Is Sustainability a Business Challenge?

Is Sustainability a Business Challenge?

Nirmalya Kumar 16/10/2017 11

The world population is expected to grow from the 7.5 billion currently (5 billion in 1987) to 10 billion by 2050. This increase is driven by a combination of enhanced life expectancy and high birth rates. While the former has been a global phenomenon, the latter is restricted to the Asian and African continents. Projections beyond 2050 are more varied. Some projections see declining, while others seeing increasing world population. Regardless of the longer-term picture, the anticipated near-term growth in population will put considerable stress on the planet in the coming three decades.

 

THE CHALLENGE TO THE PLANET

 

 

There is widespread consensus in the scientific community that increased human emissions of greenhouse gases (GHG – carbon dioxide, methane, and nitrous acid) has caused global warming and climate change. The average temperature has increased 1.3 degrees centigrade between 1910 and 2015. GHG emissions were 60 percent higher in 2014 compared to 1990, showing an accelerating trend compared to the slower increase since the industrial revolution.[i] 

  

Accounting for a quarter, fossil fuel consumption is the single largest source of GHG emissions.[ii] Hence, the push for energy conservation and the move to alternative sources of energy, especially renewable energy.

 

Agriculture, forestry, and other land uses account for 24% of GHG emissions. Rising population and increasing standards of living are expected to raise substantially the demand for food. For example, one expert argued that the planet must produce more food in the next four decades than all farmers have harvested over the past 8000 years.[iii] To avoid hunger and starvation, it is imperative to increase yields, reduce wastage, while conserving consumption of water and energy as well as minimizing the use of chemicals and antibiotics.

 

Increasing population combined with urbanization will put great pressure on cities. The United Nations report on urbanization envisages an increase of 2.5 billion in the world’s urban population by 2050. Given that the overall global population is also expected to grow by 2.5 billion, the deleterious effects of the increased population will be concentrated in the urban areas. Since 90% of this urban growth will be in Africa and Asia, they will see enormous demand for urban infrastructure, particularly, affordable housing, large public transportation networks, and health care access.

 

On 25th September 2015, recognizing the challenges above, the United Nations adopted 17 goals related to people and planet.[iv] Associated with these goals, 169 specific targets were set as part of the “2030 Agenda for Sustainable Development” to end all forms of poverty, fight inequalities, and tackle climate change.[v] While not legally binding, all global leaders committed to progress in meeting these goals (see Appendix 1).

 

 

HOW SHOULD BUSINESS ENGAGE WITH SUSTAINABILITY?

 

 

Most business firms, especially small and medium enterprises, probably see doing nothing as the smart strategy. They view their mandate as serving customers and generating returns for the shareholders. Managing the impact on society is out of the scope of their activity and thought better left to the government and/or NGOs. In any case, the problems of sustainability seem too large and expensive for any individual firm to tackle, or even make a difference.

 

 

More astute business leaders, especially of large organizations, recognize that demands from important stakeholders require sustainability to be incorporated within their corporate agenda. In one Accenture survey, 97% of industry CEOs said that sustainability is critical for the future success of their business.[vi] On further reflection, business leaders realize the pursuit of sustainability can have some of the following benefits for their firms:

 

 

Build corporate reputation (i.e., license to operate)

 

 

New growth opportunities (e.g., hybrid cars for Toyota)

 

 

Cost reduction (e.g., energy conservation by Walmart)

 

 

Employee engagement (e.g., Tata with the largest corporate volunteering program)

 

 

Resonance with specific segment of consumers (e.g., Body Shop, Whole Foods)

 

 

Access to specific pools of capital (e.g., socially responsible funds, impact investors)

 

 

APPENDIX 1:

  

Goal 1 End poverty in all its forms everywhere

Goal 2 End hunger, achieve food security and improved nutrition and promote sustainable agriculture 

Goal 3 Ensure healthy lives and promote well-being for all at all ages

Goal 4 Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all 

Goal 5 Achieve gender equality and empower all women and girls

Goal 6 Ensure availability and sustainable management of water and sanitation for all

 Goal 7 Ensure access to affordable, reliable, sustainable and modern energy for all

Goal 8 Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all 

Goal 9 Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

Goal 10 Reduce inequality within and among countries

Goal 11 Make cities and human settlements inclusive, safe, resilient and sustainable

Goal 12 Ensure sustainable consumption and production patterns

Goal 13 Take urgent action to combat climate change and its impacts

Goal 14 Conserve and sustainably use the oceans, seas and marine resources for sustainable development  

Goal 15 Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss

Goal 16 Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels

Goal 17 Strengthen the means of implementation and revitalize the global partnership for sustainable development

 

 

ENDNOTES:

 

[i] Rebecca Henderson, Sophus Reinert, Polina Dekhtyar, and Amram Migdal, “Climate Change in 2017: Implications for Business,” Harvard Business School case 9-317-032, 27 June 2017, 1-39.

 

[ii] “Climate Change 2014, Synthesis Report,” Intergovernmental Panel on Climate Change, 2014, p.14.

 

[iii] Frank Viviano, “A tiny country feeds the world,” National Geographic, September 2017, 82-109.

 

[iv] Sustainable Development Goals, United Nations, http://www.un.org/sustainabledevelopment/

 

[v] https://sustainabledevelopment.un.org/post2015/transformingourworld

 

[vi] The UN Global Compact – Accenture Strategy CEO Study, https://www.accenture.com/sg-en/insight-un-global-compact-ceo-study, 2016

 

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  • Elsa Gibbs

    Excellent!

  • Frank Delon

    Enjoyed it very much.

  • Lizette Smook

    Why is it so hard to get humans to change patterns of consumption...?

  • Rehana Abbaasi

    Wonderful Explanation

  • Matt Thomas

    My sustainability assignment brought me here :)

  • John Mallory

    Sustainability saves our planet and helps us financially as well as making us feel like part of a community.

  • Christina Hoffmeister

    Extremely informative! Thank you for sharing! :D 

  • John Hann

    We continue to have the problem of greed and those who want more than their fair share, more than they deserve. How do we convert the oil industry to this idealogy or concept? How do we change the cell phone industry to stop producing new phones while making old phones obsolete? I am currently working with others to do just that, change industry and culture simultaneously, the more ideas and input the better.

  • Nirvik Mahin

    Nice :o

  • Richard Jahnke

    Great article, makes a lot of good points.

  • Helena

    Amazingly written and explained. Great work.

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Nirmalya Kumar

Company Guru

Nirmalya Kumar is Lee Kong Chian Professor of Marketing at Singapore Management University and Distinguished Executive Fellow at INSEAD Emerging Markets Institute. Previously, he was Member-Group Executive Council at Tata Sons.  As an academic, he has previously taught at Columbia University, Harvard Business School, IMD (Switzerland), London Business School, and Northwestern University (Kellogg School of Management). Nirmalya has written seven books, five of which were published by Harvard Business Press. Nirmalya holds a PhD in marketing from Northwestern University. 

   

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