Sustainability principles

Posted on 7 May 2008 by The Manufacturer

Steve Downing, associate professor at Henley Management College, explains the point of sustainability in business

With some risk of oversimplification, sustainability is a set of ideas seeking to ensure the long-term wellbeing of the planet and all its life forms.

This is often expressed as an attempt to secure a better balance between economy, ecology and society (or profit, planet and people). In this phrase is the fundamental assumption that two or three hundred years of industrialisation have taken us to an unbalanced position where the economy is privileged over and above the environment and society to a dangerous/unsustainable degree. This pre-occupation with the economy can itself be expressed as a market failure, so that the market price of goods and services have externalised environmental and societal costs.

Sustainability requires the economy or markets to internalise these costs. An example of this thinking is found in the UK Stern Report, which described climate change as the largest market failure in human history and made recommendations to price greenhouse gas emissions through CO2 equivalent quotas and trading schemes. Despite the tipping point in public consciousness about climate change that has happened in the last few years, it is critical to recognise that sustainability speaks to a larger agenda.

A sustainable philosophy has at least four key elements or principles:
Living within the biophysical parameters of the earth
Living in harmony with other life forms
Living to allow future generations to do so also
Living with greater equity

The business case for sustainability

Given the well known view that ‘the business of business is business’ and the overriding view of most CEOs and their boards that their primary duty is to maximise the financial returns of the business for shareholders, business may not seem a natural bedfellow for sustainability principles. However, over the last two decades the ‘business case’ for sustainability has become an increasingly well-worn argument. It runs along the lines of enlightened self interest and extends a stakeholder perspective to assert a win-win relationship between shareholders and sustainability (society and the environment). In short, it suggests increasing public awareness of sustainability principles and issues, raising expectations on business performance. The ‘licence to operate’ is raised and if businesses do not respond they face a range of risks and reputational (share price) damage. The other side of risk is opportunity and it is argued that the application of sustainability principles and related ideas such as ‘biomimicry’ and ‘closed loop systems’ allows the business to reduce costs, increase revenues, innovate, differentiate and enhance brands and enjoy further competitive advantages from improved recruitment and retention and ability to partner and lobby government.

Within this business case for sustainability a critical element is technological innovation, which is deemed able to provide ever increasing material living standards for everyone in developing and developed economies as the population grows from its current level of 6.7 billion to an estimated 9.6 billion by 2050.

(Published on behalf of Henley Management College)