All of us talk about Sustainability, but what is it really ?
In literature, Dyllick and Hockerts have defined sustainability from a corporate level perspective as “meeting the needs of the firms’ shareholders, employees, clients, pressure groups, communities and other stakeholders without compromising its ability to meet the needs of future stakeholders”. Sustainability in the corporate environment thus involves a balance of social issues, financial security and environmental protection within the context of the internal and external operations.
This concept has been extensively discussed in Indian board rooms for many decades, however the triple bottom-line activities appear disconnected from the core strategy. Indian organisations have commonly taken a fire-fighting approach to comply with regulations or to engage in philanthropy by donating to reputed charities. Sustainability has always been treated as an “add on” and quick fix solution rather than integrated into corporate strategy.
Why Integrate Sustainability into Corporate Strategy?
The conventional “laissez-faire” outlook held that organisations must act exclusively on economic motives for the sole purpose of profit maximization. This view has undergone a significant change wherein organisations are realizing the importance of responsible management. The notions of CSR and sustainability have emerged as significant concepts worldwide in the last decade. Currently, stakeholder perceptions require organisations to commit to responsible behaviour by integrating ‘corporate social responsibility’ (CSR) into their corporate strategies for supporting sustainable development. Furthermore, sustainability and CSR are comparable as both take into account the economic, social and environmental scopes and both imply towards creating a long-term perspective based upon meeting the present needs with responsibility and not compromising on the needs of the future generations. However, sustainability extends beyond CSR as it provides opportunities to achieve competitive advantage, initiate innovation and generate real triple bottom-line results. Many researchers have supported the possibility of a win–win scenario wherein an organisation can maximize returns even while progressing towards implementing sustainable business strategies. Thus, it is necessary to integrate sustainability concerns into business strategy for a competitive advantage.
One of the major steps in integrating sustainability strategies is to establish the main priorities and performance indicators for action i.e. to determine materiality. The identified performance priorities will form the basis for integrating sustainability and managing performance. Vague priorities, if chosen, pose challenges for development of meaningful strategies. Establishing connections between priorities and existing strategic framework is essential if the priorities are to become a part of the sustainable strategic framework. In the course of determining material issues, an organisation should aggressively engage with its internal and external stakeholders.
The Global Reporting Initiative has provided a comprehensive materiality assessment tool to help organisations determine what matters the most for their sustainability performance.
The SWOT tool can also help reaffirm the material issues for organisations and a specialized SWOT tool for Sustainability can be a good starting point for sustainability planning.
Utilizing the Sustainability SWOT (sSWOT)
The SWOT tool proposes that organisations can achieve a competitive advantage if they use their strengths to develop their opportunities and neutralize their perceived and actual threats, while finding solutions for internal weaknesses.
The clear understanding of opportunities and threats arising from the strengths and weaknesses is imperative for a business case for sustainability. As per World Resources Institute (WRI, 2012), Organisations need to explore ways and means to communicate and collaborate with stakeholders on triple bottomline challenges. They need to demonstrate to stakeholders that triple bottom-line challenges are integral to core business interests. WRI has recently developed and road tested a new Sustainability SWOT (sSWOT) tool for strategic analysis. It is a format for starting cooperation between company and stakeholders to consider opportunities for collaboration to think about long term sustainability challenges that will create significant business risks or opportunities in future. With the help of this tool companies can identify strengths, weaknesses, opportunities and threats to create new business solutions. This tool can also be used for a new strategic analysis, or in conjunction with existing or earlier analyses. The starting point can be a significant sustainability related challenge that the sector or organisation is facing or likely to encounter in the future.
However, in order to measure performance for sustainability, managers need to know what needs to be measured i.e. performance indicators. In short Managers should be aware of the sSWOT on the basis of which they can devise strategies and implementation plans. However many of the external and internal resources are issues related to stakeholders but these relationships needs to be represented by performance measurement systems.
5 Stages of Sustainability
The insights from the sSWOT analysis can help in determining the stage at which a company is currently operating in its pursuit for sustainability. Willard (2005) has identified 5 stages as follows –
Organisations who wish to head towards a stage 3 and beyond need to devise a comprehensive plan of integrating sustainability and measuring performance. The triple bottom-line objectives can be integrated into the corporate strategy by utilizing the performance measurement tool – The Balanced Scorecard but with sustainability elements firmly embedded in its perspectives.
The Materiality assessment, sSWOT and the Sustainability Stage determination completes the Strategic planning phase where an organisation has finally decided to transition from Stage 3 to Stage 4. However merely planning sustainability initiatives will not get the results as performance also needs to be measured and monitored to achieve triple bottomline benefits.
Watch this space to know more about how organisations can incorporate a Sustainability Balanced Scorecard into their strategy toolset and progress from Stage 4 to stage 5.
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Swarada Chitale is Co-founder of Alstonia, a company which partners with companies and social organisations to deliver holistic sustainability and CSR programs aligned to company profits and community needs.
For more information visit Alstonia