Week 11

Corporate sustainability – efficiency & equity

Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me what I want, and you shall have this which you want, is the meaning of every such offer; and it is the manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love.

Adam Smith – The Wealth of Nations

A tale of 2 countries

Cotton: Cost of production = 78c per pound Market price = 48c per pound

In USA – subsidies provide the difference In Benin – farmers go out of business In UK – price of clothing has fallen 14.7%

over the past 5 years

Sustainability

Sustainability is concerned with the effect which action taken in the present has upon the options available in the future

If resources are utilised in the present then they are no longer available for use in the future

‘We are now, more than ever, aware of the potentially negative impact of business on the

environment, whatever the nature or size of the business. There can only be positive results

from developing sustainability – from benefiting your own bottom line to benefiting tomorrow’s

industry to benefiting the environment in which we all live.’

Tony Blair, Prime Minister, May 2000

The Triple Bottom Line

3 aspects of performance: Economic Social Environmental

Sustainability 1

Societal influence Environmental Impact Organisational culture Finance

Sustainability 2

Maintaining economic activity Conservation of the environment Ensuring social justice Developing spiritual and cultural values

The environment

The business environment in which the firm is operating

The local societal environment in which the organisation is located

The wider global environment Nature

The environment

A free resource? Classical Liberalism

Infinitely available? Can be manipulated? A sacred trust?

The Gaia Hypothesis

The ecosphere is a complete system The earth and all its constituent parts are

interdependent The actions of one organism affect other

organisms Responsibility Accountability

Lovelock, 1979

Sustainable development

The Brundtland Report General policy areas:

Economic Environmental Social

Changing reporting

Environmental reports CSR reports Sustainability reports

Corporate reporting

%

Mention sustainability

100

Focus on sustainability

70

Focus on sustainable development

15

Corporate sustainability

No clear understanding The ‘going concern’ principle Obfuscation Disingenuity

Risk reduction

Sustainability reduces risk Sustainable development reduces risk

more The semiotic is sufficient Reduced risk = reduced cost of capital

Sustainable sustainability

Efficiency Financial Environmental

Equity Satisficing

Sustainable development

Sustainability

A source of competitive advantage A strategic imperative Essential to survival