Definitions and Elements of Corporate Sustainability

According to Montiel, interest in corporate sustainability surged after the United Nations World Economic and Development Commission popularized the term “sustainable development” in its famous 1987 “Brundtland Report” and researchers began to adapt the concept to companies by declaring that they could pursue sustainability by meeting their present needs without compromising the ability of future generations to meet their own needs.[1]  During the 1990s academics and practitioners began to argue that corporate sustainability required simultaneous attention to, and satisfaction of, environmental, social, and economic standards.[2] Dyllick and Hockerts suggested that when the fundamental principles of sustainable development are translated to the firm level, it leads to defining corporate sustainability as “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 as well”.[3]  Dyllick and Hockerts explained that in order to achieve and maintain corporate sustainability, companies must be able to growth their economic, social and environmental capital basis while also actively contributing to sustainability in the political domain.  They went on to identify what they felt to be the three key elements of corporate sustainability[4]: 

• Integrating the economic, ecological and social aspects in a “triple-bottom line”: Economic sustainability alone is not a sufficient condition for the overall sustainability of a company and while companies can enjoy short-term success by focusing only on economic growth they must ultimately learn how to satisfy and balance all three dimensions of the “triple-bottom-line” simultaneously, a difficult task given the complex inter-relationships among them.
• Integrating the short-term and long-term aspects: Many companies, large and small, have responded to the demands of their investors by over-emphasizing short-term profits, a strategy that is at odds with the spirit of sustainability and its elevation of the future needs of stakeholders to the same level as their present desires. In addition, emphasis on discounted rates of return tend to value short-term gains and minimize the costs associated with social or environmental degradation that will be incurred farther out in time as a result of the firm’s current activities.
• Consuming the income and not the capital: Management and maintenance of economic capital has been a long-standing tenet of long-term sustainability for businesses and the fiduciary responsibility of corporate directors and managers; however, corporate sustainability requires that companies not only manage the economic capital, but also their natural and social capital stocks.

This article is part of the Sustainable Entrepreneurship Project’s extensive materials on Entrepreneurship and Sustainability and Entrepreneurship and an excerpt from Sustainable Entrepreneurship by Alan S. Gutterman, which is available for purchase at various online booksellers.  Readers may also enjoy the author’s book on Entrepreneurship.

Notes

[1] I. Montiel, “Corporate Social Responsibility and Corporate Sustainability: Separate Pasts, Common Features”, Organization and Environment, 21(3) (September 2008), 245, 254 (citing UN World Commission on Environment and Development, Our common future (Oxford, UK: Oxford University Press, 1987), 43).

[2] Id.  For further discussion, see P. Bansal, “Evolving sustainably: A longitudinal study of corporate sustainable development”, Strategic Management Journal, 26(3) (2005), 197; and T. Gladwin and J. Kennelly, “Shifting paradigms for sustainable development: Implications for management theory and research”, Academy of Management Review, 20(4) (1995), 874.

[3] T. Dyllick and K. Hockerts, “Beyond the Business Case for Corporate Sustainability”, Business Strategy and the Environment, 11 (March 2002), 130, 131.

[4] Id. at 132.