‘The most obvious corporate support for sustainable development is the conviction that being socially and environmentally responsible does not necessarily mean that you have to sacrifice the bottom line’
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Sustainable development requires a balanced approach to economic, social and environmental ends. And this is what we require business corporations to pursue. Here is an example as an illustration. Consider a corporation which is seeking to provide efficient and affordable cooking equipment to rural households to replace traditional wood stoves. This serves three goals: addressing the environmental problem of reforestation; the social problem of women’s health, and the economic problem of meeting the energy needs of a population. Here is another example. In urban areas, bio-methanation using organic waste to produce methane gas solves an environmental problem. It is waste disposal and solves a developmental problem, which is energy production.
A microcosm of society
It is possible that even in these cases, the investing company may focus so much on economics that it may not sufficiently value the environmental benefits. It is of course true that corporations realise that their success depends on what happens in the marketplace and on much else as well. It depends on the morale, the commitment, and the loyalty of the workforce. It also depends on the loyalty of the customer base and the public reputation it commands. All of this contributes to the long-term success of a corporation. Corporate leaders should recognise this and become far more sensitive to the concerns of these other groups.
Companies must pursue not just the bottom line and shareholder satisfaction. They must also worry about: employees, the opinions of clients, and the impact on the societies of which it is a part. Corporations today cannot command respect even among their own employees if they do not have a reputation for being environmentally and socially responsible. A large corporation is a microcosm of society. If environmental awareness and a sense of social responsibility are growing in society, these things will be reflected in the workforce. Shareholder value is important. But in the longer run, they also have to worry about the workforce and the needs of society.
With the growing global involvement of companies, corporate managers are part of a community of corporate managers around the world. The powerful factor here is a sense that “this is how my peers expect me to behave — this is now the standard of behaviour”. Today, the admired person is the manager who is able to combine shareholder value with environmental and social responsibility successfully.
Part of corporate policy
Most corporations today show environmental consciousness because of the need to meet regulatory standards. But what has happened in the minority of corporations is that instead of being limited to the environmental department doing audits of waste and so on, the broader issue has entered the boardroom, and is being written into corporate policy. It commands the attention of not only the environmental and engineering departments but also the marketing department, the finance department, and, certainly, the CEO.
Many years ago, this writer met an Indian CEO who said that his company had recently become ISO 14000 compliant (which was a demanding international standard for environmental management). When asked why, because nothing in Indian legislation at that time required compliance with ISO 14000, his answer was very simple: ‘If I want to be a global player in my business, I have to be there with the other global players in terms of standards. I also have to be compliant with these standards because that is what my clients abroad increasingly demand.’
The view of what constitutes social responsibility must also vary. One CEO might think that if the company is making a profit, it is socially responsible because many thousands of people work for the company and benefit from its success. Another CEO might have another view: “Oh yes, profit is important, but I must also make sure that my corporation is able to do something concrete for the community whose resources it uses. I need to put something back into the community.” A third CEO may reason, “My corporation cannot survive if there is continuous strife in my country, so I have a certain responsibility to see how I can contribute to the resolution of that strife.” What is interesting is that very few are ready to say that they are not socially responsible. The challenge is to make sure that there is a certain commonality to what people mean by social and environmental responsibility.
Commitment from the top
The most obvious corporate support for sustainable development is the conviction that being socially and environmentally responsible does not necessarily mean that you have to sacrifice the bottom line. Such people believe that win/win solutions are available, particularly on the environmental side. A greater commitment to sustainability can come from a CEO with a long-term vision for sustainability; things that are not a part of the normal calculation of shareholder value but are likely to become part of shareholder value 10 years from now. Both these approaches are consistent with a focus on shareholder value.
A more challenging goal is when CEOs accept that a significant part of the problems of society arises from environmental and social stresses. And if companies must be ready to sacrifice some profit in order to be able to address that environmental and social stress, they can make a great contribution. But the benefit of this accrues to society at large, including rival companies. Therefore, these steps will not be taken without a broad consensus that the steps are necessary and binding on all. This third type of corporate approach to sustainability requires a broad-based consensus where all players (businesses, governments, and civil society) recognise sustainability as a shared responsibility. Platforms such as the World Sustainable Development Summit (WSDS) play a crucial role in fostering such partnerships, enabling collective action toward sustainable development.
Will this come on time? CEOs and managers are not a breed apart. They are a part of society. This will happen when sustainable development is a widely accepted consensus for development policy and actions.
Nitin Desai is Chairman, The Energy and Resources Institute
Published – April 05, 2025 04:08 pm IST
