The engine that powers sustainable organisations
As the world shifts to a more responsible view of business, corporate sustainability or ESG has been gaining momentum with no signs of slowing down. In this article, we explore what sustainability means for corporations, why it's important, what corporations stand to gain from it, and how to adopt and measure sustainability.
Corporate sustainability is the practice of doing business in an environmentally sustainable and socially ethical manner, while remaining profitable. Corporate sustainability revolves around three fundamental aspects of business:
otherwise known in short as ESG.
Some definitions also include the economic aspect as it relates to economic contributions in the form of employment creation, payments to suppliers and government, industry collaboration and industrial development, etc.
Traditionally, sustainability was the reserve of government and civil society, both functioning as a watchdog to police corporate behaviour. Corporations' sole purpose was to turn a profit – and leave the sustainable agenda to non-profits. A profit-at-all-costs mindset typically drives business operations, keeping costs down while offloading true costs as externalities. But times are changing, and government as well as societal expectations have shifted to focus on the impact of business on non-business spheres. Investors are not only interested in the profitability of a company, but they are also concerned about how that profit is made. For corporates, sustainability is not so much an option as imperative now that they are being held to higher standards.
ESG issues such as labour violations, human rights breaches, environmental pollution, and safety incidents have caused serious damage to corporations, both reputationally and financially. As a result, sustainability is regarded as a risk that must be managed. Management of ESG risks is now often absorbed into a corporation's enterprise risk management framework, becoming a core part of the business strategy and continuity plans.
Different frameworks use slightly different principles for sustainability. For example, the United Nations Global Compact is a framework with ten guiding principles, while the Triple Bottom Line concept is built on People, Planet, and Profits. Despite these differences, corporate sustainability principles share a core set of principles that encompass the ESG pillars.
With large operational footprints that can span the globe, corporations are responsible for significant impacts on the environment and society. Big business has a responsibility to manage their impacts and embrace an active role in corporate citizenship. Here, a distinction should be made between corporate social responsibility (CSR) and corporate sustainability. Corporations stand to gain much more from integrating sustainability into the business compared to CSR. Juggling between profits, environmental sustainability, and social responsibility is a delicate act, but taking control of sustainability risks and opportunities can lead to huge business payoffs.
There are several benefits to practising sustainability as a corporation, many of them directly beneficial for the economic bottom line.
Sustainability looks different for every corporation, depending on the industry and the unique challenges of the business. There is, however, a standard approach that corporations take to implement sustainability strategically.
How you measure sustainability is essential for the design of your sustainability plan, as it will inform the strategies and metrics involved. It is also important for tracking your progress over time. Most corporations publicly disclose their sustainability performance annually. This practice of sustainability reporting is heavily influenced by sustainability standards and frameworks developed by independent bodies and experts. Frameworks provide guidance on what metrics to use for different sustainability topics and how to correctly measure and report them. For an introduction to the most common sustainability reporting frameworks in use today, see our article on a guide to sustainability reporting standards and which one to use.
Keep in mind to set up the measurement and data collection processes as early as possible during the design and implementation stage of your sustainability planning. Ensure that data owners understand the metrics they have ownership of so that when the time comes for collating the data, information exchange can flow easily between parties.
Corporate sustainability has the potential to transform the future-readiness of a corporation and build its resilience. Like any other corporate strategy, the risks, and rewards from sustainability should be approached with method and commitment.