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Telephone: +65-94522069
CORPORATE SUSTAINABILITY: WHAT IS IT AND WHERE DOES IT COME FROM?

CORPORATE SUSTAINABILITY: WHAT IS IT AND WHERE DOES IT COME FROM?

Combine sustainable development, corporate social responsibility, theory and transparency to stakeholders, and you have the four corporate sustainability foundations. It's an emerging theory adopted by managers as an alternative to the conventional paradigm of growth and benefit maximization.

There has been considerable debate about "corporate sustainability" in the business, academic, and mainstream press in recent years. This word is sometimes used in combination with other words such as "sustainable growth" and "corporate social responsibility" and in some cases as a synonym for them. But what is corporate sustainability, how does it relate to these other concepts, and why is it important? These questions are answered in this article.

What is corporate sustainability?

It is possible to consider corporate sustainability as a modern and changing model of corporate management. The word 'paradigm' is purposely used, in that corporate sustainability is an alternative to the conventional model of growth and benefit maximization. Although corporate sustainability recognizes the importance of corporate growth and profitability, it also requires the organization to follow societal objectives , especially those related to sustainable development: environmental conservation, social justice and equality, and economic development.

A analysis of the literature indicates that elements of four more developed principles are borrowed from the philosophy of corporate sustainability: 1) sustainable growth, 2) corporate social responsibility, 3) stakeholder theory, and 4) the principle of corporate responsibility. In Figure 1, the contributions of these four principles are illustrated. Each meaning, and its link to corporate sustainability, is addressed below.

1) Sustainable Development

Sustainable development is a broad, dialectical concept that combines environmental conservation and social justice with the need for economic growth. In Our Shared Future, a book published by the World Commission for Environment and Development (WCED), the concept was first popularized in 1987. Sustainable development has been described by the WCED as development that meets the needs of present generations without sacrificing future generations ' ability to meet their needs. Or, as described in the book, it is "a process of change in which resource exploitation, investment direction, technological development orientation, and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations." Sustainable development is a broad concept in that it combines economics, social justice, the environment. It is a dialectical term in that it defies a concise empirical description, like justice, democracy, equity, and other significant social concepts, although one can sometimes point to examples that explain its values.

In The common vision (Oxford University Press, 1987), the WCED acknowledged that government regulators and policy makers could not simply be left to achieve sustainable growth. It agreed that there was a major role for industry to play. Although companies have always been the drivers of economic growth, the authors argued that they needed to be more involved in balancing this push with social justice and environmental conservation, partly because they were the cause of certain unsustainable situations, but also because they had access to the resources required to tackle the problems.

The response of industry to the WCED 's call came in stages as everyone struggled with what sustainable development might look like in reality. The International Chamber of Commerce, when it released its Business Charter for Sustainable Development in 1990, offered the first serious sign of support. The book Changing Direction, by Stephen Schmidheiny and the Sustainable Development Business Council (now the World Business Council for Sustainable Development; MIT Press, 1992) followed this in 1992.

Sustainable development (now the Sustainable Development Corporate Council of the World; MIT Press, 1992). Both publications concentrated on the role of companies in sustainable development, and the authors argued that it was as much an economic necessity as an environmental and social necessity to promote sustainable development. Since then, several corporate leaders and companies have come forward to express their support for sustainable development ideals.

There are two facets of the importance of sustainable development to corporate sustainability. Second , it helps to define the areas that businesses can concentrate on: environmental , social and economic efficiency. Second , it provides businesses, states, and civil society with a shared community aim to strive towards: natural, social , and economic sustainability. Sustainable development alone, however, does not provide the requisite reasons for why businesses should be concerned about these issues. Such claims stem from corporate social responsibility and the philosophy of stakeholders.

2) Corporate social responsibility

Corporate social responsibility ( CSR), like sustainable development, is also a wide, dialectical term. CSR deals with the role of business in society in the most general sense. The fundamental principle is that corporate managers have an ethical duty not only to behave exclusively in the interests of the shareholders or their own self-interest, but also to recognize and meet the needs of society. CSR can be seen as a debate in several respects, and what is generally in question is not whether corporate managers have an duty to consider the needs of society, but the degree to which such needs should be taken into account.

CSR has been around for longer as a philosophy than sustainable development or the other topics presented in this article. Nicholas Ebserstadt 's 1973 article traced the origins of CSR back to ancient Greece, when governing bodies developed codes of conduct for entrepreneurs and merchants (Managing Corporate Social Responsibility, Little, Brown and Company, 1977). Ever since then, the role of business in society has been discussed. The modern age of CSR began with the publication in 1953 of the book Social Obligations of the Businessman by Howard Bowen, according to Archie B. Carroll, one of the most prolific writers on CSR. Many scholars have written on the subject since then. The key subject of these writings for the first few decades after 1953 was whether business managers had an ethical duty to acknowledge society's needs. By 1980, it was widely understood that this ethical duty was held by company administrators, and the emphasis turned on what CSR looked like in practice.

By offering ethical reasons as to why business managers can strive for sustainable growth, CSR contributes to corporate sustainability: if society in general agrees that sustainable development is a worthy aim, companies have an ethical duty to help society move in that direction.

3) Stakeholder theory

The theory of stakeholders, which is short for the firm's stakeholder theory, is a relatively new idea. It was first made famous by R. In his 1984 book Strategic Management: A Stakeholder Strategy, written by Edward Freeman (Pitman Books, Boston, Mass, 1984). Freeman defined a stakeholder as "any group or individual that can influence or is impacted by the accomplishment of the goals of the organization." The fundamental principle of stakeholder theory is that the better your relationships with other external parties, the easier it will be to achieve your corporate business goals; the worse your relationships, the harder they will be. Strong stakeholder relationships are those that are built on trust, respect, and cooperation. Unlike CSR, which is mainly a metaphysical idea, the principle of stakeholders was initially, and is still predominantly, a term of strategic management. In order to build a competitive advantage, the stakeholder principle seeks to help businesses improve partnerships with external groups. Identifying their stakeholders is one of the first obstacles for businesses. There seems to be general agreement among businesses that certain parties, shareholders and investors, staff, consumers, and suppliers are stakeholders. However, beyond these, it becomes more difficult because there are no specific stakeholder description requirements. Most scholars believe that there must be a way of distinguishing stakeholders from non-stakeholders if the word 'stakeholder' is to be meaningful.

Some scholars also indicated that those who have an interest in the operations of the company are stakeholders, something at risk. Other writers have indicated that everybody is a stakeholder if you consider the global consequences of business, such as climate change or cultural changes due to marketing and advertisement. Currently, the problem of eligibility conditions for stakeholder status is being discussed.

The next task for corporate managers, considering the key stakeholders have been identified, is to establish strategies for coping with them. This is a challenge because various groups of stakeholders may have different objectives , goals, and demands, and often do so. Shareholders and investors want the best return on their investments; workers want safe jobs, sustainable wages and job security; consumers want products and services of quality at fair prices; local governments want community investment; regulators want to comply completely with the relevant regulations. There is a general understanding, however, that the priorities of economic prosperity , environmental security , and social justice are similar among several groups of stakeholders. Few organisations, while they might address the degree of priority or urgency, will argue against these objectives.

The contribution to corporate sustainability of the stakeholder principle is the incorporation of business reasons as to why corporations should work for sustainable growth. The theory of stakeholders suggests that operating in this direction is in the company's own best economic interest, since doing so would improve its relationship with stakeholders, which in turn would help the company achieve its business goals.

4) Corporate Accountability

Corporate accountability is the fourth and final principle which underlies corporate sustainability. Accountability is the legal or ethical duty to provide an account or account for the conduct for which one is held liable. Accountability varies from liability in that accountability refers to one's obligation to behave in a certain manner, while accountability refers to one's obligation to clarify, explain, or report on one's behavior.

There are several different accountability relationships in the corporate world, but the important one is the relationship between corporate management and shareholders in the sense of this article. This relationship is based on the fiduciary model, which in turn is based on the philosophy of agencies and agency law, in which the 'client' is corporate management and the 'principal' is the shareholders. This arrangement can be seen as a contract in which the principal entrusts capital to the agent and the agent is accountable for using the capital in the best interest of the principal. The agent is therefore kept responsible for how the money is used and the return on the investment by the principal.

There is no need to limit corporate responsibility to the conventional fiduciary model, nor only to the partnership between corporate management and shareholders. As a matter of daily business, corporations enter into contracts (both explicit and implicit) with other stakeholder groups, and these contractual agreements can serve as the basis for accountability relationships. Companies seeking environmental permits and approvals from regulators for the operation of facilities , for example, are also held responsible by regulators as to whether the approval terms are being met. Social contract theory advocates also claim that in return for good conduct, businesses are granted a 'license to operate' by government, and as such, businesses should be accountable for their performance to society.

The contribution of the principle of corporate responsibility to corporate sustainability is that it helps to establish the essence of corporate managers' interaction with the rest of society. It also sets out the reasons as to why, not just financial results, businesses should report on their environmental, social , and economic results. In 1997, John Elkington of Sustain Capacity, the UK consultancy, referred to this type of environmental, social and economic performance accounting as 'triple bottom line' reporting.

A modern and emerging model of business management is business sustainability. Although the concept recognizes the need for sustainability, it differs from the conventional paradigm of growth and benefit maximization by putting a much greater focus on environmental, social , and economic success and reporting on this success by the public.

From four other principles, corporate sustainability borrows elements. Sustainable development lays out the areas of success that corporations can concentrate on, and also contributes to the corporation's vision and societal priorities, namely environmental sustainability, social justice and equality, and economic development. Ethical arguments apply to corporate social responsibility and the philosophy of stakeholders offers business arguments as to why businesses should work towards these objectives. Corporate responsibility offers the reasoning as to why firms should report on their success in these fields to society.

Not all businesses actually adhere to the ideals of corporate sustainability and, at least not willingly, it is doubtful that all will do so. A large number of businesses, however, have made public contributions to the conservation of the environment, social justice and equality, as well as economic growth. Their number is still rising. If shareholders and other stakeholders endorse and reward companies that perform their activities in the spirit of sustainability, this pattern will be strengthened.