Protecting organization’s capital base to satisfy stakeholders



Protecting an organization's capital base to satisfy the stakeholders along with protection and sustenance of the world's natural and human resources for use in the future can be a simple definition of sustainable development.

But for this to achieve any results it is essential to integrate sustainable development policies into the designing and monitoring mechanisms of the enterprise.

The stakeholders include shareowners, financers, buyers, workers, partners and societies which are impacted by the business activities.

It not only considers physical and financial resources but also lays stress on human and natural resources.

It needs to be noted that sustainable development can not be achieved by a single enterprise in isolation nor can it be achieved by an entire business community. For sustainable development to become a reality it is necessary that every player in the global economy from the consumers to the governments should understand and implement its principles so that we can meet our current needs and ensure that our future generations can meet theirs.

Considerations for the Enterprise:

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The implications of sustainable development are generally a trade off between business growth and environmental protection.

Sustainable development is all about bringing about a overall change in the way these issues are approached.

Enterprises can find out ways of achieving all the following achievements

environment conservation

social prosperity

economic growth

Sustainable development can be a great profit making initiative since it will create demand for providers of eco friendly and social prosperity products thereby opening up a whole new un explored market potential.

Tradeoffs to be Analyzed:

There are some who consider an enterprise's sole objective to only make wealth for its shareholders while others think that there should be a much wider scope which engulfs the whole society and environment.

All enterprises today have to struggle in choosing between sustainable development and financial health.

Also most sustainable development policies are ambiguous for many industries for example it is very difficult to tell what constitutes sustainable development strategies in forestry industry.

Current Situation

Most executives today believe that sustainable development is a hot topic and represents both threats and untapped potential. There is today a much wider support for sustainable development initiatives in the prevailing business groups but it is essential that these initiatives should be adequately rewarded.

There are many business houses that have taken the first steps example 3M, Dow, McDonalds etc. and have shown that sustainable development provides good financial returns.

It is important to note that customers today are showing preference towards environmental safe products over other products.

Preparing today's Leadership:

Sustainable development needs to be integrated with the business policies of an enterprise. This just requires a new approach to existing systems and processes.

The most important issues regarding it are

Being more accountable to all stakeholders

Enhancement of reporting standards

Sustainable development policies should be integrated into the MIS used by company executives so that they may easily measure their performance against sustainable development targets and make decisions geared towards achieving them. There needs to be more emphasis given to sustainable development policies in every decision making level.

The following steps need to be implemented for sustainable development to be implemented in an enterprise:

1. Conduct stakeholder identification:

A stakeholder identification and their demand survey is needed so that their needs can be identified correctly and any party isn't missed out which is or considers itself to be indirectly or directly impacted by the enterprise's activities. This step defines the issues of maximum importance, curiosity and details needed by stakeholders regarding the enterprise's sustainable development exercises.

An enterprise can exist only in association with the global economy and along with the society in which it operates. In performing its operations, an enterprise must ensure consideration for human prestige, and work for a community where the environmental protection is ensured.

At the beginning of the industrial age, company executives were interested only in earning the maximum wealth for their shareholders and owners. Enterprises were not to take interest in any communal or environmental goals. Exploitation of natural resources was a norm everywhere.

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But today, enterprises operate in a much more complex, and dynamically regulated, atmosphere. Laws and regulations keep a check on their activities, and

Ensure that their directors are accountable to a much larger number of stakeholders. Sustainable development enlarges the stakeholder group much more, by encompassing future generations as well as natural resources.

2. Establish sustainable development programs and targets:

In this step the executives set out the basic virtues that they want their employees to follow regarding sustainable development, and set benchmarks for operational performance.

Senior executives are responsible for formulation of a sustainable development policy for their enterprise, and for setting up of specific targets. Sustainable development is much more than just the environment. It should have social elements in it as well, for example removal of poverty and equity in distribution.

Executives should embody stakeholder requirements into a policy statement that captures the enterprise's mission regarding sustainable development. This statement would serve as a guide in the planning and implementation process and also put forward values which the executives, workers and other partners such as suppliers are required to strive to achieve.

3. Formulate and implement the plan:

Transforming sustainable development policies into operationally relevant targets is a major task which will affect the entire organization. It involves bringing about a complete change in the overall corporate culture and employee beliefs, assigning responsibilities and accountability, and putting in place organizational structures, information reporting mechanisms and operational customs

These changes are generally so great that a long term plan with yearly targets is generally needed.

This type of organizational change needs guidance from top management, the board of directors, the CEO and other top executives who must also be actively involved in the entire process. They must lead by setting their own example, and thereby set the tone for the entire organization.

4. Create a supporting corporate culture:

To ensure that the organization and its people give their proper backing to the sustainable development programs, a supporting corporate culture is required

Implementation of sustainable development policies will probably require managers to bring about a change in their attitudes. This can be achieved only through retraining. For example, some executives may have been trained such that their only responsibility is to maximize the wealth of their shareholders. As a result, they may not understand that sustainable development concepts are a part of a legitimate business objective.

5. Establish performance measures and benchmarks:

The implementation of sustainable development policies in a successful manner along with preparation of effective reports on progress requires an appropriate means of measuring progress.

This required so as to let executives assess performance of their enterprise against external and internal standard benchmarks, using performance measures appropriate for the purpose. Information systems therefore are required to be constantly reviewed, to ensure the important reports are made available to management constantly.

6. Provide reports:

In this step it requires that the process to develop understandable reports for internal executives and stakeholders, which briefly outlines the enterprise's sustainable development policies and compares the performance against the targets.

Directors and top management use internal reports to benchmark and measure performance take decisions and assess the execution of sustainable development policies and strategies. Shareholders, partners, workers, lenders and customers, as well as the entire public, use external reports to measure the performance of an enterprise, and to lay blame on the directors and top management for the financial, social and environmental policies of sustainable development.

7. Enhance internal monitoring processes

On a continuing basis it is always important to create mechanisms to aid directors and top executives in ensuring that the sustainable development policies are continuously being implemented as planned.

Performance monitoring is a well established and an important feature of the management process. In many fields, it is directly related to reporting. The key to the effectiveness of any system is whether the executives monitor operations and results on a continuous and ongoing basis.

Monitoring can be in many forms, such as:

Reviewing the reports prepared and submitted by middle level managers;

Making on the site visits of operating sites while operations are in progress and observing employees going about their duties;

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Holding regular summits with the subordinate managers to review reports and get inputs on how best can the procedures and reporting mechanisms might be improved for th e good;

Implementing and executing an environmental audit program.

Leadership from Top Executive:

Establishing and sustaining sustainable development policies requires leadership from top executives, and their full commitment.

1. The board's role: It is the role of the board to monitor the implementation of sustainable development policies. The board should obtain regular reports, and should be held accountable for the company's progress against these targets.

2. Self-assessment: This deals with all the issues and steps that have to be performed to determine the enterprise's current standing with regard to sustainable development.

3. Deciding on a strategy: The top management should perform a comparison of their enterprise with respect to other companies in the same sector and on the basis of such comparisons a strategy should be formulated which would be practical.

4. Strategy implementation: Detailed plans regarding operations, MIS, reporting etc should be prepared in consultation with workers and specialists.

5. Small business and private company considerations: Small business who lack expertise in implementing sustainable development policies should get help from industry associations.