The Importance of Corporate Sustainability and Stakeholder Engagement

Sustainability is “development that meets the needs of the present without compromising the ability for future generations to meet their own needs.” This is example of sustainability essays which shows a crucial role of Corporate Sustainability ans stakeholder-partnerships to achieve sustainability in business and social environment.

Traditionally, businesses have focused more on the two main areas, corporate growth and profitability. However, since 1987 the term sustainability has been used quite often due to a book of ‘Our Common Future’ published by the World Commission for Environment and Development (WCED). Sustainability should not be a responsibility of the government only because industries play an important role as they are partly the cause of the unsustainable conditions we face today. Industries and their stakeholders have the access to the resources that are required to tackle the problem of unsustainable future, therefore, “The real and strong corporate sustainability may be reached only through the synergy of the business and stakeholders.” However, sustainable development was not the only reason to adapt to sustainability. As a result, CSR was introduced for the companies to think about the impact their activities have on society. It was an ethical obligation to consider and it has been around us since 1953. Furthermore, in the 1980s society believed that it was worthwhile to show sustainable development goals within companies and which lead corporate managers to be ethically responsible to publish the CSR. In 1984 the emphasis was more on how a company interacts with its stakeholders, Freeman defines that the stronger your relationship with stakeholder the easier to meet organisation objectives. As we look closer to CSR and sustainable development, we realise that they come under a big umbrella called ‘Corporate Sustainability’.

The Importance of Corporate Sustainability in Corporations

Corporate sustainability (CS) is about approaching sustainability by implementing a process within the company to integrate their economic, social and environmental objectives into the business strategies and optimize the balance among all three. The three main pillars connected to corporate sustainability are social, environmental and economic, however, they are well known as the 3Ps, people, planet and profits and triple bottom line. The social factor will measure education, equity and access to social resourced such as health, quality of life and social capital. Environmental represents measures of natural resources such as air, water, and energy consumptions and the waste produced by a corporation through their activities. Economic variables look at the income, expenditures, taxes and employment.

It is important to adapt and address corporate sustainability as it provides new opportunities to focus on core business objectives such as reducing expenses at either manufacturing or commercial sites. Corporations adapting to sustainability will make a priority to reduce waste or use recyclable packaging rather than plastic. This is one of the most effective factors that damage our environment. Therefore, this will encourage the companies to waste less material or reuse the packaging in the production of goods, as a result, reduce their expenses because they will not need to buy extra material if they are careful with using the amount they have already bought and created less waste. For example, Amazon has reduced packaging waste by creating sustainable packaging by eliminating the use of hard plastic cases and plastic-coated wire ties in all of their packaging and has adapted to 100% recyclable packaging through their frustration-free packaging initiative. Similarly, studies have shown that industries can save 4% of costs by employing waste minimisation techniques.

Sustainability implementation can increase gain financially in terms of increased revenue and share value. As businesses start adapting to increase the quality of a product by adapting to sustainable packaging/products they will be able to satisfy their consumers with the certainty of their product, alternatively, increase their demand. There are opportunities for competitive advantage and increase profits by engaging in environment strategies. A research carried out by Bonini and Gorner suggests that because of sustainable product corporations can achieve a higher price and market shares. For example, General Electric, “the company reduced its greenhouse-gas emissions by 4% between 2004 and 2006, while revenue grew by 21%.”

It is believed that CS can lead to an improved brand image which can help corporations to grow. One example is when corporations such as those in the automotive industry make a priority to reduce ecological footprints generated by their product. Honda was able to realise that mineral fuels are limited, and the price of petroleum is rising due to its high impact on our environment and climate change. Therefore, they adapted to making cars with fuel-efficiency which in return generated higher sales for the company in 2008 than in 2007. Consumers were satisfied the way they adapted to the environmental concerns; therefore, consumers bought more Honda Civics and Fits in 2008, this led to an increase of 28% in Honda’s brand value since 2004.

The importance of corporate sustainability in corporations also carries the barriers to implement CS because adapting to corporate sustainability will not show the benefits straight away as it is a long-term perspective, it may take few years before you see the value gained from being sustainable in your operations. There are some situations were corporations decide not to continuously carry on with the sustainable operations which are a short-term implementation, therefore, they will not be able to fully discover the importance it carries. There are barriers in implementing sustainability, such as improved environmental sustainability is not valued in internal capital allocation decisions. This is because the implementation of internal mechanisms of an organisation does not respond to the environmental factors being valued at the core operation. Barriers also include the goals of the different departments being incongruences, such as the financial team and the sustainability team will not have well-aligned goals. These differences will make it hard for the corporation to achieve sustainable goals as they may not be able to get the teams together to engage in one project that might have a higher impact to adapt to the triple-bottom-line. Companies lack the knowledge to account for external environmental costs, they may be able to identify their impact and costs on the environment, however, they do not have the metrics that will indicate external risks and opportunities.

The Role of Stakeholders in Company's Culture and Processes

Stakeholders are everyone who has an interest in the corporation’s activities, strategies and development plans. Such stakeholder is customers, shareholder, suppliers, employees and communities. Stakeholders are often people who are impacted the most when a company decides to implement sustainability into their operations. The main stakeholder of a company is customers, employees and shareholders. As per research, BT believes that long term stakeholder value is best achieved through focusing on ‘triple bottom line’ in a corporation’s activities. There are two elements to cover in corporate sustainability, internal and external. Internal element is mainly about people within organisations such as employees and how they are treated within the organisation. However, the external is mostly about shareholders and customers as they are not internally involved within the business’s day to day activities.

Employees such as the HR team may be able to look at the internal and external elements as they will be able to foster employee commitment to engage with CS activities and then align them with stakeholder values internally and externally. HR management plays an important role in corporate sustainability due to the activities they are involved in the day to day business. For example, they can impact CS by implementing value-based recruitment and selection. This can also include the training and development of employees aligned with the firm’s CS strategy. “HRM can incentivize and reward employees and offering company-sponsored volunteerism and service-learning programs aimed at promoting social responsibility and sustainable development.”

Shareholders play an important part in convincing the company to adapt and implement sustainable strategy into their day-to-day running of the business. Shareholders have the right to vote at the annual general meeting and they will be able to give their opinion on how the business is running, therefore, they can speak up regarding implementing corporate sustainability in the company. Shareholders can also influence the company in many ways outside the general meeting. Majority shareholders communicate their decision and influence the company to adapt to the CS, the majority of shareholders will have a long-term perspective as they want to keep their shares in the company until they gain a profitable return. However, a minority shareholder may only look for short-term profitability of their shares in the company, hence, it plays a very less influencing role in the corporate sustainability of the company.

Customers are the largest group of stakeholders for most of the companies in the UK and around the world, they influence the productivity of companies and their actions towards our planet. They are always at the heart of a business as the main reason a business is still running is due to the demand by customers for their products and services. Customers have a powerful tool of purchasing behaviour when customers demand more sustainable product the business will make sure that they provide those sustainable products for the business to survive in their competitive industries. However, there is a very good point when it comes to sustainability, do all customers of the company have a good education regarding sustainability? There is uncertainty about the behaviour of different generation, some may want the product and services to be more sustainable for a good cause to the planet, on the other hand, some would only care about their advantage and think the cheaper the better.

The Place of Stakeholder-Partnerships to Achieve Sustainability

Traditionally, sustainability was the responsibility of the government of a country. However, in recent years the stakeholder has been invited to sustainable issues faced by corporations. As stakeholders believe that the negative impact on the environment should be reduced to sustain the present environment for future generations. Therefore, this change in recent years has bought the concept of partnership for sustainable development. It is voluntary and non-negotiated collaboration between actors from the different parts of society such as shareholders, local communities, employees, customers and government. A stakeholder-partnerships is another term for stakeholders who are actively involved to overcome the complex challenges of sustainability issues because the issues faced by companies for sustainability are too big and cannot be solved alone.

When it comes to sustainability, a collaboration between stakeholders plays an important role because the responsibility and resources of social equity, environmental health and economic wealth lie within the different societal spheres and it is true that individuals, government and corporations cannot provide the solution on their own. There are two major perspectives in the partnership literature, both focusing on different aspects. First, “intuitional perspective, partnership as a new arrangement in the environmental governance regime, second, the actor perspective, where individual actors’ strategies are used as an instrument to achieve the sustainable goal.” The challenges of sustainability faced by corporations today are improving people’s lives and conserving our natural resources in a world with a growing population that demands food, water, health services and economic security. Stakeholders are an instrument to achieve sustainable goals because they have “complementary strength to add value to development efforts and pool their resources in solving problems”. If the stakeholders of an organisation come together to solve sustainability issues they may be able to overcome it quicker than their competitors and will not need to invite external partners such as other organisations in different industries, do not need to share their confidential information to another organisation which can take advantage. Therefore, stakeholders-partnership would benefit the organisation to retain its brand image, reputation and competitive edge within the industry.

The benefits of a stakeholder-partnership may not be able to overweigh its negative outcomes because in the business perspective partnerships are viewed as corporate environmentalism. It allows “negative perception of greenwashing”, the ability to encourage corporations to put a green profile to show the world how their activities have a positive impact on sustainability, however, behind the scene there isn’t much substance or real commitment for the environmental improvements. It is believed that “no single company can deliver the myriad expectation surrounding sustainability articulated by all its stakeholders.” Small to medium organisations with fewer stakeholders involved will not have the convenient access to information regarding the sustainable development to implement within their CSR strategies, therefore, this may lead to ineffective reporting of health, environment and sustainable policies. The knowledge that current stakeholders hold for the environmental and health risks is incomplete, therefore, “the complexity may require multiple organisations with different but complementary environmental orientations, skills and resources.” Such multiple organisation comes together in multi-stakeholder partnerships (MSPs). However, MSPs across different sectors is difficult because it requires bringing together different approaches, culture, interests, vocabularies and values. It is believed that “stakeholders from each sector bring their organisational interest and weakness.” Therefore, negotiation between stakeholders for the optimal outcome is necessary for effective MSPs to emerge.

Conclusion

Corporate sustainability is achievable when we (society, stakeholders, organisation and government) harmonise our goals. This is something that is achieved by partnering stakeholders, although, the younger generation is more concerned about sustainability and taking more actions than large corporations. It is believed in Nielsen’s report ‘Brands that can strategically connect sustainability to actual behaviour are in a good place to capitalise on increased consumer expectation and demand.’ Stakeholders like consumers, employees and shareholders should be encouraged by the companies to play an important role in corporate sustainability as stakeholders may think this is not worthwhile, therefore, companies must show them how sustainability can lead a better future. It is necessary in today’s world that we focus on sustainable development and goals because our environment is limited where resources will no longer be left for the future generation and corporations running today will damage the economic, social and physical environment that we live in. it is difficult because harmonisation leads to stakeholders putting aside their cultures, values and belief, this may lead to conflict. On the other hand, even if the stakeholders are happy to do that and partner to overcome the challenges of sustainability, we cannot assure that environmental management is easy to define. Alternatively, a commitment and time investment to corporate sustainability by the MSPs is crucial to respond to the crises of climate change, water scarcity, damage to the environment and many more. Corporate sustainability is the only answer to improve the planet, people and profit.  

References

1. Bansal, P., & Song, H. C. (2017). Similar But Not the Same: Differentiating Corporate Sustainability from Corporate Responsibility. Academy of Management Annals, 11(1), 105-149.

2. Epstein, M. J., & Buhovac, A. R. (2014). Making Sustainability Work: Best Practices in Managing and Measuring Corporate Social, Environmental, and Economic Impacts. Berrett-Koehler Publishers.

3. Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar, B. L., & De Colle, S. (2019). Stakeholder Theory: The State of the Art. Cambridge University Press.

4. GRI (Global Reporting Initiative). (2016). GRI Standards: The World's Most Widely Used Sustainability Reporting Standards. Global Reporting Initiative.

5. Henderson, R. (2017). The Role of Business in the Modern World: Progress, Pressures, and Prospects for the Market Economy. Oxford University Press.

6. Hollender, J. (2012). The Responsibility Revolution: How the Next Generation of Businesses Will Win. Berrett-Koehler Publishers.

7. Ansari, S., Gray, B., & Wijen, F. (2016). Fiddling While Rome Burns: The Response of Competitors to Industrywide Social Initiatives. Administrative Science Quarterly, 61(3), 393-441.

8. Bansal, P., & Roth, K. (2000). Why Companies Go Green: A Model of Ecological Responsiveness. Academy of Management Journal, 43(4), 717-736.

9. Dyllick, T., & Hockerts, K. (2002). Beyond the Business Case for Corporate Sustainability. Business Strategy and the Environment, 11(2), 130-141.

10. Elkington, J. (1994). Towards the Sustainable Corporation: Win-Win-Win Business Strategies for Sustainable Development. California Management Review, 36(2), 90-100.

11. Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar, B. L., & De Colle, S. (2019). Stakeholder Theory: The State of the Art. Cambridge University Press.

    Keep in mind:
    This is only a sample.

    Get a custom paper now from our expert writers.

    Get custom essay

12. Gray, B., & Stites, J. P. (2013). Transparency and Stakeholder Engagement: Building Trust through Institutional Logics. Business