Sustainability: Organizations' Institutional Challenge To Advantage

Introduction

The Austrian economic chamber’s advertisement slogan reflects how we think and motivate growth today “If the economy is well, we are all well” (Labitsch, 2016). I believe this concept of growth needs to be redefined in the wake of mankind's struggle for existence because of the unsustainable industrial revolution. Human history is filled with greed and reckless economic prosperity. Today the world faces challenges that are so fundamental in nature that they could jeopardize its very existence. The growth concept has come to achieve ultimate sine qua non status within politics and business today – and to a great extent the society. The pursuit of growth should not be thoughtless. Rather, it should be distributed carefully to meet sustainable developmental goals. This is called growth with a purpose. Every industry needs to play its role in creating a growth trajectory with sustainability as the core focus. The seventeen Sustainable Development Goals(SDGs) given by the United Nations address the global challenges faced by the world today. The goals related to environmental degradation and climate change are of prime importance when we say sustainability-focused organizations.

The Necessity of Sustainable Growth

In the UN Global Compact – Accenture survey, 2010, it was found that “93% of CEOs believe that sustainability issues will be critical to the future success of their business” (Lacy et al, 2010; as cited in Iarossi et al, 1988). In another report by the UN Global Compact – Accenture industry wise survey, 2010, it was found that “98% of consumer goods CEOs emphasized that sustainability issues will be important to the future growth of their business and 97% of consumer goods CEOs believe that sustainability issues should be fully integrated into the strategy and operations of a company” (Lacy & Barringer, 2010). The environmental, social and governance issues became the executive agenda. Companies are now finding that governmental regulations and supply chain pressures that they should mend their actions more towards sustainability practices (Iarossi et al, 1988). However, these CEOs also admitted that the main obstacle they find in driving this era of sustainability is execution. Recently Plastic pollution has grabbed the attention of the world. In a news article published in the ‘Independent’, it was mentioned that there are 500 times more pieces of microplastic in the sea than the number of stars in our galaxy. It is estimated that there will be less fish and more plastic in the sea by 2050. A total of 8.3 billion metric tonnes of plastic have been Human beings with only 9 percent of these were recycled (Johanston, 2017). Out of these 8 million tonnes are being dumped into the ocean each year.

The Association of Postconsumer Plastic Recyclers (APR) has declared that the recycling of Polyvinyl chloride (PVC) is not feasible. PVC packaging and bottles contaminate the recycling of polyethylene terephthalate (PET) and high-density polyethylene bottles (HDPE) as well (Association of Postconsumer Plastic Recyclers, 1998). Moreover, Segregation and removal of PVC bottles are costly for recyclers and reprocessors when mixed with PET. The conversion of bottles into pellets is not economically viable. The whole plastics recycling industry can function effectively if PVC were not part of packaging waste. Due to Stock keeping unit (SKU) proliferation, the UK government has put packaging under scrutiny. Owing to the toxic threat of PVC, many corporations and governments around the world have passed laws to phase out PVC. The UK government is also considering a nationwide ban on PVC packaging. They have already banned the single-use plastics from packaging in the form of “UK Plastics Pact” to tackle the plastic pollution.

Impact and Limitations of PVC

The use and disposal of PVC pose a serious threat to environmental and human health. All over the world, companies, governments, and scientific institutions have recognized the hazards of PVC. Almost all European nations have limited the use of PVC for environmental reasons. Some of them are planning to ban the use of PVC completely. Most of the recyclers cannot handle PVC into the system, as recycling PVC is not functionally and economically feasible. Therefore, PVC bottles and labels also contaminate the recycling process of PET and HDPE bottles or labels. Some of the major hazards of PVC lifecycle are discussed below. PVC production uses the largest amount of chlorine gas in the world. It consumes about 40 percent of total chlorine production. PVC is the largest producer of organochlorine, a chemical class which poses severe hazards. Throughout the PVC lifecycle, large quantities of hazardous by-products such as organochlorine are formed and released into the environment. These by-products of PVC, which are produced and released into the environments, are highly bioaccumulative, persistent and toxic. Here, persistence means a substance which cannot be degraded naturally, builds up over time and gets nixed with wind and water. Bioaccumulation is a fat-soluble substance and it builds up in the tissues of living things. These substance gets mixed up in the food chain. They have the ability to cross the placenta and concentrate in the breast milk of humans (Thornton, 2005). The by-products and feedstocks released during the lifecycle of PVC can cause many health hazards including cancers, reproductive impairment, immune system suppression etc.

Changing Sustainability Landscape

There is a fundamental shift in the views of business leaders and CEOs worldwide on sustainability and environmental degradation, particularly in the consumer goods industry (Lacy & Barringer, 2010). They now see sustainability as central to their business and strategic decisions. The growing concern from the civil societies about the environmental impact has forced the governments to form several new legislation. As a consequence of this, it is imperative for firms to innovate and grow to keep sustainability as their core strategic agenda. Portraying authentic commitment to sustainability is vital for firms to build trust for its key stakeholders such as governments and consumers. Many of the European countries like Czech Republic, Spain, Denmark, Germany, Norway, and Luxembourg have already passed resolutions to put restrictions on PVC packaging. Even in the UK, there is a growing concern for selling soft drinks bottled in PVC containers. The UK's right-wing media highlighted this concern. The UK government is planning to bring a legislation to ban the use of PVC containers. Companies should anticipate changes in the legal and regulatory landscape and work proactively with governments to promote both commercial and environmental sustainability.

Genuine Value Evaluation of Sustainability

The term “sustainability” was introduced by the Brundtland Commission (World Commission on Environment and Development, United Nations) in 1987 which states that 'Humanity has the ability to make development sustainable - to make sure that it satisfy the needs of the present generation without compromising the ability of future generations to satisfy their needs' (Crews, 2010). Since 1987, this concept has expanded its horizon and now has a focus on the environment, social impact, and economic profits. Elkington (1998) coined this amalgamation as a triple bottom line (TBL) in his book, Cannibals with Forks: The Triple Bottom Line of 21st Century Business. TBL is many times referred to as the three P's: 'people, profits, and planet.' Environmental sustainability is about making responsible decisions that will reduce the business negative impact on the environment.

Customers, investors, governments and society continually push companies to improve on social and environmental sustainability. This high pressure forces companies to invest in sustainable actions with unsure economic impact (Tervonen & Kutvonen, 2015).

Sustainability offers possibilities for future innovations and creating competitive advantage and increased customer value (Delmas & Burbano, 2011; Schiedering et al., 2012; as cited in Tervonen & Kutvonen, 2015). In addition to this, there are two basic motivations for sustainable innovations. One is internal goals and the other is external pressure. The internal goals may be linked to new business opportunities, efficiency improvements and increased image etc. while external pressure can be linked to getting a license to operate under increasing legislation. The firms which are compliant with new standards and legislation confer legitimacy in the current business context (Gilbert et al. 2011; as cited in Tervonen & Kutvonen, 2015).

Challenges to Overcome: From Strategy to Execution

Sustainability should not be a standalone strategic initiative but rather fully integrated into the strategy and operations of a company. However, there are several external challenges in implementing this integration. Uncertainties among investors, consumers and regulatory bodies are some of them. It is the belief of many business leaders that investors are wary of supporting corporate efforts to create value through sustainable products and services. They are also cautious of the fact that sustainability actually influences buying behaviors and to what extend sustainability concerns will drive purchasing decisions by businesses and governments (Lacy & Barringer, 2010). Internal Challenges includes managing complexities to integrate sustainability across different functions, competing strategic priorities due to turbulent market environment forces companies to make decisions based on short-term pressures and embedding sustainability metrics in performance assessment (Lacy & Barringer, 2010).

Strategies for Consumer Goods Companies to Transform the Business through Environmental Sustainability:

If we want to create a future, good ideas and regulatory compliance are not enough. Rather innovations led by real companies have to push their boundaries to build an eco-friendly future. Consumer goods companies can become the pioneers in this innovation of sustainability by addressing the key challenges of the industry. Sustainable packaging and supply chain management calls for multistakeholder partnerships. For example, Nestlé’s sourcing strategies deal with multiple suppliers to reduce the environmental impacts of their goods. Nestlé partnered with The Forest Trust (TFT) and defined Responsible Sourcing Guidelines to ensure compliance with the Nestlé Supplier Code. Similarly, Lipton-Unilever’s biggest tea brand has partnered with the Rainforest Alliance to drive sustainable production throughout the company’s supply chain for black tea. Packaging has become a key focus for companies that seek to cut costs and at the same time, they want to build their brand and reputation around sustainability. For example, retailers such as Walmart, set a target to reduce the amount of packaging in its supply chain by 5 percent till 2013, and to eliminate waste entirely in its 4,100 US stores by 2025. This puts pressures on consumer goods companies to work with their suppliers in order to minimize unnecessary wastage, packaging and using more sustainable packaging. Another example of companies are coping with these kinds of pressures and showing the way forward is Procter & Gamble. P&G sets a target of using 100 percent renewable or recycled materials, such as its sugarcane-derived plastic, for all packaging by 2020.

Embedding sustainability into core business through Stakeholder engagement: The approach outlined in the triple bottom line signifies the three pillars of sustainability and the related risks to be managed and mitigated. There will always be conflicting demands and interests among stakeholders, integrative approach to stakeholder management leads to 'stakeholder symbiosis' and there is value in exploring how an organization can achieve benefits for all (Dess, Lumpkin, and Eisner, 2008; as cited in Crews, 2010). Proactively engage investors in order to demonstrate the value of sustainable activities through metrics such as revenue growth and cost reduction. For example at Timberland- an outdoor product company, environmental concerns are being embedded within its core product design process and at the same time engaging the entire supply chain. Timberland’s environmental footprint throughout the value chain is focussed on innovation and integration. Timberland’s strategy is industry collaboration for sustainable business.

Creating the culture: Employees have to appreciate and value the reasons behind the change. If they are convinced then only a detailed action plan can be drawn up and the organization's readiness can be assessed. The company needs to move away from a responsive CSR towards a strategic CSR. If you’re a food company, you need to produce healthy products and follow practices that foster a safe and hygienic environment to live. Embedding sustainability in individual performance frameworks for employees across the organizations through remuneration packages and with processes like TBL accounting will measure the value of sustainability at the individual as well as organizational level.

Organizational learning: Organizations require the knowledge, energy, and innovation of every employee to face the challenges of a complex and dynamic environment (Spreitzer and Quinn, 2001; as cited in Crews, 2010). A holistic learning culture needs to be built.

Shaping consumers behaviors: Improve access to consumer information about their needs and responsibility towards sustainable products and services in order to create a market. The companies have to set clear standards. Today environmental footprint and sustainable products are becoming a point of differentiation and a key to winning the market share. The price sensitive consumers need to see the value of their desire to trade with environmentally responsible companies. Leading companies shape the demand that is conducive to sustainable products and services but also helps the end customers to make informed choices by creating environmental impact.

Product consumption, disposal and recycling: If the company involves the customers into the product's lifecycle then the customer relationship becomes deeper while also, the impact of environmental initiatives gets broader. For example, Nokia’s 'Take Back' campaign engaged its customers in a long-term, 'closed loop' cycle of product ownership. As a result, customer loyalty and customer retention has increased. Under this campaign, customers were incentivized to return and recycle old phones, batteries and accessories at designated recycling bins in Nokia Care Centers around the world. This program demonstrated that environment and business could co-exist.

Conclusion

One of the most disturbing and counter-productive trends of the last half-century has been the short term thinking adopted by the firm. For humans to survive and thrive against exponentially rising reckless economic prosperity and greed, the optimal strategy is to shift the focus towards sustainable growth. This shift from 'quarterly capitalism' towards a true, longer-term way of thinking would require wide-ranging shifts in mindset and practice of managers facing pressure from owners and stock markets. In a survey by McKinsey of retailers and consumer goods manufacturers found that almost half of those undertaking sustainability initiatives were pursuing new business or growth opportunities, which is long-term thinking. Leading consumer goods, companies are taking a new approach to ‘business-as-usual' by bringing sustainability across their entire value chain. These companies are actively shaping consumer attitudes in order to create a market for sustainable consumer goods. They are generating new skills and mindsets inside the company to foster sustainable development. They are integrating the sustainability reporting with financial reporting and simultaneously bettering the relationships with its investors. They are devising mechanisms to measure both positive and negative impacts on society and articulating value beyond the P&L and balance sheet. They are developing industry standards to create new regulations in collaboration with the governments for a better and sustainable world. More companies need to create a social and environmental dimension to its value proposition, making social and environmental impact integral to the overall strategy.

References

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