In the broadest sense, sustainability refers to the ability to maintain or support a process continuously over time. In business and policy contexts, sustainability seeks to prevent the depletion of natural or physical resources so that they will remain available for the long term.
Key Takeaways
- Sustainability is the ability to maintain or support a process over time.
- It often encompasses three core concepts: economic, environmental, and social aspects.
- Many businesses and governments are committed to sustainable goals, such as reducing their environmental footprint and conserving resources.
- Some investors actively embrace sustainability investments, also known as “green investments.”
- Skeptics have accused some companies of “greenwashing,” a practice of misleading the public to make a business seem more environmentally friendly than it is.
How Sustainability Works
Sustainable policies emphasize the future effect of any given policy or business practice on humans, ecosystems, and the wider economy. Without major changes to the way the planet is run, it is believed it will suffer irreparable damage.
With rising concerns about climate change, biodiversity loss, and pollution, the world has shifted towards sustainable practices and policies, primarily through the implementation of sustainable business practices and increased investments in green technology.
3 Pillars of Sustainability
Sustainability is often broken down into three pillars: economic, environmental, and social—also known as profits, planet, and people.
Economic Sustainability
Economic sustainability focuses on conserving the natural resources that provide physical inputs for economic production, including both renewable and exhaustible inputs.
Environmental Sustainability
It emphasizes maintaining life support systems, such as the atmosphere or soil, that are crucial for economic production and human life.
Social Sustainability
Social sustainability includes efforts to eradicate poverty and hunger, as well as combat inequality, emphasizing human effects of economic systems.
The United Nations’ 1987 report defined sustainable development as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”
Corporate Sustainability
In business contexts, sustainability refers to more than just environmentalism. It’s about balancing long-term benefits with immediate returns, striving for inclusive and environmentally sound objectives.
Real-World Examples
- Walmart has pledged zero emissions by 2040.
- Morgan Stanley has committed to net-zero financed emissions by 2050.
- Google aims to operate carbon-free by 2030.
Cost Cutting and Greenwashing
Some companies move parts of their business to less-regulated markets to obtain cheaper labor, making it harder to evaluate their sustainability practices. This can sometimes lead to “greenwashing,” creating a false impression of environmental friendliness.
Challenges and Benefits of Business Sustainability
Challenges
- Difficulty in understanding individual firm impact.
- Challenges in ranking the environmental impact of activities.
- Unpredictability in how economic agents respond to changing incentives.
Benefits
Using resources sustainably improves business viability, saves on costs, and enhances public image. Government tax incentives may also be available for adopting certain sustainability practices. Investors increasingly value the ethical dimensions of firms, often willing to pay a premium for shares in sustainably-minded companies.
Creating a Sustainable Business Strategy
Steps to Integration
- Identify Specific Shortcomings: Analyze areas like waste generation or harmful hiring practices.
- Set Goals and Metrics: Establish target objectives and measurable criteria to track progress.
- Implement and Assess: Execute strategies and continuously re-evaluate to align with evolving goals.
Real-World Example: Unilever
Unilever serves as a successful example of implementing sustainability strategies. Through its Unilever Sustainable Living Plan, the company reduced its environmental impact while enhancing employee fairness, ultimately saving over 1 billion euros from 2008 to 2018.
Most Sustainable Companies
Refer to research from Corporate Knights for an annually updated list of the top sustainable companies globally, including names like Vestas Wind Systems and Schneider Electric.
Conclusion: The Bottom Line
As consumers become more environmentally conscious, businesses are finding ways to reduce their environmental impact. Sustainability practices not only highlight social benefits but also attract customers and investors, driving the long-term success of the business.
Related Terms: greenwashing, economic sustainability, environmental sustainability, social equity, triple bottom line.
References
- World Commission on Environment and Development. “Report of the World Commission on Environment and Development: Our Common Future”, Page 16.
- University of California Los Angeles. “What Is Sustainability?”
- Harvard Business School. “What Does Sustainability Mean in Business?”
- Walmart. “Climate Change”.
- Morgan Stanley. “Morgan Stanley Announces Commitment to Reach Net-Zero Financed Emissions by 2050”.
- Google. “We Must Help Build a More Sustainable Future for Everyone”.
- Economic Policy Institute. “Truth and Consequences of Offshoring”.
- Lartey, Theophilus A., et al. Environmental Sustainability Practices and Offshoring Activities of Multinational Corporations Across Emerging and Developed Markets. *International Business Review,*vol. 30, no. 5, 2021, pp. 101789.
- Santa Fe Institute. “The Complexity of Sustainability and Investing”.
- BlackRock. “Sustainability Goes Mainstream”.
- Securities and Exchange Commission. “Chocolate-Covered Cicadas”.
- Bloomberg News. “Beware of ‘ESG Bubble,’ Says Ex-Chair of World’s Biggest Pension”.
- Bonnefon, Jean-Francois. Do Investors Care About Corporate Externalities? Experimental Evidence. *HEC Paris Research Paper No. FIN-2019-1350,*September 2019, pp. 1-48.
- Harvard Business Review. “The Investor Revolution”.
- Principles for Responsible Investment. “Signatory Directory”.
- International Institute for Management Development. “Why All Businesses Should Embrace Sustainability”.
- Unilever. “Four Ways that Sustainability Has Made Us a Stronger Business”.
- Corporate Knights. “The 100 Most Sustainable Corporations of 2022”.
