By Valeria Makarova
Conversations about the role of sustainability in a business organization can become heated. There are many supporters, but a number of skeptics as well. There is no argument that excessive use of hazardous materials, waste generated from production and consumption, and polluted land, air and ocean require proper attention and better management. But there is a gap between public expectations and business response when it comes to deciding how to change the status quo.
Why are many firms still rather reluctant to fully embrace the concept of sustainability? When managers are put on the spot, very often their reaction is somewhat defensive. They refer to tough competition, point fingers at regulators, or simply admit that they don’t have sufficient resources to address it yet. Indeed, the current business environment is very competitive and tough. But whether the growing sustainability movement is a new threat or a welcome opportunity depends on how the organization decides to deal with it.
The first barrier is that the concept of sustainability is often misunderstood, as often happens with new ideas. One common misconception is that sustainability is focused on environmental issues only. Though it had initially emerged on the foundation of protecting natural resources, the concept eventually became much bigger than that. Back in 1987, the World Commission on Environment and Development defined sustainable development as meeting present social, economic and environmental needs without compromising the ability of future generations to meet their own needs.
It evolved into a new paradigm, the triple bottom line — profit, people, planet. This captures the true meaning of a sustainable business: profitable, safe for the environment and socially responsible. Obviously, solid economic performance is the cornerstone. Having a sustainability strategy in place means that environmental, social and governance performance is measured, analyzed and reported. What many organizations fail to understand is that this helps businesses stay profitable and competitive. Moreover, it becomes a vitally important tool for long-term success if managed properly.
Think tanks, academics and practitioners have conducted numerous studies that show that addressing sustainability-related challenges is not a zero-sum game anymore. Issues like increasing population and energy use, depletion of natural resources and generation of enormous waste that had been predominantly perceived as global concerns started having an impact on a local level as well. Challenges such as tightening environmental regulations, competing against low-wage markets and dealing with changing consumer preferences caused by socio-demographic shifts call for next-generation business solutions. As time goes by, an increasing number of organizations are beginning to recognize sustainability as a tremendous opportunity to improve customer satisfaction, community relations and, of course, profitability.
There are inspirational stories of companies in resource-intensive industries, as well as in service and technology fields, that have built a clear business case for their sustainability strategy. Improved resource efficiency and waste management, optimized energy consumption and reduced risk are just a few examples of the cost-saving measures that are attainable for a company of any size.
A growing number of investors are paying attention to sustainability performance as an indicator of effective management. And, of course, given the consumer preferences for safer products and services, the sustainability-driven innovators and innovations have a much better chance for successful positioning on the market.
It’s still a long road ahead, though. This year, a global survey of thousands of executives and managers by MIT Sloan Management Review and the Boston Consulting Group showed that while 90 percent of respondents consider sustainability activities as critical to future competitiveness, only 60 percent indicated that their companies have a sustainability strategy.
There is a learning curve. It takes time and effort to figure out what sustainability means for each particular organization, but the result is worth the time and effort.
• Valeria Makarova is an assistant professor in the School of Management at California Lutheran University.