The political theorist John H. Schaar opined, “The future is not some place we are going to, but one we are creating.” Schaar argues that every individual must make responsible choices in the way they act and react to situations: “the paths are not to be found, but made, and the activity of making them changes both the maker and the destinations.”
Choice is the cornerstone upon which a sound market economy is built. The element of choice can determine the health of an economy. It brings benefits to both customer and enterprise.
Responsibility is a pre-requisite for choice. It is far too simplistic to turn towards government and expect action while concurrently ignoring the need to be responsible and socially-engaged individuals.
Sustainable development is a concept which aims to utilise resources to satisfy human needs without damaging the environment or hindering future use of essential and finite resources.
On an environmental level, firms may adopt green policies which can reduce carbon emissions and make more effective use of resources such as water and energy. These policies may be supported by other social measures which support a stable work-life balance, corporate citizenship and ethical entrepreneurship. .
Such practices were traditionally viewed as being costly and ineffective; eating away at hard earned profits. Nonetheless, issues of sustainability are becoming dominant factors determining the long-term success of the enterprise.
A joint-study by Professors Robert Eccles, Ioannis Ioannou and George Serafeim from the Harvard Business School and the London Business School (University of London) concluded that sustainability is an “essential ingredient for a company’s long-term success”. They compared 90 firms which can be classified as highly sustainable with another 90 firms which have yet to adopt methods to make the firm more sustainable.
The study discovered that high-sustainability organisations had a structure which took into account environmental and social factors in addition to financial health. This led to a greater focus on customer satisfaction and customer care – factors which affect the way a company relates to its customers and the way it is perceived by the public.
Companies which support sustainable development engage more actively with stakeholders such as customers, employees and civil society. Their strategy is viewed as being more long-term oriented and thus they are able to secure more long-term investors.
The aforementioned study also discovered that high-sustainability firms outperformed low-sustainability firms in financial terms. This runs counter to the commonly held perception that sustainability measures erode competitiveness.
Governments have detected this reluctance and thus new regulation has been introduced to legally coerce firms into adopting sustainable measures. In the current environmental and regulatory climate there seems to be no alternative to sustainable development.
Customers have become more conscious of their choices and have developed new expectations based on these new realities. Consumers are increasingly concerned with making ethical choices and having as little a negative impact as possible on society and the environment. Thus, adopting sustainable measures adds to the competitive advantage of a firm.
In this ground breaking study, Eccles, Ioannou and Serafeim conclude that sustainability is “the key to creating value for shareholders and all other stakeholders over the long term, thus ensuring the sustainability of the company itself”.
Making the quantum leap may be difficult; but the alternative seems to have far too many negative consequences to be worth contemplating.
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The author holds a Masters of Arts in International Relations and studied Management and Public Policy.