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Wal-Mart, McDonald’s, Starbucks, and Google, no matter how genuine they might be or how embedded sustainability might be internally, can only push the envelope on sustainability if they facilitate change among multiple, highly interconnected actors in their supply chain and industry. Business sustainability strategies run the gamut, but the ones that do produce results are both reasonable in scope and able to be measured, providing demonstrable proof of their environmental impact. Incidentally, many firms do well with this strategy partly because of a number of third party ranking bodies that tend to be more attracted to key initiatives undertaken by the firm in contrast to the extent to which the firm lives and breathes sustainability. Established in the late 1970s, the company was so transformative in its business model that it single-handedly convinced over 800 Egyptian farmers to transition their practices to organic cultivation in exchange for guaranteed access to the European market. We can see similar types of initiatives in the social realm as well. I would love to say, “It’s simple, really!” but alas, if mastering global sustainability was simple – well, then, there would be no need for writing this article at all. Unlike companies adopting the third strategy where sustainability related capabilities are confined to one department or small group of employees, capabilities are often at the firm level, crossing functional areas as employees, in their daily behaviour, interact in ways that create innovative forms of value for consumers and other stakeholders. At Next Now Strategies, we help organizations and leaders drive growth, profitability and trust through value-led strategies that keep our planet and society in balance. One has to have a sense of humour to not balk at the company’s initiative to raise money for child food education by selling sugar-laden cookies through their Smile Cookie Program. When students of business want to know what makes a business tick, they typically turn to its strategy. But a key difference from the fourth strategy is that their focus wasn’t just on embedding sustainability, it was about rewriting the regulations associated with the carpet industry by demonstrating that more sustainable modes of manufacturing carpet were possible. If the company is going to effectively revolutionize practices in its supply chain, its industry, or even great society, it is going to require a very strong trusting relationship with key players that want to take the leap to more sustainable practices. is a registered trademark of Alterity, Inc., registered in the U.S. Privacy & Disclaimers, Learn more about Acctivate Inventory Management Software by giving us a call at. Culturally, employees are likely unaware of any positioning around sustainability and more directly associate any improvements to representing an important and natural part of business improvement. While there might be other factors that differentiate the firm in the marketplace (e.g. Oftentimes, companies that embed sustainability have a very strong culture where employees, feeling that they are part of something that aligns closely with their values, are more productive and committed to their work. Absent government regulation, natural resources such as a fish species, water or clean air would be depleted if companies behaved independently. When aligned, these three components produce the coveted sustainable competitive advantage, which is defined as a firm’s ability to persistently create more economic value than the marginal (breakeven) competitor in its product market,  Let's examine each in turn. Meta-organizations are unique networks of organizations in that they organize actions around a system-level goal but are not bound by formal authority relations. This might include particular individuals employed by the firm (e.g. These companies often refer to how close they are with their fellow employees, how collaborative they are in their work, and how there is very little politics that erode workplace performance. They may have a particular product that is so revolutionary in its benefit for the environment or consumer health that, despite their other operations, represents a highly innovative capability that could be replicated internally in the firm but is hard to replicate by competitors. Performance evaluations are tied to cost reductions efforts that just so happen to be associated with environmental system improvements for instance, but there is very little in the way of accountability towards social and ecological goals across levels of the business. SEKEM’s own ‘mother farm’ was so advanced in its agricultural practices environmentally and socially that the Egyptian government established regulatory policies in the agriculture sector based partly on what SEKEM proved was possible. As a result, companies adopting this strategy will not necessarily lay claim that their positioning embodies sustainability but they will tout their efforts to make this a core part of their strategy by reflecting on the resources allocated to efforts to challenge certain sections of their products/services and operations. But what is unique and difficult to imitate in these organizations are the very things that contribute to system erosion. Other companies may develop expertise associated with resource efficiency that competitors have been unable to replicate. The organizations involved range from businesses, to non-governmental organizations, to community based organizations and even governmental bodies. Sustainability strategies are plans and efforts that a business puts into place in order to remain a going concern. Another reason why rivalry must be lower is that companies need to collaborate to avoid the tragedy of the commons. In fact, their source of distinction represents a key erosion of social, ecological, and economic systems. Definition: Business Sustainability Business sustainability is a strategy that prioritizes the long term survival of a business and connected ecological, social and cultural systems. CIBC’s Run for the Cure, although a worthy cause, ignores how their everyday decisions associated with capital lending might actually be greasing the wheels of those companies making products that have shown linkages to cancer. **Make sure to scroll for links to several organizations helping businesses better their supply chain & business sustainability**. Sustainability might be isolated in an organization in a variety of ways. My name is Ally Long. Clorox, the consumer packaged goods company, launched a highly popular Greenworks line that represents an isolated brand in the minds of consumers. An imbalance between supply and demand is the direct cause of overproduction, and overproduction leads to waste. In their attempt to distinguish a firm between strategy 2 and 3, students of business need to examine to what extent these initiatives represent a substantial part of their strategy or, as the second strategy described, do they instead represent a means to mask the system degradation of their traditional operations. Corporate sustainability strategies. (2010) p. 10. Background. Marketing is important in conveying this image to outside actors but positioning is supported by strong evidence that supports these claims (e.g. But any smart student of business would be interested in distinguishing responses that negatively affect these systems. We have helped companies that are beginning sustainability programs to understand the value proposition, design internal structures, select key performance indicators, and navigate tracking and reporting options. But at least two leading CEOs have instructed governments in the jurisdiction that they were considering entering that any charging infrastructure must be universal and therefore usable by competing electric car companies. It is no longer good enough to have a set of sustainability initiatives or responsible business goals. A critical source of competitive advantage for companies adopting strategy 5 is their ability to foster relationships with key actors in its external environment. The Equator Principles is a similar platform through which major global banks, including CIBC and Royal Bank of Canada, agreed to prohibit any loaning of capital to projects in developing countries of the world that carry substantial social or environmental risks to its citizens. Dr. Tima Bansal is a Professor of Strategy at the Ivey Business School. A mining company, as another example, might take a much more comprehensive approach to community development surrounding one or two of their mines but relies predominately on donations and philanthropy on the remainder of their mines. Companies in the transformative strategy want to avoid these standoffs and establish a common standard that competitors can use as well. Any public criticism of the firm is deflected as managers vehemently deny any wrongdoing or responsibility. Even more lucrative is when government, always uneasy about setting harsh social and environmental regulation that might stifle growth and job creation, establishes regulation that is based on what the company has in fact proven to be possible, without the economic costs governments want to avoid. It’s the job of the analyst to put these initiatives together to pull out a overarching strategy that defines their positioning, core competencies, and internal culture and identity. More common though would be a particular positioning that very much relied on the erosion of social or ecological systems where denial of responsibility is oftentimes the only option. This is an important paradigm shift from strategies 1, 2, and 3 because employees of the company struggle to understand how the business could exist without sustainability filtered through their daily activities just like employees of strategies 1, 2, and 3 struggle to understand how sustainability could at all be relevant to their daily operations. The transformative strategy then can only be transformative if networks of actors are created. One response is to engage in philanthropic activities that are more associated with the impacts of their operations. In addition to combining forces to innovate, competitors and players along the supply chain (customers and suppliers)  often come together to self-regulate in ways that governments have struggled. Under the defense strategy, improvements are limited by an improvement ceiling because the process or product itself is oftentimes inherently unsustainable. Complexity is important when considering internal competencies because the higher the complexity of a given competence, the more difficult it is for a competitor to copy or substitute it. When you employ sustainability practices in your own region, likely no one will notice unless you openly share your vision or values. 2. Interface Carpets is a US-based carpet company that has pioneered a number of technologies that have revolutionized the once very toxic carpet industry. Third, sustainability might be isolated to a particular set of product lines where it represents a relatively small percentage of revenue. They have merely become more efficient or incrementally less impactful. Did you know that by 2025, 1.8 billion more citizens of Earth will join the global consumer class? The term sustainability or corporate social responsibility has grown increasingly prevalent in corporate boardrooms and on executive agendas. In response, CEOs regularly tout their efforts to “embed” or “weave” sustainability into their operations and culture as the ultimate commitment[v] while scholars and practitioners have offered a number of prescriptions to achieve this objective[vi]. Other examples include Interface Carpets, and Level Ground Trading. Today, more than 90 percent of CEOs state that sustainability is important to their company’s success, and companies develop sustainability strategies, market sustainable products and services, create positions such as chief sustainability officer, and publish sustainability reports for consumers, investors, activists, and the public at large. Food manufacturers have either developed their own highly sustainable products or they might purchase healthy brands such as PepsiCo’s purchase of Naked Juice. Business Sustainability Strategies: Delivering Value through the Business Model. Transforming an entire industry away from unsustainable practices, such as fishing in a remote coastal region, requires collaboration among large groups of fishing companies. Because change starts gradually, and even taking one step to become a more sustainable business, is still one step towards change. So whereas the company may be successful in creating a responsible image to broader society through philanthropic contributions, it's identity internally does not at all reflect sustainability. They command a premium price for their products but the philosophical value alignment they facilitate for their consumers justifies the price increase. The growing demand for "green" and "sustainable" products has created major new markets in which sharp-eyed entrepreneurs are reaping rewards. © 2020 Alterity, Inc. All rights reserved. Oftentimes companies, in the absence of core competencies in the area of sustainability, will acquire firms that have these competencies with the alleged intent to slowly integrate this way of thinking into its mainstream product lines (more often than not, this doesn’t actually happen). Open source innovation is a relatively new practice where multiple competitors join forces to innovate in ways that no individual company could possibly innovate. This helps them defend their operations because they can lay claim to the fact that they are at least redistributing some of the profit associated with these operations to various causes that work to stem their effects. This requires the sharing of important intellectual capital. Many companies adopting this strategy tend to be smaller simply because the market isn’t large enough to support the business. David Bennell outlines how to establish your reputation as a company focused on sustainability, manage supply chains more responsibly and effectively, create sustainable products and services, and reduce energy use, waste, toxic substances, and emissions. future success of their business and 80 percent saying that in 15 years a majority of companies globally will have incorporated sustainability [iii]. Internal processes, reward systems, performance evaluation and employee skill and training have virtually nothing to do with sustainability. Tim Hortons recently did this. Figure 1 illustrates these five strategies in the X axis alongside the guiding principle of philanthropy, business case, and paradox. In the past, only a small number of CFOs have gone public with a positive take on sustainability as a driver of business value (Kurt Kuehn, former CFO of UPS, comes to mind). profitability and competitiveness) while operating within the capacity, or contributing to the integrity, of social, economic, and ecological systems. A firm’s strategy can be determined using three factors:  1) its positioning in the marketplace relative to competitors, 2) its core competencies that differentiate it from those competitors, and 3) its underlying culture that clarifies to employees the underlying purpose and identity of the organization, supported by structures, processes and policies. Firms are playing a dominant role in society today. That said, research has shown that companies can be categorized into specific adoption levels of sustainability according to important organizational dimensions. You’ll need to evaluate your operations across a range of … Economic systems would encompass the global financial system, income equality, the free flow of goods and services while social systems might include things like the proper functioning of civil society, low poverty rates, the education or health systems, social justice, or the food system. Business sustainability is a business principle that is widely recognized as a critical strategic concern for … But over the last few decades amidst the rise in devastating natural disasters, labor scandals, massive oil spills, and trash-islands floating across the ocean, consumers AND businesses started paying attention. In fact, the existence of a sustainability department has been found to give employees a license to continue on with business as usual or, in some cases, to operate even more egregiously in their degradation of social, ecological, and economic systems. Although it may sound like it, sustainability in business is not purely altruistic. Patagonia, for instance, is a good example of a company that has clearly differentiated itself from competitors like North Face or Timberwolf. That is, consumers are loyal to the company because they can count on the fact that all products and services, and the operations used to support the design, manufacturing, and distribution of those products and services, reflect sustainability principles. One of the ways to do this is to consider the relevance of these responses to the core strategy and operations of the firm. Consider gun manufacturers, tobacco companies and weapons manufacturers, all of whom have developed strong competencies related to their products whether it be design innovation, the manufacturing process, or logistics. That said, some companies might develop competencies in their brand as stakeholders perceive a certain company as a leader in making incremental improvements to their impact. Ultimately, companies will often say that nothing they are doing is against the law and so they are doing nothing wrong. In summary, research has shown that companies respond to pressures for sustainable business practices in very different ways (see summary table in Exhibit 2), ranging from ignoring and defending against those pressures to aligning the broader objectives of the company and even the supply chain. Another example might be a manufacturing firm’s use of a new technology that cuts emissions by 90% such as Vale Inco’s supposed plans to use a carbon sequestration scheme in Sudbury, Ontario that would replace one of Canada’s largest smokestacks. QuickBooks Inventory Management Software | Acctivate. When Toyota came out with the Prius as the first hybrid vehicle, they demonstrated a highly lucrative core competency that competitors could not duplicate for quite some time. Inside companies, after years of saying, “Oh, the sustainability guys are taking care of that,” CFOs and financial execs in particular are at the table for real. Imagine that, organic farming in the middle of the desert. Why Is Sustainability Important? In a recent study, McKinsey concluded: “the choice for companies today is not if, but how, they should manage their sustainability activities”[iv] with 96 percent of CEOs believing that sustainability issues should be fully integrated into the strategy and operations of a company. The fourth strategy sees sustainability infiltrated throughout the firm where, unlike the previous strategy, sustainability is no longer relegated to a particular department among some isolated die-hard employees or reflected in one or two product lines but is instead present in all aspects of the business across all products and services and among most, if not all, employees. Each of these items can lead to a strategy type that a company will use to improve business operations for the long term. For example, companies that take business sustainability or CSR seriously would be figuring out how to be profitable while preserving biodiversity or, more impressively, contributing to the integrity of existing ecosystems. In other words, companies are starting to lose the argument that they are not responsible for system degradation and so want to show that they are responding to pressures of stakeholders, especially consumers. From a performance appraisal point of view, only a selected group of employees, managers and directors would be held accountable for performance indicators related to sustainability. Sustainable Business Strategies is a consultancy founded in 2005 by Andrew W. Savitz, author of The Triple Bottom Line and formerly a lead partner running PricewaterhouseCoopers’ sustainability consulting practice. Be Intentional About Sustainability. One of the ways to understand these differences is to consider them in the context of strategic adoption levels where sustainability in the firm varies according to its role in positioning the company in the marketplace, representing lucrative competencies that are difficult to imitate, and creating a particular culture and identity that aligns with sustainability. 1.8 billion more citizens of Earth will join the global consumer class, The Sustainability Accounting Standards Board (SASB), How to Become a Dropship Supplier in 5 Steps, The Foodservice Distribution Industry is Changing, Bill of materials (BOM), Kitting & Assemblies. The innovativeness of meta-organizations as alternative forms of organization to traditional hierarchical organizations bestows on them an advantage in coping with the complexity of sustainability. In the first strategy, sustainability and CSR are highly irrelevant to the firm’s strategy. For instance, the evolution of credit unions has isolated the original purpose of addressing gaps in finance in local communities yet represents only a small percentage of their core business operations that resemble the typical financial institution. The most common initiatives are related to reductions in energy and fuel use in manufacturing processes or a reduction in waste through an increase in resource efficiency coupled with an increase in recycling efforts. [ii] KPMG found that 95% of the top 250 companies report on sustainability. This can go as high up as a Vice-President as in the case of Centerra Gold where there is a VP – Sustainability & Environment. Ironically, the influx of specializations in sustainability in business schools inadvertently pushed mainstream professors to avoid thinking more critically about how their course might be partly responsible for some of the system level issues we’ve been seeing. The Guardian reported that The European Commission’s outlawing of subsidies for clean energy were largely requested by BP, Shell, Statoil and Total, and by trade associations representing oil and gas companies[vii]. Payday loan retailers can be classified under this strategy as well because their positioning as a source of capital for those consumers typically unable to get credit naturally positions the firm as an exploiter of vulnerable consumers. the business case). Unlike strategies 1and 2 then, the identity of employees and image to outside actors are aligned. In fact, the company itself struggles to figure out how they were able to develop these competencies. Yet despite the prevalence of sustainability and corporate social responsibility, there is tremendous variation in how companies have responded. The following two tabs change content below. But in most cases, the highest position tends to be at the director role as is the case at Loblaw Companies. But evidence in the last decade suggests otherwise. Big banks, at least in Canada, have avoided this low end market because, although legal, they do not want to position themselves in such a way that leads to outcomes that can be perceived by many as exploitative. When done successfully, the strategic benefits become quite lucrative for businesses that adopt this strategy. Steve Jobs), specific decision-making processes, unique products, a strong brand, innovation practices, intellectual property, highly valuable machinery or low cost operations. But if you are contributing to your environment and community in unsustainable ways, everyone will notice — and not all press is good press. That is, 20-30% of an employee’s daily routine might be associated with activities related to sustainability. First, positioning goes beyond marketing and represents a unique value proposition to consumers that distinguishes the firm from its competition. Part of this variation can be explained by the lack of standardized definitions available, leaving the movement open to various managerial interpretations that influence the type of responses by a given firm. A 2010 report from the Deloitte professional services, reported that while most companies saw an alignment between their overall business strategy and sustainability, many companies had a pronounced gap between their leaders’ aspirations for sustainability and the way that sustainability is realized within their organizations. Best practices in managing and measuring corporate social, environmental, and economic impacts (San Francisco, CA: Greenleaf Pub, 2008); Ethical Corporation, “How to embed corporate responsibility across different parts of your company”, 2009; S. Bartels, L. Papania and D. Papania, Network for Business Sustainability (NBS), “Embedding sustainability in organizational culture”, B. Willard, The sustainability champion’s guidebook (Vancouver: New Society Publishers, 2009), [vii], © 2018 Mike Valente, Ph.D. Unlike the previous strategy where companies feel that there is no need to adjust operations, the companies in this strategy work to lower their impact incrementally but avoid any serious reconsideration of their strategy. The era of stand-alone sustainability strategies, with subsequent integration of sustainability into company strategy, needs to end; the creation of resilient business strategies that take sustainability as their foundation needs to begin. The earth, on the other hand, is not expected to gain any more acreage at a whopping 197 million square miles — 71% of covered by water, and the remaining 29% by land. customer service), stakeholders consider the firm’s primary value proposition to be related to its commitment to sustainability. cit. While many “green” consultants focus primarily on helping clients “do good,” we are laser-focused on helping our clients “do well” through value-added sustainability strategies, best-in-class public policy insights, clean energy transaction development, stakeholder relationship management, and detailed market and issue analyses. Know what makes a business tick, they typically turn to its commitment sustainability! Innovativeness and high quality this requires change in the transformative strategy then can only be transformative networks... The top 250 companies report on sustainability strategies for sustainable business connects executives with MIT and. No interest in sustainability to be irrelevant to the external environment in which sharp-eyed entrepreneurs reaping... In philanthropic activities that are more associated with sustainability maximum results one common source of represents... 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