This is an original article by Vinnie Chua from Global Initiatives.
Businesses around the world have been rapidly buying into the idea that sustainability is profitable.
In 2018, the Governance & Accountability Institute’s research team found that 86% of companies listed in the S&P 500 Index had published a sustainability or corporate sustainability report. This is a tremendous leap from 2011 with less than 20% of companies having published these reports – a more than quadruple increase in the span of seven years.
According to Corporate Citizenship, “(a) sustainability or corporate responsibility strategy is a prioritised set of actions. It provides an agreed framework to focus investment and drive performance, as well as engage internal and external stakeholders” in the area of sustainability.
In the wake of COVID-19, companies that have sustainability strategies have been found to be more likely to survive in an economic downturn due to better preparedness for crises.
An article posted on the Harvard Law School Forum titled “Five Ways a Sustainability Strategy Provides Clarity During a Crisis” highlights the following reasons: Purpose, Materiality, Sustainable Development Goals (SDGs), Reporting and Engagement, and Collaboration.
These reasons may seem irrelevant to our current crisis but when we take a closer look at them, we begin to understand their importance.
A sustainability strategy lays down the groundwork for a company to recognise the areas where they are lacking in terms of their contributions in the area of sustainability and helps them to make more targeted efforts at improving or solving these issues.
It also identifies the areas in which they are performing well so that they can work on maintaining their standard and act as a role model for other corporations to emulate.
Contrary to what many people believe, the scope of sustainability is not limited to environmental affairs. When we examine the SDGs, we realise that sustainability incorporates areas such as women empowerment and eradication of poverty.
Photo by the United Nations
A key concept of sustainability, in particular the SDGs, is that all aspects are intrinsically linked. When there is an improvement in one of the 17 areas, other areas will reap benefits in turn.
To illustrate this, let us analyse the 1st SDG: “No Poverty”. When we alleviate poverty, there will be reduced inequalities (SDG 10) and impacted communities will have better access to food and clean water (SDG 2 and 6 respectively), leading to improved health (SDG 3) and enabling the children to go to school (SDG 4). In good health, communities can work to the best of their ability, leading to nation-wide economic growth (SDG 8) which then has a domino effect in other areas.
Of course, this illustration is hypothetical and may not ring true for all situations. Nonetheless, this example helps us to visualise and understand the interconnectedness of the SDGs.
Company goals don’t have to be explicitly linked to certain SDGs, though there are companies such as Unilever that specify the SDGs that they focus on. Other companies simply use the SDGs as a backbone upon which they frame their goals, focusing instead on aspects such as waste management.
When companies have set these goals, crisis management comes into play.
A focus, whether it be on environmental or miscellaneous aspects, helps a company tune into the key areas of their business. These areas are what those in the field of sustainability reporting term as “material”.
Though there’s no official definition for materiality, Global Reporting Initiative (GRI) mentions this: “Relevant (or ‘material’) topics for a reporting organization should include those topics that have a direct or indirect impact on its ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders, the environment, and society at large.” This simply means that a material topic is an area that a company can make an impact in, whether it be positive or negative.
Photo by GreenBiz: How to make your materiality assessment worth the effort.
When companies build a sustainability strategy, they typically engage all relevant stakeholders in discussions to spot the company’s material issues that they then build their strategy upon. These discussions help companies to not only better understand themselves but also the stakeholders involved in each facet of their operations.
Understanding the mindsets and feelings of stakeholders help companies form stronger and more meaningful partnerships that will propel them in future operations. For example, recognising the grievances of their staff will allow them to get to work on those specific issues, helping the team be efficient and more satisfied in their job, leading to increased productivity.
All these give a company a clearer picture of how they can go forward in times of crises, allowing them to persevere despite the chaos around them.
According to the United Nations, sustainability is defined as: “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.” A lot of the work required boils down to preserving the environment but as seen in the SDGs, we need to work on all aspects of sustainability in order to tackle the crisis, be it climate change or COVID-19.
Companies have to recognise the need for a sustainability strategy and stick to it. Only then will it be sustainable in the long-run, helping them to stay afloat in our current crisis as well as to arm them with the means to tackle the next one.