From Tima's Desk: What Is Business Sustainability?
Dr. Tima Bansal, NBS's Executive Director, shares her observations about business sustainability.
Why Am I So Often Asked: What Is Business Sustainability?
I am often asked, “what do you mean by business sustainability?” I hear this question from almost everyone, including business leaders, students, and even my academic colleagues who study sustainability.
I find it puzzling that this concept continues to create confusion. Terms like ‘leadership’ or ‘innovation’ do not seem to create such angst, even though the term ‘sustainability’ is grounded in a commonly accepted definition and these other concepts are not. Sustainable development is development that “meets the needs of present generations without compromising the needs of future generations” (WCED, 1987).
This definition emphasizes that business must consider the following in their operations: social equity, short and long term thinking, and trade-offs between using resources now or later. These implications are often overlooked, ignored, or misunderstood.
Why the term ‘sustainability’ is confusing…
I think part of the problem people have is that the word ‘sustainability’ is commonly used in other business contexts, including to describe sustainable competitive advantage and sustained growth. I gave a talk recently to an audience at an Australian business school. When I asked audience members to define sustainable development, six people responded, each with different definitions. Only one person spoke to the prosperity of future generations. Several people described business sustainability in terms of sustained organizational profits and success —which can actually be at odds with sustainable development.
The other part of the problem with the word ‘sustainability’ is that that the definition— “meet[ing] the needs of present generations without compromising the needs of future generations.” — seems unclear and its guidance to companies seems vague and unspecific. What does it mean for a company to assure the prosperity of future generations? Business sustainability seems more like inspiration than aspiration.
…but other concepts aren’t equivalent
People often find it easier to translate business sustainability to corporate social responsibility (CSR), shared value, the triple bottom line, or just managing environmental impacts. For example, when Shell Oil describes what sustainability means to them, they confuse it with responsibility and the triple bottom line: “Sustainability at Shell means providing energy in a responsible manner, respecting people, their safety and the environment.”
These other concepts differ from sustainability in important ways.
CSR speaks to the corporation’s ethical responsibilities, whereas business sustainability speaks to sustaining systems over the long run. However, what is ethical for one person is not necessarily ethical for another. Some executives feel their firm is acting ethically by abiding with laws; others feel their firm must often go beyond the law’s requirements. For some managers, being responsible requires offering the minimum wage; to others, it means offering the higher living wage.
Furthermore, CSR does not speak to equity across generations. When Nike announced its woven FlyKnit, it claimed to be responsible for creating fewer wasteful offcuts. I agree that the action is responsible, but I am not sure it is necessarily sustainable if Nike intends to sell more sneakers, which consumes more resources in the long run.
Shared value argues that companies can generate value for the firm and society simultaneously. Like CSR, it too ignores the importance of time. Creating shared value often takes a long time, but many businesses are unable to see very far into the future.
Sustainability is also distinct from the triple bottom line, which simply requires businesses to consider three ‘bottom lines’ – social, environmental, and financial performance. However, just considering the three bottom lines, does not offer guidance on how to manage those bottom lines or make difficult trade offs. How should Nike choose between selling more sneakers (more profits) or fewer sneakers (smaller environmental footprint). How should Shell Oil decide between providing more energy to people to help them live a better life (and generating profits) and drilling in the sensitive Arctic ecosystem?
Making “sustainability” meaningful for business
“Meeting the needs of present generations without compromising the needs of future generations.” While sustainability’s definition can seem ambiguous, I believe that it can offer corporate guidance and a vision of a prosperous future.
It is important to recognize that this definition applies to the entire economy, not to specific organizations. A single organization cannot secure the prosperity of future generations; every single firm consumes resources and generates waste. But collectively, organizations can ensure their wastes become the feedstock for other industrial processes – what is often called the circular economy. So, in terms of specific practices, this means that organizations should seek to source from renewable sources and find organizations that can productively use their wastes.
Organizations must consider how their operations fit within the larger industrial ecosystem. If executives see their organization as part of a larger system, then they can see that they must collaborate to create a sustainable system.
Moving from a short-term business logic to a long-term systems logic
I admit that business sustainability is not a simple, straight forward concept. It requires systems thinking, which will be the topic of future musings from my desk. I also acknowledge that it will be some time before we move from short-term business logic to a long-term systems logic. However, I am reassured that executives and academics alike are increasingly more open to this perspective.
I look forward to the day when I will no longer be asked: “So, what do you really mean by business sustainability?”
Continuing the conversation
I would appreciate hearing your reaction to the ongoing question of ‘what is business sustainability’. Please feel free to message me (@TimaBansal) or the NBS community (@NBSnet) privately or publicly.