How Sustainability Is Becoming Mandatory for Corporations

In recent years, there has been a lot of discussion in corporate, academic and public arenas about the term ‘corporate sustainability’. The term has often been used as a synonym for ‘sustainable development’ or ‘corporate social responsibility’ (CSR). Essentially it represents a new paradigm that promotes a management model that offers an alternative to the more traditional profit maximization and growth models. This comes about primarily due to increasing popular concern for the social and environmental consequences of corporate actions and unrestricted growth. Hence, principles such as environmental protection and social justice are promoted to a status of concern, which they would not have had before.

There are many factors behind the increasing focus on corporate sustainability. These include the ever-shrinking role of government, increasing investor pressure, and a growing interest from consumers. A survey by Environics Research showed that more than one in five consumers reported having either rewarded or punished companies based on their perceived social performance. An increasingly competitive labour market has also made employees seek benefits over and above standard wages. This has led to companies having to offer better working conditions to retain skilled workers.

A case study was carried out by Lynes and Andrachuk (2008), in which they made a conceptual model of the influences, motivations and catalysts on a firm’s level of commitment towards corporate sustainability, and then applied it to the case of Scandinavian Airlines (SAS). Market mechanisms played a role, for example tradable permits for CO2 emissions and airport landing charges aimed at high-polluting aircraft. In this context, Sweden has embraced the use of charges for aircraft emissions to encourage airlines to adopt greener technology, and these charges are focused around SAS’s main hub in the Stockholm-Arlanda Airport. Another factor is the level of social awareness of employers in Scandinavia. Work is ‘humanized’, with environmental and social issues being on the forefront of many decisions. Within this context, SAS would not be alone in focusing on issues related to corporate sustainability. For SAS itself, senior managers felt that a positive environmental image added to the value of the company. As Lynes and Andrachuk put it, the catalysts for SAS were “the Scandinavian culture, the win–win situation of eco-efficiencies and the importance of image”.

Regulations are currently in place globally to ensure companies adopt corporate sustainability policies as part of their management strategy. However, companies themselves occasionally do so without external demand. For example, Canon introduced the corporate philosophy of ‘kyosei’ as part of its global corporate plan in 1988. A fear of brand damage has also influenced many companies’ decisions to pursue a corporate sustainability philosophy. For instance, Coca Cola were embroiled in claims regarding their conduct in India, which involved water pollution and over-extraction of groundwater, as well as claims that their product sold in India contained pesticide residue. This had serious consequences for their public image that they were forced to address.

Corporate sustainability looks set to become even more prevalent in the future. The Global Reporting Initiative is an international effort to create a shared framework for the voluntary reporting of the economic, social and environmental impact of a firm’s activities. With the benefits largely being industry specific, nevertheless the need for corporate sustainability is now firmly understood by many companies and legislators. It is imperative for firms to adapt to this new paradigm.

Adam Watson

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