Out of the Fortune 500 companies in 1955, only 12.2% survived in 2016 due to the changing priorities of stakeholders mainly customers, severe competition and ecological challenges like global warming. If corporates have to sustain in future, they have to adapt strategies considering these factors. This led to corporate sustainability as a new paradigm in corporate strategy.
The new recipe for sustained leadership of an organisation is to have concern for stakeholders, passion for modernity and adherence to quality. Modernity doesn’t merely come from adopting cutting-edge technologies and processes. It comes from identifying material priorities of stakeholders and being early adapters to emerging trends.
Corporate sustainability is currently a burning issue and a major concern across the globe. Due to increased regulations and rising awareness of stakeholders, it has been assuming great importance. Brundtland defined corporate sustainability as meeting the needs of the present generation without compromising on the ability of future generations to meet their own needs.
World Business Council for Sustainable Development (2002) defined corporate sustainability as the commitment of business to contribute to sustainable economic development and to work with employees, their families, local community and society at large to improve their quality of life. Investors’ interest in non-financial performance of companies has recently grown nicely.
Corporate sustainability means creating long-term shareholder value by embracing opportunities and managing risks arising from social, environmental and economic factors. Sustainable behaviour adds value to commercial endeavour and is specifically helpful to manage corporate image. It helps in assessing the capabilities and effectiveness of business management.
The role of corporates has been understood in commercial terms that focus purely on economic parameters of success. As they have been regarded as institutions that cater to the market demand by providing products and services, and have the onus to create wealth and jobs, their market position has traditionally been a function of financial performance and profitability.
However, as a result of globalisation and ecological issues, the perception of the role of corporates has been changing in recent years. It’s now redefined taking into account their broader responsibility towards society and environment beyond economic performance, and evaluation is made whether they are operating in an ethical and socially responsible manner.
Due to the shift from purely economic to economic with an added social dimension, many institutions and corporates are endorsing the term corporate sustainability. It’s defined as organisation’s commitment to the society and environment within which it operates. Many people in the local communities can be empowered through corporate social responsibility initiatives.
As a result of corporate sustainability, there can be shift in the organisational focus from short-term to long-term goals. Transparency is an essential element of corporate sustainability. It can be assessed along various dimensions such as energy efficiency, community relations, ecology design, materials efficiency, product recyclability and employee relations.
The firms should have accountability for various impacts of their activities on the overall society and environment. They should make proper disclosure of these impacts in the sustainability report, which provides a detailed description of their governance structure, stakeholder engagement approach and triple bottom line performance consisting of profit, people and planet.
It’s widely believed and suggested by researchers that in today’s dynamic and complex business environment, corporate sustainability is likely to influence corporate profitability and overall performance. It lays basis for preserving and enhancing value of firms. The firms reap plenty of strategic benefits as a result of embedding sustainability in their core strategies.