Business Ethics: What does sustainability mean to you?

My perception of sustainability

Sustainability is everywhere these days. Be it on the website of British Petroleum or on the homepage of a global manufacturing giant like Xerox. But does having a mere webpage for sustainability make these organizations ‘green’? I don’t think so. Sustainability to me is the art of using the natural resources of our beloved mother Earth in such a way so as to not waste any resource and to make sure that our next generations will also be able to benefit from the same resources.

Some organizations have really become ‘sustainable’. They have become efficient in the way they consume energy, in the way they manage their waste, in the way they operate (Example: Wal-Mart, Toyota and IBM). But on the other hand, most other organizations use sustainability just for publicity. But no one can refute the fact that sustainability is here to stay and that it is and will be a force to be reckoned with in the future. This is very easy to prove – just look at any major organization’s website. They all have a sustainability section these days.

Reasons not to have sustainability

My personal opinion is that there can be only two reasons as to why an organization does not have a sound sustainability policy. These are:

1. The company does not fully understand what sustainability is. Or they don’t really understand what affect it has on their business. This is the most common form of problem that I have noticed with some companies. Every company is unique and no matter how small or big a company may be, they can always have a solid sustainability policy. I think the point to be taken note of is that the organization’s leaders feel that they don’t need sustainability. They think it’s a fad like some other things in the recent past and that the hype about sustainability is short-lived. This thinking needs to be changed. Corporations in this time of high competition cannot survive without competing on equal grounds with their competition. If your competitor is practicing sustainability and you are not, you are bound to lose out at some stage in the near future.

2. The company’s implementation of the sustainability policy is incorrect or weak. Some companies do understand the need to go sustainable, but their interpretation of the level of sustainability or their sustainable policy is not correct. They might try to implement their flawed policy but fail or have minimum impact. Another reason could be that the policy may be correct and robust on paper but its implementation may be flawed or incorrect. This happens in organizations all the time is not the first occasion of incorrect implementation. This reason is far less critical to the first one discussed above for the simple reason that the organization at least has the right intent and will to become sustainable – they only need to get better at implementing it. On the other hand, there are a handful of organizations who get overawed by the situation and decide to throw the sustainability policy in the dumper just because they were unable to implement it in the first place. Organizations need to realize that sustainability is here to stay and that it has to be a long term policy. It cannot be used to deliver short term goals only and then forgotten about.

Reasons to support sustainability

There are many reasons to support sustainability, some of which that I could think of are:

1. Better company/brand positioning – Companies who are really sustainable and show it, are benefitting from the fact that the people recognize their effort and the company has a better brand image than before. People want to be associated with such brands.

2. Savings – Being efficient pays off. If the company operates efficiently, they save money by reducing their costs. This means that the company will make more profit than before. This also means that the company will have more money to pay its stakeholders.

3. Create competitive advantage – The companies who use sustainability fabulously have created a competitive advantage for themselves and their peers have been forced to follow in their footsteps half-heartedly.

4. Employee morale – There is no doubt that people like to work for a company that cares for its employees and customers, but also the environment, the society and the future. This is exactly why sustainability can raise the morale of a company’s workforce and cheer them up.

5. First mover’s advantage – A company that deploys the sustainability policy first will get the first mover’s advantage and all others will be followers. This generates awareness in the customer’s and potential customer’s subconscious and benefits the organization and its brands.

The role of government

The government plays a very important role in the formation and implementation of the sustainability policies of companies. Government releases guidelines as to what the sustainability policies should look like and what a company can do to help the cause of sustainability. But I think that mere guidelines are not enough to implement an important policy like sustainability. What we need is some concrete steps by the government to force all organizations into looking at themselves and finding out their most suitable sustainability policy.

The government can also make sustainability look more viable for firms by giving tax breaks or subsidies to companies which have a robust sustainability policy. This will encourage organizations to actually change and become sustainable instead of just pretending.

The role of customer

Even more powerful than the government is the customer. Over the years, customers have forced organizations to change drastically. The cases of IBM and Xerox come to mind when I think of successful change by organizations in order to cater to the changing demand of its customers and consumers.

In today’s high competition environment, customers have so many options. The products are being made to cater to his needs and the customer has become the master. So if the customer warms up to the idea of sustainability, there is very little that organizations can do apart from have a top class sustainability policy and stick to it.

The role of capital markets

The capital markets arguably play one of the most important role in the design and implementation of the sustainability policy. These days capital investors look at things like company’s sustainability, there CO2 emission, etc. before lending them money. Sometimes they even refuse to lend based on the fact that the company does not have a complete or comprehensive sustainability policy and hence, is less likely to survive and pay back.

This fact is not only true for starting new businesses but also existing businesses. Banks like HSBC, Barclays, etc. are shifting towards sustainable businesses and expect their clients to do the same. Banks have added a sustainability criterion to evaluate a company’s suitability for the loan and the risk attached to the loan. Banks are refusing loan requests from corporations which they think are not sustainable or are charging a very high interest. This will ultimately force the companies to turn sustainable.

The role of leaders

One of the most important roles in an organization is that of its leader, the visionary who guides the organization to its desired goal. The role may be called Chairman, CEO, Managing Director and so on but the huge role this leader has to play in the organization’s growth and development cannot be denied.

If the leader of an organization is visionary enough to see the immense role that sustainability has to play in the future of the organization, he or she is sure to work on creating an organization which will have a robust sustainability policy.

On the other hand, if the leader is not sure of the benefits sustainability can bring to the organization or is not convinced of its future, he will use it only as a ‘marketing stint’ to go with the flow till the time the hype about sustainability dies down (He thinks that the hype will die down eventually!). These organizations will eventually end up paying the price for the error in judgment of their supreme commander. Companies in the future cannot survive without sustainability and the sooner the leaders of organizations accept this fact the better it is for them and their organizations.

Conclusion

There is no dodging the fact that sustainability is here to stay. The sooner the organizations understand this simple fact the better it is for them and their organizations. Eastern countries like China and India are growing at a very rapid pace and are competing with the existing players. These countries are very flexible and are already applying the sustainability policies to play to their advantage. Organizations in the west are set up just right to adapt the sustainability policies, the time seems perfect too. It will be fascinating to see companies from different backgrounds and countries applying similar policies but differently.