Making Sustainability Tangible – An Oxymoron or a possibility?by Varuna Khattri September 10 2015, 11:08 pm Estimated Reading Time: 7 mins, 41 secs
“If tomorrow’s business leaders don’t “get” sustainability, then the chances of a sustainable tomorrow are slim.”
Sustainability, literally, is the economic advance that meets the needs of the present generation without compromising the ability of future generations to meet their’s.
Sustainability is no more an abstract concept; rather, it is one of the great challenges our world faces. Described as the “triple bottom line” of social, environment, and economic impacts, it is gaining more popularity than the top and bottom line. There are ample logical evidences as well hue and cry which indicate that earth’s natural systems are being strikingly affected by climate change brought on by the unchecked use of fossil fuels, untreated waste and many more human interventions. The impact of these on society is one of the most significant environmental challenges facing us today.
A little farsighted thought can make us believe how important and pragmatic is to develop sustainably. We use resources, fuels, manpower, dump waste, increase pollution, damage environment all in the name of “growth and development”. Now is the time to think and question if all that we employ and exploit is going to last forever? And the answer is a definite NO! So to continue your so-called development process, isn’t it imperative to save these resources, use them wisely, invest in their preservation, because that is when you, at least, stand a chance to continue your “magnificent growth story” with huge bottom lines. Else you survive only as long as you are able to abuse and destroy these resources more than your competitors can.
Putting a value on sustainability initiatives can pose a systematic and universal challenge: their costs, like most investments, are readily apparent, but some of their benefits are difficult to quantify.
However, when corporations push forward on projects based on cost-benefit analyses that weigh social, economic, and environmental factors; the economic element of the triple bottom line often outweighs the other two components. When it comes to sustainability, managers respond most effectively when the outcomes move beyond the qualitative to the quantitative. In addition, sustainability has far reaching impacts on management decisions when approached through the lens of robustness and externalities.
As corporate houses continue their journey towards sustainability for very tangible reasons, consumers will give more preference to sustainably produced goods as benefits become ever more evident. Examples of this are the “Sustainable brand index” for Scandinavian markets where more than 24,000 patrons evaluate enterprise brands every year. Also, the Dow Jones Sustainability Index was launched in 1999 as the first global sustainability benchmark which tracks the stock performance of the world’s leading companies in terms of economic, environmental and social standards. The indices serve as benchmarks for investors who incorporate sustainability considerations into their portfolios, and provide an effective action platform for companies who want to adopt sustainable best practices. In their 2013 report, Woolworths Australia was the industry group leader for the Food & Staples Retailing category whereas Nestle Switzerland was nominated as leader in the Food, Beverage, and Tobacco group. Hence, returns are very tangible in the form of investors seeking to support leaders in sustainability.
To further illustrate the increasing significance of sustainability, there is another, yet unfortunate incident.
On April 24, 2013, the calamitous collapse of the Rana Plaza building on the outskirts of Dhaka, Bangladesh, when more than thousand factory workers, who had been producing apparel for some of the world’s largest retailers, got slayed. This disaster triggered a chain of reactions that resulted in a major shift in corporate liability in terms of global supply chain safety. While global climate change, air and water pollution, child labor, and workers’ rights remain among the key challenges that face corporate executives, the scope of corporate responsibility is indeed changing.
The issue of whether companies should consider their sustainability or the impacts of their activities on their stakeholders is no longer a question. On the contrary, these and many many more issues, have become a central part of shareholder value creation and the management of both local as well as global enterprises. The question has, honestly, moved from “whether” to “how” to integrate corporate social, environmental and economic impacts (read corporate sustainability) into day-to-day management decisions when all management levels have significant incentive pressures to increase short-term earnings. For example, controls on greenhouse gas (GHG) emissions will affect the price of energy and the products, services and sectors that rely it. Companies should assess their business strategies to determine whether there are opportunities in new worldwide markets in carbon, capital, cutting-edge technologies, and products and services that emit lesser amount GHGs.
Now that, we just argued that sustainability is crucial and certainly has tangible implications, let us have a look at one more dimension that has utmost relevance in today’s scenario, which is media and sustainability. It is being talked about at this juncture because anything is only possible, of masses are aware both of the problems as well as probable solutions. Media houses, as creators and distributors of content, have a very unique role to play for sustainability. Having said that, being corporates, media and entertainment companies need to be sensitive to issues like carbon emissions, water and paper usage, energy consumption and staff treatment, but then they also have an influence on what people see, learn and how people think (aka brainprint), which is where comes the huge responsibility. These companies shape public opinion, provide a voice by presenting different perspectives, spotlighting important issues and initiating debates. Certainly there is a challenge when it comes to accessing and articulating the progress made, and it is further complex to interpret the impact, positive or negative, that this awareness might have. But then again, if there is any sector that is well positioned to raise levels of knowledge, awareness, lead the debate for exploring solutions for most intractable problems and take us towards a more sustainable way of living, it is the media sector. Media companies like The Disney and Time Warmer are trying to device ways creatively about how to measure their intangible impacts. Even though for now, the influence that meaningful entertainment and media will have on the people is intangible, but the impact that that awareness would result into will be tangible enough to be quantified, as explained in the article earlier also. Their actions today are vital in shaping the more sustainable world of tomorrow.
Finally, I would like to sum up as to why the issues and education of the issues demands our urgent attention:
So since we are discussing tangibility, let me start with a factor / concern which outweighs all the other factors when it comes to any management decision for large corporate houses; i.e., Cost and revenue obligations. Sustainability can help in creating financial value for the corporation through enhanced revenues and lower costs. Revenues can be improved through augmented sales due to improved group reputation. Costs can be lowered due to using resources more competently, product and process enhancements, and a shrinkage in regulatory fines. The key is to identify the areas where good for society, environment and the company transect.
Then will come regulations, since we do not tend to operate unless it is enforced upon us. Government regulations and industry code of conducts require companies to increasingly address sustainability, non-compliance to which, not only is, costly, it leads to tarnishing of corporate reputation
Community relations is another factor of critical importance for corporate houses to be able to conduct business on an ongoing basis. Alternatively, the consequences of mismanaging sustainability and stakeholder relationships can be exorbitant in terms of reputational damage and potential impacts on the bottom line. For example, Coca-Cola, has provided data that shows it uses water responsibly, and also makes a point that it would be contrary to its own business interests to damage water sources and harm residents in the process. In doing so, it has gained ground in the courts and among regulators
Last but certainly not the least, is our obligation towards the society, environment, resources and people that we exploit and ruin in our endeavor to create “progress”. The impact that companies have on society, environment and economy, makes them responsible for managing sustainability and keeping the resources that they consume safe. It becomes their societal and moral obligation.
All in all, managing sustainability is a good business decision, because no proposition these days is strong and executable, unless it bears quantifiable results, along with societal and environmental development. GE’s CEO, Jeffrey Immelt, has publicly stated that his company must focus on innovation and the environment in order to increase revenues and stay competitive. With this, I rest my case, that to keep any business a going concern, we need to take care the environment it operates in which is precisely what sustainable development stands for. Thus bungling of the same surrounding and its manpower, the bottom line would immediately take a hit. It is a simple give and take relation which shouldn’t be disturbed for peaceful co-existence.