The Case for Sustainable Business |

The Case for Sustainable Business

By QS Contributor

Updated June 15, 2014 Updated June 15, 2014

Tauseef Afzal

‘The Social Responsibility of Business is to Increase its Profits’. This, now infamous 1970 article by economist Milton Friedman was very much the sum total of the profit-hungry corporate world’s social conscience in the 70s and 80s.

However, eventually the realization dawned that Earth and its resources are not infinite, and if consumption and associated activities continued at their current pace, future generations would find it difficult to meet their needs because of depleted resources. And this would have repercussions for the corporate world itself – a time might come when, because of unsustainable practices, a business would not have access to the resources and raw materials it needs to produce its products.

This gave rise to the concept of the ‘triple bottom line’: profit, people, planet, so that in addition to caring for its profits, a business also needs to care for all of the stakeholders, not just the stockholders. As well as its own employees, these include people working along the entire supply chain and the communities affected by its business practices, and, of course, the planet itself, which provides the resources and raw materials.

The benefits of sustainable business

Slowly and gradually, most big corporations have realized the importance of sustainable business – though some are still using it just for publicity and portraying a good corporate image, whereas some others, genuinely intrigued by its potential, have revamped their processes along the whole supply chain (from raw materials to disposal)  to actually embrace the idea of sustainable business. They have realized that sustainable business is not just a buzzword or a marketing gimmick, and that they can actually benefit from adopting sustainable practices.

Examples include increasing the efficiency of processes to reduce energy consumption, CO2 emission, waste, and safety related incidents for example, or increasing the use of sustainable and recyclable materials in product production. All these sustainable business initiatives not only contribute towards environmental goals, but also can improve financial results. It can also improve the public image of a business, thereby helping increase customer retention or new customer acquisition, which can translate into increased sales and profits. So there are both direct and indirect improvements for a company’s bottom line.

Fostering corporate social responsibility

For a corporate social responsibility (CSR) initiative to be effective, it’s necessary to for all stakeholders to be on board. These include employees, suppliers and customers as well as the government, NGOs and local communities. A corporate social responsibility initiative conceived through the close collaboration of all these stakeholders can turn out to be much more effective, as no single entity can effectively tackle the social and environmental problems on its own.

Corporate social responsibility drives are most successful when they concentrate on issues that align with a company’s core competencies and the solutions found can also contribute something in return to the business. This will help keep interest levels in achieving these goals high. Some CSR initiatives might take a while to bear fruit; hence they demand patience and continuous support from all the stakeholders.

Improving business reputation

Sometimes even indirect issues have the potential to impact business reputation. Something happening way down the supply chain or even in the supply chain of a key supplier or partner, for example. Thus, a business needs to be proactive in finding problems in its supply chain, rather than waiting for accidents to happen. Recent fires and factory collapses in Bangladesh are a prime example where proactive action could have saved human lives.

The proactive approach can not only help minimize potential problems but can also improve lead to an improved business reputation with key stakeholders.

Using social entrepreneurship to tackle social problems

The concept of social entrepreneurship has gained in popularity in recent years. This is the idea of encouraging the formation and expansion of new businesses that, in addition to making money also tackle social problems. Social entrepreneurship is crucial in the 21st century as it not only satisfies an entrepreneur’s desire to make money, but can simultaneously help to tackle social issues, such as reducing poverty, which helps to create jobs, improve economic conditions and hence ultimately expand the customer base.

ESMT, which has the mission of crafting responsible business leaders of tomorrow, is quite active in evangelizing the concepts of corporate social responsibility and social entrepreneurship. Several workshops and seminars are held throughout the year, which see speakers from companies and NGOs such as Accenture Sustainability Services, BSD Consulting and Allianz invited to speak on campus. Other initiatives include fundraising, field work and the Responsible Leaders Fellowship program, which sees MBA graduates from ESMT go to developing countries for a period of 6 – 12 months to work on various social initiatives.

About Tauseef Afzal

Tauseef Afzal has 8+ years experience working with multinational companies in technical sales, marketing, business development and strategy consulting in the Telecom and IT industry. He did his MS in Communications Engineering at TU Munich, Germany and  completed a full-time MBA with honors at ESMT (the European School of Management and Technology) Berlin on a Kofi Annan Business Foundation scholarship.

This article was originally published in February 2014 . It was last updated in June 2014

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