Why organizations [should] care about sustainability

Sustainability can provide many organizational benefits. Examples include

  • risk reduction
  • enhanced brand value
  • cost reductions
  • talent attraction
  • creation of competitive advantages
  • entrance into new markets
  • maintaining relevance to investors
  • launching new business models

There are several reasons for change, founded in fundamental ecological principles and economics, as well as evolving societal influences. At a foundational level, the global population is growing, affluence is increasing, and resources are limited, leading to increased geopolitical tensions over resources. Economic growth has outpaced resource efficiency gains. This has led to the increased use of more expensive energy sources, more conventional power plants, and climate change. Additionally, industrial processes tend to be linear, resulting in supplies at risk and waste production. Increases in demand have led to increasingly risky practices, leading to more catastrophic events, new regulations, balancing costs and risks of compliance, and forced supplier transparency. Prevalence of smart phones and social media means that information is shared widely and quickly. This affects consumer behavior and public awareness, potentially impacting brand name or employability.[1]

Businesses have become the dominant social institutions of our time. But with powerful social and political influence comes increased scrutiny from watchdog groups and individual stakeholders, making sustainability and corporate responsibility valuable business practices. Walmart, often maligned for what many viewed as corporate irresponsibility, has made significant changes in recent years. Walmart exceeds $400,000,000,000 in revenue, employs approximately 2,000,000 people, and has a reputation for strong influence on its supply chain, introduced its Supplier Sustainability Assessment Survey in 2009, which works to better protect the environment and labor rights in its supply chain.[2] Furthermore, Walmart has publicly established sustainability goals (Links to an external site.)Links to an external site. of being supplied by 100% renewable energy, to create zero waste, and to sell sustainable products.

Sustainable practices have the potential to create business value. Research suggests that CEOs primarily care about sustainability because of brand, trust, and reputation. Other factors include the potential for revenue growth and/or cost reduction, consumer demand, and personal motivation. To a lesser extent, employee engagement and recruiting, government regulation, business impact, and shareholder pressure are reasons CEOs care about sustainability.

In some cases, businesses need to rebuild their brand name following negative publicity. The Exxon Mobile Corporation and Nike are two examples. The Exxon Valdez oil spill was a widely publicized environmental catastrophe and poor working conditions in overseas Nike factories were also publicly scrutinized. Sustainable practices have helped improve public perceptions of these companies.[1]

Some entrepreneur’s found their businesses in sustainable practices. Molly Moon’s Ice Cream out of Seattle, Washington, is one example. Molly Moon’s business plan included providing 100% health care coverage for all employees; using local, organic, seasonal, and fresh ingredients; and for all waste coming from the business to be compostable. This business model created a brand name that has been very successful. Since the opening of her first shop in May 2008, the business has grown to include six shops across Seattle in addition to online merchandise and an ice cream truck that can be booked for birthdays, weddings, and other events.[3] Likewise, Hopworks Urban Brewery out of Portland, Oregon, is monikered Portland’s first Eco-Brewpub, along with the Hopworks BikeBar. This brewery uses organic, fresh, local ingredients and provides a family-friendly atmosphere. Their buildings are built and operated sustainably. They compost, use salvaged materials, operate on 100% renewable energy, are carbon-neutral, and use pervious pavers in the parking lot.[4] These examples highlight a growing number of businesses that have built a brand name on sustainable principles and established themselves in a corner of the market where the customer base values sustainability.

Striving to improve sustainability has become an important business practice. In 2011, more than 5,500 companies issued sustainability reports. CorporateRegister.com tracks corporate responsibility reports. At the time this was written, the directory included 63,870 reports across 12,299 companies. Timothy Mohin suggests that “the economic winners of tomorrow will be the innovators who find ways to do more with less.”[2] Sustainability really has become an integral part of successful businesses in the 21st century.

 

[1] Graf, P. 2014. The Business Case for Sustainability. Sustainability and Business Innovation. SAP.

[2] Mohin, T. J. 2012. Changing Business from the Inside Out: A Treehugger’s Guide to Working in Corporations. Greenleaf Publishing.

[3] Exclusive Interview with Ice Cream Entrepreneur Molly Moon. 2015. IceCreamProfits.com. http://www.icecreamprofits.com/interview-with-ice-cream-entrepreneur-molly-moon

[4] Green at HUB. 2014. Hopworks Urban Brewery. http://hopworksbeer.com/green-culture

 

This material is based upon work supported by the National Science Foundation under Grant No. DUE-1400699.

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Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the National Science Foundation.

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