Most organization’s are realizing the importance of considering the impact they have on society. These impacts can be environmental, economic or social (EES) and in most cases are interlinked where each one can create impacts on the other two. Organizations are also realizing that EES impacts can effect their operations and profitability. These impacts can come from climate change, extreme weather events, changing economic conditions and social disorder or from impacts the organisation has created through its business activities. Examples can include man made disasters such as Exxon Valdez, Bhopal and BP;s Gulf of Mexico incidents, natural events such as floods and tsunami’s which have effected Japan and Thailand and social examples such as the reaction to Lynas operations and bauxite mining in Kuantan, Malaysia.
Organizations are also being pressured through regulatory change to consider to consider these sustainability issues. Bodies such as stock exchanges in Malaysia,Singapore, Thailand and India are increasingly asking their listed companies to “comply” with sustainable reporting requirements or “explain” why not. Pressure is also being applied indirectly through the supply chain with organizations being asked to vouch for the credibility of their supply chain. Recent examples in the palm oil sector are a case in point where customers have boycotted large plantation companies because of supply chain issues. Other stakeholders such as NGO’s, minority shareholders, employees, communities are increasingly demanding a say in how organizations operate.
Investors are also becoming more conscious of the actual and potential EES impacts of those with whom they wish to invest. Human rights and human trafficking are becoming important considerations for investors. The recent UK Modern Slavery Act 2015 and the Corporate Manslaughter and Corporate Homicide Act 2007 are clear examples where those creating EES impacts are being held accountable and the failure to comply with these Act’s would deter investors.
Sustainability and sustainable development are becoming central to best practice management and organizations that are not following that path may find themselves out of business in the not too distant future.
Organizations commencing their sustainability journey need to start with a clear mission, vision and values that reflects this intent. The mission may reflect sustainability principles such as those in the UN Global Compact or others that are more sector specific such as the Sullivan or Equator Principals. These principals provide a recognized path which organizations can follow in developing their implementation strategy. The strategy should aim to cascade sustainability through every level of the organization and where necessary across the supply chain. The strategy may also require changes in governance structures, including board charters and consultation with key stakeholders. It needs to be updated are regular intervals and be seen as a living document that reflects the Boards and senior management commitment to sustainability and sustainable development.
Management systems offer a cost effective method of managing an organizations EES impacts, their associated risks and opportunities and what is “material” to the organization. They provide a recognized framework to implement the organizations strategy across the organisation to demonstrate its commitment to sustainability. Current management system standards include those related to quality, environment, safety and health, business continuity, sustainable supply chains, event management, road traffic management, sustainable communities and anti corruption. Other supporting standards include those related to risk, social responsibility product life cycles, environmental labeling, GHG calculations,etc. All these standards support the implementation of sustainability and/or sustainable development.
Measuring progress towards achieving sustainability is essential to demonstrate the organizations commitment. Performance outcomes require the setting of objectives that include targets and indicators, These are a function of the organizations EES impacts, associated risks and opportunities and matters that are “material” to the organisation. Management system provide an effective mechanism for managing these, however organization are frequently required to report upon their performance to regulators, stock exchanges, etc. Reporting frameworks provided by regulators may be useful along with other recognized standards such as the Global Reporting Initiative (GRI) and act as means by which organizations can demonstrate their progress towards sustainability in the public domain.
Innovation and knowledge management are becoming increasingly important in implementing sustainability. Thinking “outside the box” has lead to many unique ideas in the digital environment and is no less important in other sectors. The circular economy and other models are aimed at reducing the use of scare resources through the product or service life cycle. Organizations must be aware of what is “material” to them and techniques such as material flow cost accounting and how to account for natural, human and other capitals if they are to be innovative. These and other techniques provide a mechanism for evaluating the cost of innovation and offer a link to the organizations bottom line.
