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You are here: Home / Signals — well-being and the environment / Signals 2012 / Close ups / Makes ‘business sense’?

Makes ‘business sense’?

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From small enterprises to multinationals, many companies are looking for ways to retain or increase their market shares. In times of tough global competition, the pursuit of sustainability suggests much more than ‘greening’ the corporate image and cutting down production costs. It might mean new lines of business.
Production line

Production line  Image © Stockbyte

Invasion by great apes was probably not mentioned among Unilever’s top business risks, but it happened. On 21 April 2008, Unilever’s headquarters in London and its facilities on Merseyside, Rome and Rotterdam were invaded by Greenpeace activists dressed as orangutans. The activists were protesting the damage done to Indonesian tropical rainforests by the production of palm oil, used in many of Unilever products. Soon after the raid, the company announced that it would draw all its palm oil from ‘sustainable’ sources by 2015. Since then, the company outlined a business plan to integrate sustainability to the core of its practices.

Many different reasons could motivate a multinational company to adopt more sustainable practices. It could be linked to the company’s corporate image or the image of its brands. Sustainability could also be demanded by the company’s investors who might shy away from putting their money into companies not addressing the risks of environmental change or not interested in reaping the benefits of eco innovation. 

As Karen Hamilton, Vice President of Sustainability at Unilever, puts it: ‘We see no conflict between growth and sustainability. More and more consumers actually demand this.’

Or simply, adopting sustainable practices might make business sense. Companies might gain competitive edge and increase their market share. It could also mean new business opportunities for innovative eco entrepreneurs responding to a growing demand for ‘green’ products. 

Karen adds: ‘Sustainability also implies cost savings. If we can reduce packaging, we can cut down on energy use in the factory, hence saving money and increasing profitability.’

Where to look for ideas

Once large multinational companies start adopting greener practices, their size enables them to make a difference on the ground. They tend to call on their peers to adopt similar practices. Founded on the eve of the 1992 Rio Summit to give a voice to the business sector, the World Business Council for Sustainable Development (WBCSD) is a platform set up to promote sustainability in the business sector. 

The WBCSD’s ‘Vision 2050’ report, put together with leading CEOs and experts, outlines the must haves that the business sector should put in place in the next decades to achieve global sustainability. In other words, it is a call for sustainability from within. 

The main ‘must haves’ identified by the WBCSD reflect many of the objectives of policymakers: getting market prices to include the costs of environmental damage; finding efficient ways to produce more food without using more land and water; stopping deforestation; reducing carbon emissions worldwide by shifting to environment friendly energy; and using energy efficiently everywhere, including the transport sector. 

The Carbon Disclosure Project (CDP) is another initiative promoting sustainability in the business sector. It is a non profit organisation, aimed at achieving reductions in greenhouse gas emissions and water use by businesses and cities. CDP also helps investors assess business risks linked to the environment, such as climate change, water scarcity, flooding and pollution, or simply shortage of raw materials. Especially in the context of the current financial crisis, investors have an important say in which companies survive.

Copyright: Thinkstock

No one size fits all solution

The question then remains: how can a company translate sustainability into business management? There is not a one size fits all solution but plenty of advice and support is available. 

Sustainable business platforms such as the World Business Council for Sustainable Development and the Carbon Disclosure Project provide guidance to companies willing to position themselves at the forefront. There are also more targeted recommendations such as the OECD Guidelines for Multinational Enterprises, which are annexed to the OECD Declaration on International Investment and Multinational Enterprises. They provide voluntary principles and standards for responsible business conduct for multinational corporations operating in countries adhered to the Declaration.

Most of the existing schemes are voluntary, however, and are usually addressed within the broader context of corporate social responsibility. 

It is not only the top managers in various companies who steer the transition to sustainable practices. Governments and public authorities in general can help companies by creating a level playing field and providing incentives. Orangutan costumes might not always be necessary, but consumers and civil society can also send in a strong signal to the private sector, simply by showing there is interest in environment friendly products. 

Karen confirms this: ‘Governments and civil society certainly need to work together. Businesses can particularly make a difference in cross boundary supply chains and, of course, the scale at which they reach consumers.’

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