Section 4.1: Balancing the pillars of sustainable development

The term sustainable development, balances development with traditional notions of growth, and includes environmental and social issues into economic development. These three pillars—environmental, social, and economic—serve as guiding principles for long-term global development.

The diagram below shows how these three pillars add value to global, sustainable societies. In addition, the areas of overlap, such as socio-environmental, socio-economic, and eco-economic also create further opportunities for sustainable development.

Source: sellingsustainabilitysolutions.com

Sustainable development is difficult to address by one sector of society alone. It requires collective efforts of individuals, communities/societies, governments and global institutions to work effectively. This is why companies often need to work together with other parties to achieve the three pillars of sustainable development, that so many companies now incorporate into their central vision and values.

We will now explore some of the key partnerships and initiatives that help businesses address sustainability

Drivers of sustainability in business

There are several drivers trigger firm’s paths towards becoming more sustainable. The drivers impact firms’ competitiveness as well as their ‘license to operate’, or the viability of doing business in the global market of growing environmental awareness and changing beliefs. These drivers help firms to internalize sustainability at an institutional, firm, and individual level.

Industrial- level drivers of sustainability

Institutional level drivers operate at a societal level to drive firms to incorporate sustainability processes and practices.

Regulatory Drivers

Regulatory drivers come in the form of domestic environmental protection laws/statues, incentives, and recommendations for compliance. They are delivered through government bodies, overseeing institutions, as well as international environmental and trade agreements. Changes in regulatory processes at local and international levels have evolved to cope with the growing demands for sustainability in a changing economy, market, and societal setting.

In the U.S., regulatory control mechanisms have shifted from a command-and-control structure in the 1970s to one that promotes regulatory compliance via incentives (2000s). The Global Environmental Management Initiative (1999) recommends the use of these initiatives in tandem with traditional command-and-control regulation for even stronger environmentally positive results.

Regulation, if suitably developed, can trigger firms to respond by taking a strategic approach to address sustainability, achieve market growth, and remain competitive in a global market

Industry and International Drivers

– International Standards, Certifications and Codes of Conduct

Standards are an industry endorsed “agreed way of doing things”. Businesses use standards to improve the quality and performance of their products, reduce risk and support branding reputations. The adoption of uniform industry standards serves to stimulate operational efficiency while minimizing economic, environmental and social risks.

The ISO 14001 is one example of a voluntary international standard that serves to integrate environmental responsibility into corporate management practices. The active commitment towards adopting these standards allows firms to achieve ISO certifications that enable them to trade within environmentally conscious multinational markets such as the European Union.

Similarly, codes of conduct provide the baseline standards for testing, labelling, packaging, storage, distribution and disposal of products and materials so that businesses can engage in international trade and enter new markets.

– Voluntary Industry Initiatives

Industries and firms increasingly recognize the importance of the social and natural environment to sustain their business. As a result, businesses voluntarily pursue initiatives to improve their environmental and social footprints to stay ahead of changing regulation, but also changing beliefs among consumers.

Businesses have moved away from treating end-of-pipe disposal (in a linear economy) towards more pollution prevention type models (in a circular economy) through voluntary industry initiatives and corporate commitments. In doing so voluntarily, firms pre-empt regulatory changes and are able to seek strategic and competitive benefits that suit their own corporate structures and supply chains.

Social Pressure Drivers

– Social Actors

Social constituents are highly influential and have the ability to mobilize public sentiment, alter traditional norms, influence public concerns, and modify the roles of corporation in the context of social and environmental sustainability. When firms fail to address these social constituents, it can have severe consequences for their competitiveness.

Environmental and social activism reflect the shifts in community values and directs attention to and exposure of the firm via social media and the press. Similarly, indigenous and community rights affect firms because the congruence of the firms values are scrutinized within those communities. Local communities provide the labor and local economic market for a firm. Falling afoul of the values and not addressing the concerns of these communities uphold can diminish a firm’s viability to operate with the region.

These social drivers are supported by the functions of media. The press and social media play and important role in bringing environmental and sustainability issues to the forefront of public and industrial concern. They inform and encourage debate which serves to influence public and stakeholder opinions and attitudes.

– Market Mechanisms

As a firm addresses its own sustainability issues, each of its partners within the value chain face similar challenges and pressures. Each stakeholder interprets and responds to these pressures in a different manner. The firm must work together with its stakeholders to support the viability of the business, and address their concerns as well as its own concerns when responding to institutional pressures.

In addition, insurance companies increasingly equate environmental concerns of companies with financial risk. Companies that face environmental risk and liability also face higher insurance premiums, and insurance companies can place pressure on firms to form sound sustainability practices if they seek to be insured.

Similarly, investors pressure firms to adopt sustainability practices. Investors’ control of capital markets provides them with a unique position to influence firms’ strategic action, particularly when it comes to sustainability.

Other market mechanisms deter firms from engaging in unsustainable practices by adding an economic cost to such activities. For example, tradable carbon permits within carbon cap-and-trade systems, such as the EU Emissions Trading System encourage businesses to surpass their environmental performance standards and receive credits in return for each unit of pollution reduction.

Corporate and individual level drivers of sustainability

Sustainability drivers for corporations also exist at the firm and individual level. Drivers such as competitive advantage, access to a talented labor pools, and even personal preferences of corporate leaders can all influence companies’ sustainability strategies.

From a business perspective, these drivers translate as opportunities to increase profitability through the reduction of inputs and resources, reduce strategic and operational risks through the optimization of externalities, increase employee commitment and productivity, and increase the firm’s economic competitive advantage.

Some of the main corporate and individual level drivers of sustainability, and their effects are summarized as follows: