A fundamental component underlying prolonged business success, sustainability is growing increasingly important in an environmentally conscious world. According to a study carried out by MIT and Boston Consulting Group (2017), 60% of companies have a sustainability strategy yet only 25% have a supporting business case. Companies combining the two were 200% more likely to profit from their sustainability targets. But what exactly is corporate sustainability and how can it be achieved?
Corporate Sustainability: A Brief Introduction
Sustainability is a term often coined with environmental connotations. Corporate sustainability, however, exists more broadly than purely ecological. Grounded in theories of the Triple Bottom Line in the 1990s, corporate sustainability involves the consideration of financial, environmental and social factors to guide decision-making. As business becomes increasingly integrated into wider society and firms are expected to contribute to a greater set of goals than purely maximizing profits, establishing corporate strategy encompassing sustainability is becoming ever more important. This concept is not lost on investors either, Larry Fink of BlackRock acknowledging evidence that companies that are more sustainable perform better financially, stating BlackRock will use these criteria to drive their investment portfolio, particularly useful for start-ups. Bizlaw U.K. offers business services to navigate this decision-making as well as legal services to ensure compliance with relevant government regulations.
The Business Case for Sustainable Strategy
The ‘business case’ involves the reasoning behind a particular project, evaluating its costs and benefits, risks and timescale amongst other relevant factors. The business case for sustainability typically falls under one of two categories: management of risks associated with low sustainability or exploration of business opportunities sprouting from high sustainability.
One common risk of low sustainability to be managed is the expectations of different stakeholders (employees, suppliers, creditors, investors and other parties with an interest in the business) that companies become more sustainable. This varies in both intensity and source from industry to industry. Evidence shows millennials are happy to spend more on sustainable brands and consider sustainability criteria when applying for jobs, indicating the potential for greater risks in operating with low sustainability. Such groups could form a vital revenue stream for start-ups and small businesses without compromising on financial objectives.
Ensuring greater sustainability may also present unique opportunities. Growing research indicates a link between sustainability performance and financial performance. One such link is through operations designed with minimal waste and energy usage, reducing costs and optimising internal processes. Further studies have found 40% of corporate reputation is explained by sustainability performance. For growing companies, ensuring sustainability is at the core of the business may improve local reputation against competitors.
How to Achieve Sustainability as Part of Corporate Strategy
The recent work of Paolo Taticchi and Melissa Demartini (2021) provides a guide for the integration of sustainability objectives within broader corporate strategy, notably used by Taticchi in assisting Harrods with their sustainability strategy. They propose a four-stage framework composed of pre-work, the ‘why’, the ‘what’ and the ‘how’.
- Initially, pre-work involves analysis of the core business strategy to create a sustainability profile from which to start. Existing sustainability initiatives and approaches are considered, if any.
- At the ‘why’ stage, one should analyse their industry and stakeholders to contemplate the impact of sustainability on each relevant group. This is also where the business case should be built.
- The ‘what’ stage involves defining the objectives of the sustainability push. This is supported by the creation of ‘sustainability pillars’ where these objectives are grouped into core categories (e.g. improving carbon performance or increasing transparency). A materiality assessment may also be undertaken, analysing stakeholders and their relative power, interests and ensuring the chosen objectives align with stakeholder concerns. On this basis, sustainability initiatives can be formed to reach these objectives.
- The ‘how’ stage pertains more to implementation than strategy design. This involves processes of measurement or reporting of sustainability, recognition and reward of management or employees driving progress on these objectives, as well as marketing and branding of these new processes.
The overall goal of this framework is to design sustainability strategies fully integrated into the overall business strategy. If the above analyses are performed accurately and diligently, a corporate strategy can be developed that achieves both competitive and sustainable goals.
Applying Sustainability to Small or Medium-Sized Enterprises
Critical for smaller businesses are engaging with sustainability without stretching finite resources too thin. Whilst Harrods may create all-encompassing sustainability strategies, a smaller businesses may be better served to select a small number of initiatives to pursue whilst still benefitting from enhanced local perceptions by customers or staff. Such initiatives may include the selection of eco-friendly suppliers or supporting local social or environmental programs. Bizlaw U.K.’s business services can advise on business planning for SMEs.
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