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Principles of Corporate Sustainability

Updated: May 7, 2023

Corporate sustainability helps organisations and companies gain long term benefits and financial benefits in various forms such as reducing waste through energy efficiency investments to produce savings, increasing the name and image to such an positive impact that committed individuals would be willing to take a lower salary in the name of sincere commitment, gaining greater credibility by attaining higher ESG ratings i.e Environmental, Social and Governance ratings. To contribute to sustainable development, businesses should create wealth to reduce poverty without harming the natural environment, thereby, helping not just the world today but also ensuring that future generations can also thrive. This means that business must consider three key things in their operations:

Human rights and social justice

Sustainability requires businesses to recognise their impact on the people they employ and the communities around them by committing to fair wages, just and ethical treatment, and a clean and safe environment.

Natural resource extraction and waste

Businesses often rely on natural resources such as land, water and energy and thereby, need to respect the cycles of nature and give the renewable resources time too to be able to sustain by using natural resources at the rate at which they regenerate.

This can be done in various ways such as, reducing thei resource extraction by using recycled or repurposed products, increasing efficiency by reducing waste generation, etc.

Short and long term thinking

Companies are used to longer-term thinking for capital investments, but a sustainability orientation applies this logic to investments in technologies, people and society despite facing pressure for immediate results.

A review of the literature suggests that the concept of corporate sustainability borrows elements from four more established concepts

1. Sustainable development

it is a broad concept that essentially balances the need for economic, social and environmental growth and equity by combining social justice, business management, economics, environmental science, politics and law. It is argues that supporting sustainable development is as much an environmental necessity as it was an economical necessity. And over time, many business leaders and corporations have come forward to show their support for the principles of sustainable development.

Sustainable development not only helps companies set out areas to focus on (environmental, social and economical) but also provides a common societal goal for organisations, companies, governments, etc to work towards.

2. Corporate social responsibility (CSR)

CSR is also a broad concept that deals with the role of business/ organisation/ company in society with the basic premise being that corporate managers have and ethical obligation to consider and respond to the needs of society and not only their own needs or shareholder’s needs. The extent to which CSR is considered and practices is essential as either of the extremities can be a factor of loss for organisations/ companies. The arguments in favour of corporate managers having an ethical responsibility to society draw from four philosophical theories:

Social contract theory: The social contract theory is that society consists of a series of explicit and implicit contracts between individuals, organisations, and institutions and these contracts evolved so that exchanges can be made between parties in an environment of trust and harmony. Corporations, as organizations, enter into these contracts with other members of society, and receive resources, goods, and societal approval to operate in exchange for good behaviour.

Social justice theory: Social justice theory is a variation of the social contract theory and even sometimes considered to be a contrasting view of social contract theory. It focuses on fairness and distributive justice— how, and according to what principles, society’s goods (here meaning wealth, power, and other intangibles) are distributed amongst the members of society. In this theory it is argued that a fair society is one in which the needs of all members of society are considered, not just those with power and wealth. As a result, corporate managers need to consider how these goods can be most appropriately distributed in society.

Rights theory: Rights theory, not surprisingly, is concerned with the meaning of rights, including basic human rights and property rights. One argument in rights theory is that property rights should not override human rights. From a CSR perspective, this would mean that while shareholders of a corporation have certain property rights, this does not give them licence to override the basic human rights of employees, local community members, and other stakeholders.

Deontological theory: Deontological theory deals with the belief that everyone, including corporate managers, has a moral duty to treat everyone else with respect, including listening and considering their needs. This is sometimes referred to as the “Golden Rule.”

CSR contributes to corporate sustainability by providing ethical arguments as to why corporate managers should work toward sustainable development: If society in general believes that sustainable development is a worthwhile goal, corporations have an ethical obligation to help society move in that direction.

3. Stakeholder theory

This is a modern concept that was first popularised by R.Edward Freeman who defined stakeholder as “any group or individual who can affect or is affected by the achievement of the organisation’s objectives.” It essentially states that the the ease of meeting businesses objectives is directly dependant on how good the relation of the organisation is with other external parties. A good relation emphasises trust, honesty, respect and cooperation, thereby making this theorem a highly philosophical concept despite being one of the primary strategic management concepts. However an issue that is faced in this theory is the need to be able to clearly characterise stakeholders.

4. Corporate accountability theory

The fourth and final concept underlying corporate sustainability is corporate accountability which deals with the legal or ethical responsibility to provide an account or reckoning of the actions for which one is held responsible. Accountability differs from responsibility in that the latter refers to one’s duty to act in a certain way, whereas accountability refers to one’s duty to explain, justify, or report on his or her actions.

One thing to keep in mind is the fact that corporate sustainability and CSR are not the same concept. CSR emphasises a company’s ethical responsibilities. However, what is ethical for one person or company may not be seen ethical by another whereas, corporate sustainability emphasises science-based principles for corporate action. A corporate sustainability lens would set a wage in which people could meet their basic needs, which will vary from place to place.

Additionally, CSR generally does not speak to fairness across generations; it focuses more on the present.


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