Sustainable business
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A sustainable business, or a green business, is an enterprise that has a minimal negative impact or potentially a positive effect on the global or local
- It incorporates principles of sustainability into each of its business decisions.
- It supplies environmentally friendly products or services that replace demand for nongreen products and/or services.
- It is greener than traditional competition.
- It has made an enduring commitment to environmental principles in its business operations.
Terminology
A sustainable business is one that participates in
The
Everyone affects the sustainability of the marketplace and the planet in some way. Sustainable development within a business can create value for customers, suppliers, investors, employees and future generations. A sustainable business is one that meets customer needs to make a profit while, at the same time, treating the environment in sustainable ways.[8]
To succeed in such an approach, where balancing stakeholder interests and collaborative solutions are key, requires a strategic approach. One philosophy, that includes many different tools and methods, is the concept of Sustainable Enterprise Excellence.[9] Another is the adoption of the concept of responsible growth.[10]
Sustainability is often confused with corporate social responsibility (CSR), though the two are not the same. Bansal and DesJardine (2014) state that the notion of ‘time’ discriminates sustainability from CSR and other similar concepts. Whereas ethics, morality, and norms permeate CSR, sustainability only obliges businesses to make intertemporal trade-offs to safeguard intergenerational equity.[11]
Short-termism is seen as the bane of sustainability.[11] While CSR and sustainability are not the same, they are related to each other. For example, setting salaries, implementing new technologies, and retiring old plants all have an impact on the firm's stakeholders and the natural environment.[12]
Green business has been seen as a possible mediator of economic-environmental relations, and if proliferated, would serve to diversify our economy, even if it has a negligible effect on lowering atmospheric CO2 levels. The definition of "green jobs" is ambiguous, but it is generally agreed that these jobs, the result of green business, should be linked to "
Environmental sphere
A major initiative of sustainable businesses is to eliminate or decrease the environmental harm caused by the production and consumption of their goods.[14] The impact of such human activities in terms of the number of greenhouse gases produced can be measured in units of carbon dioxide and is referred to as the carbon footprint. The carbon footprint concept is derived from the ecological footprint analysis, which examines the ecological capacity required to support the consumption of products.[15]
Businesses take a wide range of green initiatives. One of the most common examples is the act of "going paperless" or sending electronic correspondence in instead of paper when possible.[8] On a higher level, examples of sustainable business practices include: refurbishing used products (e.g., tuning up lightly used commercial fitness equipment for resale); revising production processes to eliminate waste (such as using a more accurate template to cut out designs), and choosing nontoxic raw materials and processes. For example, Canadian farmers have found that hemp is a sustainable alternative to rapeseed in their traditional crop rotation; hemp grown for fiber or seed requires no pesticides or herbicides. Another example is upcycling clothes or textiles, in which businesses can upcycle products to maintain or increase their quality.[16]
Sustainable business leaders also take into account the life cycle costs for the items they produce. Input costs must be considered regarding regulations,
The many possibilities for adopting green practices have led to considerable pressure being put upon companies from consumers, employees, government regulators, and other stakeholders.[18] Some companies have resorted to greenwashing instead of making meaningful changes, merely marketing their products in ways that suggest green practices. For example, various producers in the bamboo fiber industry have been taken to court for advertising their products as "greener" than they are.[19] Still, countless other companies have taken the sustainability trend seriously and are enjoying profits. In their book “Corporate Sustainability in International Comparison”, Schaltegger et al. (2014) analyzes the current state of corporate sustainability management and corporate social responsibility across eleven countries. Their research is based on an extensive survey focusing on the companies’ intention to pursue sustainability management (i.e. motivation; issues), the integration of sustainability in the organization (i.e. connecting sustainability to the core business; involving corporate functions; using drivers of business cases for sustainability) and the actual implementation of sustainability management measures (i.e. stakeholder management; sustainability management tools and standards; measurements).[20] The Gort Cloud written by Richard Seireeni, (2009), documents the experiences of sustainable businesses in America and their reliance on the vast but invisible green community, referred to as the Gort cloud, for support and a market.
Green investment firms are consequently attracting unprecedented interest. In the UK, for instance, the
An effective way for businesses to contribute towards waste reduction is to remanufacture products so that the materials used can have a longer lifespan.[22]
Sustainable Businesses
The Harvard Business School business historian
The automobile manufacturer Subaru has also made efforts to tackle sustainability. In 2008 a Subaru assembly plant in Lafayette became the first auto manufacturer to achieve zero landfill status when the plant implemented sustainable policies. The company successfully managed to implement a plan that increased refuse recycling to 99.8%.[24] In 2012, the corporation increased the reuse of Styrofoam by 9%. And from the year 2008 to the year 2012, environmental incidents and accidents were reduced from 18 to 4.[25]
Smaller companies such as
Some companies in the textile industry have been moving towards more sustainable business practices. Specifically, the clothing company Patagonia has focused on reducing consumption and waste. The company limits its environmental impact by ensuring only recycled and organic materials, repairing damaged clothes, and by complying with strong environmental protection standards for its entire supply chain. [31]
Some companies in the
In the luxury sector, in 2012, the group Kering developed the "Environmental Profit & Loss account" (EP&L) accounting method to track the progress of its sustainability goals, a strategy aligned with the UN Sustainable Development Goals.[40] In 2019, on a request from the President Emmanuel Macron, François-Henri Pinault, Chairman and CEO of the luxury group Kering, presented the Fashion Pact during the summit, an initiative signed by 32 fashion firms committing to concrete measures to reduce their environmental impact. By 2020, 60 firms joined the Fashion Pact.[41]
Fair Trade is a form of sustainable business and among the highest forms of CSR (Corporate Social Responsibility). Organizations that participate in Fair Trade typically adhere to the ten principles of the World Fair Trade Organization (WFTO). Moreover, Fair Trade promotes entrepreneurial development among communities in developing countries and it encourages communities to be responsible and accountable for their economic development via market engagement. Fair Trade is a form of marketing with a strong and direct social benefit beyond the economic supply chain.[42]
Social sphere
Organizations that give back to the community, whether through employees volunteering their time or through charitable donations, are often considered
For a business to be truly sustainable, it must sustain not only the necessary environmental resources, but also social resources—including employees, customers (the community), and its reputation.[43]
A term that is directly relates to the social aspect of sustainability is Environmental justice. Sustainability and social justice are directly connected to one another, and seeing these as separate unrelated issues can lead to more problems for the environment and potentially businesses.[44]
Consumers and Marketing
When people are choosing to purchase goods or services, they care what a company stands for. This includes social and environmental aspects that may not have seemed important in business in the past. Consumers nowadays are demanding more sustainable goods and services.
Greenwashing
With sustainability becoming more prevalent in the last decade, businesses need to be aware of laws and norms surrounding claims and the potential legal implications. In the United States, the
Organizations
The European community’s
Corporate sustainability strategies
Corporate sustainability strategies can aim to take advantage of sustainable revenue opportunities, while protecting the value of business against increasing energy costs, the costs of meeting regulatory requirements, changes in the way customers perceive brands and products, the volatile price of resources.
Not all eco-strategies can be incorporated into a company's business immediately. The widely practiced strategies include Innovation, Collaboration, Process Improvement and Sustainability reporting.
- Innovation & Technology: This method focuses on a company's ability to change its products and services towards better environmental impacts, for example less waste production.
- Collaboration: The formation of networks with similar or partner companies facilitates knowledge sharing and propels innovation.
- Process Improvement: Continuous process surveying and improvement are essential to reduction in negative impacts. Employee awareness of company-wide sustainability plan further aids the integration of new and improved processes.
- Sustainability Reporting: Periodic reporting of company performance in relation to goals encourages performance monitoring internally and transparency and accountability externally. The goals might then be incorporated into the corporate mission.
- Greening the Supply Chain: Sustainable procurement is important for any sustainability strategy as a company's impact on the environment is much bigger than the products that they consume. The B Corporation (certification) model is a good example of one that encourages companies to focus on this.
- Choosing the Right Leaders: Having CEOs informed about the opportunities from sustainability guides companies in the right steps to being eco-friendly. As the world is slowly transitioning to sustainability, it is important for our company leaders to prioritize and have a sense of urgency. [51]
Companies should adopt a sound measurement and management system to collect data on their sustainability impacts and dependencies,[52] as well as a regular forum for all stakeholders to discuss sustainability issues.[53] The Sustainability Balanced Scorecard is a performance measurement and management system aiming at balancing financial and non-financial as well as short and long-term measures. It explicitly integrates strategically relevant environmental, social and ethical goals into the overall performance management system [54] and supports strategic sustainability management.
Noteworthy examples of sustainable business practices that are often part of corporate sustainability strategies can include: transitioning to renewable energy sources, implementing effective recycling programs, minimizing waste generation in industrial processes, developing eco-friendly product designs, prioritizing the adoption of sustainable packaging materials, fostering an ethical and responsible supply chain, partnering with charities, encouraging volunteerism, upholding equitable treatment of employees, and prioritizing their overall welfare, among numerous other initiatives.[55][56][57]
Standards
Enormous economic and population growth worldwide in the second half of the twentieth century aggravated the factors that threaten health and the environment — including
One critical milestone was the establishment of the
- ISO 14004 provides guidance on the development and implementation of environmental management systems.
- ISO 14010 provides general principles of environmental auditing (now superseded by ISO 19011)
- ISO 14011 provides specific guidance on audit an environmental management system (now superseded by ISO 19011)
- ISO 14012 provides guidance on qualification criteria for environmental auditors and lead auditors (now superseded by ISO 19011)
- ISO 14013/5 provides audit program review and assessment material.
- ISO 14020+ labeling issues
- ISO 14030+ provides guidance on performance targets and monitoring within an Environmental Management System
- ISO 14040+ covers life cycle issues
There are now a wide range of sustainability accounting frameworks that organizations use to measure and disclose on their sustainability impacts and dependencies. These have evolved since the 1990s to encompass metrics spanning a wide range of social, environmental, economic and ethical issues.[52]
Circular business models
While the initial focus of academic, industry, and policy activities was mainly focused on the development of re-X (recycling, remanufacturing, reuse, recovery, etc.), it soon became clear that the technological capabilities increasingly exceed their implementation. For the transition towards a Circular Economy, different stakeholders have to work together. This shifted attention towards business model innovation as a key leverage for 'circular' technology adaption.[58]
Circular business models are business models that are closing, narrowing, slowing, intensifying, and dematerializing loops, to minimize the resource inputs into and the waste and emission leakage out of the organizational system. This comprises recycling measures (closing), efficiency improvements (narrowing), use phase extensions (slowing or extending), a more intense use phase (intensifying), and the substitution of product utility by service and software solutions (dematerializing).[59]
Certification
Challenges and opportunities
Implementing sustainable business practices may have an effect on profits and a firm's financial 'bottom line'. However, during a time where environmental awareness is popular, green strategies are likely to be embraced by employees, consumers, and other stakeholders. Many organizations concerned about the environmental impact of their business are taking initiatives to invest in sustainable business practices.[60] In fact, a positive correlation has been reported between environmental performance and economic performance.[61] Businesses trying to implement sustainable business need to have insights on balancing the social equity, economic prosperity and environmental quality elements. [62]
If an organization’s current business model is inherently unsustainable, becoming truly sustainable requires a complete makeover of the business model (e.g. from selling cars to offering car sharing and other mobility services). This can present a major challenge due to the differences between the old and the new model and the respective skills, resources and infrastructure needed. A new business model can offer major opportunities by entering or even creating new markets and reaching new customer groups.[63] The main challenges faced in the sustainable business practices implementation by businesses in developing countries include lack of skilled personnel, technological challenges, socio-economic challenges, organizational challenges and lack of proper policy framework.[60] Skilled personnel plays a crucial role in quality management, enhanced compliance with international quality standards, and preventative and operational maintenance attitude necessary to ensure sustainable business.[64] In the absence of skilled work forces, companies fail to implement a sustainable business model.
Another major challenge to the effective implementation of sustainable business is organizational challenges. Organizational challenges to the implementation of sustainable business activities arise from the difficulties associated with the planning, implementation and evaluation of sustainable business models.
Companies leading the way in sustainable business practices can take advantage of sustainable revenue opportunities: according to the Department for Business, Innovation and Skills the UK green economy will grow by 4.9 to 5.5 percent a year by 2015,[67] and the average internal rate of return on energy efficiency investments for large businesses is 48%.[68] A 2013 survey suggests that demand for green products appears to be increasing: 27% of respondents said they are more likely to buy a sustainable product and/or service than 5 years ago.[69] Furthermore, sustainable business practices may attract talent and generate tax breaks.[70]
See also
- B4E Business for the Environment – International conference for business and environment dialogue
- Green America – US non-profit organization
- B Corporation (certification) – Social and environmental certification of for-profit companies
- Bottom of the pyramid – Socio-economic group
- Carbon Trust – UK non-profit climate change consultancy
- Clean Edge – Publisher of thematic stock indexes tracking clean energy, transportation, water, and the grid
- Clean Energy Trends – Energy development
- Clean Tech Nation – 2012 book by Ron Pernick and Clint Wilder
- Cleaner production – Preventive, company-specific environmental protection initiative
- Conscious business – Business concept
- Corporate sustainability – Business strategy that focuses on sustainability as a core aspect of the business
- Externality – In economics, an imposed cost or benefit
- Gort cloud
- Green brands – Potentially sustainable brands
- Sustainable MBA
- Low carbon economy– Economy based on energy sources with low levels of greenhouse gas emissions
- The Natural Step – Foundation
- Net Impact – company
- Renewable energy commercialization – Deployment of technologies harnessing easily replenished natural resources
- Renewable energy industry – Electric energy utility industry
- Sustainable Business Network – Social enterprise in Auckland, New Zealand
- Sustainable finance – Financial regulations, standards, norms and products that pursue an environmental objective.
- Worldchanging – nonprofit publisher
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External links
- Sustainable Business Ideas For Eco Conscious Entrepreneurs
- David O'Brien Centre for Sustainable Enterprise, Concordia University, Montreal
- Erb Institute for Global Sustainable Enterprise at the University of Michigan
- Center for Sustainable Global Enterprise at Cornell University
- Natural Resources Defense Council
- Sustainable Business Models - On the New Economy
- Magazine MN| Sustainable Business and Eco-innovations
- Sustainability-focused consumer business reviews