“Creating strong business and building a better world are the essential ingredients for long term success.”Corporate Sustainability is an evolving management paradigm for companies. While the concept understands the significance of profitability, it also reiterates the need for environmental protection and social equity.
FOUNDATION OF THE CONCEPT
Corporate Sustainability borrows elements from four main concepts.
It is a broad concept that aims to balance economic growth and environmental protection. We cannot leave efforts for achieving sustainable development to the government only. Companies are the engines of economic growth. Therefore, they ought to be proactive in making consistent efforts towards achieving sustainable development.
Corporate Social Responsibility (CSR)
CSR is a self-regulating business model. According to this concept, companies have an ethical obligation to respond to the needs of society. CSR is based on four theories-
Social Contract Theory
The theory revolves around the fact that individuals and organisations enter into various implicit and explicit contracts. When a company extracts resources from the environment, it enters into a contract. The contract is to be socially responsible towards the environment.
Social Justice Theory
This theory argues that in a fair society, all members hold equal importance. It also highlights the significance of social equity and justice. Hence companies must respond to the needs of all the people in a society.
According to this theory, a company should respect the human rights of their employees and the local communities around them. It must behave ethically with them and ensure a safe working environment.
The theory throws light on the golden rule that companies have a moral duty towards society. They should therefore listen, consider and respond to the needs of the society while framing strategies.
A stakeholder is an individual or organisation that can affect or is affected by an organisation’s goals. This theory emphasizes that the stronger the relationship a company has with the external parties, the easier it is to achieve its business goals. Consequently, good external relationships help gain a competitive edge.
There is a fiduciary relationship between a stakeholder and a company. Hence a company must be accountable for its actions to the stakeholders. Accountability refers to the legal or ethical responsibility to justify one’s actions. The ambit of Corporate Accountability extends to society as well. A company enters into various implicit and explicit contracts with society. Since a company gets its resources from society, therefore, it must be accountable for its actions.
THE PILLARS OF CORPORATE SUSTAINABILITY
Three main pillars lay the foundation of Corporate Sustainability.
Companies rely on society for getting resources. Some of these resources are non-renewable, some are renewable. Companies need to instill an understanding that renewable resources need time to get replenished or renewed. Therefore they should respect these natural cycles and should reform extraction processes. It would ensure that the resources get plenty of time for renewal.
Corporate Sustainability requires companies to recognize their impact on the people. This recognition can be in terms of committing to fair wages, showcasing ethical behavior and a safe working environment for employees. The Social Pillar promotes practices that help prosper the health, safety and well-being of the employees.
Each company faces intense pressure to earn immediate profits. But Corporate Sustainability encourages investment in technology for the future even if financial benefits show up later. The economic pillar is all about investment in creating technologies for the future.
WHAT’S THE DIFFERENCE BETWEEN CSR AND CORPORATE SUSTAINABILITY?
CSR is a broader term than Corporate Sustainability. CSR often looks backwards to reflect on what the company has done in the past to contribute to society. On the other hand, Corporate Sustainability looks forward and aims to make efforts in the present to create future opportunities. CSR initiatives mainly target the opinion-forming groups like media while Corporate Sustainability targets the various stakeholders.
A PEEP INTO CORPORATE SUSTAINABILITY REPORTING
We have a concept called Green GDP to measure the economic growth of the countries. Green GDP is an accounting system that considers the environmental loss incurred during the process of economic growth. Thence countries can measure the environmental deterioration caused and can take measures to reduce it. Similar to this is the concept of Corporate Sustainability Reporting. It represents a potential mechanism to generate data and measure the contribution of companies towards achieving sustainable development.
THE FINAL THOUGHT
The vision of doing business is certainly changing over time. The government and stakeholders expect companies to make efforts for people and the environment. According to Global Risks 2020, climate change ranks first as a global risk. Societal risks like water crises and infectious diseases are also threatening. It expects air pollution to become a major cause of environmental mortality by 2050.
These facts highlight the urgent need for action. Corporate Sustainability provides a prospective solution to this. Therefore we need consistent efforts from the end of companies as they are the engines of economic development in a society.