How to turn sustainability into a driver for corporate growth

How to turn sustainability into a driver for corporate growth

This article was released on November, 24th 2014 in „Wirtschaftswoche Green “. It was translated from German language by shared.value.chain.

by Michael D‘heur

The term ‘sustainability’ is a popular one. Measured by its media exposure, one would expect that its implementation in companies is already in full swing. Thus, it is all the more surprising that sustainability can only rarely be found within company’s core business.

However, understanding sustainability only as producing sustainability reports is naïve. It does not include the parts of companies which get the most attention: turnover, profit and cash flow as measures for a company’s success. Such parameters define how production is controlled, how resources are allocated and how investments are made – even sustainability investments. This is why sustainability needs to be implemented in the core business.

Globalisation changes business relations

The “core business” describes all divisions of commercial value creation that are responsible for a company’s turnover and profit creation. It embraces products, services, and value chains through which resources are purchased, products manufactured and then delivered to clients. The term supply chain is often used here, though it is misleading.

In the course of globalisation, client and supplier relations have changed profoundly. Global purchasing of goods and worldwide production do no longer happen at multinational companies only. Nowadays even medium size businesses have to manage global value chains. A variety of external engineers and product developers, suppliers, logistics providers and trade partners have to work in a coordinated way – as well as the company’s own employees. It is not easy to create an equal weighting of economic, ecological, and societal value in these systems. Many, partly contrary, interests have to be harmonised.

Active management is compulsory, as well as controlling the achieved progress in terms of strategy, product development, purchasing, production, logistics, and distribution.

1. Strategy

A sustainable value creation strategy are rarely planned out on the drawing board

Maximisation of profit without considering ecological and societal aspects is no longer a sufficient basis for a long-term business and value creation strategy. The demand for permanent growth can only be fulfilled where ‘permanent’ equals ‘sustainable’. A success-oriented corporate management has to realise this.

Implementing sustainability into the core business stands for the entrepreneurial confession to organise all aspects of the core business so that economic, ecological, and societal value is created at the same time.

This causes fundamental and strategic challenges to companies. Besides the rejection of purely profitable trade many other aspects are essential: product design for cyclical use, responsible use of resources, consideration of ecological consequences, reduction of CO2 emission, creation of fair working conditions, the promotion of women, avoidance of corruption, creation of transparency and social engagement. Furthermore, it is necessary to communicate such objectives clearly.

When many functions and different interests have to be coordinated within companies, questions concerning targets, methods, and costs arise.

However, a strategy cannot be changed overnight. Implementing sustainability into the core business is a multi-step process that requires…

 

Download the full article here

This post is also available in: German