Week 3 – Business Sustainability

Business Sustainability

Business sustainability relates to how a business manages the financial, social and economic risks which can be linked to profit, people and planet in the long-term. This means that a company has to be ethical when trading, and take into account environmental and social factors. One of the key ways of doing this is called corporate social responsibility.

Corporate Social ResponsibilityCorporate social responsibility (CSR) means that a business has to consider issues in society, such as paying a fair wage and ensuring good working conditions, and the environment such as ensuring that they are considerate of the amount of natural resources used. Some people, such as Milton Friedman, believe that businesses should only be concerned about profit. However, other business researchers such as Carroll believe that businesses have lots of other responsibilities:

There are two main approaches to CSR: Offensive – using this model to realise opportunities and expand into new

markets, such as sustainable technology Defensive – using this model to protect their existing company

Business EthicsAll of these points relate to an overall theme of business ethics. This means deciding between what’s ‘right’ and ‘wrong’, and choosing to act in the ‘right’ way. It’s fairly easy to identify unethical business decisions. For example, companies shouldn’t use child labour, bribery or copyrighted materials. Doing any of these things would be unethical, and very bad for business because customers won’t be happy.

However, it’s not always easy to enforce ethical behaviour. This is especially the case when owners are pushing a business to make a profit, because acting in a more ethical way can be expensive.

Advantages of Ethical Business Behaviour and Corporate Social ResponsibilityAlthough this model can be more expensive, it can also have a number of advantages for businesses such as:

More public support – if your customers see that your company is acting responsibly, they are more likely to buy off you and spread the word! People like to buy off companies who demonstrate that they care about customers, society and the environment, and not just making money.

Long-term profits – doing things like helping to look after the environment will lead to long-term profits for your business. This is because certain resources will be available for longer periods of time, which your business can use in the future.

Ethical obligation – quite simply, acting responsibly is the ‘right’ thing to do.

Better environment for future generations Discourages government regulation – acting more responsibly will mean

that the government is less likely to enforce certain laws in the market. This will give your business much more freedom to operate how it chooses.

Improves business value – considering all the above, your business will be much more valuable!

Disadvantages of Ethical Business Behaviour and Corporate Social ResponsibilityAs mentioned previously, this model can lead to increased costs which your business will have to include in its accounts. It could also mean that your business is less likely to make a profit. Finally, many businesses don’t have the knowledge or skills to implement a CSR policy.

How CSR can be encouragedAs you can see, CSR and ethical behaviour will be very important for your business to succeed. Although it may seem complicated, here are a few simple steps for you to make your own CSR policy. Employee training and selection

Employee training on issues relating to ethical behaviour will make them more likely to share the business’s vision of how it should operate. When selecting employees, you should show awareness of issues such as gender equality and equal opportunity for disabled applicants to demonstrate that you’re an ethical business.

A code of ethics

A code of ethics is a document which sets out exactly what a business does and how it should operates responsibly. Every business should have one of these. You should also get employees to sign it. Leading by example

Of course, not every business in today’s world operates responsibly. This is why it’s often left up to smaller organisations to lead the way and show other businesses and customers how a business should operate. This could mean that others join the movement in the long-term. Reinvesting in society

There are many businesses and projects which reinvest in the societies where they operate. The Fairtrade project, for example, has helped to set up education and healthcare facilities across Africa by setting aside some surplus revenue. This concept is known as philanthropy. If your business can do this, it will certainly lead to a competitive edge!Green business behaviour

Living in a world which is set to become more affected by climate change, businesses now have to take action. This means preserving natural resources, water harvesting and greener forms of energy. If businesses don’t do this, then the world could face catastrophic consequences such as rising sea levels, crop degradation and many businesses being forced to close.

Types of Business SustainabilityThe issue of business sustainability can be broken into three strands; community, economy and the environment. Community

With shifts in population size, it’s expected that we will have a population of 9 billion people by 2050. This means that food production will need to increase by 70%. A sustainable business will have to adjust their behaviour to cope with such a significant population rise.

Economy

More people are living in poverty than ever before. It’s important that businesses try to pay fair wages to break this cycle. An example of a major corporation working with charities is Amazon with their very own Amazon Smile service whereby Amazon donates 0.5% of the price of a customer’s eligible Amazon Smile purchase to a charitable organisation of the customer’s choice.

Environment

Climate change is affecting the way in which we live. Global temperature rises will mean decreased crop yields, water shortages and extinction. Successful and sustainable businesses will look to have alternative methods of running their business if problems such as flooding, fires or extreme weather were to arise.

We hope that you found this handout useful – please email us if you have any questions!