BSI - Lecture 1 - 07/09/21 - Business & Sustainability
Business
Business enterprise de nition:
- A pro t-seeking organisation
- That provides goods and/or services designed to satisfy costumer’s needs
- By transforming lower-value inputs into higher-value outputs (adding value)
The value chain depicts all the activities a company engages in while doing business
The role of business in society
- Who does bene t from the rm’s activities?
- Who should bene t from the rm’s activities?
Shareholder theory:
Stakeholders are all those who can a ect business. They can present both threats and bene ts.
Their expectations can a ect business.
Corporate activities have an impact on society and the natural environment and therefore may (or
may not) contribute to sustainable development.
The business case for sustainability
Business case: in the context of sustainability: whether and how a company can actively create
synergies between managing environmental or social issues in a way that increases corporate
economic performances.
1) Costs and cost reduction (cost savings)
1 of 14
fi fi fi fi ff fi fi ff fi
, 2) Risk and risk reduction (improving risk management)
3) Sales and pro t margin
4) Reputation and brand value
5) Attractiveness as an employer (attracting and engaging employee motivation)
6) Innovative capabilities (fostering innovation)
Paper from Harvard Business Review:
- Point: executives are often reluctant to place sustainability core to their company, because they
think that it will only cost them money. However, research and business experiences both point
to quite the opposite —> embedded sustainability has a positive impact on business
performance.
- How they de ne sustainable practices: 1) at minimum do not harm people or the planet and at
best create value fro stakeholders and 2) focus on improving ESG performance in the areas in
which the company has a material environmental or social impact (s.a. in their operations, value
chain or customers).
- They talk about sustainable businesses, which rede ne the corporate ecosystem by designing
models that create value for all stakeholders, including the planet
- A company with a sustainability agenda is better positioned to anticipate and react to
economic, social, environmental and regulatory changes as they arise
- Also, good relationships with stakeholders helps with the whole operating process
- Some businesses have invested in e.g. rainforest movements, to assure their long-term supply
—> investing in sustainability is very important on the long-term
- Investors are correlating better nancial performance with better ESG performance —> they
value them more highly. The last years, the top 100 sustainable global companies experienced
higher mean sales growth, return on assets, cash ows, etc. During the recession in 2008, they
did better than other companies.
- Signi cant cost reductions and logistic savings can result from improving operational e ciency
- A shift is occurring in the minds of customers. On employee level, the morale is better in
sustainable companies
Corporate sustainability and its implementation
The sustainability triangle tells you that economic e ectiveness
(maximize pro ts) is in uenced by a combination of factors:
- Eco-e ectiveness (environmental management
- Socio-e ectiveness (social and cultural demands)
• Main challenge is to integrate all the aspects
The 5 stages of organisational growth:
1. Defensive stage (‘not our job’, often unexpected criticism, denial)
2. Compliance stage (‘we’ll do as much as we have to’, protecting the reputation)
3. Managerial stage (‘it’s the business, stupid’, the company realises a long-term problem)
4. Strategic stage (‘it gives us a competitive edge’, realign strategy to address responsible
practices)
5. Civil stage (‘we need to make sure everybody does it’, promoting collective action)
2 of 14
fiff ff fifi fl fi fl fffi ffi
Business
Business enterprise de nition:
- A pro t-seeking organisation
- That provides goods and/or services designed to satisfy costumer’s needs
- By transforming lower-value inputs into higher-value outputs (adding value)
The value chain depicts all the activities a company engages in while doing business
The role of business in society
- Who does bene t from the rm’s activities?
- Who should bene t from the rm’s activities?
Shareholder theory:
Stakeholders are all those who can a ect business. They can present both threats and bene ts.
Their expectations can a ect business.
Corporate activities have an impact on society and the natural environment and therefore may (or
may not) contribute to sustainable development.
The business case for sustainability
Business case: in the context of sustainability: whether and how a company can actively create
synergies between managing environmental or social issues in a way that increases corporate
economic performances.
1) Costs and cost reduction (cost savings)
1 of 14
fi fi fi fi ff fi fi ff fi
, 2) Risk and risk reduction (improving risk management)
3) Sales and pro t margin
4) Reputation and brand value
5) Attractiveness as an employer (attracting and engaging employee motivation)
6) Innovative capabilities (fostering innovation)
Paper from Harvard Business Review:
- Point: executives are often reluctant to place sustainability core to their company, because they
think that it will only cost them money. However, research and business experiences both point
to quite the opposite —> embedded sustainability has a positive impact on business
performance.
- How they de ne sustainable practices: 1) at minimum do not harm people or the planet and at
best create value fro stakeholders and 2) focus on improving ESG performance in the areas in
which the company has a material environmental or social impact (s.a. in their operations, value
chain or customers).
- They talk about sustainable businesses, which rede ne the corporate ecosystem by designing
models that create value for all stakeholders, including the planet
- A company with a sustainability agenda is better positioned to anticipate and react to
economic, social, environmental and regulatory changes as they arise
- Also, good relationships with stakeholders helps with the whole operating process
- Some businesses have invested in e.g. rainforest movements, to assure their long-term supply
—> investing in sustainability is very important on the long-term
- Investors are correlating better nancial performance with better ESG performance —> they
value them more highly. The last years, the top 100 sustainable global companies experienced
higher mean sales growth, return on assets, cash ows, etc. During the recession in 2008, they
did better than other companies.
- Signi cant cost reductions and logistic savings can result from improving operational e ciency
- A shift is occurring in the minds of customers. On employee level, the morale is better in
sustainable companies
Corporate sustainability and its implementation
The sustainability triangle tells you that economic e ectiveness
(maximize pro ts) is in uenced by a combination of factors:
- Eco-e ectiveness (environmental management
- Socio-e ectiveness (social and cultural demands)
• Main challenge is to integrate all the aspects
The 5 stages of organisational growth:
1. Defensive stage (‘not our job’, often unexpected criticism, denial)
2. Compliance stage (‘we’ll do as much as we have to’, protecting the reputation)
3. Managerial stage (‘it’s the business, stupid’, the company realises a long-term problem)
4. Strategic stage (‘it gives us a competitive edge’, realign strategy to address responsible
practices)
5. Civil stage (‘we need to make sure everybody does it’, promoting collective action)
2 of 14
fiff ff fifi fl fi fl fffi ffi
