What is sustainability and what are its implications for companies
February 15, 2023
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Sustainability has become a vital part of any organization, as it impacts everything from customers, employees to investors. Business leaders who are aware of how to integrate sustainability into their operations can set their companies up for long-term success.
Sustainability can help businesses innovate and grow while also addressing environmental and societal challenges.
We can eventually define sustainability as “the process of living within the limits of available physical, natural and social resources in ways that allow the living systems in which humans are embedded to thrive in perpetuity.”
Sustainability is a generic concept that can be applied by all: governments, companies, and even individuals, in strategy, behaviors, and actions.
It is not just about the environment, it is made up of three pillars: the economy, the society, and the environment. These pillars are also informally described as profit, people, and the planet.
Each pillar includes several specific issues that give guidelines to organizations to define their sustainability strategy and the objectives they want to work on.
Create a nurtured community, treat employees and communities well, protect their health, and allow their prosperity.
Universal human rights and necessities are attainable by all people, who have access to enough resources to keep their families and communities healthy and secure.
Issues related:
Maintain a viable natural environment, using natural resources responsibly and preventing pollution.
Ecological integrity is maintained, all of earth’s environmental systems are kept in balance while natural resources within them are consumed by humans at a rate where they can replenish themselves.
Issues related:
Invest in the long term to create a resilient economy
Human communities across the globe can maintain their independence and have access to the resources that they require, financial and other, to meet their needs. Economic systems are intact and activities are available to everyone.
Issues related:
Coming together, those 3 pillars create a viable sustainable economy, respecting the people involved in the process and including social equity while preserving the environment.
Sustainability seats perfectly in the center of the combination of the 3 pillars’ spheres.
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Around the sustainability central position, each pillar meets one of the 2 others to bring specific topics:
Social + Environmental:
Economic + Social:
Environmental + Economic:
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The sustainability approach requires a shift in organizations’ vision about the future, forcing them to transform their classic short-term financial strategy.
Short-termism is defined as the excessive focus of decision-makers on short-term goals at the expense of longer-term objectives. It can deteriorate firms’ competitiveness, increase systemic risk, and reduce the long-term potential of the entire economy.
In a sustainability approach, organizations must adopt a “long-term” and a systemic perspective. It requires them to be mindful and consider not only the traditional business concerns, such as revenues, costs, and profits but also the effects their actions have on the physical environment and the well-being of future generations.
It also requires companies to address the root causes of an issue and not just its consequences. For instance, an ambitious and robust sustainability approach will address the deforestation issue by identifying its root causes (e.g. overconsumption of meat, overuse of palm oil in manufactured goods) and not just by investing in reforestation projects.
This forces companies to have a vision over several decades and multiple stakeholders.
A concrete application of this long-term vision is the UN Sustainable Development Goals and the Agenda 2030. The 17 goals regarding different topics linked to population living conditions, environment, and natural ecosystem protection, define worldwide ambitious objectives for 15 years, to be reached by 2030.
The Paris Agreement and its ultimate goal of limiting global warming to well below 2°C is also an example of the necessary systemic and long-term thinking.
Many terms exist to describe companies’ social and environmental initiatives, like Corporate Social Responsibility (CSR), Environmental, Social, and Governance (ESG), or Creating Shared Value (CSV).
Sustainability applies to business as corporate sustainability. "Corporate sustainability" emerged as a component of corporate ethics in response to public discontent over the long-term damage caused by unsustainable and non-ethnic economic systems and business strategies.
One company alone cannot create sustainable development, because sustainability issues are vast. Everyone needs to be involved, it must be a collective effort.
For any single company to become sustainable, it needs suppliers to innovate cleaner and more socially responsible products and regulators and customers willing to support their efforts.
Sustainability requires new forms of business collaboration and new thinking about the economy.
Companies need to figure out how to embed sustainability into their corporate DNA and strike the right balance between being profitable and having a positive social impact and the minimum environmental impact.
They must always consider the three pillars of sustainability in their strategic decisions and their daily operations:
Social sustainability is about identifying, recognizing, and managing business impacts on employees and the communities linked to their business. This recognition means committing to fair wages, just and ethical treatment, and a clean and safe environment.
Businesses often rely on natural resources such as land, water, and energy. Natural resources regeneration takes time. Businesses need to respect these cycles in their operations, by using natural resources at the speed at which they regenerate.
Implementing long-term thinking. Businesses face intense pressure for immediate profits, but sustainability requires investing in people and society for the future, even though financial benefits show up much later.
Economic sustainability is where most businesses feel they are profitable. But profit cannot trump the other two pillars, social and environment.
In a very practical way, companies must:
Becoming sustainable may sound expensive and hard but sustainable businesses experience a lot of positives that lead to even greater success.
Reducing environmental footprint often means looking at efficiency measures in every aspect and at every stage of the business operations (energy, raw materials, factories…). Many companies are also moving toward a circular economy that conserves, reuses, and recycles resources.
Changing habits, reducing waste, energy-cutting, implementing more cost-effective systems and supply chains show that transitioning toward sustainability, therefore, goes hand in hand with cost savings and operational efficiency.
Today’s consumers are more environmentally-conscious than ever before.
They consider a company’s social and environmental impact when deciding whether to purchase their goods or services, and they are more likely to purchase from companies that practice sustainable habits.
According to Deloitte UK’s latest survey on sustainability and consumer behavior, 28% of consumers have stopped buying certain products due to ethical or environmental concerns. It even goes up to 45% among the generation Z (people born after 1997).
This trend will keep on increasing years after years and companies need to meet consumers’ new expectations.
People’s needs for meaning and accountability toward the future increase constantly, especially among younger generations. They do not want to be linked to companies implicated in ecological disasters and social welfare scandals.
Companies that are not showing any interest in acting on the social and environmental impact of their activity will be set aside.
The proliferation of media outlets and the power of social media means that companies are increasingly subject to public scrutiny. It is more and more difficult to hide unethical practices and irresponsible operations. Corporate entities are now under constant pressure to demonstrate a positive image of their environmental, social, and ethical responsibility.
For organizations throughout the world, integrating sustainable innovation, inclusive growth, as well as social and environmental impact into their corporate strategy, now makes real business sense in the long-term company resilience and survival.
A study by professors at Harvard Business School and London Business School tracked companies that voluntarily adopted sustainability policies by 1993.
Compared to businesses that did not adopt many sustainability policies, the more sustainable ones significantly outperformed over the following 18 years from both a stock market and accounting perspective.
With all the discussion regarding climate change, resources availability and allocation, and environmental impact, it’s no surprise that states and international organizations are enacting regulations to protect the environment and human rights.
Integrating sustainability will ease companies’ business strategies to meet changing regulations promptly.
Investors are increasingly scrutinizing corporate sustainability efforts, both in terms of overall practices and shareholder disclosure.
According to the US SIF Foundation’s 2020 Report on US Sustainable and Impact Investing Trends, as of year-end 2019, one out of every three dollars under professional management in the U.S. was invested based on what’s known as sustainable, responsible and impact (SRI) strategies. A 42% increase from the amount identified two years prior.
Companies leading the ecological and social transition and showing that a new type of sustainable business development is feasible and attractive will create inestimable value to the society, the people, and the environment.
They will lead by example and will be recognized for their commitment.
Companies need to think creatively if they want to meet their customers' needs. Such out-of-the-box thinking can lead to more sustainable and less costly practices.
The more a company cares about society, the environment, and its employees, the more successful it will be in the long run. Start implementing a sustainability policy with little steps, and scale up.
And for that, apiday can help!
With the support of our experts, you can benefit from a custom strategy that fits your company's unique goals and needs.
We’ll get you through a materiality assessment and identify where your energy should be dedicated, with a step-by-step roadmap and customed suggestions.
Schedule a call today to learn how we can help your organisation 🌿
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