Sustainability is a big topic these days. Consumers and companies are paying a lot of attention to it. But while average consumers like you and I only spend a few extra bucks buying an eco-friendly product, companies are pouring millions, if not billions, into sustainability. Are you curious why this is the case? Join us today and explore the topic of sustainability in business.
What Is Sustainability in Business?
Any business activity will affect the environment in one way or another, either through natural resource use or product waste. The impact might be small, but it will add up over time and take a heavy toll on our planet. How can a business achieve its economic goals without draining the Earth? The answer is to invest in sustainability.
Sustainability in business refers to business practices that positively impact the environment, communities, or society as a whole.
Overall, business sustainability addresses two main issues:
But companies not only tackle responsibility to minimize their negative impact on the environment and society, but they also do it to ensure a sustainable future for themselves and their clients.
For example, McDonald's was criticized for using too much fat and salt in their food, which contributed to the obesity pandemic. As a result, many of their customers turned to healthier brands, bringing a slump in the company's sales. McDonald's had to switch their strategy to become more sustainable to win back customers. They began cutting sodium, oil, and fats while using whole grains for burger buns and wraps. This effort has a long-term benefit to both the company (economic performance) and consumers (health).1
Sustainable goals are often tied to an environmental, economic, or social aspect of the company or a community. For instance:
Reduction of greenhouse gas emissions (environmental),
Reduction of land and water pollution (environmental),
Use of sustainable materials (environmental and economic),
Renewable energy usage (economic),
Support of underprivileged societies (social),
Use of green-certified products (environmental).
In practice, these goals can be achieved by:
Using eco-friendly materials for production,
Optimizing the supply chains to reduce carbon footprint,
Powering business facilities with renewable energy sources like solar and wind power,
Supporting local communities through development plans or education funds.
Factors of Sustainability
The factors of sustainability are divided into four pillars:
The Social Pillar
The Human Pillar
The Economic Pillar
The Environmental Pillar
Sustainability in Business: The social pillar
The social pillar seeks to preserve communities and their culture by investing in social services promoting community culture. It stresses the importance of quality relationships, togetherness, and honesty among people.
Sustainability in Business: The human pillar
The human pillar looks to maintain and improve human capital in society through investment in empowerment, education, and good, reliable services. Here, the well-being and growth of everyone in society is the goal.
Sustainability in Business: The Economic Pillar
This economic pillar looks to improve the standard of living and also maintain economic capital. It also works toward maintaining quality economic growth through various investments in ecological systems and people.
Sustainability in Business: The Environment Pillar
The environmental pillar looks to improve living standards through investment in protecting natural resources and natural capital like water, land, and air. It aims to satisfy human needs without harming the environment and future generations.
Overall, sustainability in business protects the environment while generating wealth for companies and establishing trust between them and employees, investors, and the community.
Importance of Sustainability in Business
So you know what sustainability in business means, but why should companies be bothered with it? What are their incentives for addressing sustainable issues?
Being environmentally and socially responsible can help the business to:
Meet consumer expectations,
Gain new customers and public support,
Attract, motivate, and retain employees,
Win investors' support.
From an economic perspective, sustainability allows the company to reduce costs and generate more sales:
Sustainable businesses often receive government subsidies and grants, bringing down production costs.
Sustainable solutions like green energy help businesses reduce electricity bills and save money.
Customers are more likely to purchase from a brand that acts sustainably.
Business Sustainability Principles
The principles of business sustainability are the foundation upon which business sustainability is built. Business sustainability principles are divided into three categories:
Economic sustainability
Social sustainability
Environmental sustainability
These three sustainability principles are also informally referred to as profit, people, and planet.
Sustainability in Business: Economic sustainability
Economic sustainability means sustainably using available resources to create long-term sustainable value for the business.
There are two goals in economic sustainability:
As a result, the main activities of economic sustainability include:
Protecting and sustaining resources such as water, materials, human resources, etc.
Creating long-term value through optimal use, recycling, and recovery.
Sustainability in Business: Environmental sustainability
Environmental sustainability aims to improve human and natural welfare by protecting natural resources from pollution and exploitation.
The primary goal of environmental sustainability is to meet the needs of consumers while reducing the negative impact on the environment.
Some examples of environmental sustainability activities are:
Reducing the carbon footprint of production,
Using sustainable materials for packaging,
Protecting water bodies,
Minimizing product waste.
Sustainability in Business: Social sustainability
Social sustainability involves a business having the support of its employees, investors, and people in the community where its operations are situated.
Businesses can achieve social sustainability through investing in human resources and improving social quality through support for equality and diversity campaigns.
Social sustainability also promotes the ideas shared in the sustainable development goals, which aim to improve and protect the environment and society from further harm.
Trade-offs Between Sustainability and Profits
The main focus of many businesses in the long term is profitability, which begs the question: does sustainability produce enough profits?
Many businesses often struggle to answer this question, meaning they sometimes have to choose between sustainability and profit generation. This choice is known as a trade-off.
Implementing ethical and environmentally friendly practices, such as using eco-friendly materials, can increase business costs. As a result, the business might generate less profit than if it were using cheaper, unsustainable materials. This situation is an example of the trade-off between sustainability and profit generation.
Sustainable profitability can offer a solution to the trade-off problem.
Sustainable profitability is based on the idea that corporations who take responsibility for economic, social, and environmental issues will be more profitable in the long run.
Businesses can achieve sustainable profitability through a four-step stairway:
Product - adopting sustainable materials, reducing material waste, using energy more efficiently, etc.
Employees - ensuring a healthy and motivated workforce.
Customers - listening and responding to customers' needs for sustainability.
Brand - communicating the company's sustainable efforts to the public.
Sustainability Challenges in Business
It's not always easy to act sustainably. Here are some sustainability challenges in business:
Growing costs: It can cost a lot of money to produce goods sustainably. This is because companies have to invest in new technology and tools for production or to research eco-friendly materials.
Time-consuming: Companies can't replace all the production methods in one go. They must do it slowly and steadily to avoid significant disruptions to operations. As a result, sustainability can take a lot of time, especially for large corporations.
Risk of making inaccurate claims: It's tempting to exaggerate your sustainable efforts to appear more environmentally friendly or socially responsible. However, false claims tend to do a business more harm than good. If customers find out a company is untruthful, they can boycott the brand and refuse to purchase from it in the future. Thus, it can be challenging for businesses to align marketing messages with sustainable practices.
Sustainable Business Examples
Today, most businesses engage in sustainability in one way or another. But while many only do it out of obligation, some make sustainability their top priority. We'll take a look at two sustainable businesses below.
Sustainability in Business: Patagonia
Our first sustainable business example is Patagonia - a retailer of sustainable outdoor clothing based in the US.
Patagonia has consistently topped the list as an eco-friendly brand. Their reputation comes from their effort to slow climate change and support for communities to protect their environment.
For example, Patagonia only uses preferred materials like organic and regenerative organic cotton, recycled polyester, and nylon in production. They also adopted 100% clean energy for stores and offices in the US. Outside of the business domain, Patagonia supports the protection of wild places and a transition to renewables.2
Patagonia is an inspiring example of maximizing customer value without harming the environment and communities.
Sustainability in Business: Tesla
A decade ago, nobody thought electric cars could stand on the same playing field as gasoline-powered cars. After all, the automotive market is saturated with established automakers like Ford, Honda, and Toyota. This was proven wrong when Tesla Motors released its flagship car Model S, in 2012.
In September 2014, the company sold 2,500 electric cars in less than a month.3 By the first quarter of 2015, the sales jumped to 10,030.4 Today, Tesla's market capitalization stands at $968 million.5
It is challenging for any sustainable business to balance sustainable solutions and profits. Everyone wants to be sustainable, but few are willing to compromise conveniences and their hard-earned money. The success of the Tesla car is a perfect example that sustainability can go hand in hand with profits as long as the company focuses on providing the best value for the customers.
What are your thoughts on sustainability in business? Do you think it's worth the trouble? Before you go, why not take our quiz to reinforce what you've just learned about sustainability?
Sustainability - Key takeaways
Sustainability in business refers to business practices that positively impact the environment, communities, or society as a whole.
Sustainability can help businesses meet consumer expectations, gain new clients, attract and retain employees, and win investor support.
From an economic perspective, sustainability allows businesses to reduce costs and generate more sales.
The three sustainability principles are economic, environmental, and social sustainability, also known as profit, people, and planet principles.
There are four pillars of sustainability: the social pillar, the human pillar, the economic pillar, and the environmental pillar.
Businesses can tackle the trade-offs between sustainability and profits with sustainable profitability.
References
- Susan Pinto, Business Standard, McDonald's franchisee cuts sodium, oil and fats by over 20% in menu, https://www.business-standard.com/article/companies/mcdonald-s-franchisee-cuts-sodium-oil-and-fats-by-over-20-in-menu-118040400004_1.html
- Patogonia, Climate Goals, 2022, https://www.patagonia.com/climate-goals/
- nside EVs. "Tesla Delivers 10,030 Model S Electric Cars In Q1 2015, 2015, https://insideevs.com/news/325234/tesla-delivers-10030-model-s-electric-cars-in-q1-2015/
- Yahoo Finance, Tesla Inc. (TSLA), 2022, https://finance.yahoo.com/quote/TSLA/
- Car and Drive, 2022 Tesla Model S, 2022, https://www.caranddriver.com/tesla/model-s
Explanations 
Exams 
Magazine 
