The Current Landscape for Sustainability
More and more companies across the globe embrace and incorporate sustainability principles into their value creation. They are doing so by enacting various changes into their supply chain—from improving efficiency in energy consumption and resource extraction, developing eco-friendly products to enhancing employee retention and morale through better corporate engagement.
There are numerous reasons as to why business sustainability has become increasingly relevant in the corporate world. From what was once perceived solely as a means to safeguard brand reputation in the form of short-term corporate social responsibilities (CSR), sustainability management has evolved to address various concerns inhibiting business growth.
With a much better understanding of the concept, companies actively seek to employ various sustainability plans to achieve longevity and recalibrate their value creation for better returns on investment.
Such a shift in paradigm is reflected by how the top executives have viewed the significance of sustainability in their corporate strategies over the years. Although reputational and risk management remains as the primary driver for sustainability efforts at 61 per cent today—according to the annual survey by GlobeScan and BSR in 2019—other factors have quickly caught up to become equally important points of interest.
For instance, customer demand and investor interest have joined the ranks of the top-three drivers for sustainability at 43 and 41 per cent respectively, with the latter experiencing a significant jump from only 25 per cent in the previous year.
The Low Uptake of Internal Sustainability in Corporate Strategy
As the survey above has shown, business sustainability has increasingly played a larger role in corporate success. With growing awareness of how their activities impact their surroundings, companies in droves initiate myriad sustainability efforts to address global challenges, such as climate change, social inequality, and resource scarcity in hopes of creating a resilient and regenerative business model.
While such progress laudably merits recognition, the holistic integration of sustainability into the business model surprisingly stays relatively low.
For instance, it has been found that in 2019 only 16 per cent of companies say that sustainability is exceptionally well-integrated into their organisations, a paltry three per cent growth from the same survey in 2016.
Such low figures indicate that while most companies strive to align their corporate goals with their sustainability initiatives, nevertheless, only very few have imbued their core strategies with substantial social and environmental values.
In other words, for most companies, sustainability is still seen as an accelerator of growth for short-term value gains rather than an integral part of strategic planning to help weather through risks and take on opportunities for the future.
As a result, we have witnessed the cultivation of corporate culture that sells the premise of sustainability, but disregards the importance of internal sustainable endeavours to obtain operational and growth-oriented benefits. McKinsey corroborates this supposition—showing that areas such as employee engagement and internal communications have insofar received inadequate attention from companies.
Only 53 per cent of respondents say that corporate sustainability efforts are critical to attract and retain employees. When it comes to the implementation of sustainable activities to improve employee retention and motivations, that number is further diminished to only 26 per cent.
The underutilisation of corporate engagement as a key area of sustainability is such a missed opportunity, considering that 48 per cent of companies have reportedly experienced better performance in value creation against their competitors by making this adjustment.
Why Employee Engagement is Critical to Successful Sustainability
Employee engagement is essential to assist a business in transforming its sustainable concepts into attainable goals. Instilling workforce with sustainable values helps a company better communicate its strategic planning across all levels of management.
By engaging its employees in every sustainable endeavour, from the top to the bottom of the hierarchy, a company can synergise its different functions to pursue a sound business decision. In the same breath, it can also eliminate organisational silos and competing objectives among departments that arise from the lack of communication.
It is important to note, however, that sustainable value creation differs significantly across industries. Some industries prioritise growth, while others concern more about capital returns or risk management.
Please Read About: What is International Integrated Reporting Council (IIRC)
Nevertheless, there are three common, necessary steps that a company can take to engage employees better in sustainability, and they are as follows:
1. Materiality Assessment
Incorporating environmental and social considerations into a business strategy is a complicated endeavour, especially for companies with no prior knowledge and experience in sustainability. This is where the concept of sustainable materiality comes into the picture. Materiality assessment is a set of activities that enables companies to analyse the most relevant issues that may affect the supply chain of the business. Companies that regularly exercise an assessment of material concerns of their business activities have better chances to create a more efficient strategy to meet not only their financial goals but also the social and environmental obligations set upon by their stakeholders, from customers and community to investors and employees.
Sustainability – an international consultancy and think-tank—opines that the lack of proper planning in advocating specific sustainability issues becomes one of the pitfalls that a company often commits. It further explains that most companies ambitiously embed multiple sustainable issues into their activities without conceptualising a holistic masterplan beforehand—resulting in improper executions and lack of measurable traction on any of their initiatives. A company can easily alleviate this problem by simply creating a plan that subsumes all areas of business, from workforce management, product development to corporate strategy.
2. Establish Clear Internal Communication
After formulating the key sustainability issues that will become its main focus, a company must then create a clear channel where all the relevant parties can communicate and share ideas on how to conceptualise plans to tackle these issues.
This step is highly crucial in helping a company fully adopt a sustainable business model as it mandates that everyone in the company is involved and well-informed of the expectations and objectives that they concomitantly strive to attain.
Every managerial role must, thus, assume the responsibility of conveying the vision of the company clearly so sustainability values can be consistently applied and embedded in every decision-making process.
Let’s take a look at how PITT Ohio, the US-based transportation solutions provider, has managed to bolster its position in the post-recession market by delivering an added value through sustainability initiatives. While other freight service companies are competing in providing reliable shipment on a competitive price, PITT Ohio has taken one step further and introduced an avenue where customers can be better informed of their emissions activities.
In 2011, realising the growing concern for carbon emissions caused by the freight operational activities, the company launched a carbon calculator, which enables customers to track their carbon footprints when using the company’s service.
The initiative has shown positive results, raising awareness of carbon emissions in transportation for around 25 per cent to 50 per cent of its target market. The company also succeeded in reducing three per cent of carbon emissions from utility usage at their facilities and freight fleet in the first year of tracking.
This initiative would not have been successful without clear communication between the company’s Operations, Vehicle Maintenance, and Building Maintenance departments, all of which produced the highest emissions. But PITT Ohio did not intend to stop there.
The company continued to synergise its workforce to expand the areas of sustainability in its value creation, which also encompassed the rollout of the Sustainability Steering Committee in 2012.
Also See: GRI Sustainability Reporting Standards
3. Fostering Professional Environment with Embedded Sustainable Values
Simply communicating your sustainability plan and target goals is not enough to truly drive sustainability into the core of your business strategy. Pollman and Bhattarchaya highlight that companies must know how to “link employees’ personal values and support for sustainability with the employees’ daily work and the company’s operations”.
In other words, companies must show they are willing to accommodate employees’ commitment to implementing sustainability values in their day-to-day tasks.
To foster such a supportive atmosphere, a company must bridge the gap between personal and corporate values in three dimensions: formal, psychological, and social. These dimensions – defined by Strebel as personal compacts – underpin the professional and social contracts that both parties, a company and an employee, must fulfil. In the formal dimension, a company must show that sustainability values are expected of the employees through job descriptions, training requirements, and performance benchmarks.
In the psychological dimension, on the other hand, a company must show in every managerial activity that a sustainability initiative is rewarded and highly encouraged.
Lastly, in the social dimension, a company must demonstrate to its employees that it strives to establish an environment where sustainability culture and values can thrive.
These three steps serve as guideposts for every company that seeks to embed sustainable values deep into its corporate culture—creating behavioural and attitudinal changes from the grassroots level.
Moreover, implementing this concept into the workplace also benefits the employees as it also seeks to satisfy their professional fulfilment.
While indeed driving sustainability through corporate engagement requires careful planning and time, however, the successful integration of sustainability into the core business model will help mould a highly efficient productive workforce who can simultaneously bring value to the company, while simultaneously empowering the community and the environment.
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