Beyond holiday festivities and annual performances, here’s why December’s focus should be about celebrating human rights in the workplace.
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In today’s fast-paced corporate landscape, business leaders navigate a delicate balance between the long-term need to protect the planet and the short-term need to stay economically viable.
On the global stage, climate change is one of the most pressing challenges of our time, and businesses across all sectors are transforming their business models to create a sustainable future that protects the triple bottom line – people, the planet, and profits.
Yet, as we delve deeper into this realm, one question emerges: does corporate sustainability and a commitment to a net-zero economy remain exclusive to those with the financial means to afford it?
Higher energy prices, supply chain disruptions, increased interest rates, geopolitical instability, and slow economic growth make it more difficult for businesses to invest in sustainability.
Some argue that corporate social responsibility is a luxury that only affluent companies can afford. Others believe that corporate accountability is essential for all businesses, regardless of size or industry.
What remains undebatable, however, is the imperativeness for businesses to seek pathways toward sustainability, even if it entails certain short-term sacrifices.
In this article, we’ll explore the multifaceted aspect of corporate sustainability and examine the opportunities for leaders to start building and scaling the future.
What is Corporate Sustainability?
In recent years, the term “corporate sustainability” has taken center stage in discussions within the business community, academic circles, and the mainstream media. Frequently, it’s used synonymously alongside other terms like “sustainable development” and “corporate social responsibility.”
But what is corporate sustainability, and how does it connect with these other concepts?
At its core, corporate sustainability is a business approach that seeks to create long-term value for shareholders, employees, customers, and the broader community by responsibly and transparently managing environmental, social, and economic impacts.
While it shares common ground with sustainable development and corporate social responsibility (CSR), there are notable distinctions.
Sustainable development is a broader concept that revolves around meeting present needs without jeopardizing the ability of future generations to meet their own requirements.
CSR primarily centers on a business’s social and environmental impacts, whereas corporate sustainability adopts a more comprehensive approach, encompassing all three pillars of sustainability: environmental, social, and economic.
What are the Three Pillars of Corporate Sustainability?
The three pillars of corporate sustainability are environmental, social, and economic. These pillars are interconnected and essential for businesses to operate sustainably.
1) Environmental Pillar
The environmental pillar of corporate sustainability often garners the most attention. Environmental sustainability encompasses various aspects, including:
- Greenhouse gas emissions reduction
- Responsible water usage
- Transition to sustainable energy sources
- Minimizing packaging
- Reducing carbon footprints
- Pollution control
- Effective waste management
- Biodiversity preservation
These concerns extend beyond a business’s internal processes to encompass its supply chain, product innovation, and packaging and delivery practices.
What’s more, these practices not only benefit the planet but can also yield positive financial outcomes. For instance, reducing packaging materials cuts costs and enhances fuel efficiency.
Several metrics can be considered when evaluating a company’s environmental performance, such as greenhouse gas emissions, water consumption, and waste production.
Established frameworks like the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide valuable guidance and structure for measuring and reporting environmental progress.
2) Social Pillar
The social pillar is tied to the concept of ethics in the workplace. It’s not just about a company’s internal processes but also its interactions with other businesses, communities, and its workforce.
A sustainable business must enjoy the support and approval of its employees, stakeholders, and the communities in which it operates. The path to securing and maintaining this support may take various forms, but it consistently centers on treating employees fairly and becoming a responsible local and global community member.
When evaluating corporate citizenship, several vital areas come into focus, including:
- Human rights
- Employee rights and retention
- Diversity, equity, equality
- Representation and hiring practices
- Skills development
From an employee perspective, businesses can refocus on retention and engagement strategies, offering responsive benefits such as improved parental leave and family support, flexible scheduling, and education and development opportunities.
For community engagement, companies employ various methods to give back, including fundraising, sponsorship, scholarships, and investments in local public projects.
On a global scale, businesses must be mindful of their supply chain practices. This includes examining issues like child labor in manufacturing, fair wages, and safe working conditions.
While compliance with laws and regulations, such as the Fair Labor Standards Act (FLSA) and OSHA, represents the baseline of expectations for companies, how a company handles its social responsibilities significantly influences its reputation and attractiveness to customers, potential employees, and investors.
3) Economical Pillar
The economic pillar of sustainability is about ensuring that a business is profitable and can continue to operate in the long term. It encompasses crucial financial aspects of a corporate sustainability strategy, such as shareholder value, revenue generation, and growth.
However, it is important to emphasize that sustainable businesses do not prioritize economic growth at the expense of social and environmental responsibility.
In many ways, the economic pillar acts as a counterbalance to extreme measures that corporations might be pressured to adopt, such as an abrupt transition away from fossil fuels or chemical fertilizers.
In terms of sustainability, the economic pillar must evaluate the sustainable actions taken by the business and assess their impact on:
- Short, medium, and long-term sustainability goals
- Shareholder value
- Revenue and growth
These sustainable actions must be cost-effective and provide tangible value for the company.
In some circles, the economic pillar is also called the governance pillar, represented by the “G” in the ESG acronym.
This pillar focuses on aligning executive leadership and management with the interests of shareholders and those of the company’s broader community, value chains, and customers.
For example, investors want to be sure that a company uses accurate and transparent accounting methods and that stockholders have a say in important decisions. They also expect companies to avoid conflicts of interest when selecting board members, refrain from using political contributions to gain undue advantages, and avoid illegal practices.
Why is Corporate Sustainability Important?
Global warming and climate change are pressing concerns that transcend borders. While world leaders will convene at COP28 to discuss ways to combat it, the private sector also increasingly recognizes its role in this mission.
In one sustainability survey, 93% of over 500 leading companies have made public commitments to address climate change.
However, despite this widespread acknowledgment, the frustrating reality is that progress remains painstakingly slow in delivering the necessary emissions reductions.
Part of the reason behind this sluggish progress is the historical belief that sustainability and financial success are opposing goals.
So, does doing good translate into doing well? Why is corporate sustainability important?
Companies today have a unique opportunity to create value by pursuing green growth and repositioning themselves ahead of other companies.
Namely, there are five key sources of value for companies embracing corporate sustainability:
- Financial Value – Revenue growth & earnings
- Employee Value – Recruitment, retention & satisfaction
- Customer Value – Product quality, brand perception & purchasing behavior
- Societal Value – Public health & economic opportunities
- Planetary Value – Reduced greenhouse gas emissions
This value may not always manifest immediately as a specific dollar figure; it can materialize as enhanced consumer trust, improved staff retention, or more intangible benefits.
Implementing policies that support employees and the community can enhance a company’s reputation, potentially boosting consumer spending power and, consequently, attracting new customers to purchase the company’s products.
The Benefits of Corporate Sustainability
Companies that take decisive, sustainable actions not only contribute to the planet’s well-being but also reap financial benefits in the form of increased revenue and earnings.
Authentic corporate sustainability offers numerous advantages:
- Sustainable practices force businesses to question the status quo and find new, more efficient operating methods.
- Renewable energy and sustainable sourcing can reduce costs and improve resilience.
- Employees want to work for companies that share their values, and sustainability is a top priority for many people.
- Consumers are increasingly choosing to buy from sustainable brands.
- Using fewer or more sustainable resources can decrease production costs.
- A commitment to sustainability can generate positive media coverage and attract new customers and employees.
- Sustainable practices can be a powerful way to differentiate your brand from the competition.
- Companies that lead the way on sustainability can inspire others to follow suit.
Is Corporate Sustainability a Luxury?
Geopolitical conflicts, pandemics, inflation, and recessions are only some of the challenges businesses are faced with in today’s world.
These times of uncertainty can make it challenging for both consumers and companies to embrace sustainability without breaking the bank.
1) Cost Considerations
One of the biggest challenges to corporate sustainability is the “green premium,” which is the extra cost associated with choosing more sustainable products and services.
Deloitte’s Global Sustainability Survey offers a glimpse into changing attitudes and behaviors across the globe.
Support for climate action appears to be weakening this year, and fewer individuals are making sustainable choices. Unsurprisingly, some may be tempted to cut back on sustainability efforts to save money.
However, businesses can still make a compelling case for sustainable practices to skeptical decision-makers.
Here’s the kicker: sustainability is not just good for the environment, but also for business.
Research from the Harvard Business Review reveals that sustainable businesses enjoy greater financial gains than their unsustainable counterparts. In fact, an impressive 69% of companies report that their financial gains from climate initiatives have exceeded their initial expectations.
2) Consumer Expectations
Generally, global consumer preferences are shifting towards sustainability, transforming a once-niche market into a mainstream movement.
The IBM Institute for Business Value Survey shows that 62% of consumers are committed to reducing their environmental impact through their purchases, and 50% are willing to pay a premium for sustainable products.
However, various factors, like income, location, and access to information, affect people’s ability to make sustainable choices, contributing to a lack of awareness about the benefits of sustainability.
Enhanced awareness, more information, and better quality would help more than 4 in 5 consumers buy more sustainable products.
In fact, products featuring sustainability claims on their packaging generated nearly $114 billion in sales in 2019, a 29% increase from 2013. Sustainable products also outpaced their non-sustainable counterparts by growing more than five times faster.
3) Leadership Buy-In
Corporate sustainability is often overlooked by leaders because many mistakenly believe it is not a current issue.
However, shocking statistics reveal that one in four deaths are linked to preventable environmental causes. Climate change alone is killing an additional 250,000 people each year.
Businesses can’t wait for the perfect conditions to be more proactive. They must start taking steps to become more sustainable now.
In today’s climate of heightened awareness about social and environmental issues, corporate sustainability has become an essential tool for demonstrating an organization’s intent and priorities to customers.
How Businesses are Embracing Sustainability?
Many companies are taking meaningful steps to embrace sustainability as a core part of their identity. Some organizations have even built their brand around this commitment and are thriving as a result.
These companies are not only embracing sustainability but also setting a high standard for responsible business practices, inspiring others to follow suit.
Let’s take a closer look at a few remarkable companies leading the way with strong corporate sustainability initiatives:
Bank of America
Bank of America is at the forefront of promoting sustainability by providing financial support to businesses striving to meet their sustainability goals.
In 2014, they launched the Catalytic Finance Initiative, which channeled $10 billion into investments considered high-risk by conventional standards but aligned with the United Nations’ sustainability objectives.
By investing in ventures like early-stage clean energy companies, Bank of America effectively reduced the risk associated with sustainable investments, opening the doors to more impactful projects.
The initiative has since expanded to include 12 partners, further reinforcing the idea that investing in sustainability is not only the right thing to do but also a smart business move.
The prominent online marketplace for artisanal products, Etsy, has taken significant steps to offset 100% of carbon emissions from shipping.
Recognizing the environmental impact of the vast number of packages they ship daily, Etsy partnered with 3Degrees, a renewable energy company, to fund verified carbon emission reduction projects. These projects involve activities like protecting forests, supporting wind and solar farms, and developing eco-friendly methods for auto part production.
Etsy’s commitment ensures that the carbon emissions generated by their shipping activities are effectively neutralized.
Despite being known for its plastic building block toys, Lego has made substantial progress in sustainability. They have donated to offshore wind farms, initiated plans to make their bricks more sustainable, and improved the energy efficiency of Lego brick production.
Lego’s sustainability goals include making all core products from sustainable materials by 2030, targeting zero waste going to landfill by 2025, and implementing a ‘replay’ scheme, allowing customers to donate used bricks to children in need.
As a multinational technology company, Microsoft has made commendable strides in sustainability, diverting over 60,000 metric tons of waste from landfills and funding numerous water replenishment projects in 2020.
Their current sustainability goals encompass becoming carbon-negative and achieving zero waste by 2030, along with developing the “planetary computer” – a groundbreaking platform that harnesses global environmental data and artificial intelligence to provide actionable insights for sustainability.
Future Trends in Corporate Sustainability
Businesses need to be proactive in their sustainability efforts, which means staying up-to-date on the latest trends and technologies.
Below are some of the key trends in corporate sustainability that businesses should be aware of.
The Circular Economy
The circular economy is a new model of production and consumption that aims to keep resources in use for as long as possible. This involves designing products for durability, reusability, and recyclability.
Companies are increasingly adopting circular economy principles to reduce their environmental impact and save costs.
For example, Patagonia offers a repair service for its clothing, and some companies sell products as a service rather than selling them outright.
As a result, companies retain ownership of the products and ensure that they are recycled or reused at the end of their life.
Forest Carbon Credits
Carbon credits are a way to offset carbon emissions by supporting the protection and restoration of forests. Forests absorb carbon dioxide from the atmosphere, so by protecting and restoring forests, we can help to reduce greenhouse gas levels and mitigate the effects of climate change.
A number of companies are now purchasing forest credits to offset their carbon emissions.
For example, oil giant Royal Dutch Shell is planting trees in Guatemala, China, and Scotland to offset its carbon emissions. Amazon is paying to help small-scale farmers restore degraded lands in the Amazon rainforest.
Finally, Delta Air Lines is spending $30 million to offset pollution from its jets by protecting forests in Indonesia and Cambodia.
Authenticity, Accountability & Sustainability Reporting
Large corporations often recognize and embrace trending causes, not necessarily out of genuine activism but to safeguard their reputation and attract socially conscious consumers.
Research has revealed that over 40% of websites falsely claim about their eco-friendly credentials.
In other words, more than two in five websites are “greenwashing”, or lying, about being green.
One reason why greenwashing is so common is that there is no single standard for sustainability reporting. Companies can choose their own metrics and frameworks, which makes it difficult for consumers and investors to compare companies and assess their true environmental performance.
Another reason for greenwashing is that there is a lack of accountability. Companies are rarely penalized for making misleading sustainability claims.
However, there is a growing movement to hold companies accountable for their sustainability commitments. Investors, regulators, and consumers are demanding more transparency and scrutiny.
In the European Union, for example, large and listed companies are now required to publish regular reports on their social and environmental impacts. An independent third party must audit these reports.
In the coming years, we anticipate the emergence of more precise frameworks and metrics alongside increasingly stringent government regulations.
Is Accessibility the Key to Sustainability?
Sustainability is not a goal that only a privileged few can reach; it must be accessible to companies of all sizes and all members of society.
Small and medium-sized enterprises (SMEs) play a vital role in the global economy, accounting for over 90% of businesses and employing more than 50% of the workforce.
However, SMEs often face challenges in adopting sustainable practices due to limited resources, lack of awareness, and difficulty accessing information and support.
Governments and financial institutions can support SMEs to become more sustainable by providing funding for information and advice, training and development, and research and innovation.
For example, the US Small Business Administration offers a loan program for businesses that purchase or develop renewable energy systems.
Above all, sustainability is something that concerns everyone.
For businesses to make a real impact on climate issues, they must understand the importance of collaborating with a wide range of partners. This includes working with other companies, even their competitors, startups, government entities, clients, and communities.
These partnerships offer valuable insights, help businesses fully benefit from their efforts, and allow them to join forces on big projects that would be too challenging to tackle individually.
By ensuring that everyone has equitable access to environmental, economic, and social opportunities, we can pave the way for a more sustainable and inclusive world.
The intersection of accessibility and sustainability is where progress toward a brighter, more balanced future truly begins.
Written by Ivana Radevska
Senior Content Writer at Shortlister
- Global sweep finds 40% of firms’ green claims could be misleading (UK Gov)
- Balancing sustainability and profitability (IBM)
- Accelerating the transition: Hyperscaling to net-zero (McKinsey)
- A Planetary Computer for a Sustainable Future (Microsoft)
- Corporations are turning to forest credits in the race to go ‘carbon-neutral’ (NBC News)
- Micro-, Small and Medium-sized Enterprises Are Key to an Inclusive and Sustainable Future (UN)
- Economic uncertainty puts pressure on sustainable behavior change (Deloitte)
- How can slowing climate change accelerate your financial performance? (EY)
- Financial barriers are preventing climate-conscious individuals from taking action, new Deloitte report shows (Deloitte)
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