Sustainable Business Development: Reaching Beyond The Rhetoric To Superior Performance
Overview & Comments
Why and in what circumstances do sustainable development practices contribute to business success?
The connection between sustainable development and business success depends on the depth and quality of the sustainable development practices, and their fit with the company's distinctive business strategy and culture. In particular, sustainable development practices are most likely to boost long term performance when they serve to stimulate innovation and foster a competitive business advantage.
These are the key messages from the Australian Business Foundation's latest research study, undertaken by Suzy Goldsmith and Professor Danny Samson of the University of Melbourne. The study took a thoughtful look at the sustainable development approaches of six diverse companies identified as leaders in this field – BHP Billiton, Blackmores, Eli Lilly, Multiplex, OneHarvest/Vegco and VicSuper. The scope of sustainable development practices covered in this research was based on those listed in the Global Reporting Initiative, namely economic practices such as those affecting customers, suppliers and employees, environmental practices, and social initiatives like labour practices, human rights, product safety and community involvement.
Background interviews were conducted with fourteen industry associations to examine industry sector effects. Drawing on careful analysis of the academic and business literature, and on their own expertise and experience, the authors distilled several useful concepts linking corporate sustainable development and business success. These concepts will help business executives to think through the increasing and often conflicting demands for more action by companies on sustainability and social responsibility issues.
Sustainable development practices should be deep, well-rounded and high-quality initiatives that offer the best available value proposition for the business, not just window-dressing.
Sustainable development practices are more likely to contribute to long-run business success when they are:
- Focused on delivering specified performance improvements or targets in particular areas, like pollution emissions or direct employee involvement in community welfare programs, rather than just compiling an account of effort or budget spend, e.g. donations to charity.
- Integrated with mainstream business practices like health and safety programs or customer service responsibilities.
- Re-shaped over time for depth and effectiveness, noting the progressive results achieved.
- Responsive to evolving stakeholder issues and community concerns.
- Selected to maximise value to the long-term prospects of the business, e.g. a paper recycling scheme in an office environment could improve the balance sheet in multiple ways through waste minimisation, cost savings and greater employee commitment and even, enhanced community reputation and support for the company in some circumstances.
Effective sustainable development practices are aligned with, and demonstrably advance, a company's own distinctive business strategy.
Information gleaned by the authors from interviews both with specific enterprises and with industry associations indicates that successful sustainable development practices are those that clearly contribute to the company's business strategy.
The business strategy of any company is influenced both by its position in the industry in which it operates, and by its own unique circumstances and attributes. Not surprisingly, both of these factors need to be considered by business executives in deciding on their approach to sustainable development. For example, companies in mature industries like mining are likely to focus their sustainable development practices in areas which ensure their continuing access to resources and maintain their licence to operate. On the other hand, an emerging industry (like biotechnology or renewable energy) may view sustainable development practices as a fundamental growth opportunity for accessing new markets or customers.
In the study, consistent connections were detected between sustainable development practices and core business strategies. Those most likely to succeed over the long term made good sense in one or more of the following areas:
- Stakeholder Support – where the aim is to increase and strengthen the company's appeal to and involvement with various groups of stakeholders (including shareholders, employees, suppliers, customers and regulators). This might encompass risk management programs for shareholders, product safety and health information to customers, supply chain partnering and support and shared benefits programs to suppliers.
- Efficiency – those sustainable development practices that make a direct or indirect contribution to the company's financial performance, e.g. waste minimisation or energy efficiency initiatives.
- Market Edge – pivotal to sustainable development practices are those that contribute to enhancing a company's market opportunities, whether through creating new products and services; opening up new markets or being more responsive to existing ones; increasing market share or profit margins; or stimulating innovative new business areas.
Leading firms that pursue high quality sustainable development practices share common cultural characteristics – breadth of vision, stakeholder empowerment and being progressive.
The sustainable development approach taken by enterprises needs to fit with their culture and ways of working. The researchers developed a new concept, 'sustainability orientation', to describe the deep-seated, high level set of principles that guide the choice of effective sustainable development practices. The sustainability orientation of a company helps business decision makers make the connection between their sustainable development practices and pursuit of the distinctive character and strategic advantage of their business. The researchers consistently found this sustainability orientation in the leading companies.
The common cultural characteristics evident in the sustainability orientation of leading firms were:
- Breadth of vision – big picture thinkers with a reputation for trust and integrity, they view their business in the broadest context, going beyond just compliance to being open to new ideas and mutually beneficial opportunities.
- Stakeholder empowerment – fostering relationships that go beyond transactions to share power with stakeholders for mutual benefits, where stakeholders are genuine sources of new ideas and value for the business.
- Being progressive – long term outlook, enthusiasm for change and new opportunities, with a commitment to growth, progress and high performance through best practice, business excellence and quality programs.
Behaviour leads attitude. Modest, iterative steps with an end goal of creating business advantage and stimulating innovation is the best prescription for connecting sustainable development with long run business success.
Motives for businesses engaging in sustainable development practices can be many and varied. Despite some of the public commentary, no motive driving sustainable development is more or less pure than another. Sustainable development does not equate to philanthropy. It is quite distinct in that the aim is to contribute materially to business goals and prospects.
Companies can gain greatest mileage from their sustainable development practices through 'learning by doing' and by proceeding incrementally - building on, customising and embedding those practices that work best for their particular business and stage of development.
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