Corporate Sustainability: More than Going Green

Windmills on a desk
Date: 
September 24, 2018
Author: 
Hannah Ramil

A growing number of corporations are choosing to introduce sustainability efforts within the company. From plant-based, environmentally friendly laundry detergent to shoe brands that donate a pair for every pair purchased, more products are designed and marketed with sustainability in mind. Starbucks, for example touts fair-trade coffee beans, coffee sleeves made from recycled fibers, and are introducing strawless lids. This emerging pattern is known as corporate sustainability. Organizations invested over $8.7 trillion (more than twice the GDP of Germany, the fourth largest economy in the world) in corporate sustainability efforts in 2016 in the U.S. alone (USSIF, 2016). Nearly 12,000 organizations disclose their sustainability efforts through the Global Reporting Initiative, an international organization founded in 1997 to promote corporate sustainability.

WHAT IS CORPORATE SUSTAINABILITY?

According to Dyllick and Hockerts (2002) corporate sustainability is an organization’s efforts to not only meet the needs of current stakeholders, but also meet needs of future stakeholders. Hahn and colleagues (2018) argue that corporations can meet these divergent and potentially competing goals by embracing paradox theory. In other words, corporations who embrace corporate sustainability must recognize that they will likely have to embrace competing demands (e.g., immediate profit, long-term environmental sustainability), without trying to resolve them into a unified goal. Organizations who embrace this paradox perspective may balance their actions and initiatives to meet the separate competing demands, being clear about which initiatives are tied to which goals.

The definition of corporate sustainability continues to be debated, mainly because it is related to other constructs, like corporate social responsibility, environmental management, and sustainable development (Landrum, 2017). Schwartz and Carroll (2008) observe that corporate sustainability and other related constructs have three main pillars: generation of value for the company and society, balance of financial and non-financial interests, and corporate accountability for actions.

Constructs Definition
Corporate Sustainability “Meeting the needs of a firm’s direct and indirect stakeholders (such as shareholders, employees, clients, pressure groups, communities, etc.), without compromising its ability to meet the needs of future stakeholders” (Dyllick & Hockerts, 2001, p. 131).
Corporate Social Responsibility (CSR) “The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time” (Carroll, 1979, p. 500).
Environmental Management “Encompasses all efforts to minimize the negative environmental impact of the firm's products throughout their life cycle” (Klassen & McLaughlin, 1996, p. 1199).
Sustainable Development ‘‘Development that meets the needs of the present without compromising the ability of future generations to meet their own needs’’ (WCED, 1987, p. 43).

WHY IS IT IMPORTANT?

Pressure on corporations to partake in corporate sustainability initiatives has increased in recent years. As a result, many corporations have attempted to incorporate these conscious practices in their business goals and strategies. Holding organizations accountable for the ways in which they conduct their business can yield potential lasting benefits for the wellbeing of the earth and societies within it.

Embracing corporate sustainability efforts can also benefit organizations. Eccles and colleagues (2014) examined the organizational characteristics and performance of 90 high sustainability companies and 90 low sustainability companies for a period of 18 years. In terms of organizational characteristics, they found that low sustainability companies are those that continue to operate under profit-maximization practices and view social and environmental responsibilities as externalities. In contrast, within high sustainability companies, the boards of directors are directly responsible for sustainability efforts, and leadership ties incentives to sustainability metrics. These companies also have deeper stakeholder engagements and are long-term oriented. Organizational performance outcomes differed. High sustainability companies significantly outperform low sustainability companies in terms of long-term performances in stock market and accounting.

Positive outcomes emerge within the organization from corporate sustainability efforts. Carmeli, Brammer, Gomes and Tarba (2017) conducted an empirical study on organizational Ethic of Care and employee involvement in sustainability-related behaviors at work. They found that an organizational culture based on compassion and care can motivate workers to partake in sustainability initiatives through workers’ affective reactions towards sustainability initiatives. The findings also imply that the Ethic of Care within the organization can lead to enhanced organizational identification. This enhanced organizational identification can amplify worker satisfaction and can drive sustainability-related behaviors.

FUTURE DIRECTIONS

Because of the variations of understanding in corporate sustainability, efforts remain inconsistent. This inconsistency makes the actual effectiveness of sustainability practices on reducing environmental damage is questionable. There is a lack of a unified understanding of corporate sustainability. To ensure that these sustainability efforts are truly meaningful, Landrum (2017) urges for a narrower conceptualization of corporate sustainability that does not prioritize profit maximization.

Further exploration on integrating corporate sustainability practices, and such integration’s effects on organizational culture constitute a key next direction in research. Linnenluecke and Griffiths (2010) suggest that the culture of a business is an important aspect to examine. Because an organization’s culture reflects organizational values, the integration of sustainability initiatives can fail if the culture is not conducive to such values. The study by Carmeli and colleagues (2017) presents a promising possibility for a type of organizational culture that is conducive to sustainability practices. However, further examination on the Ethic of Care and corporate sustainability is necessary to validate their methods. Along with Linnenlucke and Griffiths, they also suggest further examinations on different organizational cultures and how it affects sustainability efforts.

Similarly, Avota, McFadzean, and Peiseniece (2015) directed their attention to how the interplay of organizational values and personal values can influence behavior and sustainability initiatives. Their conceptual model suggests that the congruence or incongruence between organizational values and individual values influence behaviors at all levels, including individual, group, and structural behaviors, as well as management processes. The outcomes from these interplaying factors can lead to sustainability initiatives in the economic, environmental, and social dimensions. Further studies are necessary to validate their conceptual model in different organizational settings and within different cultures.

Further Reading: 

Avota, S., McFadzean, E., & Peiseniece, L. (2015). Linking personal and organizational values and behavior to corporate sustainability: A conceptual model. Journal of Business Management, 10, 124-138.

Carmeli, A., Brammer, S., Gomes, E., & Tarba, S. Y. (2017). An organizational ethic of care and employee involvement in sustainability‚Äźrelated behaviors: A social identity perspective. Journal of Organizational Behavior, 38(9), 1380-1395.

Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4(4), 497-505.

Dyllick, T., & Hockerts, K. (2002). Beyond the business case for corporate sustainability. Business Strategy and the Environment, 11(2), 130-141.

Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835-2857.

Hahn, T., Figge, F., Pinkse, J., & Preuss, L. (2018). A paradox perspective on corporate sustainability: Descriptive, instrumental, and normative aspects. Journal of Business Ethics, 148(2), 235-248.

Hopwood, B., Mellor, M., & O'Brien, G. (2005). Sustainable development: mapping different approaches. Sustainable Development, 13(1), 38-52.

Klassen, R. D., & McLaughlin, C. P. (1996). The impact of environmental management on firm performance. Management Science, 42(8), 1199-1214.

Landrum, N. E. (2017). Stages of corporate sustainability: Integrating the strong sustainability worldview. Organization & Environment, DOI: 10.1177/1086026617717456.

Linnenluecke, M. K., & Griffiths, A. (2010). Corporate sustainability and organizational culture. Journal of World Business, 45(4), 357-366.

Schwartz, C. A. B., & Carroll, A. B. (2003). Corporate social responsibility: A three-domain approach. Business Ethics Quarterly, 13(4), 503-530.

USSIF Foundation. (2016). Report on US sustainable, responsible, and impact investing trends 2016.

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