1

Corporate Sustainability for Value Creation

By Mohammed Hanif Ajari Former Vice President ICMA Pakistan

Director Global Supply Chain, Information Management and Corporate Compliance, Getz Pharma

People—Planet—and Profits is rapidly becoming the new orchestrated tune of the

21st century business entrepreneurs. Business leaders and managers are

challenged as never before to address a multitude of issues that go far beyond the

single profit motive.

In recent years there has been significant discussion in the business, academic, and popular press about “Corporate sustainability.” This term is often used in conjunction with and in some cases as a synonym for, other terms such as “sustainable development” and “corporate social responsibility.” But what is corporate sustainability, how does it relate to these other terms, and why is it important? This paper addresses these questions. Given the enormous complexity and challenges before us, what can business managers and leaders do? Regardless of your role, function, position or company, what can you do? How can business leaders and managers create a better balance between the needs of people, the planet and profit in both the short- and long-term?

As a step forward on the journey to a more sustainable world, an ever increasing number of organizations are beginning to move toward a new “sustainability” business paradigm—one that focuses on creating a better balance between social, environmental and economic factors for short- and long-term performance. In more and more cases, businesses are adopting sustainability-related values, principles, strategies and practices.

Corporate Social Responsibility what is it? Corporate sustainability can be viewed as a new and developing corporate management paradigm. The term ‘paradigm’ is used deliberately, in that corporate sustainability is an alternative to the traditional growth and profit-maximization model. While corporate sustainability recognizes that corporate growth and profitability are important, it also requires the corporation to pursue societal goals, specifically those relating to sustainable development — environmental protection, social justice and equity, and economic development.

2

Our Common Future, UN Brundtland Report, 1987 described as “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.” Key aspects: Focused are simultaneously on the People, the Planet, and Profits balancing social, environmental, and economic factors for short and long-term performance

A careful view of the literature suggests that the concept of corporate sustainability borrows elements from four more established concepts: 1) sustainable development,2) corporate social responsibility, 3) stakeholder theory, and 4) corporate accountability theory. The contributions of these four concepts are illustrated in Figure 1. Each concept, and its relationship to corporate sustainability, is discussed below

The business implication of the sustainability is passing through greater scrutiny. As there are many questions needs immediate addressing. The foremost questions raised is “will sustainability change the competitive landscape and reshape the opportunities and threat that companies faces in the global world today?” if so how? How worried are executives and other stakeholders about the impact of sustainability efforts on the corporate bottom line? What if anything are companies doing now to capitalize on sustainability driven challenges? And what strategies are they pursuing to position themselves competitively for the future?

Underlying

Boundaries of c matter

description of a societal

to why

c

should work

Business to

why c should

work

sustainability

as to why c

sustainability

c

Accountability

Social Justi

Strategic

Business

Figure 1: The of

3

Whereas the ground realities exposed that there is no single, established definition for sustainability. Companies view it in innumerable ways, some focusing solely on environmental impact, others incorporating the numerous economic, communal, and political implications. Yet while companies may differ in how they define sustainability, everybody is on same page and united in the view that sustainability, however, defined is and will be major force to reckon with and one that will have a determining impact on the way their businesses think, act, manage, and compete. To resolve and answer the prevailing imbroglio Boston Consultancy Group and MIT Sloan Management Review have conducted a survey collaboratively called the sustainability initiative. As part of that effort, they recently launched a global survey of more than 1,500 corporate executives and managers about their perspectives on the intersection of sustainability and business strategy. To supplement the finding of this survey they have conducted more than 50 in-depth interviews, with a broad mix of global thought leaders. The disclosure of both the surveys reveals a fascinating glimpse of sustainability’s current position on the corporate agenda and where the topic may be headed in the future. Synchronization: Among the Organizations on Sustainability Matters. Without a doubt, the vast majority of the managers and executives participated in the survey informed the surveyors that sustainability related issues are having or will soon have material impact on their business. 92% of the survey respondents told that their company was already addressing sustainability in some way. Furthermore, there was strong consensus that underlying drivers of sustainability are highly multifarious, consistent, and lasting, and that the corporate sector will play a vital role in solving the longer term global issues related sustainability. Peter Senge, a senior lecturer, MIT Sloan School of Management, has nicely put in a nutshell that “in the last year or two, everything has changed. People are starting to suspect that these are really strategic issues that will shape the future of our business. The specifics are different depending on industry and context, but we are in the beginning of historic wake-up. “ Economic downturn Impact on Business Sustainability Presently a debate is promulgated among the fortune 500 companies in the world whether down turn in the global world has accelerated a shift toward a greater corporate focus on sustainability-particularly toward sustainability related actions

4

that have an immediate impact on the bottom line. At the same time, several respondents in the corporate survey group lamented having to meet higher than normal criteria for sustainability investments. They told us that the current financial environment has made it increasingly difficult to maintain investments not only in the sustainability but also more fundamentally in the business because of limited access to capital. However, a good indication is that sustainability is her to stay, and going to have larger canvas of execution in the corporate world. This can further be legitimated in the recently concluded survey by Boston Consultancy Group comprise of over 1500 companies representing each and every spectrum of the business, trade, and services.

Potential effects of Business Sustainability on value creation. Sustainability has the potential to affect all aspects of a company’s operations from development, manufacturing, and distribution to sales and support functions. It has the great influence to affect every value-creation lever over both the short and longer term. Rarely has a business issue been viewed as having such a broad scope of impact. There is a mounting pressure from stakeholders, employees, customers, consumers, supply chain partners, competitors, investors, lenders, insurers,

5

nongovernmental organizations, media, the government, and society over to initiate sustainability measures. Even though there is a unique challenges and opportunities for the executives, and key stakeholders to initiate however, there are many reasons why companies have difficulty tackling sustainability more decisively. First, companies often lack the right information upon which to base decisions. Second, companies struggle to define the business case for value creation. Third, when companies do act, their execution is often flawed. All of these issues points to a critical need for a thorough and structured gathering and sharing of basic facts about sustainability as first step toward helping managers to be more decisive in the choices they face. To aid managers in this difficult task, we have developed a simple framework for understanding the drivers and impacts of sustainability efforts and for helping to add clarity to the boardroom discussion on the appropriate actions for each company. Some companies have difficulty in modeling the business case or even finding a compelling case for sustainability. Mostly conducted recently surveys in which respondent who considered themselves Guru in sustainability, as well as most of the corporate executives in the thought leader group, said that their company had found compelling business case—one that reflected multiple tangible and intangible cost and benefits for sustainability. Find the one given below compiled by the BCG group.

6

Qualities of a Sustainable Enterprise

Following are the specified qualities found in the successful sustainable business enterprise. It is assimilated from the different reports and corporate annual reporting compiled. 1. All the good qualities sustainable organizations and corporate in the global

world are having a whole hearted support and the CEO, the Chairman of the board and senior management teams show public and untiring support for sustainability.

2. Key and core values related to sustainability are deep-seated in the company. 3. Among the “world’s most sustainable companies, “values related to

sustainability were deeply integrated in their “DNA” This should be appeared and blended on the surface.

4. In the global world sustainable quality company have Sustainability factor deeply ingrained centrally in their business strategy.

5. In the quality companies the structure, systems, business processes and organization culture are aligned around sustainability.

6. All elements of the organization need to be aligned around sustainability strategies and actions. Managers can help infuse a sustainability focus into all human capital and other business systems and policies. {such as the following processes are pivot around business sustainability

Recruitment and selection

Training and Development

Performance Management

Compensation and Advancement

Communications

Employee Engagement

Supply Chain

Operations

Manufacturing

7. The company deploys an array of rigorous sustainability measures, which are described as sustainability metrics. These metrics are embedded in the system as Energy Audit; Carbon foot prints Analysis & GRI: Global Reporting Initiatives.

8. The company reaches out to and involves a broad array of external and internal stakeholders around sustainability issues, including customers, suppliers, governmental and non-governmental organizations.

7

9. Organization Integration: various aspects of sustainability are viewed holistically and integrated across the functions that have responsibility for them.

After encapsulating the parameters above the quality sustainable companies pyramid will give the following look.

1. The business factors driving greater focus on sustainability, as well as factors

hindering its progress, both today and as we look forward into the next ten years

a. Factors driving greater focus

(i) Ensuring workers ‘health and safety (ii) Increasing workforce productivity (iii) Improving image with shareholders and public (iv) Effectively addressing regulatory restrictions (v) Enhancing innovation Meeting expectations of investors and

lenders (vi) Attracting and retaining diverse top talent (vii) Improving employee morale and engagement (viii) Addressing challenges of the healthcare system (ix) Providing goods / services that are good for the world

b. Factors hindering its progress

(i) Lack of demand from consumers and customers, (ii) Lack of demand from managers and employees, (iii) Lack of awareness and understanding (iv) Lack of standardized metrics or benchmarks

8

(v) Lack of specific ideas on what to do (vi) Lack of demand from shareholders and investors (vii) Lack of demand from suppliers (viii) Unclear or weak business case (ix) Lack of demand from community (x) Lack of support from senior

2. The twelve most widely used sustainability-related practices

(i) The health and safety of employees. (ii) Ensure accountability for ethics at all levels. (iii) Engage collaboratively with community and non-governmental groups. (iv) Support employees in balancing work and life activities (v) Encourage employees volunteerism (vi) Involve employees in decisions that affect them. (vii) Provide employee training and development (viii) Reduce waste material (ix) Highlight our commitment to sustainability in our brand. (x) Improve energy efficiency. (xi) Work with suppliers to strengthen sustainability practices (xii) Get groups across organization that are working on sustainability

related initiatives to work more closely together.

Combining all together you can derive Triple Bottom Line

References 1. American Management Association 2. Boston Consultancy Group research material 3. MIT Sloan Management review (research material) 4. Fortune 500 5. Harvard Business Review.