The strategy of corporate sustainability
Introduction
Corporate sustainability is a strategy that focuses on the ethical, social, environmental, cultural, and economic aspects of conducting business in order to provide long-term stakeholder value. [1] The plans put forward are meant to encourage longevity, openness, and appropriate staff growth inside commercial businesses. [2] A statement of Corporate Sustainability Standards (CSS), which are typically policies and procedures intended to meet or exceed minimal regulatory standards, is a common way for businesses to demonstrate their commitment to corporate sustainability. [3]
Although they are not the same, corporate social responsibility (CSR) and corporate sustainability are frequently used interchangeably.
The 3 Pillars of Sustainability
Economic
Contrary to its name, the economic pillar's focus is on corporate risk management, not profit maximization for the firm. The balance between ethics and profit is crucial. Although a change in the supply chain could result in immediate financial gains, it should be treated with great caution if there is a chance that the company's reputation could be harmed. However, the economic pillar also acts as a check on extreme sustainability measures that businesses may be compelled to take, including quitting all use of fossil fuels.
Social
In general, corporate practices shouldn't be harmful to their long-term development and reputation or self-defeating. The economic pillar simply enables businesses to keep implementing sustainability initiatives gradually and profitably.
Having the backing of the community, stakeholders, and employees is essential to the social pillar. Increased productivity and creativity, as well as excellent retention and engagement, are all results of treating people properly and fostering a respectful supply chain process. In the long run, employing sustainable social initiatives produces a workforce that is more skilled and driven. Employee innovation, which has the capacity to enhance current goods, processes, and business models, is encouraged through fostering a strong, community-focused culture. Globally speaking, the social pillar entails being aware of where and how your supply chain is being sourced for labor that is sustainable, safe, and respectful to the community.
Environmental
Among the three, the environmental pillar is undoubtedly the most significant. Because they are always analyzing current procedures to identify better, greener options, sustainable businesses are frequently the most innovative. Corporations can improve their public perception and financial results by minimizing their carbon footprint and packaging waste. Implementing transportation management systems, lowering carbon emissions, and improving packaging are some frequent objectives that assist businesses in saving money while minimizing their environmental effect. To establish a reputation among customers as being environmentally friendly as consumer awareness of environmental issues grows, it is critical to have a mission of green sustainability.
What Kinds of Sustainability Strategies Are There?
Every company has a varied approach to implementing sustainability initiatives because their operations and underlying industries may have diverse influences that change their plans.
Plans and initiatives that a company does to continue operating are known as sustainability strategies. Corporate governance, staff development, innovation, and methodical improvements are some of these tactics. Each of these factors can result in a certain strategy type that a corporation will employ to enhance daily operations over time. Every company has a varied approach to implementing sustainability initiatives because their operations and underlying industries may have diverse influences that change their plans. These factors and the internal operations of each organization must be taken into account while choosing the best strategy.
Corporate governance refers to the broad principles and directives that a business utilizes to manage its employees and business activities. Corporate governance may include sustainability plans, making this a constant focus of a business' activities. Corporate governance may address social and environmental issues in addition to more conventional business concerns. This makes sure a business has enough material resources to keep running. Due to social difficulties, the firm may need to invest money in projects that benefit their surroundings and benefit both internal stakeholders and those who are not directly related to the business.
The development of employees is yet another popular form of approach. Wetware, or the qualities and advantages that an employee's intangible skills provide to the company, is frequently used by businesses. Strategies for retaining employees include training them, paying them above-market rates, and discouraging them from leaving the business to work for a rival. This method can be strengthened by having open lines of communication and allowing employees to participate in decision-making. A business with a strong employee base strives to keep its workers long after the current executives and management have left.
Why is it vital for firms to have a sustainability strategy?
The biggest commercial opportunity in a century is presented by the shift to a sustainable low-carbon economy. In the upcoming decades, spending on environmentally friendly infrastructure, healthy food, and equality will all increase enormously. For instance, the European Green Deal intends to make €1 trillion in funding accessible in order to assist Europe in becoming the first economy in the world to be climate neutral. The best-positioned businesses to benefit from this will be those having a sustainability strategy.
The following advantages of a corporate sustainability strategy, when applied to business operations, can be seen:
Cost-cutting: Businesses that improve their resource efficiency will have decreased operating expenses. Apple made investments in energy-efficient enhancements in 2019, which reduced the company's need for electricity by over a fifth and generated savings of $27 million.
Lower risks: Local and national governments frequently push through new climate regulations and policies. Companies are better prepared for potential policy changes, such as the implementation of a new carbon price, thanks to a corporate sustainability plan.
New markets: To meet changing consumer wants in our society, which is constantly changing, new goods and services are created. Businesses can gain a head start on developing sustainable products by implementing a sustainable strategy. This will guarantee that they can benefit from emerging markets and market sectors.
Better brand: Customers are becoming increasingly driven to work with sustainable businesses. A company's sustainability approach will establish credibility with consumers, who are always getting more aware. This should result in a better brand image, which will benefit the overall business.
Access to financing: Banks are applying increased pressure to financially distressed businesses. This has been underlined by recent Addelshaw Goddard research.
Key Steps to a Sustainable Corporate Strategy
There are other businesses that are having difficulty putting corporate sustainability policies into practice for every one like Unilever and Wal-Mart that have done so successfully. In order to improve sustainable practices, each organization must do a thorough evaluation of its strategy, operations, and goals. Although there is no one way to implement sustainability, there are essential stages that can aid in its successful integration into a corporate strategy. These steps will be the main topic of this article, which will serve as a sort of road map for the formulation and execution of a business sustainability plan.
1. Recognize the significance of sustainability for the company.
It is crucial to first define sustainability for each department inside the business and to list its advantages. Sustainability is becoming a more important factor in all types of decisions, including those involving investments, the creation of new goods or services, and modifications to purchasing procedures. One business that bases its investment choices on sustainability is Coca-Cola. Water sustainability is becoming a major consideration in the design and location of new manufacturing facilities. Potentional markets and ease of distribution used to be the only important factors, according to Sanjay Guha, president of Coca-Cola Great Britain. The long-term availability of water is now in focus.
2. Talk with interested parties
A company's impact on stakeholders might change depending on its line of operation. Typically, businesses maintain tight relationships and ongoing communication with the most powerful groups. Engagement, however, can take place on various levels and must meet the expectations of both parties. Different engagement levels and techniques provide advantages for businesses and stakeholders alike and can lead to more sustainable business practices. "Allowing stakeholders to honestly critique us encourages us to enhance our programs and helps us strengthen our thought leadership platforms," says Bonnie Nixon, Director of Environmental Sustainability at Hewlett Packard. Similar to this, Procter & Gamble has benefited from its interactions with local communities by discovering new uses for its waste products.
3. Establish commitments and goals
Following the identification of the most important environmental, social, and governance issues and the definition of the engagement strategies for each stakeholder group, efforts must be directed toward minimizing risks and seizing opportunities related to these issues that are centered on sustainable practices. Sustainability pledges and targets must be created, whether they are motivated by cost savings, innovation, or improved financial performance.
The majority of Wal-sustainability Mart's commitments and objectives center on the usage of renewable energy and the adoption of energy efficiency. Initiatives in these areas have made Wal-Mart the largest on-site green electricity generator in the United States and have saved the company more than $500 million USD annually.
4. Create procedures and systems
Once the objectives have been set, each initiative must be carried out according to precise standards and meticulous procedures. Processes and policies in place must be taken into account throughout the design, and cooperation between departments should be encouraged. Getting executive commitment is essential at this point. A successful staff engagement model and the selection of an internal sustainability champion as the sustainability initiative's primary driver are both examples of best practices. According to VOX Global and Net Impact Berkeley's 2012 Report of Sustainability Leaders, 78% of respondents believe senior management played a significant role in the adoption of sustainability. However, 81% said that their coworkers throughout the organization were the main factors in their success.
5. Monitor progress, share actions, and fulfill commitments
Last but not least, it's critical to establish a method for tracking progress toward each objective. The ability to identify areas for improvement and to collect pertinent data to monitor progress will result from the definition of key performance indicators to achieve the defined goals. Metrics and indicators are also crucial to the company's reporting and communication processes. The availability of data internally helps to prioritize challenges and activities and encourage employee engagement in sustainability. Externally, gathering data is essential for an accountability plan, to meet the expectations and interests of stakeholders, and to abide by reporting requirements.
Companies who follow the rules of the Global Reporting Initiative have already embraced the creation of indicators. The Sustainability Accounting Standards Board is also creating frameworks to standardize sustainability key indicators for each sector in addition to these standards. In addition to these initiatives, businesses are developing their own performance evaluation systems, such as Wal-Sustainability Mart's Scorecards, which, among other factors, evaluates suppliers according to their environmental footprint and aids in the performance evaluation of Wal-Mart.
Corporate sustainability ultimately needs to change in accordance with the business's maturity and willingness to view sustainability as a strategic opportunity. These measures are just the start of a process that, in time, will enable businesses to convert their whole business plans to sustainable ones.
Conclusion
Sustainability-related factors that influence strategy
Investor pressure is among the most potent forces influencing the transition to sustainability. According to Gartner study, 85% of investors will take into account ESG elements in their investments in 2020, and 91% of banks will track the performance of ESG investments. It is evident from the most recent letter from BlackRock's CEO, the world's largest asset manager, that investors are paying close attention to sustainability. According to Larry Fink, being sustainable results in long-term, sustainable profitability in addition to merely doing the right thing.
Desire from consumers - As millennials and Gen-Z consumers proliferate, there is a rising demand for sustainable goods. Consumers in Gen-Z are eager to pay extra on sustainable goods, according to 73% of them. According to a Deloitte report, almost 60% of UK customers cut back on the use of single-use plastic in order to adopt a more sustainable way of life. One third of UK shoppers looked for brands with excellent sustainability credentials. Any firm that wants to be relevant in the upcoming years must incorporate sustainability into its corporate strategy, as worldwide demand for sustainability is only expected to grow.
Governments need to be tighter now more than ever because to the Paris Climate Agreement. While the UK, Canada, Japan, and other nations have a 2050 net zero commitment, Sweden and Germany have legally binding net zero ambitions for 2045. Non-EU companies who conduct business in the EU are also impacted by the EU's taxonomy, which governs companies depending on how environmentally friendly they are. Organizations should begin changing their operations to become more sustainable in light of the shift toward sustainability being made by many governments. Better relationships with regulatory agencies will result from taking an active role in sustainability.
Finding Talent - In order to draw talent, a firm must be sustainable. According to a Deloitte survey, 49% of Gen-Zers and 44% of millennials claimed that their personal ethics have guided their job decisions. According to a recent survey, 51% of business students in the US would accept reduced income if the company practiced environmental responsibility. Due to the rising demand for talent, businesses who don't prioritize sustainability risk losing out to those that do.
Increased Productivity - Being sustainable will increase staff motivation to deliver greater results. According to McKinsey & Company, sustainability lowers expenses and can have an impact on operating profits of up to 60%. Being sustainable also boosts productivity since, according to a Deloitte study, inclusive organizations have a 27% greater.