Business+&+Sustainability

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=**__1.1 Introduction: Setting the Scene__**=

====Sustainability has gained a significant public following and presence as the result of a realisation that the world we live in cannot support infinite growth. The subject of sustainability is heavily focused on by the public, media and governing bodies as the related issues concern humankind and must be addressed to reduce their long term global impact.====

__1.2 The Evolution of Business and Sustainability__
====From a business point of view, attitudes towards sustainability have evolved greatly over the last three decades. An early theory describes sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED: 1987). For many, this term described a strategy that protected and sustained current levels of development, and for others it was the first real attempt at merging the desire to develop while confronting concerns for the environment (Capra, F. Pauli, G: 1995).====

====When addressing this ecology crisis, Michael Hoffman (1991) states that “the question is not whether there is a problem, but how we will address it”. Business and government are the two main forces that can significantly influence society’s attitudes towards sustainability and for these two forces to make progress certain questions must be answered. These questions address the relationship between business and government during environmental crises and the obligations businesses have to help with environmental crises (Hoffman, W: 1991).====

====Due to an increase in legislation and awareness by the global community, businesses are pushed to find ways to capitalize on new opportunities presented by the necessity to become sustainable. The competitive nature of the business environment has pushed sustainable practices and innovation to reduce the weaknesses of a business and address the threats posed by competitors and other external factors (MIT Sloan: 2009).====

=**__2.1 Sustainability on a Global Level__**=

====The nature of sustainability is constantly changing to meet the needs of our constantly changing environment. From early concepts in religion and various global cultures describing man as a custodian of planet earth to recent issues concerning the declining condition of the natural world. Economies of nature, a term describing the natural world as a whole since the seventeenth century has evolved to what is known as sustainability today, addressing the social, ecological, and environmental needs of the world (Capra, F. Pauli, G: 1995).====

====Traditionally the social responsibility of businesses has been to produce goods and services and to make profit for its shareholders (Carroll, A. Shabana, K: 2010), however concerns over the “Triple Bottom Line” (3BL), concerning profit, people and the planet, have shifted that focus. Businesses are now more inclined to address the 3BL to measure and address the impact they have on stakeholders such as communities, customers and employees in the same way they would address the traditional bottom line (Norman, W. MacDonald, C: 2004).====

__2.2 Business Criticisms__
====The constant and natural criticism of business and government, two major institutes within our society, has lead to the necessity for action and has reshaped the relationship business has with society (Bucholtz, A. Carroll, A: 2011). These criticisms can be attributed to several factors:====


 * ==== Affluence and Education: “As a society becomes more prosperous and better educated, higher expectations of its major institutions, such as business, naturally follow” (Bucholtz, A. Carroll, A: 2011). ====
 * ==== Awareness through Media: Globally, people have gained a greater understanding of the world and the impact they have upon it. Political stances in media such as movies address concerns felt by society, and the recent internet and mobile explosion has raised global awareness of the issues of sustainability (Bucholtz, A. Carroll, A: 2011). ====
 * ==== Rising Expectations: As the issues escalate, so do the expectations of people worldwide. As current business practices become more transparent they are coming under scrutiny from the global community, pressuring businesses to adopt new policies on sustainability (Anderson, M: 1995). ====
 * ==== Rights Movements: “Business has been affected with an ever-expanding array of expectations as to how people want to be treated, not only as employees but also as owners, consumers, environmentally conscious citizens, and members of the community” (Bucholtz, A. Carroll, A: 2011). ====
 * ==== The implications of the points above have lead to people of all races, creeds and ideologies seeking equality and representation, including environmentally conscious citizens wishing to bring global environmental concerns into focus. ====


 * ==== The volatile prices of natural resources such as food, water and energy. ====
 * ==== Stakeholders such as consumers, customers, shareholders and governments are becoming increasingly aware of the issues of sustainability, pushing companies to act. ====
 * ==== Capital markets are using sustainability to evaluate organisations and measure investment opportunities. ====
 * ==== Early adopters of sustainability will gain a commanding lead over competitors that may find difficult to reach. ====

====Organisations are being pushed to adapt their policies to reduce the risks associated with these threats. In a resource constrained world, organisations that adopt sustainable practices will be more resilient to the fluctuation in cost of natural resources (MIT Sloan: 2009).====

====As discussed above, the growing concerns of global communities push governments to advocate sustainability policies involving business. Companies that actively pursue sustainability initiatives will be more prepared for updates and alterations in legislation (Bucholtz, A. Carroll, A: 2011).====

====In highly competitive markets any edge on competitors is seen as strength, making a more appealing case to investors. As brand image is essential to differentiation and loyalty within markets, businesses with an ethics system that reflects the interests and values of consumers is much more appealing to investors. (Kramer, M. Porter, M: 2006).====

====Organisations that realize these threats and are able to align their practices with consumer concerns and legal guidelines have an advantage over those that are slower to act will leave competitors behind. (Kramer, M. Porter, M: 2006).====

__2.4 Opportunities of Sustainable Efforts__
====Adopters of sustainable practices will often find that sustainability has a lot more to offer than just factors leading to a competitive edge. An example of a large opportunity that businesses are recognising is supply chain optimization. When eliminating waste and centralising the supply chain organisations are seeing increased savings and increased profits. This centralization provides a much clearer understanding of the supply chain and businesses are able to control the ways they interact with various resources that contribute to the provision of goods and services. (Ameshi, K. Osuji, O: 2008).====

====The above image depicts a broad spectrum of sustainability opportunities that businesses can exploit, however one of the main issues with this is simply the potential range of initiatives that can be implemented. Businesses often view sustainability as a standalone department next to others such as marketing or human resources when a more progressive view of sustainability involves integration across an entire organisation.==== ====This approach is often met with hostility as managers lacking the necessary expertise maintain a focus on finance and operations claiming that sustainability “dilutes business’ primary purpose” (Carroll, A. Shabana, K: 2010) and adopting sustainable practices “would put business into fields of endeavour that are unrelated their ‘proper aim’” (Hayek, R: 1969).====

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=**__3.1 Sustainability in Business__**=

====In order to become a sustainable business many steps must be explored and sustainability must be integrated into the business’ core goals and attitudes. Business practices are the processes a business follows to reach its objectives. Ethics are integral to business practices and dictate how a business goes about reaching its objectives. The practices that businesses follow, and the ethical choices behind them, can strongly influence corporate image and consumer opinions (Forsyth, D: 1992).====

__3.2 Ethical Business Practices__
====The practices that businesses follow, and the level of integration of these practices within corporate structure, often reflect the core values of the organisation’s directors. This is often more apparent with small and medium enterprises (SMEs) than with larger multinational corporations (MNCs), as SMEs have a much more recognisable personality and a closer relationship with the communities that they contribute to (Forsyth, D: 1992).====

====An evident trend that occurs in business is one of short sightedness; there is a much larger focus on short term gain from smaller more direct investments, rather than costly investments with a long term return. This is shown by Business’ tendency to pursue short term sustainability goals instead of embrace change that would benefit society and the environment (Capra, F. Pauli, G: 1995).====

====From a rigid business point of view, sustainability is measured with regard to risk and reward and has been sidelined as irrelevant. As it becomes clearer that businesses have to implement diverse ethical business practices many organisations are altering their structures to become more ecologically oriented. This is done in the hope that the trend of ecological business flourishes and the risks taken by businesses pay off (Capra, F. Pauli, G: 1995).====

====“There is a high correlation between the depth of a business leader’s experience with sustainability and the drivers and benefits that he or she perceived, suggesting that the more people know about sustainability, the more thoughtfully they evaluate it and the more opportunity they see in it – and the more they think it matters to how companies manage themselves and compete.” (MIT Sloan: 2009)====

__3.3 Corporate Social Responsibility__
====Changes in corporate value systems, driven by pressure from external forces including governments, consumers and various other non-governmental organizations (NGOs) have lead to widespread considerations for corporate social responsibility (CSR). CSR has transformed from “an irrelevant and often frowned upon idea to one of the most orthodox and widely accepted concepts in the business world over the last twenty years” (Min-Dong, P: 2008).====

====Corporate social responsibility builds on the concept of business and sustainability, but focuses entirely on the social implications and relationships within the topic. It is now a common belief that CSR is in a Business’ interest to be socially responsible and viable in the long term (Carroll, A. Shabana, K: 2010).====

__3.4 The Competitive Implications of Sustainability Strategies__
====Although sustainable operations and ethical business practices are focused on providing external benefits, there are many ways that organisations can use sustainability to their advantage in regard to competitiveness (MIT Sloan: 2009).====

====Competitiveness has lead to cut throat decisions and deceptions within the business world and “in situations where competition is more intense that profit margins are narrow enough to put shareholder value and firm survival at risk, the incentive to cut corners and save money will cause corporations to act in socially irresponsible ways insofar as they believe that this will help them turn a profit and survive” (Campbell, J: 2007).====

====The chart below show the results of a survey by the MIT Sloan Management Review, having consulted more than 1500 worldwide executives and managers about their perspectives on sustainability and business strategy as well as their own assessments on how well their organizations are acting upon sustainability threats and opportunities. These managers were asked specifically: “What are the greatest benefits to your organization in addressing sustainability issues?”====



====The results of this survey clearly show that managers believe the main advantage of sustainability is improved company or brand image, identifying that customer perception of sustainable strategies can impact performance. This suggests that increasing a business’ focus on sustainable strategies will result in greater customer loyalty and differentiation within its market (MIT Sloan: 2009).==== ====When consumers relate to companies and identify the personalities displayed by them it becomes clear what the ethics of an organization are. Due to the advances in technology and the global reach of information it has become futile for organisations to try to hide their attitudes towards ethics. Sustainability is a new way for businesses to market themselves as environmentally aware to customers with similar dispositions (Fowler, S. Hope, C; 2006).====

====It is clear that sustainability impacts consumer behaviour towards brand and image and when embraced by a company it can become an integral part of an aggressive sustainability initiative. This provides an opportunity for businesses to relate to consumers on a more intimate and cooperative level. It is appealing for a business to show consumers that it has progressive initiatives, making it more relatable and appear magnanimous (Fowler, S. Hope, C; 2006).====

====Another key implication of sustainable practice is cost saving. Reducing waste along the supply chain is the most effective initial way to cut costs, and can lead to a greater management of supply chains as well as internal business mechanics (Fowler, S. Hope, C; 2006).====

====Employee satisfaction is also impacted by sustainable processes, indicating that contributing to sustainable practices as well as working to benefit themselves increases morale and job satisfaction (MIT Sloan: 2009).====

[[image:strategy_graf_1.jpg align="right" caption="Image Source: ablemen.com/sustainability [Accessed March 2014]"]]
====When implementing new strategies to improve the performance of an organisation, there are always going to be barriers that delay or disrupt development. Often businesses lack the necessary experience or information when it comes to decision making and in many cases businesses cannot understand the potential benefits of sustainable strategies (MIT Sloan: 2009).====

====An initial barrier to sustainability is that many organisations do not truly understand what sustainability is and the impact it can have on promoting innovation within business. Many managers lack understanding of the relevant drivers within their industries and the issues that they stem from (MIT Sloan: 2009).====

====Because of the traditional attitudes towards sustainability and the lack of a clear and resounding definition, many companies are struggling with the basic concepts of sustainability. “Some define it very narrowly, some more broadly, others lack any corporate definition” (MIT Sloan: 2009).====

====This lack of definition can lead to sustainable development being discarded as there is no clear benefit to traditional motivators. Sustainability lacks the notion of a clear goal or reward for businesses, leading to difficulties in measuring progress and a further hostility towards sustainability (Salzmann, O: 2005).====

====These factors all relate to a basic understanding of sustainable practices and can be addressed with a comprehensive case for sustainability and the relations that a particular industry has with sustainable issues.==== ====The next barrier that companies struggle with is relates to the previous point of appropriate business cases. An understanding of sustainability is not the only requisite of becoming a sustainable organisation; there must be clear and appealing case tailored to the specific needs and specific sustainable implications of the subject organisation. This case must detail both the tangible and intangible benefits that can be gained once a commitment is made (MIT Sloan: 2009).====

====This is often seen by organisations as the primary reason businesses fail to pursue sustainable development as it pushes planning and organising conventions outside of what businesses normally encounter. The traditional investment framework of one to five years is expanded and this is often what poses a challenge to the case for sustainability (Salzmann, O: 2005).====

====Due to a focus on the long term implications of sustainable strategies, businesses are adapting to understand and evaluate forecasts that stretch into the foreseeable future. The lack of interest and understanding is then compounded upon by investors seeking only short term gain.====

====The third barrier businesses encounter is planning amid high uncertainty. This relates to the external factors that organizations have little or no control over, such as government legislation, economic turbulence and consumer attitudes (MIT Sloan: 2009).====

====Planning for these factors is challenging enough for businesses with traditional values, and when capital is allocated to sustainable strategies it increases the threat of these external factors. Drivers for sustainability are among the most unpredictable and can lead to complications with long term sustainability plans (Salzmann, O: 2005).====

====The most practical approach to these barriers is to understand the value chain and integrate it with an industry specific case for sustainability. Adapting established forecasting methods to meet the requirements of the ethical environment are also required.====

Both SMEs and MNCs face issues when approaching sustainability and both for different reasons. The case for MNCs relates to the barriers above and the issues for SMEs are slightly different.
====It is relatively plausible for a larger organisation to commit to sustainable practices due to the resources they control such as capital and knowledge. SMEs on the other hand are often more focused on maintaining profit and sustainability is side lined or often not considered due to the necessity to stay operational (McWilliams, A. Siegel, D; 2001).====

====It is understood however that SMEs often have a greater concern and relationship with the communities they operate in, meaning that by adopting sustainable practices the benefits can be seen firsthand (McWilliams, A. Siegel, D; 2001).====

====MNCs on the other hand are more distant from communities and don’t see the environmental contributions in the same way SMEs do. The focus is placed upon measurable capabilities that can isolate them from the social environment (McWilliams, A. Siegel, D; 2001).====

====The ethical subjects that affect MNCs are often oriented towards issues such as confidentiality, criminal conduct and anti-corruption. These ethical issues are of higher relevance to the mechanisms of a large organisation and address issues that pose a more immediate threat. This approach often neglects the opportunities businesses have in the external ethical environment, leaving no room for nurturing change (McWilliams, A. Siegel, D; 2001).====

====Governments are the primary facilitators of legislation that can reduce environmental impact and motivate companies to redesign products and processes Influenced by the needs of society, governments have to address policies towards sustainability in a progressive manner, encouraging businesses to return investment to the social and natural environment (Capra, F. Pauli, G: 1995).====

====Governments encourage sustainable development by protecting companies that embrace it and offer monetary rewards and industry recognition. This leads to increases in investments and an organic and competitive business environment (Capra, F. Pauli, G: 1995).====

====It is necessary for governments to encourage and support sustainable business practices and legislation is advancing at an increasing pace as social pressures encourage them to adapt. Businesses that fail to adapt to sustainable development will struggle to compete effectively within the business environment (Capra, F. Pauli, G: 1995).====

This video outlines the legislation put forward by the UK government after the 2012 Rio+20 summit.
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=__Conclusion__=

====Adopting sustainable practices can provide many benefits to many businesses, but at what cost? Organisations have been encouraged by consumers, governments, shareholders and potential investors to adopt sustainable business practices as the attitudes towards sustainability are evolving with humanity’s need for a change. This change must address the increasing social, ecological and environmental issues. There are many benefits to implementing sustainable development, such as brand awareness, reduced associated cost of waste, staff motivation and a greater control of internal business processes. There are many barriers to implementation of sustainable practices, including cost, uncertainty, lack of knowledge and lack of direction. These can only be addressed with a firm understanding of the specific opportunities that businesses have in relation to their markets, size and the environmental systems that they affect. It is clear that increased awareness of sustainability issues at managerial level leads to motivation and implementation of practices that contribute to the wellbeing of the natural and social environment.====

=__References__=

====Ameshi, K. Osuji, O. et. al. (2008). ‘Corporate Social Responsibility in Supply Chains of Global Brands: A Boundaryless Responsibility? Clarifications, exceptions and Implications’. //Journal of Business Ethics//. Vol. 81, No. 1. pp. 223-234==== ====Anderson, M. (1995) ‘Vulnerability to disaster and sustainable development: A general framework for assessing vulnerability’. //Disaster Prevention for Sustainable Development: Economic and Policy Issues.// Washington, DC: World Bank. pp. 41-59. (Anderson, M: 1995)====

Buchholtz, A. Carroll, A. (2011). //Business and Society: Ethics, Sustainability, and Stakeholder Management.// Cengage Learning. pp. 1-768 (Bucholtz, A. Carroll, A: 2011)
====Campbell, J. (2007). Why would corporations behave in socially responsible ways? An Institutional theory of Corporate Social responsibility. //The Academy of Management Review//. Vol. 32. No. 3. pp. 946-967====

Capra, F. Pauli, G. (1995). //Steering Business toward Sustainability//. United Nations University Press. pp 1-191 (Capra, F. Pauli, G: 1995)
====Carroll, A. Shabana, K. (2010) ‘The Business Case for Corporate Social Responsibility: A review of Concepts, Research and Practice’. //International Journal of Management Reviews//. pp. 85-105 (Carroll, A. Shabana, K: 2010)====

Kramer, M. Porter, M. (2006). ‘Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility’. //Harvard Business Review//. pp. 78-92
====McWilliams, A. Siegel, D. (2001) ‘Corporate Social Responsibility: A Theory of the Firm Perspective’. //Academy of Management Review//. Vol. 26. pp 117-127 ==== ====Min-Dong, P.L. (2008) 'A review of the theories of corporate social responsibility: Its evolutionary path and the road ahead'.//International Journal of Management Reviews,// 10 (1), pp. 53-73. ====

Salzmann, O. (2005). ‘The Business case for Corporate Sustainability’. //European Management Journal//. Vol. 23. No. 1. pp. 27-36
====World Commission on Environment and Development (1987). ‘Towards Sustainable Development’. //Our Common Future: Brutland Report 1987//. Oxford University Press. pp.36-51 ====