The Business Case for Sustainability

In this chapter, I discuss how companies address sustainability challenges. First, the chapter begins with examples of different corporate approaches to taking responsibility for sustainability. Second, I explore how companies are viewed from the stakeholder perspective, so how others outside the company view the managers’ motivations for engaging in corporate responsibility. Although most companies are still motivated by risk reduction and/or marketing in their sustainability work, this chapter will reframe the motivations into something more positive—a business opportunity. Four cases will be presented, Nike, Arthur Andersen, Volkswagen, and companies involved in the Rana Plaza tragedy, and the companies’ approaches relative to the following strategies will be discussed: reacting, defending, accommodating, and, finally, a proactive approach in which a business’s profitability is anchored in sustainability. The chapter will conclude with reflections on business models for sustainability.

Sustainability and Finance: Environment, Social, and Governance (ESG)

Finance plays a central function in the business world. From being included in small and specialized funds, Environment, Social, and Governance (ESG) and socially responsible investment (SRI) have become part of the mainstream for investors and analysts. In this chapter, I will address what ESG, SRI, environmental and social risk assessment, and ethical investment are about, as well as different investment strategies taking these into account. Further, dilemmas that arise are introduced such as what is a sustainable sector or product and how this differs based on the values of individuals. The move from addressing sustainability issues as a risk reduction activity to a business opportunity is discussed. Finally, the Norwegian Pension Fund, the world’s largest fund, is used as an example to illustrate product-based and conduct-based exclusions in practice.

Stakeholder Management

Stakeholders have a key role in the corporate world, and especially related to sustainability. Even peripheral stakeholders can have a great impact on companies. This is an important consideration that companies need to be aware of and consider. In this chapter, I explore the roles of different kinds of stakeholders such as owners, investors, employees, governments, suppliers, customers, NGOs, and the media, and how to communicate and involve these stakeholders in a constructive manner. I address the function of each respective stakeholder as well potential areas for positive collaboration. The power and impact of NGOs on corporations will receive special attention as they often act as representatives for environmental and social interests—and bring such issues to the attention of others. Cases are provided to illustrate the issues presented.

Circular Economy: New Business Models

This chapter begins with an overview of the key challenges faced by society with a linear economy and proceeds to the concept of circular economy, its potential, and associated challenges. Key elements in circular economy will be addressed including issues like “refuse”, “reduce”, reuse”, “refurbish”, and “recycle”. I provide numerous examples to illustrate the different approaches in practice. The role of different stakeholders in the process of achieving a circular economy is discussed. Lastly, the transition from selling products to providing services is addressed.

Key Tools for Social- and Environmental Performance, and the UN Sustainable Development Goals (SDGs)

Corporate responsibility provides the foundation for sustainable development. It is a complex sphere since there are several confusing initiatives intended to help companies incorporate sustainability. From an international perspective, the UN initiatives have had the most impact. I provide a short introduction to the history of key UN initiatives associated with environmental and social issues and how they relate to business and corporations. As the UN Sustainable Development Goals (SDGs) have a key global framework for sustainable development, they will be discussed in detail with special attention to challenges and practical relevance for corporations. Well-known and widely applied initiatives to evaluate corporate performance like Fair Trade Certificate and ISO 14001; greenhouse and climate reporting initiatives, like the GHG Protocol, CDP, TCFD; sustainable reporting frameworks, like GRI and IIRC; and supply chain guidance and due diligence like the OECD Guidelines for Multinational Enterprises, and new laws on transparency, will be presented.

Sustainable Corporate Responsibility

In this chapter, I begin by reflecting on the origins and historical context of terms related to sustainability and business, including but not limited to Corporate Social Responsibility (CSR), Corporate Citizenship, and so on. I discuss what they mean, their purpose and limitations. I explore different, multilateral initiatives and frameworks pertaining to sustainability, in particular ones adopted by UN member states and how these apply to businesses. The role of corporate involvement and contribution, moving from a reactive to proactive sustainability engagement, is addressed. The responsibility of corporations from a philosophical perspective including key ethical schools of thoughts is also addressed.

Anti-corruption

Representing at least five percent of world GDP, corruption is a great challenge in general, and especially associated with sustainable business, both nationally and internationally. In this chapter, I reflect on how to address corruption and anti-corruption practices. Typical forms of corruption include bribery, facilitation payments, gifts, hospitality and expenses, political contributions, charitable contributions, sponsorships, voluntary community contributions, trading in influence, and conflict of interest and impartiality. Corruption leads to weak institutions and injustice, less respect for rights, denial of basic services, and several of the world’s environmental damage and tragedies are associated with corruption. Studies show that almost half of the companies have experienced fraud over the past two years. This chapter addresses the corruption challenges, how they are addressed by corporations and key international laws as well as challenges associated with norms and behaviors. How to detect and avoid corruption receives key attention. As anti-corruption is a huge topic and challenge, and only limited space is available in the book, the topic is presented from a more general perspective. Even though anti-corruption is often left out when talking about sustainability, it cannot be excluded from a book on sustainability and responsibility.

Introduction

Since the Industrial Revolution, we have experienced tremendous growth in population, production, and consumption. We are on an unsustainable track considering today’s environmental degradation, poverty, climate challenges, overconsumption, and more. In this first chapter, I present key issues related to societal development over the course of the last decade and pinpoint what needs attention. The background, relevance, and purpose of this book’s 12 chapters are introduced.

Economic Theories and Sustainable Development

In this chapter, I provide a brief introduction of some of the key economic theories, and how and to which extent they apply to sustainable development and corporate responsibility. How economics, international trade, organizations, tax, values, banks, governments, and so on work today can all be attributed to one or more of the economic theorists introduced in this chapter. Still, these theories were developed at the time when environmental challenges such as climate change and resource depletion were not pressing issues, and therefore not considered. I conclude with an overview of the key economists and philosophers who explicitly consider sustainability and corporate responsibility in their assessment of society and business. This chapter concludes with discussing new trends and theories capturing the sustainable element of business models.

The Way Forward: Is Sustainable Development Realistic?

This final chapter addresses the future of sustainable development. Given the fact that current consumption in developed countries is unsustainable, and a similar level of consumption in developing countries would be devastating from an environmental perspective, a shift in development is necessary. This chapter touches upon peoples’ human needs and discusses to which extent unsustainable consumption is a necessity for happiness. Alternative approaches to GDP in measuring a country’s success, like Gross National Happiness (BNH) and the Happy Planet Index, are discussed. Shifting focus from an increased consumption of natural resources to more attention on development associated with social issues like well-being, health, and happiness will be addressed. This chapter concludes with how sustainable development and happy people are realistic, but it will require a shift associated with revised business models, metrics, and goals.