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Sustainability in Business

Sustainability in Business

Sustainability is a big topic these days. Consumers and companies are paying a lot of attention to it. But while average consumers like you and I only spend a few extra bucks buying an eco-friendly product, companies are pouring millions, if not billions, into sustainability. Are you curious why this is the case? Join us today and explore the topic of sustainability in business.

What Is Sustainability in Business?

Any business activity will affect the environment in one way or another, either through natural resource use or product waste. The impact might be small, but it will add up over time and take a heavy toll on our planet. How can a business achieve its economic goals without draining the Earth? The answer is to invest in sustainability.

Sustainability in business refers to business practices that positively impact the environment, communities, or society as a whole.

Overall, business sustainability addresses two main issues:

  • The impact on the environment.

  • The impact on society.

But companies not only tackle responsibility to minimize their negative impact on the environment and society, but they also do it to ensure a sustainable future for themselves and their clients.

For example, McDonald's was criticized for using too much fat and salt in their food, which contributed to the obesity pandemic. As a result, many of their customers turned to healthier brands, bringing a slump in the company's sales. McDonald's had to switch their strategy to become more sustainable to win back customers. They began cutting sodium, oil, and fats while using whole grains for burger buns and wraps. This effort has a long-term benefit to both the company (economic performance) and consumers (health).1

Sustainable goals are often tied to an environmental, economic, or social aspect of the company or a community. For instance:

  • Reduction of greenhouse gas emissions (environmental),

  • Reduction of land and water pollution (environmental),

  • Use of sustainable materials (environmental and economic),

  • Renewable energy usage (economic),

  • Support of underprivileged societies (social),

  • Use of green-certified products (environmental).

In practice, these goals can be achieved by:

  • Using eco-friendly materials for production,

  • Optimizing the supply chains to reduce carbon footprint,

  • Powering business facilities with renewable energy sources like solar and wind power,

  • Supporting local communities through development plans or education funds.

Factors of Sustainability

The factors of sustainability are divided into four pillars:

  • The Social Pillar

  • The Human Pillar

  • The Economic Pillar

  • The Environmental Pillar

The social pillar seeks to preserve communities and their culture by investing in social services promoting community culture. It stresses the importance of quality relationships, togetherness, and honesty among people.

The human pillar looks to maintain and improve human capital in society through investment in empowerment, education, and good, reliable services. Here, the well-being and growth of everyone in society is the goal.

This economic pillar looks to improve the standard of living and also maintain economic capital. It also works toward maintaining quality economic growth through various investments in ecological systems and people.

The environmental pillar looks to improve living standards through investment in protecting natural resources and natural capital like water, land, and air. It aims to satisfy human needs without harming the environment and future generations.

Overall, sustainability in business protects the environment while generating wealth for companies and establishing trust between them and employees, investors, and the community.

Importance of Sustainability in Business

So you know what sustainability in business means, but why should companies be bothered with it? What are their incentives for addressing sustainable issues?

Being environmentally and socially responsible can help the business to:

  • Meet consumer expectations,

  • Gain new customers and public support,

  • Attract, motivate, and retain employees,

  • Win investors' support.

From an economic perspective, sustainability allows the company to reduce costs and generate more sales:

  • Sustainable businesses often receive government subsidies and grants, bringing down production costs.

  • Sustainable solutions like green energy help businesses reduce electricity bills and save money.

  • Customers are more likely to purchase from a brand that acts sustainably.

Business Sustainability Principles

The principles of business sustainability are the foundation upon which business sustainability is built. Business sustainability principles are divided into three categories:

  1. Economic sustainability

  2. Social sustainability

  3. Environmental sustainability

These three sustainability principles are also informally referred to as profit, people, and planet.

Sustainability in Business: Economic sustainability

Economic sustainability means sustainably using available resources to create long-term sustainable value for the business.

There are two goals in economic sustainability:

  • Profit generation

  • Preservation of human and natural resources.

As a result, the main activities of economic sustainability include:

  • Protecting and sustaining resources such as water, materials, human resources, etc.

  • Creating long-term value through optimal use, recycling, and recovery.

Sustainability in Business: Environmental sustainability

Environmental sustainability aims to improve human and natural welfare by protecting natural resources from pollution and exploitation.

The primary goal of environmental sustainability is to meet the needs of consumers while reducing the negative impact on the environment.

Some examples of environmental sustainability activities are:

  • Reducing the carbon footprint of production,

  • Using sustainable materials for packaging,

  • Protecting water bodies,

  • Minimizing product waste.

Sustainability in Business: Social sustainability

Social sustainability involves a business having the support of its employees, investors, and people in the community where its operations are situated.

Businesses can achieve social sustainability through investing in human resources and improving social quality through support for equality and diversity campaigns.

Social sustainability also promotes the ideas shared in the sustainable development goals, which aim to improve and protect the environment and society from further harm.

Trade-offs Between Sustainability and Profits

The main focus of many businesses in the long term is profitability, which begs the question: does sustainability produce enough profits?

Many businesses often struggle to answer this question, meaning they sometimes have to choose between sustainability and profit generation. This choice is known as a trade-off.

Implementing ethical and environmentally friendly practices, such as using eco-friendly materials, can increase business costs. As a result, the business might generate less profit than if it were using cheaper, unsustainable materials. This situation is an example of the trade-off between sustainability and profit generation.

Sustainable profitability can offer a solution to the trade-off problem.

Sustainable profitability is based on the idea that corporations who take responsibility for economic, social, and environmental issues will be more profitable in the long run.

Businesses can achieve sustainable profitability through a four-step stairway:

  • Product - adopting sustainable materials, reducing material waste, using energy more efficiently, etc.

  • Employees - ensuring a healthy and motivated workforce.

  • Customers - listening and responding to customers' needs for sustainability.

  • Brand - communicating the company's sustainable efforts to the public.

Sustainability Challenges in Business

It's not always easy to act sustainably. Here are some sustainability challenges in business:

  • Growing costs: It can cost a lot of money to produce goods sustainably. This is because companies have to invest in new technology and tools for production or to research eco-friendly materials.

  • Time-consuming: Companies can't replace all the production methods in one go. They must do it slowly and steadily to avoid significant disruptions to operations. As a result, sustainability can take a lot of time, especially for large corporations.

  • Risk of making inaccurate claims: It's tempting to exaggerate your sustainable efforts to appear more environmentally friendly or socially responsible. However, false claims tend to do a business more harm than good. If customers find out a company is untruthful, they can boycott the brand and refuse to purchase from it in the future. Thus, it can be challenging for businesses to align marketing messages with sustainable practices.

Today, most businesses engage in sustainability in one way or another. But while many only do it out of obligation, some make sustainability their top priority. We'll take a look at two sustainable businesses below.

Sustainability in Business: Patagonia

Our first sustainable business example is Patagonia - a retailer of sustainable outdoor clothing based in the US.

Patagonia has consistently topped the list as an eco-friendly brand. Their reputation comes from their effort to slow climate change and support for communities to protect their environment.

For example, Patagonia only uses preferred materials like organic and regenerative organic cotton, recycled polyester, and nylon in production. They also adopted 100% clean energy for stores and offices in the US. Outside of the business domain, Patagonia supports the protection of wild places and a transition to renewables.2

Patagonia is an inspiring example of maximizing customer value without harming the environment and communities.

Sustainability in Business: Tesla

A decade ago, nobody thought electric cars could stand on the same playing field as gasoline-powered cars. After all, the automotive market is saturated with established automakers like Ford, Honda, and Toyota. This was proven wrong when Tesla Motors released its flagship car Model S, in 2012.

In September 2014, the company sold 2,500 electric cars in less than a month.3 By the first quarter of 2015, the sales jumped to 10,030.4 Today, Tesla's market capitalization stands at $968 million.5

It is challenging for any sustainable business to balance sustainable solutions and profits. Everyone wants to be sustainable, but few are willing to compromise conveniences and their hard-earned money. The success of the Tesla car is a perfect example that sustainability can go hand in hand with profits as long as the company focuses on providing the best value for the customers.

What are your thoughts on sustainability in business? Do you think it's worth the trouble? Before you go, why not take our quiz to reinforce what you've just learned about sustainability?

Sustainability - Key takeaways

  • Sustainability in business refers to business practices that positively impact the environment, communities, or society as a whole.

  • Sustainability can help businesses meet consumer expectations, gain new clients, attract and retain employees, and win investor support.

  • From an economic perspective, sustainability allows businesses to reduce costs and generate more sales.

  • The three sustainability principles are economic, environmental, and social sustainability, also known as profit, people, and planet principles.

  • There are four pillars of sustainability: the social pillar, the human pillar, the economic pillar, and the environmental pillar.

  • Businesses can tackle the trade-offs between sustainability and profits with sustainable profitability.


References

  1. Susan Pinto, Business Standard, McDonald's franchisee cuts sodium, oil and fats by over 20% in menu, https://www.business-standard.com/article/companies/mcdonald-s-franchisee-cuts-sodium-oil-and-fats-by-over-20-in-menu-118040400004_1.html
  2. Patogonia, Climate Goals, 2022, https://www.patagonia.com/climate-goals/
  3. nside EVs. "Tesla Delivers 10,030 Model S Electric Cars In Q1 2015, 2015, https://insideevs.com/news/325234/tesla-delivers-10030-model-s-electric-cars-in-q1-2015/
  4. Yahoo Finance, Tesla Inc. (TSLA), 2022, https://finance.yahoo.com/quote/TSLA/
  5. Car and Drive, 2022 Tesla Model S, 2022, https://www.caranddriver.com/tesla/model-s

Frequently Asked Questions about Sustainability in Business

A business sustainability example can be outlined through Ford Motor Company, which has recently increased the usage of renewable materials in its car production process to reduce pollution.

Sustainability is important for businesses because:


  1. It helps a business succeed by attracting new customers and talents and building up more support from the public,
  2. It motivates employees,
  3. Investors are more willing to invest in businesses with an eco-friendly business process,
  4. It promotes the reduction of greenhouse gas emissions and efficient use of scarce resources. 

Sustainability in business refers to business practices that positively impact the environment, communities, or society as a whole. Business sustainability seeks to reduce business practices that negatively impact the environment, ensuring the business practices of today don't adversely affect future generations. 

Business sustainability principles are divided into three categories:

  • Economic sustainability

  • Social sustainability

  • Environment sustainability

The factors of sustainability are divided into four pillars:

  • The Social Pillar

  • The Human Pillar 

  • The Economic Pillar

  • The Environmental Pillar

Final Sustainability in Business Quiz

Question

What is sustainability in business?

Show answer

Answer

Sustainability in business talks about business practices that have a positive impact on the environment, society or community as a whole. Business sustainability seeks to reduce business practices with negative impact on the environment and society, making sure the business practices of today don't affect the future generations.

Show question

Question

Sustainable business practices includes these except


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Answer

Show question

Question

Ford’s investment in electric vehicles was to 



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Answer

Reduce the emission of greenhouse gases

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Question

 Using green-certified products is a step towards sustainability


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Answer

True

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Question

Sustainable business practices generate wealth for the businesses, true or false?

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Answer

True

Show question

Question

 Give two reasons  why of sustainable business practices are important.


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Answer

 importance of sustainable business practises includes -

  • Apart from the social responsibility that comes with sustainability, sustainability also helps a business succeed by attracting new customers, new talents for the business and building up more support from the public. 

  • Sustainability also helps motivate business employees to work hard to improve the business reputation with its customers and align with the business vision and mission.

Show question

Question

what are the three sustainability principles


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Answer

the three sustainability principles are -

  • The Economy Sustainability

  • The Social Sustainability

  • The Environment Sustainability

Show question

Question

The principle of sustainability says that for complete sustainability to be reached, the foundation of sustainability is to be …...




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Answer

Maintained

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Question

List five of the sustainable development goals 


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Answer

Zero poverty, Zero hunger, Good health and wellbeing, Affordable and clean energy, Decent work and economic growth

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Question

Explain economic sustainability


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Answer

The economic sustainability aims to maximise the resources available to a business in order to maintain profit generation for the business. It talks about the capital generation, with an aim towards improving standard of living and profit generation. 

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Question

 Explain environmental sustainability


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Answer

 Environmental sustainability looks to improve the human and nature welfare by looking to protect natural resources from pollution and exploitation. It also looks to make sure that in reaching the needs of the population, the future generations are not compromised in any way.



Show question

Question

Give examples of environmental sustainability activities


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Answer

Examples of environmental sustainability activities include carbon footprint reduction, management and reduction of packaging waste, water bodies management and protection from pollution.

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Question

Explain the social sustainability


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Answer

This involves a business having the support and backing from its employees, investors, and from the people in the community its operations are sited. It is achieved through human investments and improving social quality through support for campaigns such as campaigns for equality and diversity. Social sustainability also promotes the ideas shared in the sustainable development goals which looks to improve and protect the environment and society at large.

Show question

Question

Explain the role of the human pillar in sustainability


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Answer

This looks to maintain and improve the human capital in the society through investment in empowerment, education, food, good services and health services. Here, the wellbeing and growth of everyone in the society is the goal.

Show question

Question

List the factors of sustainability


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Answer

The factors of sustainability are divided into four (4) pilars, they are 

  • The Social Pillar

  • The Human Pillar 

  • The Economic Pillar

  • The Environmental Pillar

Show question

Question

___ in business refers to business practices that have a positive impact on the environment, communities, or society as a whole.

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Answer

Sustainability 

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Question

Solar power and wind power are examples of...

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Answer

renewable energy.

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___ is the heating up of the earth's climate primarily due to the burning of fossil fuels as well as deforestation and other industrial and agricultural activities perpetrated by humans.


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Answer

Global warming 

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___ sustainability aims to maximise the resources available to a business in order to maintain profit generation.


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Answer

Economic 

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___ sustainability looks to improve human and natural welfare by looking to protect natural resources from pollution and exploitation.


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Answer

Environmental 

Show question

Question

___ sustainability involves a business having the support and backing of its employees, investors, and from the people in the community where its operations are sited.

Show answer

Answer

Social  

Show question

Question

Many businesses often struggle to answer this question, meaning they sometimes have to make a choice between sustainability and profit generation. This is known as a/an... 


Show answer

Answer

trade-off. 

Show question

Question

The factors of sustainability are divided into ___ pillars.


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Answer

four 

Show question

Question

One of the pillars of factors of sustainability looks to preserve communities and their culture by investing in social services that promote community culture. This pillar is called...

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Answer

the Social Pillar.

Show question

Question

One of the pillars of factors of sustainability looks to maintain and improve human capital in society through investment in empowerment, education, and good, reliable services. This pillar is called...

Show answer

Answer

the Human Pillar.

Show question

Question

One of the pillars of factors of sustainability looks to improve the standard of living, and also maintain economic capital. This pillar is called...

Show answer

Answer

the Economic Pillar.

Show question

Question

One of the pillars of factors of sustainability looks to improve the standard of living through investments in the protection of natural resources and natural capital like water, land, and air. This pillar is called...

Show answer

Answer

the Environment Pillar.

Show question

Question

The factors of sustainability are divided into four pillars:

- The Social Pillar

- The Human Pillar 

- The Economic Pillar 

- ___ .

Show answer

Answer

The Environmental Pillar 

Show question

Question

Carbon footprint reduction, management and reduction of packaging waste, water bodies management, and protection from pollution are examples of...


Show answer

Answer

environmental sustainability activities.

Show question

Question

Rule of law, risk management, and good governance are examples of...

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Answer

economically sustainable activities.

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