Primer: Business Sustainability
Getting started? This primer is designed for professionals stepping into the sustainability space.
Written by professor of management Dr. Tima Bansal, this primer provides a foundational introduction to business sustainability. Business sustainability is often defined as managing the triple bottom line – a process by which firms manage their financial, social, and environmental risks, obligations and opportunities.
These three impacts are sometimes referred to as profits, people, and planet. We extend this definition to capture more than just accounting for environmental and social impacts. We believe that sustainable businesses are resilient and that they create economic value, healthy ecosystems and strong communities.
Sustainable businesses survive external shocks because they are intimately connected to healthy economic, social, and environmental systems.
Business sustainability requires that firms adhere to the principles of sustainable development. According to the World Council for Economic Development
(WCED), sustainable development is development that “meets the needs of the present without compromising the ability of future generations to meet their own needs."
So, sustainable development is achieved when industrial development subscribes to the three principles of economic efficiency, social equity, and environmental accountability.
For industrial development to be sustainable, it must address important issues at the macro level, such as:
Businesses have an important role to play in fostering sustainability. For businesses to be sustainable, they must respond to issues at the micro level. These issues relate to the triple bottom line, which includes the financial, social and environmental considerations relating to their operations.
For example, when a business is making a major decision they may want to consider the following issues:
A number of best practices exist to help firms become more sustainable, moving them from laggards to leaders.
Organizations can learn from customers, employees, and their surrounding community. Engagement is not only about pushing out messages, but understanding opposition, finding common ground and involving stakeholders in joint decision-making.
These systems provide the structures and processes that help embed environmental efficiency into a firm’s culture and mitigate risks. The most widely recognized standard worldwide is ISO
14001, but numerous other industry-specific (e.g. Responsible Care
for the chemical industry) and country-specific (e.g. the EU Eco-Management and Audit Scheme
) standards exist.
Measurement and control are at the heart of instituting sustainable practices. Not only can organizations collect and collate the information, they can also be entirely transparent with outsiders. The Global Reporting Initiative
is one of many examples of well-recognized reporting standards.
Those organizations wanting to take a large leap forward should systematically analyze the environmental and social impact of the products they use and produce through life cycle analysis, which more accurately measures impacts.
Why Be Sustainable? There is a relationship among all three components of the triple bottom line. Firms that lead on environmental and social issues also lead in financial performance. Also, these firms more easily attract and retain employees and experience less financial and reputation risk. Finally, these firms are innovative and adapt to their environments.