The Evolution of Corporate Environmental Sustainability

Corporate Environmental sustainability is a concept that has been adopted by many firms in the recent past. This concept is used to refer to an organization’s environmental responsibility and capacity to regulate the business models and practices that contribute to ecological abuse. Thus, an organization’s sustainability approach is expected to manage its environmental impacts. In the last decades, a lot has been discussed concerning the values of corporate environmental sustainability and the processes of achieving it. Moreover, the process of environmental degradation not only continues but is also accelerating. This paper highlights the economic, industry or organizational factors and ecological complexities as the three primary conditions that influence an organization’s manageability of internal and external environmental dynamics and challenges.

The Evolution of the Agenda on Corporate Sustainability in the Past 30 Years

Industrial and organizational changes and dynamics have immensely influenced the agenda on corporate sustainability globally. Industry factors such as; market size, growth and an organization’s effort to manage the ecological system present constraints that challenge how the organization is going to implement its corporate environmental sustainability initiatives (Dahlsrud, 2008). These factors determine how effective organizational sustainability strategies can be enhanced or undermined.

There have been immense developments in the corporate sustainability initiatives in the past decades. Globalization has influenced the dynamics of corporate governance – which has led to the changes in consumer and organizational behaviour (Brockett et al., 2012).  According to Brockett et al. (2012), the global economy has significantly grown thus, introducing new trends in consumer consumption and organizational business practices. For instance, since 1970, the consumer expenditure has increased to up to 3% annually which is complemented by unsustainable resource reduction and emission trends. Brockett et al. (2012) assert that the beginning of the 21st century was marked with effective sustainability reporting by organizations since the United Nations Principles for Responsibility Investment (UNPRI) developed the sustainable stock exchanges initiatives. The efforts by UNPRI enhance corporate transparency by assisting organizations, its stakeholders and regulators to participate in dialogues that improve corporate accountability and sustainability performance index – by promoting sustainable initiatives for long-term solutions.

The Brundtland report in 1987 initiated discussions on sustainability. The report was then referred to as the World Commission on Environmental Development (WCED) was developed by the Norwegian Prime Minister Gro Harlem Brundtland who was the chairman for WCED. This report provided organizations with a blueprint of sustainable development needs that would address current and future environmental challenges. As a result, organizations were able to understand the relationship between economic growth and social equity.

The global sustainability reporting initiatives demand for internal and external disclosures on how corporate governance addresses sustainability issues. Brownlee (2011) explains that sustainability and reporting can be integrated to develop long-term strategies concerning corporate responsibility and decision making. Besides, the Global Reporting Initiative (GRI) which was established in 1997 mainly focuses on streamlining the sustainability reporting approach through advocating sustainability and global standardization (Brockett et al., 2012). GRI first published its “Sustainability Reporting Guidelines” in 2000, 2002, 2006 and 2011 respectively with the main aims of incorporating and monitoring environmental responsibility into measuring corporate performance through reporting.

Globally, the GRI is consulted as the main international standard guidelines in sustainability reporting.  The current GRI guidelines address issues surrounding the economic, governance, social and environmental performance (GRI, 2010). These guidelines support the CSR agenda which argue that the governing principles of sustainable development of an organization are not only focused on the economic factors, but also on the current and future implications of business models on social and environmental performance. Furthermore, the International Integrated Reporting Committee (IIRC) and the International Organization for Standardization (ISO 26000) frameworks promote integrated CSR reporting – whose primary intentions are to merge sustainability and economic values of public reporting (ISO, 2010). The goals of these frameworks are achieved through encouraging internal and external interrelations of all stakeholders of business to enhance social responsibility.

The ISO 26000 consists of internationally recognized guidelines that support different types of organizations despite their size, industry or category. Additionally, it addresses a wide range of economic, social, ethical and environmental practices to measure sustainability performance of firms. Since 2010 more than 3000 organizations have adhered to the GRI guidelines and have issued their sustainability report that discloses their CSR information and compliance.

Evolution of Sustainability in Business Approaches

The sustainability guidelines urge organizations to manage and balance all the priorities of their stakeholders while safeguarding their interests. However, from the economic theory, business models of an organization are primarily designed to maximize on revenue income to guarantee value creation for investors (Obermiller et al., 2008). As a result, any activities such as social or environmental undertakings which are not aligned with this objective are assumed to damage the business unless they add a profit to it.  Nonetheless, some organizations invest in social or environmental strategies to minimize government limiting their business practice through legislative rules or as part of their marketing strategy.

Sustainable development has become a popular term in the business environment as more organizations recognize the benefits associated with corporate environmental sustainability. Pogutz et al. (2010) define sustainable development in business as the adoption of management and organizational strategies that are implemented to meet the needs of a company and its stakeholders – while defending, sustaining and improving the social and ecosystem resources for the future. According to Kumar et al. (2012), business enterprises opt to comply with the corporate environmental sustainability guidelines as a marketing strategy and to achieve a competitive advantage within their industries. The development of sustainability has had a significant influence on the marketing strategies of business. Kumar et al. (2012), asserts that companies have recognized that sustainability is a requirement to meet consumer preferences.  For instance, product and service concepts, selling and production methods have evolved to over time to meet the sustainability guidelines. 

Marketing strategies have expanded and are focused on fulfilling future environmental needs. According to Jones et al. (2008), the concept of marketing is no longer limited to intra-personal and inter-personal expectations but rather on promoting social and ethical practices in the marketplace. Jones et al. (2008) explain that marketing concepts aim at creating sustainable based value to consumers through their services, products and communication channels. As a result, more companies use their marketing strategies to achieve sustainability, maximize their profits and maintain consumer loyalty.

CSR initiatives have been designed in alignment to social and societal marketing strategies. According to Obermiller et al. (2008), societal marketing strategies are advertising and promotional tools that are implemented to influence consumer social beliefs, ideas and values through product planning, communication, supply chain, pricing and market research. Over the years, societal marketing strategies have been categorized into six fields, namely; organizational philanthropy, CSR marketing, CSR business practices, cause-related marketing, and public volunteering (Kumar et al., 2012). All these marketing strategies support the communities through sustainability approaches by providing donations, grants, sponsorships and contribute to charity events to uplift a community. These marketing approaches have redefined the business world – in which organizations adopt society centred business practices that will assist them in gaining a competitive advantage.

Ecological and Green marketing is part of Environmental Corporate Social Responsibilities (ECSR) that elaborate on ecofriendly production to meet the needs of environmentally concerned customers. According to Kumar et al. (2012), ecological marketing strategies anticipate environmental disasters and recognize marketer’s preparedness and capability to take responsibility and avoid them. Therefore, ecological marketing invests in advertising tools that assist in solving environmental issues by providing effective remedies (Jones et al., 2008).  Through ecological marketing, business practices concentrate on becoming ecofriendly while meeting customer demands, thus gaining a competitive advantage.

Green marketing mainly focuses on advocating for physical environmental conservation by supporting legislative and regulations that promote eco-friendly corporate performance. Green marketing approaches use campaigns that fulfil corporate and individual goals in a manner that the natural environment is conserved, protected and preserved (Kumar et al., 2012). The application of green marketing is founded on government and stakeholder’s guidance. The concept of green marketing was defined as, ”A holistic and responsible management process that identifies, anticipates, satisfies and fulfils stakeholder requirements, for a reasonable reward, that does not adversely affect human or natural environmental wellbeing” (Kumar et al., 2012). Through green marketing, corporates can comply with the sustainability guidelines, adhere to government regulations and gain a competitive advantage as they leverage from the industry.

Organizational Culture and Sustainability

The organizational response towards environmental corporate sustainability is examined on its cultural concepts. According to Linnenluecke & Griffiths (2010), the term organizational culture is common within the context of sustainability as it is related to organizational behaviour – which is the access point in explaining a corporates sustainability performance. Brockett et al. (2012) affirm that as corporates focus on achieving the sustainable performance, they have implemented lasting strategies that are aligned with the new approaches of reporting and accountability systems. Hence, organizational cultural practices go beyond financial statements and extend to key non-financial performance indicators that primarily focus on the ecosystem impacts and social responsibility. 

Organizational sustainability continues to influence the decision-making process in the management of a firm to gain a competitive advantage. The common drivers of sustainability in the business management of an organization include; competitive edge, increased employee morale, increased incentives, value-added corporate image and character (Werbach, 2009). However, the most critical drivers for sustainability are external factors of a company which focus on creating competitive advantage, compliance with governing bodies, and risk and reputation management (Linnenluecke & Griffiths, 2010). On the other hand, the internal factors are integrated to enhance the position of the business in the marketplace, maximize on revenue income and reduce operating costs while increasing efficiency and improve employee motivation (Bertels et al., 2010). Notably, stakeholders play a significant role in influencing the drivers for sustainability within an organization.

The management of an organization facilitates the sustainability drivers by developing an environmental management system (EMS). The EMS is a performance indicator that is used in evaluating the ecological contributions of a firm (Brockett et al., 2012). According to Brockett et al. (2012), the two main goals of EMS guidelines is to address issues affecting the ecosystem and improvise sustainable policies and strategies that respond to stakeholder concerns about the environmental performance. To achieve this objective, the leadership of the organization implements EMS policies that are aligned with the ISO standards – which are designed to assist organizations in achieving uniform and efficient environmental systems. As a result, companies manage to achieve sustainable ecosystem goals that define the organizational mission and objectives that are articulated by the stakeholders. The designed EMS policies and objectives demonstrate the management’s commitment to the development of eco-friendly strategies that form the foundation for the implementation of anticipated ecosystem outcomes.

Challenges to Sustainability

Barriers to sustainability are currently associated with the economic, political and social dynamics that influence the internal and external factors of an organization. Internal obstacles of sustainability include; poor organizational structure, costs and lack of training and knowledge (Dyllick, 2015).  An inefficient management system which is not committed to the EMS programs and ISO standards and regulations leads to poor commitment behaviours. Organizations that are run by a weak management system have demotivated employee, decreased efficiency and performance. Dyllick (2015) asserts that the absence of leadership commitment negatively impacts the implementation of sustainable green practices. Furthermore, ineffective organizational management focuses on short-term objectives and ignores the long-term goals which are critical for the accomplishment of sustainability goals.

Managing costs is a significant challenge encountered in sustainability practices. The organization is expected to balance its costs to ensure that it maximizes on its revenue income while offering prices that are attractive to consumers. Past studies have revealed that integrating sustainability into the production and supply chain is extraordinarily expensive for small and medium-sized companies (Dyllick, 2015). Green purchasing practices and marketing strategies are slightly costly; however, organizations are committed to investing in environmentally friendly activities as they recognize the benefits associated with it.

Lack of sufficient knowledge and training among employees denies an organization well-equipped green specialist. For a sustainable production and supply chain, it is imperative to have adequate and qualified green specialists that will assist the organization in enhancing its ECSR initiatives (Dyllick, 2015). Experienced green specialists help a company in minimizing costs, increase competencies and commit to its environmental responsibilities professionally.

External barriers to sustainability include; government regulations, political instability, competition and consumer’s lack of awareness of sustainable green practices. As previously mentioned, government regulators are drivers but in some instances can introduce significant challenges to the sustainability of an organization’s business practices. Dyllick (2015), explains that environmental regulations may interfere with innovation and creativity by demanding specific techniques to be applied. Moreover, some government regulations create barriers when they do not encourage a sustainable environment for green practices (Dyllick, 2015). Political instability interferes with eco-friendly initiatives that are established by an organization. As a result, this leads to poor economic and social outcomes that discourage companies from investing in sustainability projects.

The competitive nature with an industry exposes an organization to uncertainties. The competitive environment and risk within the marketplace are attributed to the high level of globalization which influences consumer trends, perceptions and attitudes (Jones et al., 2008). The changing patterns make it difficult for an organization to implement strategies that will predict and address the uncertainties arising from market competition. Nonetheless, in some industries, consumers lack sufficient knowledge of the green practices implemented. Therefore, it can be a challenge to address the consumer needs based on green technology and innovations.

Sustainability in Developing Countries

Sustainability in developing nations is mainly influenced by the political, environmental, economic and social factors. According to Werbach et al. (2009), factors that affect the overall management of organizational sustainability include financial resources, insufficient human resource, corruption and climate change. Political factors such as corruption and inadequate financial resources continue to discourage investors from investing in some nations. On the other hand, insufficient equipment and human resource to address the changes in economic and environmental trends posse as a risk for organizational stability.

The size and geography of an organization in developing countries influence its sustainability. International SMEs receive heavy taxation when investing in developing nations as opposed to local organizations in the same country. High taxation hinders the potential that international organizations have in thriving within the borders of developing countries. For instance, in India introducing a mandatory 2% tax on all organizations >$100M revenue p.a. Such economic practices result in financial barriers that prevent international organizations from penetrating in foreign markets.

Organizations focus on innovation and technology approaches. MNC’s and CSR initiatives have been developed as a measure of addressing the local issues affecting the people within the rural and urban areas in developing nations. Most of the stakeholders and participants have contributed to environmental improvements through campaigns that assist the locals to invest in strategies that prepare them for the future. According to Pogutz et al. (2011), most of the MNC’s tackle three areas of their CSR, namely the economic, social and financial aspects. Financial and social initiatives are focused on empowering the local communities while uplifting the ECSR initiatives within their locality whereas the economic efforts aim at increasing the organization’s revenue income. Various MNC’s practices are committed to creating social contracts with developing nations with the aim of identifying the social needs and meeting the desires of the stakeholders. This has resulted in closing relations between MNC’s and local governments in developing countries to ensure that; these organizations legitimize their social contracts, adhere to the legislative regulations and implement business practices that meet the social standards of consumers.

Recommendations and Conclusion

The concept of corporate sustainability has developed in a dominant factor that is part of the strategic planning and management of most companies internationally. Organizational sustainability encourages corporations to act beyond profit generation and consider how its operations influence the community society and environment. Thus, environmental sustainability is highly dependent on the interaction of organizational culture, its business practices, and the ecosystem. Nonetheless, there is still a need for management theories to investigate the complexities between sustainability and organizational development.

Environmental corporate sustainability requires that firms understand the complexity of the ecosystem. It is essential for organizations to identify and acknowledge the impact that environmental changes have on the business world. Moving forward, companies are urged to incorporate nature’s outcomes into their business culture and strategy. Management literature deserves to invest more time in researching on this topic for firms to have an extensive understanding of the literature scope. It is essential to understand certain concepts such as; how management literature and environmental sciences interact and how management practices can bridge the gap between the ecosystem and organizational characteristics.

Further investigations on the interaction of organizations and nature are imperative to improve the policies used to implement environmental strategies that support the development of a corporation.

By ensuring that there are qualitative and quantitative data that examined the relationship between business and natural environment is critical for future generations. Questions such as; the impact of natural sciences on forecasting future business environments will be addressed by evaluating how the field of management and the commitment to the ecosystem impact the business world. Besides, new competencies and assurances will be required for future management of data pertaining to green innovations and the formulation of business strategic planning and management.

References

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Pogutz, S., Micale, V. and Winn, M. (2011) ”Corporate Environmental Sustainability Beyond Organizational Boundaries: Market Growth, Ecosystems Complexity and Supply Chain Structure as Co-Determinants of Environmental Impact,” Journal of Environmental Sustainability: Vol. 1: Iss. 1, Retrieved from: https://pdfs.semanticscholar.org/1779/6694417092bb2375bd86f384cc513059e8d3.pdf

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