What is corporate sustainability? (Importance and how-to)

By Indeed Editorial Team

Updated 22 June 2022

Published 3 January 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Corporate sustainability is gaining more prominence over time as more organisations realise its importance and make sustainable corporate decisions to incorporate it. It involves applying natural resources with care, prioritising sustainable investments and protecting human rights. As a current or aspiring executive, understanding what corporate sustainability is can help you identify how to incorporate its principles. In this article, we discuss what corporate sustainability means, examine the principles of corporate sustainability, identify its differences from corporate social responsibility and navigate how to develop corporate sustainability strategies.

What is corporate sustainability?

The answer to 'what is corporate sustainability?' involves a company's steps towards realising long-term goals that benefit the environment and people. Corporate sustainability is a recent and evolving corporate management behaviour, and it's an alternative to the traditional profit and growth maximisation model. The concept recognises that corporate profitability and growth are vital, but it also acknowledges the necessity to pursue sustainable societal development goals. Some of these goals include social justice and equity, environmental protection and economic development. Corporate sustainability also involves carefully utilising resources and making future-oriented decisions.

Those seeking to pursue corporate sustainability typically start by developing and implementing a corporate sustainability strategy. The concept of corporate sustainability borrows ideas from four major concepts. These concepts include:

  • Sustainable development: This lists the performance areas that a business can address and contributes to its vision.

  • Corporate social responsibility: This introduces various ethical arguments.

  • Stakeholder theory: This is a theory that argues for a business to pursue sustainable goals.

  • Corporate accountability theory: This is a theory that shows why businesses report on performance in these areas to society.

Principles of corporate sustainability

You can categorise corporate sustainability into three vital principles, including:

1. Human rights and social justice

Corporate sustainability requires that the highest-ranking employees of companies recognise their effects on the people they employ and the communities around them with consideration for social justice and human rights. This includes committing to reasonable wages, a clean and safe environment, diversity and a just and ethical environment. It also includes ensuring that customers get the information they require to use the products safely. Human rights and social justice is the social aspect of corporate sustainability.

Related: Creating a healthy corporate culture

2. Natural resource extraction and waste

Reasonable use of natural resources is another principle of corporate sustainability. Various manufacturing-based companies typically rely on natural resources like water, land and mineral resources. These resources commonly replenish themselves, but this doesn't justify their unreasonable use. It's vital for executives to ensure the companies they work for respect the resources' regeneration cycles by utilising them no faster than they regenerate. Adopting various recycling measures to prevent waste is also a vital step. This principle also includes efforts to reduce or eliminate greenhouse gas emissions, avoid toxic wastes and leverage green energy instead. It involves reducing the corporate carbon footprint.

3. Future-oriented thinking

Another aspect of corporate sustainability is future-oriented thinking. This principle involves executives ensuring that companies can thrive while making positive long-term impacts. It's common to seek immediate profits, leading to profitable decisions in the short term but having negative impacts in the long term. Corporate sustainability requires executives to make decisions that have long-term benefits instead. These high-ranking employees generally pursue long-term capital investment goals, but this principle extends the logic to societal, human and environmental investments. For example, companies are now switching to renewable energy instead of traditional sources because of its long-term sustainable benefits.

Related: What is strategic management and why is it important?

Differences between corporate sustainability and corporate social responsibility

People commonly mix corporate sustainability with corporate social responsibility, but there are vital distinctions between them. Corporate social responsibility is a broad term that describes actions or practices that advance environmental and social causes. It demonstrates a business's ethical duties and focuses more on current affairs than future needs. Corporate social responsibility also involves reflection on past achievements.

In contrast, corporate sustainability involves the practices and actions that impact surrounding communities and the environment positively. Unlike corporate social responsibility, it focuses on the future effects a company may have and encourages developing long-term social and environmental plans. Corporate sustainability focuses more on positive impacts for stakeholders.

Why is corporate sustainability vital?

Corporate sustainability is vital for multiple reasons, including:

Competitive advantage and improved brand image

Customers commonly factor in a company's environmental impact when considering who to patronise. They subsequently tend to patronise companies with excellent sustainable habits, making consistent corporate sustainability habits vital for increased patronage. As an executive, you may help the company you work for leverage this by demonstrating corporate sustainability steps in advertisements and on the company's website. Corporate sustainability also improves a company's brand image because stakeholders routinely judge businesses by their corporate values. Acts like corporate accountability, waste reduction and reasonable staff treatment help enhance the company's public perception.

Cost reduction

Applying sustainable corporate steps helps focus operational efforts and conserves resources. This increases employee productivity, leading to a reduction in the overall costs of production. For example, installing a geothermal heating and cooling system to reduce the building's heating yields long-term benefits despite its initial costs.

Compliance with regulations

Relevant authorities are constantly enacting various regulations to protect the environment, reduce excessive energy consumption and reduce the effects of climate change. This means that incorporating sustainable corporate habits into a company's activities ensures that it complies with various relevant environmental regulations. It also helps you remain in favourable conditions regarding new environmental regulations. These reduce operating risks and improve communication and discussion with decision-makers. Authorities also offer various incentives to companies that comply with various environmentally positive regulations and policies.

Attracting excellent employees

Young graduates typically desire to impact the world positively, leading them to select companies that show excellent corporate sustainability habits for employment. You can help improve talent acquisition by engaging in various corporate sustainable steps. Hiring these candidates can contribute to the business's success and help improve its public image.

Related: How to boost employee morale in 6 steps (plus tips)

Positive impact on shareholders

Company shareholders commonly see higher dividends because of corporate sustainability's profit increases and cost-saving effects. Sustainable habits also attract investors because of the company's positive public perception and regulatory compliance. This leads to improved investment in the company and subsequently more profits. Corporate sustainability also balances shareholder value without negatively impacting the stakeholder, contrary to traditional business models.

Fostering innovation

Corporate sustainability is also an excellent driver of innovation when redesigning products and services to meet social needs and environmental standards. In addition, you may notice that the company you work for sees rising consumer interest in sustainable products and services. This involves addressing numerous traditional challenges to attract sustainability-conscious customers.

How to develop a corporate sustainability strategy

Here are some of the necessary steps in building a strategy for corporate sustainability:

1. Engage your stakeholders

The first vital step when developing a corporate sustainability strategy is preparing a successful business case for sustainability. This is because you may face conflicts between corporate sustainability and competitiveness at this stage. An excellent business case focuses on connecting business benefits and sustainability initiatives. This stage also involves knowing a company's stakeholders to avoid adverse business relationship risks with them. Knowing and engaging with stakeholders assists you in identifying areas where they can collaborate to support the corporate sustainability strategy.

2. Understand your sustainability risks

The next step is outlining and prioritising the risks and opportunities you associate with the business's activities across several markets. Different industries have unique sustainability opportunities and challenges depending on where each company sources, produces and markets products. Identifying the areas of opportunities and challenges assists in focusing your efforts on the areas that can have the most impactful results. It also helps protect brand image, increase company operations and ensure compliance with current and future legislation. Undertaking a continuous materiality assessment is useful as it indicates whether you're targeting the correct areas and risks.

Related: How to perform a risk analysis (with tips)

3. Set targets and build partnerships

The best way to correctly implement your strategy is by setting reasonable targets and developing management plans to achieve each target. Gathering relevant data is necessary to understand the situation and aids in setting realistic targets. This information is also useful in determining the best management steps to realise targets. You may wish to facilitate partnerships to achieve business targets, which is fairly common. These partnerships can be with key stakeholders, government agencies, non-governmental organisations and waste management companies.

4. Measure and report

You can use applicable metrics to help you determine how consistently you're implementing the sustainability plans. There are various professional metrics and resources to track your sustainability strategies, including the Sustainable Development Goals (SDG) framework, which provides over 200 metrics. You can also report your progress to vital stakeholders to ensure transparency and accountability, increasing their confidence in the company.

5. Seek feedback and continually improve

Getting feedback from internal and external sources gives you a good perspective on current actions, their success and what steps you can improve on. Stakeholder feedback is crucial because stakeholders are your primary targets, as they're the ones the business impacts. You can set up meetings with them, share online feedback forms and organise outreach programmes to get their opinions.

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