A new framework for implementing corporate sustainability

With growing sensitivity toward social, environmental, and economic issues and shareholder concerns, companies are increasingly striving to become better corporate citizens. Executives recognize that long-term economic growth is not possible unless that growth is socially and environmentally sustainable. A balance between economic progress, social responsibility, and environmental protection, sometimes referred to as the triple bottom line, can lead to competitive advantage. Through an examination of processes and products, companies can more broadly assess their impact on the environment, society, and economy, and find the intersection between improving sustainability impacts and increased long-term financial performance. To aid executives in achieving sustainability, this chapter will:

* Define the principles of sustainability

* Identify important stakeholder relationships

* Introduce a framework—the Corporate Sustainability Model—to guide managers in measuring and managing sustainability performance. This framework will be the basis for the remainder of the book and provides a tool for the implementation of corporate sustainability and the evaluation of corporate impacts

The evaluation of social, economic, and environmental impacts of organizational actions is necessary to make effective operational and capital investment decisions that positively impact organizational objectives and satisfy the objectives of multiple stakeholders. In many cases, reducing these impacts increases long-term corporate profitability through higher production yields and improved product quality. Novo Nordisk, the global Danish-based healthcare company specializing in diabetes care, strives to conduct its business in a financially responsible (profitable for the long-term), socially responsible (patients first), and environmentally responsible (doing more with less) way. The aim is to ensure long-term profitability by minimizing any negative impacts from business activities and maximizing the positive footprint from its global operations: improved health, employment, economic prosperity, and social equity (see Fig. 1.1).

There is growing interest among the business community in the development and implementation of sound, proactive sustainability strategies, including significantly increased stakeholder engagement. The financial payoff of a proactive sustainability strategy can be substantial. By addressing the nonfinancial aspects of business, companies can improve the bottom line and earn superior returns. The Dow Chemical Company, a global diversified chemical company, focuses on manufacturing efficiency inside the company while maximizing the contributions of Dow products to improve efficiency and expand affordable alternatives. Dow's manufacturing energy intensity has improved more than 40% since 1990, saving the company a cumulative US$24 billion. Dow is committed to bringing solutions to the challenge of climate change by producing products that help others reduce greenhouse gas emissions, such as lightweight plastics for automobiles and insulation for energy efficient homes and appliances.

Henkel International, a German-based manufacturer of laundry and homecare products, beauty care, and adhesive technologies, has developed a sustainability strategy to create more value for its customers and consumers, for the communities it operates in, and for the company—at a reduced ecological footprint. Henkel concentrates its activities along the value chain on six focal areas that ref lect the challenges of sustainable development as they relate to Henkel's operations. Figure 1.2 presents Henkel's six focal areas with five-year targets for 2015. Focal areas are subdivided into two dimensions—"more value" and "reduced footprint". To accomplish these, the company uses innovations, products, and technologies, but recognizes that these dimensions must be ever-present in the minds and day-to-day actions of around 47,000 employees.

To become a leader in sustainability, it is important to articulate what sustainability is, develop processes to promote sustainability throughout the corporation, measure performance on sustainability, and ultimately link this to corporate financial performance. Corporate citizenship is an important driver for building trust, attracting and retaining employees, and obtaining a "license to operate" within communities. However, corporate citizenship is much more than charitable donations and public relations—it's the way the company integrates sustainability principles with everyday business operations and policies, and then translates it all into bottom-line results.

For sustainability to be long-lasting and useful, it must be representative of and integrated into day-to-day corporate activities and corporate performance. If it is seen only as an attempt to provide effective public relations, it does not create long-term value and can even be a value destroyer. The key is integrating sustainability into business decisions, and identifying, measuring, and reporting (both internally and externally) the present and future impacts of products, services, processes, and activities. In fact, this book is all about the integration of sustainability into corporate operations to simultaneously achieve increases in social, environmental, economic, and financial performance.

What is sustainability?

To help understand what sustainability is in the context of corporate responsibility, we have broken it down into nine principles (see Table 1.1). These principles have three attributes:

1. They make the definition of sustainability more precise

2. They can be integrated into day-to-day management decision processes and into operational and capital investment decision-making

3. They can be quantified and monetized

These nine principles of sustainability will be used as a foundation throughout this book. They highlight what is important in managing stakeholder impacts (i.e. the impact of company products,...