In recent years, Corporate Sustainability has been much discussion and debate regarding what constitutes the concept of sustainable business practices, or ESG (Environmental Social Governance), including the definition thereof along with its potential positive outcomes for both shareholders and stakeholders.
It is no doubt that this topic remains especially relevant to businesses in the light of increasing consumer awareness of environmental concerns and other corporate social responsibilities, as well as the emergence of new corporate governance regulations such as those imposed by regulators and boards of directors across the world as part of their efforts to boost corporate responsibility standards.
This also plays into the fact that, as a result of rising costs related to climate change, many countries are now facing serious dilemmas concerning how to achieve economic growth without incurring significant financial penalties and at the same time ensuring adequate provisions for future generations in terms of public health and safety.
At first glance, it seems apparent that the most important task before any organization today is to ensure that it stays competitive and profitable by meeting and exceeding the needs of consumers while simultaneously protecting both employees and society from adverse effects caused by negative industrial activities. Nevertheless, we should not forget also that these goals have to be achieved in an environmentally responsible manner, which requires us to consider the wider societal context, both within our local communities and beyond them.
As it turns out, therefore, it would also be appropriate to talk about the need to incorporate various elements of a truly effective corporate sustainability strategy, which goes hand in hand with the promotion of innovation and entrepreneurship. Such a strategy can address all issues related to carbon emissions and global warming, employee protection, water management, waste management, resource conservation, quality improvement, etc.
We need also to look into the importance of developing more integrated communication and information systems that would make sure that every initiative undertaken becomes a tangible reality. Additionally, organizational structure and culture must be reviewed according to specific requirements. A comprehensive approach to creating value should also be considered when approaching such endeavors. Therefore, corporate sustainability represents one of the key areas that must be addressed by companies if they wish to remain competitive in today’s market environment and ensure long-term profitability. This article will discuss the main aspects related to the subject under consideration and provide some examples of successful initiatives from different industries.
What is Corporate Sustainability?
In recent decades, many organizations have started taking notice of certain trends in the field of corporate citizenship and associated practices that affect people directly either positively or negatively, depending on how far they have come along in terms of establishing an efficient corporate philosophy and sustainability strategy.
For example, governments and regulatory agencies in many countries are trying to implement measures to regulate greenhouse gas emissions by encouraging companies to invest in green technologies and develop sustainable products. Moreover, investors and corporates are increasingly paying attention closely to the issue of sustainable development.
However, while corporations are doing so by integrating numerous features of ESG principles into the design of their operations, this does not mean that they have succeeded in achieving real results. So far, many attempts have been made to define corporate sustainability, but each specific company has identified its own set of values and principles that serve as guidelines for its actions.
Thus, corporate sustainability is considered to be something that “reflects the underlying moral beliefs of an employer and the culture and values of its direct workforce” (Dibb & Jones 2004). To clarify things further, it might be helpful to dwell on examples of real-life examples of corporate initiatives or policies adopted by leading international companies since 2005. Since then, they have been striving to meet specific objectives, for example, managing to decrease the rate of greenhouse gas emissions by 1% annually, reducing employee turnover rates and ensuring a high degree of job satisfaction among workers.
Many similar initiatives have also taken place within large multinational enterprises (MNE) and small firms (SMEs), resulting in considerable progress in implementing practices and programs aimed at improving public health and the lives of millions of residents through improved workplace environments. For instance, Starbucks Corporation was among the first MNEs to announce plans for reaching net zero through 2025, providing incentives to its employees through the launch of the Wellness Program.
On the other hand, Toyota Motor Corp., a Japanese car manufacturer, announced that it had developed a five billion yen plan aimed at helping disadvantaged communities worldwide in order to help them improve their living conditions and create jobs for young people (Steenkamp et al. 2020).
Overall, however, there has always been a number of challenges linked to implementing a set of ethical standards and guiding principles that would guide an organization or corporation in the right direction. One possible reason why some of the mentioned listed companies failed to realize their objectives is due to several reasons, including lack of proper leadership, poor management decisions and inadequate implementation.
By analyzing the cases studied above, one also notices that despite having implemented multiple steps to manage their sustainability efforts, many companies failed to succeed in reaching their stated objectives. This failure could be attributed to a variety of factors, the main of which is a lack of proper leadership, lack of focus and planning, insufficient budgeting, and ineffective allocation of resources.
Why Is Corporate Sustainability Important for Shareholders and Stakeholders?
Despite being commonly perceived as something unimportant or even unnecessary, corporate sustainability, when executed properly, can contribute significantly to better performance and cost-saving opportunities, which are essential for profit growth. Even though sustainability has long been perceived as meaningless, it appears to be increasingly becoming central to almost every aspect of contemporary life, ranging from food production, healthcare, energy use, resource management to travel and education. An interesting example here concerns the study conducted by Li et al. (2018) which revealed that “the primary source of pressure among U.S. CEOs is likely to be a combination of external and internal pressures: namely, pressures on customers, suppliers, competitors, and stockholders” (p. 3).
Based on this statement, it becomes clear that the way that individual firms perform their day-to-day functioning and interact with their customers is strongly impacted by the decisions that they make. Unfortunately, due to the increased levels of competition and rapidly changing dynamics in the markets, firms often make major errors in regards to the selection of product and service offerings, the pricing policy, as well as the provision of services. In fact, just three years after the inception of Google, the latter was found to have misled its users regarding privacy and security standards, and thereby making it harder for them to trust the brand (Li et al., 2018).
Hence, the idea that sustainability is critical for all stakeholders involved becomes particularly relevant in the case of a particular industry like technology or manufacturing, where continuous improvements in operational processes that do not harm the reputation of a firm can yield immediate profits but rather prove ineffective in the long run.
Another important advantage of sustainability is that modern business is highly dependent on supply chains. That said, the fact that companies are often forced to pay greater attention to sustainability within the scope of their operations makes it especially appealing for smaller SMEs that try to attract as many clients as possible by promising low prices and attractive service.
Although it sometimes works out quite successfully for bigger companies, it is often difficult for entrepreneurs who struggle to establish themselves in the new niche and find enough funds to cater to their daily expenses as part of their overall strategy of expanding into the fast-growing electronics sector. These days, sustainability becomes more and more prevalent among private investors, meaning that many start-ups and innovative organizations have become highly focused on setting specific targets that they aspire to reach.
They strive to create a sustainable competitive edge over their rivals and ensure that the company itself creates no harmful impact on the environment while still enabling profits for all stakeholders involved. Another perspective on the matter of corporate sustainability is presented by Alshammari et al. (2019).
who claim that the current trend toward the integration of the notion of corporate sustainability into finance, investment, insurance, risk management and valuation practices can lead to a shift in the perception of the term itself. According to them, instead of remaining misunderstood, the term “sustainable investing” will become synonymous with a broader set of concepts, including ESG (environmental, socially responsible), human capital management (employee retention and training).
Indeed, when considering the possibility of combining sustainability and value creation, organizations will need to build a framework that incorporates both views. When used correctly, this strategy can facilitate the formulation of holistic solutions that will enable corporations to increase their competitiveness, minimize risks and protect natural resources (Alshammari et al., 2019).
With regard to this assertion, we can say that the idea of a company operating under an entrepreneurial model that promotes sustainable practices within the entire ecosystem of a community might become a viable solution to the discussed problems. Such a scenario is particularly applicable for larger MNEs, such as Apple Inc., whose CEO Tim Cook recently made the following comments about his vision of pursuing an ecofriendly approach to technology development:
“We are launching two new devices today that are radically different than anything launched in the past ten years, and I think that really shows how far we’ve come from yesterday—with so much progress, we’re really kind of going backwards. But tomorrow, there are big things happening that will fundamentally transform all kinds of hardware that we build and software that we write.
And that is going to make the old ways a bit less useful — making them irrelevant” (Kotler 2017a: 12). Given these remarks, we can conclude that one of the possible benefits from using CSR practices is that they might prompt corporations to reevaluate their organizational models and identify weaknesses in their strategies that prevent them from reaching their full potential. Accordingly, a comprehensive approach to building an effective managerial and institutional infrastructure may become the best option available. Ultimately, incorporating elements of corporate sustainability into business operations represents an opportunity for managers to demonstrate