What is corporate sustainability and what are the issues?
November 25th, 2010. By Dr Alan Knight.
Corporate social responsibility, social responsibility, corporate responsibility, environment, ethics, sustainable development, sustainability – for people outside our field it’s confusing and even for some people inside our profession it’s baffling why there are so many descriptions and why some are more important than others.
To make it simple, I’ll distil the descriptions and start the debate by arguing for corporate sustainability versus corporate social responsibility.
There is a lively debate between the attractions and relevance of CSR vs sustainable development, although until recently there has been insufficient consensus about what those differences are.
CSR has had a long innings and in the evolution of awareness of environmental and social issues, has broad recognition among corporates. But CSR and its associated disciplines of CSI, CR, Community and Reputation have veered off too far in the direction of the process and governance world of measurement and monitoring, reporting and communication. For too many organisations CSR has become a tickbox exercise, a process that needs to be completed and then the paperwork filed away. If CSR is supported in the mainstream of an operation at board room level, it is usually because less packaging means cost savings or less waste means less landfill tax – actions not wrong in themselves, but this kind of CSR is scratching the surface of the world’s issues. Other elements of the CSR mix including community investment, charitable donations and reputation building are beneficial in themselves but are not sufficient to help protect the company from the broader sustainability challenges faced by society.
The emergence of corporate sustainability, or sustainable development, came about because of the understanding that businesses, as well as governments and NGOs, need to adapt their operations to meet the growing global environmental and social challenges that we are facing with increasing urgency. There are five big challenges:
The BIG FIVE:
Poverty: The very existence of poverty precludes sustainable development since it means that people’s needs are not being met and fuels the unsustainable use of natural resources in an attempt to meet those needs. There is an urgent need to rid the world of absolute poverty and to create viable businesses and vibrant economies in the poorest regions. This means a better world and more customers but only if we have raw materials to make this ‘stuff’ (hence finite limits).
Finite limits: the constant pressure to grow the economy, to increase production and manufacturing of ‘stuff’, means that we are draining the natural resource bank to a position where it is heavily in debt. In western Europe we are already using the equivalent of three planets’ worth of natural resources and the populations of China and India are greedily aspiring to their own ‘stuff’ – who can blame them? What is it going to be like in 2050 when we have an extra three billion people living on the planet? Forward thinking businesses will be understanding what they can achieve in a one planet economy, and helping their customers to do the same to ensure the future of their own livelihoods.
Climate change: either a subject of huge concern to the next generation or something to cause a yawn of boredom or a rant of cynicism. The wake up call in recent years has kickstarted a reaction from many organisations and governments although some nations are still dragging their heels on making challenging targets. However, it’s fairly commonly agreed that we can’t wait for someone else to pick up the reins and lead; we’re all going to be responsible for cracking the whip. The long-term future is certain: direct and indirect carbon emissions will be expensive for companies, their suppliers and their customers.
Wellbeing: wellbeing, or the lack of wellbeing, has only been recently recognised as a fundamental problem facing populations around the world. The growth of consumerism, whilst helping to grow economies, has not resulted in increasingly happier people, as countless research projects have indicated. In the same way, the winding down of food rationing after the Second World War and the development of more processed foods have resulted in unhealthy rather than healthy populations in the long term. And where western lifestyles have eased their way into either developing or rural populations, we have seen a tremendous growth of cancers, diabetes and obesity. So owning more ‘stuff’ and having a wider choice of processed foods has had a detrimental effect. Businesses have a huge opportunity to help people enjoy healthier and more fulfilling lifestyles through products, services and experiences, and risk losing their license to operate if they are seen to be accelerating the wrong trends.
New economics: Corporate sustainability is surfacing a debate on the most fundamental paradigm shaping the modern world. Namely, are GDP and rates of growth as measures of a country’s success appropriate or even possible in a world of limited natural resources? GDP of 2% is considered to be ‘good’ but that implies that growth is infinite. This is not logical with the planet’s finite limits. There are too many externalities in modern economies, which are leading to the environmental and social pressures the planet is facing. Stern, a UK economist, described climate change as a “market failure” and the Prince of Wales sees rainforest loss as an economic rather than a conservation problem. Economics will change and businesses will need to change with them.
Rainforests are becoming the most talked about example of the failings of modern economics. Recent research has shown the explicit link between climate change and rainforests and there are several organisations focused on protecting rainforests not only for habitat protection but specifically to combat climate change.
Water is another natural commodity that is central to new economics. Aquifers and river deltas straddle many boundaries and can potentially cause political as well as geographical conflict. In Africa, for example, the importance of the Congo extends beyond carbon to water, with 70% of South Africa’s water coming from the region. Modern green economics would suggest that South Africa should pay for the Congo’s resources.
In summary, businesses that engage in developing corporate sustainability strategies are thinking about future business strategies – how global realities will affect the need for or relevance of their product or service, whereas those who have CSR managers are more likely to be concerned about reducing their trucks’ road mile totals, reducing their packaging levels by 10% and worrying about what paper they should be using to print their CSR report. These concerns are not irrelevant but these kinds of actions are not going to meet the needs of this planet in 2050.
Business value is the core benefit or corporate sustainability
What organisation cannot consider sustainability if it wants to be successful in a world where we face increasingly scarce natural resources and unpredictable weather? And surely businesses must be more proactive by identifying commercial opportunities of supplying new or redesigned products or services in this changing world.
Alan Knight is the acting CEO of a newly formed organisation, the Global Association of Corporate Sustainability Officers which aims to empower the corporate sustainability professional. GACSO’s working definition for corporate sustainability is:
“Understanding and shaping a product offer and business strategy that makes a positive contribution to achieving low carbon, one planet, poverty free, healthy lifestyles for the nine billion people who will inhabit the planet by 2050. This will help shape businesses that enjoy short term cost savings, new markets, more robust supply chains, a solid reputation and long term share-holder value.”
For more information about Dr. Alan Knight visit singleplanetliving.com.