By Linda C. Ashar, J.D. | 08/27/2024
What is corporate sustainability? Corporate sustainability refers to a company's efforts to operate in an economically, socially, and environmentally responsible manner. This approach differs from the traditional business model of maximizing profits for shareholder return without concern for much else.
Instead, corporate sustainability aims to create long-term value within the business by factoring in the interests of various stakeholders who create impact. Corporate sustainability involves everyone, including:
- Shareholders (owners)
- Employees
- Customers
- Vendors in the supply chain(s)
- Investors
- Local communities
- The environment
- Society
From this perspective, the continuity and health of a business is maintained through its efforts to reciprocally sustain the welfare of global and local communities and the environment.
Corporate Sustainability Reports and Corporate Sustainability Officers
Sustainability has become a common buzzword within the millennial trend of corporate social responsibility (CSR), a globally embraced commitment to the belief that businesses owe more to society than just employment options and making money. Evidence of this trend is that the world’s largest companies routinely issue CSR reports and employ corporate social responsibility officers or managers as a part of their business operations to demonstrate their responsible business conduct.
As Snaphunt (a recruitment platform) explains, a corporate social responsibility officer is typically “responsible for developing and implementing CSR strategies and initiatives within the organization.” That employee collaborates “with stakeholders to promote ethical, sustainable, and socially responsible practices that align with the company's values and contribute positively to society and the environment.”
A similar role is the Chief Sustainability Officer (CSO). Harvard Business Review observes that the CSO should “be supported with sufficient sustainability resources and expertise throughout the entire organization, including on the board and senior leadership team.”
Stakeholder Theory and Environmental Responsibility: Their Involvement in Sustainable Business
The focus on corporate sustainability is grounded on two interdependent concepts: stakeholder theory and environmental responsibility. Each concept drives business practices away from the free-market profit theory that Milton Friedman famously championed in the mid-20th century.
In his 1970 New York Times essay, Friedman wrote that “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits.” The only caveat Friedman allowed was “follow the rules” and do not violate the law or commit fraud. The beneficiaries of Friedman’s doctrine are the business owners or shareholders.
However, other people who have a stake of some sort in the welfare of the business or the results of its actions in the pursuit of profit are not considered in Friedman’s free market theory. Those unconsidered people include employees, customers, suppliers, and members of the public.
But it is tacitly assumed that those groups would benefit from the economic growth of a business. This assumption ignores the fact that some acts intended to generate greater profits – such as harshly low wages or toxic waste dumping (where it is not illegal) – might be counterproductive to the welfare of employees or community stakeholders.
In contrast to Friedman’s theory, there is stakeholder theory. Popularized in the latter half of the 20th century, stakeholder theory began to gain traction in concert with environmental and global welfare concerns and the global expanse of corporate activity. This shift broadened the view of the influential role of corporate entities in society and a correlating call for ethical exercise of that influence.
Stakeholder theory took shape in 1984, when notable business theorist R. Edward Freeman published Strategic Management: A Stakeholder Approach. Freeman’s philosophy solidified a comprehensive methodology for managerial business decision-making that implicitly encompasses morals and values. It also considered the interests and well-being of all persons or entities that help or hinder the goals and long-term growth of a business.
These persons and entities are the business’ stakeholders as well as the owners/shareholders. The financial well-being of shareholders is not discounted in this theory, but is directly intertwined within the wider context of interests and influences affecting a company’s corporate continuity. Freeman’s stakeholder theory has resonated in both academia and boardrooms, energizing the corporate social responsibility trend.
At its core, stakeholder theory recognizes the interconnectedness of stakeholders, which views businesses as being in a symbiotic relationship with their stakeholders. In other words, business success depends on the health and strength of the many relationships that businesses have with their various stakeholders.
For example, decision-making requires balancing the interests of all stakeholders. It can mean compromising short-term profits for the overall sustainability of the business, such as by postponing them or readjusting what profit means beyond cash assets. A seamless part of this balance is the ethical dimension of social, environmental, and economic impacts of decisions.
The concept of corporate sustainability lives in this balance. What is good for people and the planet will also be good for profit.
Studies indicate that corporate sustainability practices can enhance stakeholder relationships and the overall resilience of a business. Corporate sustainability practices provide businesses with a competitive advantage and show that they are the future of corporate stewardship.
For instance:
- According to a 2016 Cone Communications Research Employee Engagement Study, millennials highly value a potential employer’s corporate social responsibility standing in deciding where to work.
- A 2017 Cone Communications Study revealed that “CSR continues to be a differentiator in the minds of consumers” and that consumers are willing to make purchases with sustainability in mind.
- A 2019 Markstein and Certus Insights national survey of 600 adults noted that when it comes to buying a product, 70% of consumers want to know how a business addresses “social and environmental issues.”
- According to a 2024 global survey by Morgan Stanley Institute for Sustainable Investing and Morgan Stanley Wealth Management, individual investors’ interest in sustainability is steadily growing. When it comes to personal investing, “more than half of individual investors say they plan to increase their allocations to sustainable investments” in the next 12 months.”
Institutional investors are also weighing environmental issues, social issues, and corporate governance (also known as ESG) highly in commitment of capital, according to Morningstar’s 2022 “A Global Survey of Institutional Investors’ Priorities and Perspectives.” The overriding revelation of this survey was that ESG is now “embedded in mainstream investment processes” as a “core element” rather than a “specialty niche” and is considered a “must-have” in the investment consideration.
These studies underscore why corporate sustainability matters, and big business is recognizing the trend. An example is Unilever®’s Sustainability Living Plan (USLP). Unilever established this program in 2010 with three sustainability goals of improving the health and hygiene of well over a billion people, reducing the environmental footprint of its factories, and supporting social programs for women and underrepresented groups.
In its 2020 report, Unilever reported its progress and its continued commitment to corporate sustainability, emphasizing that “all that sustainable business drives superior business performance.” ESG News spotlighted Unilever’s 2023 corporate sustainability goals, which included:
- Net zero emissions by 2039
- De-forestation free supply chain by 2023
- Regenerative Agriculture Code for all suppliers
- Enhance water stewardship practices program
- Biodegradable products by 2030
While Unilever has not backed off from its long-term corporate sustainability goals, the company’s CEO, Hein Schumacher, has shifted the company's business strategy to focus more on short-term, tangible impacts. This move is intended to more closely align sustainability efforts with financial performance and shareholder expectations.
Environmental groups and activists have criticized this shift, arguing that it represents a step back in addressing critical issues like climate change and plastic pollution. They fear that weakening these commitments could set a negative precedent for other businesses seeking to improve their corporate sustainability.
Despite this criticism, others argue that Unilever’s reorientation more realistically aligns with sustainability efforts. By setting more focused and achievable targets, the company can ensure better accountability and measurable progress in its social and environmental impacts. This shift reflects a broader trend where companies are pressured to balance sustainability with profitability and shareholder value.
Other Companies Practicing Corporate Sustainability through Sustainable Business Practices
Unilever is not alone in addressing corporate sustainability practices. There are other companies that include sustainability goals in their business objectives.
Patagonia
Patagonia® is a leading light in sustainability practices. It has devoted over 50 years to enlightened social and environmental practices.
As a part of its corporate sustainability strategy, Patagonia uses recycled materials in its high-end clothing products, donates a portion of its profits to environmental causes, and advocates for policies that protect natural resources and reduce its carbon footprint. It also promotes fair labor practices and transparency in its supply chain and encourages customers to repair and reuse products to reduce waste.
IKEA
Similar to Patagonia, IKEA® explains its commitment to sustainability goals is the concept of “circularity.” The company defines this concept as “the elimination of waste and continual use of resources.”
IKEA has pledged to become a circular business by 2030, meaning it aims to use only renewable and recycled materials in its products and designs. The company also promotes product longevity through repair and recycling services as a part of its corporate sustainability strategy and eco-friendly practices.
In addition, IKEA invests heavily in renewable energy by owning wind farms and solar installations that generate more renewable energy than the company consumes. The point of circularity is true recycling – making “new” from what already exists.
Tesla
With the manufacture of electric vehicles and other innovations, Tesla®'s mission is to accelerate the world's transition to sustainable clean energy. According to a recent case study of Tesla by Dario Maradin, Ana Malnar, and Ana Kastelan, the global market is demanding green alternatives “in all market segments,” and Tesla is a leading manufacturer responsive to this need.
Tesla produces electric vehicles (EVs) and energy storage solutions that help reduce society’s dependence on fossil fuels. Also, Tesla continually innovates in battery technology and energy solutions, such as solar roofs and Powerwall home batteries.
Microsoft
Microsoft® has pledged to become carbon-negative by 2030, meaning that it will remove more carbon from the environment than it emits. Microsoft is investing in carbon reduction and removal technologies, which is not only good business strategy but will help to ensure the improved health of future generations.
Microsoft’s sustainable practices focus on using renewable energy, improving energy efficiency, and reducing waste in its operations. It also supports environmental sustainability through its AI for Earth program.
Google® claims that it has been carbon neutral since 2007 and aims to operate entirely on carbon-free energy by 2030. The company invests in renewable energy projects and implements energy-efficient practices in its data centers. Google also designs its hardware products with sustainability in mind, using recycled materials and creating energy-efficient products.
Apple
In a 2018 press release, Apple® announced its “global facilities are powered with 100 percent clean energy” that included “retail stores, offices, data centers and co-located facilities in 43 countries – including the United States, the United Kingdom, China and India.” The company also encourages its suppliers to adopt clean energy practices, focuses on reducing the environmental impact of its products through recycling programs and the use of recycled materials, and designing products to be more durable and repairable.
These companies recognize what research is telling us. Businesses at all levels must be responsible to sustainability issues and participate in solutions. Companies such as Patagonia incorporate their sustainability practices into their financial reporting using an approach called the triple bottom line, accounting for corporate finances not only in terms of profit, but also the impact on people and planet.
But sustainability is not all in the hands of big business. The internet is awash with consultants advising small businesses in cost-saving sustainability measures such as recycling and lower-cost energy uses.
Why does sustainability matter to business? It is the reality of the reciprocal relationship between business and the three pillars of corporate sustainability: people, planet, and profit.
Business Degrees at American Military University
For adult learners interested in corporate sustainability, sustainable practices, and other business-related issues, American Military University (AMU) offers four degrees:
- An online associate degree in business administration
- An online bachelor’s degree in business administration
- An online bachelor’s degree in business
- An online master’s degree in business administration
The asynchronous format of the degree programs at AMU enables students to study at their own pace while balancing job and family responsibilities. Courses in these programs cover a wide range of topics, including management, marketing, business law, finance, and globalization.
In addition, all of these degree programs are accredited by the Accreditation Council for Business Schools and Programs (ACBSP). This specialty accreditation indicates that the program has been meticulously examined by reviewers and is held to high academic standards.
For more details on business degrees at AMU, visit our program page.
Unilever is a registered trademark of Conopco, Inc.
Patagonia is a registered trademark of Patagonia, Inc.
IKEA is a registered trademark of Inter IKEA Systems, B.V.
Tesla is a registered trademark of Tesla, Inc.
Google is a registered trademark of Google, Inc.
Microsoft is a registered trademark of the Microsoft Corporation.
Apple is a registered trademark of Apple, Inc.