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Sustainability has long become a buzzword. But as it is multi-dimensional and encompasses diverse parameters its true meaning is many a times missed out.
TSG has created a detailed presentation that elucidates what is sustainability, its significance, how it impacts business and how businesses can be champions of sustainability. To understand sustainability in a more pragmatic and productive manner, gain insights on key issues and drivers, and most important of all, to know how you can practise and propagate, it do go through the presentation.
Sustainability Demystified!
Multiple Interpretations
Everyone is familiar with the proverbial bunch of blindfolded people feeling an elephant to figure out what it is - each provides a plausible, even correct answer, but the big picture remains elusive! Sustainability is something similar - you ask five corporate executives what “sustainability” means to them, the chances are you will get 10 correct, but perhaps partial, answers.
So, what is sustainability? To some, sustainability is the ability to remain in business. To others, it is about ensuring that the negative environmental impacts are managed and mitigated. And then there are some who see it as synonymous with CSR (which itself is confusing, because CSR is considered by some as philanthropic, and by others, as related to business).
From Sustainable Development to Sustainability
The starting point is the best known definition of sustainable development that was put out by the Bruntdland Commission in 1987: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” What this implies is that if the earth and its inhabitants are to survive, all human activity - social, economic and political - must operate within these planetary limits.
How should business translate this idea to its context? The best known framework for this was postulated by John Elkington as what is known as the “triple bottom line”, elegantly interpreted by Shell in one of its earlier sustainability reports - People, Planet, Profits. What this says is that if a company wishes to stay in business, and protect and grow its financial bottom line, then it has to recognise that it can only do this if it manages the social and environmental aspects of being in business. Simply because society gives the business its customers, its employees, and the legitimacy to stay in business, while the environment provides it, its key resources.
So, sustainable development as applied to business - which is referred to as Corporate Sustainability or, simply, Sustainability - is about recognising that its future lies in performing well not just financially (traditional), but also but also socially and environmentally. The investor community refers to these performances as ESG - Environmental, Social and Governance. This is best illustrated by the familiar diagram of three overlapping circles illustrated below, with the overlapped orange portion being represented as sustainability.
This diagram begs the question - “What lies outside the overlaps?”
It is, of course, a fair question. The brown portion of the People circle and the green portion of the Planet circle represent actions that companies take which have little or nothing to do with its business. This can broadly be termed as philanthropy. The red portion of the Profits circle represents the activities that a company undertakes which have no significant impact on People and the Planet.
From Shareholder to Stakeholder Value
Once a company embraces the core idea of sustainability, it becomes apparent that it is no longer accountable only to its shareholders, but to all its stakeholders. The reason for this is that stakeholders are increasingly pushing these circles together, and so the overlap is increasing! This is illustrated below:
This implies that a company must (a) map its stakeholders (b) understand what its stakeholder expects of it in terms of environmental, social and financial performance, and consequently (c) build its business model such that incorporates these expectations. The governance processes have a key role to play in enabling and ensuring this.
These expectations - also called sustainability issues - are typically specific to an industry sector, stakeholder, and context. An indicative list of stakeholder, is given below as an illustration:
Stakeholders Social Issues Environmental Issues
Wages and benefits
Conditions of work
Emissions, effluents, and waste
Carbon footprint
Water consumption
Managing community expectations
Social issues in the supply chain
Product safety
Environmental performance
Security of supply of natural resources
Occupational health and safety
Freedom of association
Capacity building
Environmental conditions at the workplace
Emissions, effluents, and waste
Product safety
Product performance
Resource consumption during usage
Packaging material disposal
Infrastructure development
Better livelihood opportunities
Improved quality of life
Environmental conditions at the workplace
Emissions, effluents, and waste
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