economy in their business models. According to the United Nations Environmental Programme (2007, p. 380), a sustainable development economic model can be attained by use of this model. This model differs from the traditional industrial economic models in many ways. Unlike the traditional linear model consisting of resource production, consumption and disposal, the circular economy model organises economic activity towards a circular loop that involves resource production, consumption and regenerated resource. In this model, all resources and energy are rationally used in sustainable economic cycles under which the harmful effects of pollutants and by-products are maintained at minimum levels. According to Marshall (2007), the circular economy model operates on three core principles. First, its primary focus is to reduce energy and material flow into the processes of production and consumption. This ensures that essential products are produced with minimum use of resources. Second, the circular economy model entails reusing of materials to ensure that resources and products are used in every possible way. Third, this model ensures that resources are recycled in the economic processes. Recycling has the potential benefits of reducing wastes, turning wastes to secondary resources and decreasing the consumption of natural resources. The circular model of economy, unlike the linear model, enhances viability of business corporations by satisfying the three aspects of sustainability without compromising any aspect. By reducing wastage and ensuring that materials are used efficiently, this model reduces the environmental impact of business operations, thus enhancing their viability. Additionally, circular economy brings change from an employment downwards society to an employment upwards society. This element creates a positive impact in the social environment of firms. Lastly, increased efficiency and minimum use of natural resources reduces operational costs for businesses. This translates to improvements in quality of products and services, thus ensuring economic sustainability of business corporations. Adopting corporate sustainability: An overview of businesses Corporations are driven to adopt change as a result of a set of internal and external conditions which drive the need to adopt new and innovative approaches that guarantee sustainability and viability of the businesses. The underlying need for change on corporations is driven by the realisation that viability is a function of corporate and social sustainability. Corporations have realised that enhancing sustainability is a manifold process that encompasses many actions which function at three basic levels: the corporate level and the social and environmental levels (Ekins & Voituriez 2009, p. 59). Globalisation and its effects has created an environment in which privatisation has replaced state intervention in business (Bozyk 2011, p. 206). Businesses have adopted changes in operational processes by taking advantage of the complex and interconnected nature of global financial markets for their own benefit. Also, by opening up markets, dispersing capital and growing investments, globalisation has driven corporations to adopt sustainable business practices. Globalisation has also encouraged businesses to adopt sustainable business practices as a result of increased global accountability to problems such as environmental and social concerns which are regarded global and needing collective response. According to Hawkins (2006, p. 8), corporations are also driven to adopt changes that enhance sustainability as a result of increased customer pressure. Globalisation has enabled free and increased flow of information among consumer populations. The result has been that there have been increased consumer awareness levels and pressure groups which hold many public institutions and corporations to account for their actions. Businesses respond to a more informed and active consumer population by adopting sustainable business practices. Further, businesses are redefining the term stakeholders to include diverse groups and institutions which are committed to enhancing sustainability. Sustainability concerns have brought on board diverse groups and non-governmental organisations and other factions of the society whose activities are a strong incentive for change management in corporate organisations. Additionally, corporate organisations have adapted to the realisation that their social, environmental and economic working practices affect their viability. This is because what can be judged as poor working practices by a corporation affects its share price and, by extension, investment decisions by potential employers. Negative publicity also creates a poor perception of the firm by its employees. Corporations therefore adopt sustainable practices in order to meet the expectations of communities and their shareholders so as to safeguard product brands and value of stock as well as to ensure that all necessary government regulations are complied with. These changes are reflected in the CSR practices of a firm. Both the socio-economic and stakeholder models of corporate social responsibility entail the fundamental function of ensuring the viability of a business by identifying activities and practices that enhance sustainability and promoting their implementation in the business processes of corporations (Zu 2009, pp. 21-22). Conclusion From the foregoing, it can be concluded that the essence of the statement that the viable future of businesses depends on social and corporate sustainability is supported by current practices in the global business environment. Businesses operate in an environment that is characterised by the existence of three distinct, yet connected, groups as follows: the business stakeholders (largely employees, investors and management), the society (including customers and the entire community), and the government (regulations and compliance demands), which interact to create the need for sustainability in business operations. Also, businesses strive to ensure sustainability in three aspects: environmental, social and economic. This is done through adopting sustainability activities and initiatives which are incorporated in the corporate social responsibility frameworks of corporations. Further, the current trend of adopting the circular economic model as opposed to the traditional model of linear economy is regarded as having the potential of ensuring corporate sustainability. Many businesses are incorporating this concept of sustainable development into their business models as a way of ensuring their viability. 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