Most businesses hope to become sustainable, but for many, reaching that goal is problematic. The road to the finish is filled with obstacles such as inadequate public policy and burdensome reporting.
What is Business Sustainability?
Business sustainability refers to business models and managerial decisions grounded in financial, environmental and social concerns. Sustainable companies:
- Create long-term financial value.
- Know how their actions affect the environment and actively work to reduce their impacts.
- Care about their employees, customers and communities and work to make positive social change.
- Understand these three elements are intimately connected to each other.
- Create smart, integrated public policy: Building sound public policy on environmental issues is undeniably complex. But the uncertainty created by governments’ failure to act compounds companies’ existing planning challenges. Companies need clear, steady direction from governments regarding issues like carbon pricing, national cap-and-trade systems for greenhouse gas emissions or feed-in tariffs for new energy-generation sources. They also need clarity around the intersection of environmental, energy, economic and social policies – many of which are often conflicting.
- Build a national dialogue on responsible consumption: Companies can only do so much without the support of their customers. If consumers are unwilling to buy or pay more for environmentally responsible or fair-trade products, the sustainability movement will stagnate. Businesses need consumers to engage in national dialogues about sustainability so they can make informed decisions about sustainable living and responsible consumption.
- Embed Sustainability in Corporate Culture: CEOs are rotating through their jobs quickly. In 2007, the average tenure of CEOs for large U.S. companies was less than six years. This relatively short tenure represents a challenge for a sound sustainability strategy, which requires long-term investments. New leaders may perceive CSR departments or senior sustainability jobs as cost centers and eliminate or significantly reduce them. With these CEOs, sustainability champions find themselves having to make the business case over and over again to every new leader. Businesses need to embed sustainability into their culture, so that sustainability strategies do not lose momentum with a new CEO.
- Create conditions that support sustainability-related innovations: As long ago as 2009, the Harvard Business Review proclaimed that, because growing the top and bottom lines are the goals of corporate innovation, “smart companies … treat sustainability as innovation’s new frontier.” Despite that perspective, many business leaders still see sustainability-related innovation as risky. Large companies have investors that demand rising, quarterly earnings as well as big brands that represent massive investments of time and resources. Small companies, too, have little organizational slack. In an era of razor-thin margins and just-in-time manufacturing, many business leaders struggle to justify investments in creative pursuits and long-term projects that have unguaranteed returns.
- Mitigate and adapt to climate change: Business adaptation to climate change was one of the first issues identified by these leaders. The physical impacts of climate change will redefine entire industries, such as agri-food, tourism and insurance – not to mention the industries that rely on them. What will climate change mean for companies and for society?