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Q&A On Sustainable Business

What Is Sustainability? 

The most common definition is from a United Nations report, (Our Common Future, the Brundtland Report from 1987). This informally defines sustainability as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” (https://www.un.org/en/academic-impact/sustainability).

Is Sustainable Just Green?

Note that the idea of meeting the needs of the present without harming the future does not just relate to “green” (evironmental) issues. While considering the environment is clearly important to sustainability it is not enough. A pristine environment while people are starving is not what is meant by sustainability and indeed is clearly not sustainable as the people will destory the enviroment if they need to in order to feed their families. To achieve sustainability we must deliver on the environmental, social, and economic fronts. 

What Are The SDGS? 

The United Nations Sustainable Development Goals. These are part of an agenda for sustainable development — where the world is hoped to be by 2030. These cover a wide range of desirable goals ranging from SDG 1: No Poverty, SDG 17:Partnership For The Goals. Many of these are directly relevant to business, most obviously SDG12: Responsible Consumption and Production and SDG 8: Decent Work and Economic Growth.

Are The SDGs Just Hot Air?

No. While only the most optimistic person would believe that the SDGs will be achieved by 2030 they are a blueprint for where we want to go. The 17 goals have targets that explain in more detail what, for example, SDG1: No Poverty, means exactly. The targets then have indicators associated with them which have data backing them up. It isn’t perfect but it isn’t just hot air. The indicators can be checked against data to see where progress is being made. Look at Our World In Data‘s SDG Trackers, https://ourworldindata.org/sdgs.

What Is A Stakeholder? 

Sustainable business focuses on all stakeholders, and not just shareholders (owners). Thus, an important question revolves around identifying stakeholders. At its simplest, a stakeholder is an entity that impacts, or is impacted by, the organization. Typically, the stakeholders of a business will include its employees, adjacent communities, customers, owners, and government. Still, the list of potential stakeholders is much wider and can include hard-to-access entities, such as future generations.

What Is The Triple Bottom Line? 

The triple bottom line is an approach to assessing a business on more than just the traditional accounting bottom line of profits. The three bottom lines are typically described as Environmental, Social, and Economic. I.e., does a firm have a positive impact on these three dimensions. The snappier and roughly accurate 3 Ps — People, Planet and Profit — are often used as the three dimensions. See here for more.

Is Sustainable Business Just Charity? 

No, absolutely not. While businesses donating to charity simply because it is an important cause with no connection to the firm’s business can be a great thing, such donations are not sustainable. This is in the sense that such donations are not self-sufficient. Charity is something that occurs outside of the normal business model. In contrast, sustainable business integrates sustainability into the business model. Of course, a company can gain support from a community because of its charitable activities. If a company gives to a relevant charity this might appeal to customers, employees, or supply partners etc.. increasing support of the business and making the business better. But pure charity (think anonymous donations) is not sustainable business.

How Can Sustainable Business Make Money? 

There are many ways that sustainable business can make money. For example, treating employees better will typically motivate the employees and reduce the rate at which they leave. This improves the quality of work and reduces employee hiring and training costs. Similarly, treating customers well will keep them longer improving the profitability of the relationship. Treating stakeholders generally well will likely smooth relations with a local community or a regulator. See my MASB presentation, Demonstrating the Value of Sustainability Investments, here for more.

Will Sustainable Business Initiatives Always Make You Money? 

Sadly no. It is common on the internet to see assertions that doing something good for the world will inevitably be better for commercial success. This is usually too good to be true. Sustainable investments and strategies are like other business endeavors. When done well they can be commercially successful, but done thoughtlessly they probably won’t be. A positive way of looking at much of the sustainable business research is that while sustainable actions won’t necessarily payback, sometimes they can and other times they will not hurt the firm’s profits while helping society more generally. It is our job as business people (managers and professors) to try and help find ways that we can be sustainable in all senses which includes business commercial success. 

What Is Degrowth?

This is a controversial idea that requires radical systemic change to achieve sustainability. While it sounds like degrowth means shrinking the economy to benefit nature advocates for degrowth argue that isn’t the case. I personally, haven’t seen a clear exposition of what degrowth means and how it could be applied. For more see here.

Who Are Dark, Light, And Bright Greens?

Those interested in sustainability come from different perspectives.

Many people’s attitudes represent a mixture of attitudes. Indeed, as is true of pretty much everything, all views are imperfect on their own. Technology alone is unlikely to solve all the world’s problems if consumers don’t care about it. Consumer action (personal responsibility) matters but is likely to need some sort of technological and social progress to be truly effective.

How Can We Learn More About A Business’ Sustainability

Companies are increasingly reporting more on their sustainability. The quality of these reports has varied but progress is being made in standardizing terminology and measuring adequately. Accounting and related groups have set up bodies to advise on reporting. Non-financial reporting covers things like greenhouse gas emissions rather than costs and revenue (the core of financial reporting).

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