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This report shall investigate how committed organizations are to sustainability practices. It shall investigate what changes in corporate strategy and policy are necessary in the journey to sustainable business. A literature review shall be undertaken within the area of business sustainability and examples from organizations which have moved to a sustainable business model provided. These examples will illustrate the levels of commitment from various companies and also the changes that were necessary in terms of their corporate strategy and policy directions.
Company examples include a chemical company looking towards a sustainable business model, a cleaning company using green products as its sustainable business model and the Honda vehicle manufacturer in developing engines that are greener.
The corporate strategy of each shall be discussed in terms of their commitment to sustainable business objectives. In addition an example of how Government policy can influence sustainable business is discussed in relation to the Yangtze river in china where there are major pollution problems.
1. What it means to be a sustainable business
A recent definition of sustainable business is provided by the Brundtland Report (United Nations, 1987). This is a United Nations report which was published by the World Commission on Environment and Development in 1987. This report quotes sustainable business as: "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."
The report stresses the importance of working together and active participation of all sectors since ultimately many problems facing the world are all interconnected. All decisions relating to sustainable development ultimately effect all sectors of society (Unitied Nations, 1987).
2. Organization commitment to sustainability practices
Dunphy (2000) ask the question if sustainability is good for business. Increasing amounts of companies in trying to have zero emissions have started to understand that one companies waste is a valuable resource for another.
2.1 The benefits of adopting sustainable business model
Langenwalter (2007) notes that many companies miss a key point in believing that sustainability is just too expensive for their organization They forget about what the consumer really believes in and their long term relationship with the client. Being close to the customer involves building trust with the customer. If the customer believes that the company is going that extra step to be more responsible then the relationship between the company and consumer can be greatly enhanced. This can lead to long term benefits between customers by differentiating yourself from the competition in a more sustainable manner. Langenwalter (2007) outlines that sustainability should embrace the three R's, namely respect for each other, respect for our planet and respect for future generations
Langenwalter (2007) spent his career within a manufacturing company and during that time learned many benefits of sustainable business reform. By using three basic competitive strategies, namely lower price, innovative product and being close to the customer, he found that these three factors must be considered from the sustainable business model point of view. If the company honors it people and its community and also treats the environment with respect, it will be in a better position to gain long term competitive advantage.
Example 1 ââ‚¬" Chemical Company
Langenwalter (2007) gives an example of a chemical company which insisted on having reusable containers from its suppliers and was deeply committed to having a sustainable business plan. While the initial cost was high since they had to overhaul their logistics team, the company benefited long term by not being liable for future clean up liabilities. Their green sustainable policy paid off in the end and saved them considerable money. They also returned more money by reducing their inventory capital and reducing the cost associated with cleaning up hazardous materials.
Example 2 ââ‚¬" Green Works Cleaning Company
The Green Works organization is a good example of a business that is using the sustainable green business model in order to generate greater market share. From the soft green pastel colours of their website and branding, Green Works is focused on the environmentally friendly conscious consumer. Their products claims to be just as good, if not better than the non green competitor product ranges (Green Works, 2010).
It is owned and managed by its parent company, Clorox. According to Knauss (2010), the current CEO and Chairman of the Clorox Company, the Green Works natural cleaners company was launched in January 2008. Their main goal was to make cleaning more affordable and accessible without compromising cleaning performance.
By having a very dedicated and simple message to consumers, their brand name delivers a clear message which is backed up by also ensuring the product is delivered in 'green' packaging which is recyclable.
3. Corporate Social and Environmental Responsibilities
The consumer is increasingly looking towards green companies and wants to support companies which 'do the right' thing. The organization should be seen to use or supply environmentally friendly products which replace the demand for non green products.
Studies have shown that if the consumer is presented with two identical products with the same qualities where one product is environmentally friendly, the consumer will chose the environmentally friendly product (CNET, 2008.).
Example 3 ââ‚¬" Honda
Another example of a sustainable business model is the Honda vehicle manufacturer. As consumers look for cleaner energies and vehicles, Honda has a great advantage to use its superior engineering knowledge in this area to gain a wider consumer market share. There are also tax advantage incentives for cleaner vehicles that all European countries are now imposing
According to a study by J.D. Power and Associates the study found that seventy two percent of consumers are "definitely/probably" interested in having hybrid-electric technology for their next vehicle (CNET, 2008.) even if the vehicle is more expensive than a conventional vehicle. In response to this Honda introduced the Civic Hybrid with a lower CO2 emission level. Most recently Honda recently released the new Honda FCX Clarity. This vehicle uses hydrogen fuel cells, claims zero emissions while maintaining performance and safety. (Honda, 2009)
4. Corporate strategy direction and sustainable business
Berlind (2010), indicates that it was important to define what it means to be green since there is no industry standard for such a term. The Green works company, just discussed, decided to disclose all of the ingredients on their products and use only biodegradable ingredients which would break down safely into environmentally friendly compounds. They have also sought out standards and aligned themselves with these new benchmarks (Green Works, 2010). Hence it is important to have a clear corporate strategy direction that is supported with key steps to achieve this.
4.1 Leadership and Strategy for Corporate Sustainability
Organizations must have clear and uniform leadership about what sustainable business means to their organization and how they intend to implement such policies. The organization should integrate principles of sustainability into all of their business decisions.
Rainey (2006) shows that executives need to devote time and effort towards the whole of the organization and not just its individual parts. They must also articulate the vision for the future in terms of their sustainable business model. They must motivate but also inspire people to improve their performance (Rainey, 2006).
4.3 Sustainability and changing the behavior of the consumer
The behavior of the consumer can be changed through clever marketing and presenting to the consumer an organization that presents themselves as a sustainable business. They should show that they are greener than their competition.
5. Corporate polices required for sustainable business
5.1 Teaching sustainable Leadership
Galea (2004) indicates that teaching sustainability policies within a business environment in a traditional way will not work. It should be oriented with the needs of the organisation and concentrate only on what is essential to the business. Galea also suggests that sustainability factors should be written into employees written and performance appraisals. Sustainability learning of an organization is built upon five pillars according to Galea (2004). These five factors are business alignment, sustainability knowledge, personal and organization leadership, systems analysis and enabling technology and processes.
Timely and complete communication is also essential in promoting the sustainable initiatives of the organization. Sustainability decisions should be based on facts, not assumptions and speculation. Introducing sustainability into an organization requires effective personal and organizational leadership about how to think and learn in new ways. Galea (2004) suggests three elements important for this process. Firstly purpose driven leadership. The leaders must know the market drivers and how they relate to the issue of sustainability. Secondly, visionary foresight. The leader should identify the role of their organization in terms of market needs and how a sustainable business model can support that. Thirdly, personal mastery. There must be passion within the leadership team to really believe in a sustain business model.
5.2 Sustainability and employee behavior policy
Epstein (2008) highlights that employee behavior is not random and is heavily influenced by the eagerness and ability to product the behavior wanted by senior management. Employee behavior can be influenced by having a strong and consistent set of forces on employees. For this behavior to be sustainable it must be connected to the company business model and also the organization's mission.
5.3 Sustainable business resources policies
Desjardins (2007, p86) suggests that in terms of common pool resources, the private ownership of these resources is beneficial to ensure efficient sustainable use. Efficiency is also often enhanced when services are owned privately rather than publicly. With private ownership there are settled rules of of conduct. For example private ownership is not subject to the changing of government policies and regulations. With private ownership of resources it gives the organisation the ability to engage and anticipate other organisations more effectively (Desjardins, 2007).
5.4 Government policies for sustainable business
Government policy has a large impact on how businesses influence their business model and whether they adopt sustainable business plans. Dernbach (2002) discusses ways that Governments can enhance the efficacy of business sustainability. Governments should provide promote strong institutions and their governance abroad to encourage sustainable business activity. Factors such as honest administration, strong adherence to the law, efficiency in administration, respect for human rights, protection of property rights, health care and education all attribute to business confidence and long term sustainability for business. Governments also need to address concerns over the social, technological and environmental implications of our globalized world. Within the United States, governments have pushed sustainable development and implemented strategies to encourage competitive advantage or social conscience (Dernbach, 2002).
Example ââ‚¬" Yangtze River Delta of China and business sustainability
In an article by Liu (2009), the environmental factors on companies and how these factors influence their behavior towards the Yangtze River Delta of China is investigated.
The results of the investigation revealed that pressure as a result of external environmental factors was related to the environmental behavior of the firm. Government pressure was found as the leading factor towards the environmental defensive behavior of the company. Market pressure dominated the firms environmental preventative behavior. Community pressure and Government resulted in the greatest influence on the environmental enthusiastic behavior of the firm.
Liu (2009) recommends that governments use regulations, market factors and information mechanisms to encourage firms to improve their environmental responsibilities. According to Gang (2008), the Ministry of Environmental Protection or MEP was established in China on March 28th, 2008, to take responsibility for environmental governance, manage environmental planning and solve environmental problems. Gang indicates that the main challenge for the government is to strike a balance between development, social stability and the environment. The government must play a key part in changing the attitudes and policies of companies in order to promote sustainable businesses.
This report found that sustainable business practices must be supported by a clear corporate strategy from the very top of the organization. The key to many successful sustainable business policies is a clear strategy from upper management that the company believes in and can honestly show to the consumer. This can often provide many benefits to the image of the company and also long term profitability of the company as a consequence.
The report found that for the long term organizations are often more successful when they have a sustainable business plan in place. The Chemical company had to ensure higher costs for the short term but were then ultimately rewarded in reducing their inventory capital and cost of handling hazardous materials. The Green Works cleaning company built their entire business on a sustainable business model to great success, knowing that if there was no price difference between a green and non green product, the consumer would chose the green product. Honda has also spend large sums of money on greener engines and is now right at the edge of developing greener engines for consumers.
In summary, sustainable business strategy must come from the very top of the company and be supported by all levels of management and subsequent policies throughout the company. The company must be seen to be delivering green products which meet the needs of the present without hindering future generations to meet their needs.