Why Should Firms Invest Strategically in Sustainability?

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Why Should Firms Invest Strategically in Sustainability?
Anneke Zwart, Moderator
Businesses are increasingly implementing sustainability in their operations. However, executives often remain reluctant to put sustainability at the heart of their business strategy, mainly because the business case for sustainable business can still not be made according to them. In other words, they believe that the costs of doing business in a sustainable way outweigh the benefits of doing it.
However, integrated sustainability efforts can create a positive impact on organizational performance. Whelan and Fink (2017) aim to support the business case for sustainability by drawing up following list of reasons to invest strategically in sustainability:
  1. STAKEHOLDER ENGAGEMENT: Traditional organizations aim to create value for their shareholders, often at the expense of other stakeholders. On the contrary, new business models aim to incorporate all stakeholders of the business. This includes employees , supply chains, society and nature. It also aligns with the idea of Porter and Kramer of generating ‘shared value’, where economic value can be created by detecting and addressing social or environmental issues related to their business. The strategic value for sustainability comes from considering all stakeholders, and interacting with them on a regular base. Through continuous and regular dialogue with them, organizations are able to better position themselves and foresee changes on all dimensions when they arise. Falling short of considering the needs, concerns and desires of your stakeholders increases the chance of conflicts and reduces stakeholder collaboration. This in turn affects an organization’s overall performance. In that way, the aim for sustainability is in an organization’s own interest rather, than just being just an act of CSR.
  2. IMPROVING YOUR SUPPLY CHAIN, PRODUCTION PROCES AND DIMINISHING ORGANIZATIONAL RISKS: Supply chains nowadays are far more complex than before; they often involve multiple organizations and cross national borders. This implies that they are vulnerable to risks like climate change, national disasters, and other types of environmental, social and economic risks. Risks that manifest over the longer term, that are outside’s an organization’s control. They can disrupt supply chains and whole manufacturing and other production processes. Addressing social and environmental threats is needed to increase an organization’s ability to prevent and/or react on those risks. And this makes a case for sustainability, as it builds on long-term capacity and adaptive strategies.
  3. DRIVING INNOVATION: Investing in sustainability means investing in innovation when it leads to the redesign of invention of new products to meet social and environmental needs also lead to new business opportunities.
  4. FINANCIAL PERFORMANCE: Investments in sustainability can foster financial performance, for example by increasing competitive advantage. This may sound as a surprise, because it has long been the perception that sustainability cannot go together with financial improvements. But increasing the degree of sustainability can actually lead to costs reductions through increasing operational efficiencies (for example by better managing natural resources) and reducing waste. A focus on sustainability may also open opportunities for improved logistics and process efficiencies. There are plenty of other examples of sustainable investments driving financial performance.
  5. CUSTOMER LOYALTY: Consumers’ interest is shifting towards more sustainable interests: honesty and transparency are central values that are considered when choosing between products or services. Besides this, product performance of sustainable products is generally is high.
  6. EMPLOYEE ENGAGEMENT: Investments in sustainability with the aim of increasing environmental, social and governmental performance can increase statistics on employee retention, engagement and morale. Even more if we consider that employees emphasize moral purpose more than ever.
These six points will surely be helpful if you need to develop a business case for making sustainability a core value in the culture of your firm or a key part of your company's business strategy.

⇒ Can you think of an additional reason to invest strategically in sustainability? Please share your ideas and help making this business case complete…

Source: Whelan, T. and C. Fink (2017) “The Comprehensive Business Case for Sustainability” HBR October 2016

Sustainability Management is Key for Corporate Existence
D P BABU, Member
Sustainability safeguards corporate existence from potential threats in the overall business environment by way of strategic investments to improve strengths and reduce weaknesses. It is just like taking antibiotics to boost your body's defense system.

Why Strategic Sustainability
Greg Johnson, Member
I agree with each of the six (6) reasons for investing strategically in sustainability. Through my executive leadership work I encourage total integration to sustain a business as a long-term investment.
Great contribution to the open thinking of successful leadership.

Investing in Sustainability for TBL
Dr. Vishal Dilip Chavan, Member
Sustainability is investing today for future to address the Triple Bottom Line (TBL). What is sustainable today will not be a sustainable game plan for future.
Stakeholders need to really understand what really sustainability is all about. Many companies are investing blindly and are following various trends that can be misguiding and misleading. Doing so may lead to disaster in the long run.

Why Should Non-profit Organizations Invest Strategically in Sustainability?
JWendy Darquee, Member
It's agreed that the six points highlighted are good for the profit sector.
However, in the non-profit sector sustainability is threatened each time new technology is presented. Non-profits can't afford to keep up with the latest and greatest, they don't have the budget for high end fringe benefits such as big pharma companies, etc.
How can non-profit organizations compete with that? With respect to stakeholders, in non-profit the lens constantly expands and contracts… How do we ensure to be investing in what's best for them when it's a moving target? I'm interested to hear feedback.

Partnerships between Businesses and NGO's in Strategic Sustainability
Francis Joseph, Member
I welcome the term "Strategic Sustainability". The ability to maintain sustainability development and progression of a developmental trend of such activities cannot be pursued in isolation without engaging the people it is designed to address. Strategically speaking, the stakeholders or beneficiaries must be engaged hence the focus on the strategic approach.
Non-profit organisations (NGO`s) are challenged in absence of big funds. Therefore for this concept to work, and bring the required results, NGO`s who work in addressing and alleviating poverty in poor countries should partner with companies who are well placed to invest strategically in sustainability programmes.
The quality of life of these deprived people and communities could be addressed in partnerships by businesses with the financial resources and NGO`s with the social and community skills.

Sustainability or Sustainable Business?
Ronald Ainsbury, Member
Maybe the term sustainability is alien to good business? Sustainability - that's a government's job, or maybe an NGO's? Being a sustainable business - that's what most business owners want.
How do we embed sustainable principles into business?
  1. Show them how social and environmental risks can affect their business value;
  2. Then demonstrate to them how they should analyse these in the same way they now analyse economic threats;
  3. Then develop a strategy to mitigate the risks or take advantage of the opportunities and embed their response into their operations
As for the benefits and value of innovating in sustainability?
This short video by Andrew Winston summarises the business case beautifully.

Social Responsibility and Sustainability
alfredo menendez, Member
It's a matter of words.
Sustainability or sustainable development means ensuring the needs of the present without compromising the needs of future generations. It is a global concept.
Therefore, a company cannot be sustainable, it must be "responsible" and, in terms of sustainability, it must be said that it is "socially responsible" (ISO26000) and this includes as a whole social and environmental responsibility.
And when a company is socially responsible? When its strategy is aligned with the drivers that mark the challenge of global sustainable development. Today, we can say that these challenges are the Sustainable Development Goals adopted at the NYC Summit in September 2015.

Corporate Sustainability Includes Environmental and Social Responsibility
Jaap de Jonge, Editor
@Alfredo menendez: Indeed, that's why our Summary (of corporate sustainability) starts with: "Corporate Sustainability refers to the business approach by companies to consider not only economical needs in their strategies and practices, but also environmental and social needs.

Sustainable Capitalism
Nick Shepherd
Great discussion and some well thought through ideas and suggestions. I agree with Ronald Ainsbury (UK) about the broad based desire for business to be sustainable i.e. able to continue?
Knowledge builds our ability to understand the strategic impacts of decisions, both at a high level and operationally. We know that to sustain an investors (owners) long term value, an organization must understand, respect and manage the needs and expectations of key drivers of value creation - e.g. customers within society.
These customers' expectations of corporate behaviour are changing and should be reflected in the core drivers of a sustainable organization. To not embrace sustainability is to increase the risk of organizational failure.

Embedded Sustainability
Tanja de Jonge, Member
How sustainable is sustainability when it is only a strategic approach that lacks an ethical base in which shared believes, values and goals of an organization are embedded and are seen as the true drivers of entrepreneurship?

Investing in Knowledge
Abb Soma, Member
@Dr. Vishal Dilip Chavan: I agree with you that what is sustainable now may not be sustainable in the future. And this can possibly stem from the fast pace in innovation and technology which causes global customers to demand an international standard of service.
However this does not mean that sustainability should not be part of an organization's strategic plan. It should be mandatory so as to attain a competitive edge. It just means that there is more of a need for solution leaders where strategic mindsets are encouraged so that organizations would be able to (Jantzen 2012) "ride the waves of change."
I guess this is where we need to invest in knowledge as a resource and incorporate this as part of the organization's philosophy as mentioned in the reading.


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