Introduction to Sustainable Business

Learning Objectives

1. Explain what it means to be a sustainable business and the relationship of profitability and sustainability.
2. Understand what is meant by the triple bottom line for businesses in relation to sustainability.
3. Describe what is meant by enlightened self-interest and provide an example of how it applies to business.

A focus on sustainability (for private businesses) can be thought of as a management strategy that helps businesses set goals and prioritize resource allocations. Sustainability at the private business level can first be thought of primarily in terms of financial sustainability - that is, the ability of private firms to generate profits and cash flow to sustain business operations. For-profit businesses - first and foremost - must focus on their economic bottom line. A company that earns a profit is providing a good or service that is valued by society. Consumers and businesses do not pay for products and services that do not provide them with value or benefits above the cost of the product or service to them (or else they would not have made the free decision to purchase that product or service). Therefore, at a basic level, if a business is profitable, it is having a net positive social impact. This is assuming that the business has no external impact on the environment or society.

However, there are companies that are profitable in the short term that are having a long-term net negative impact. For example, a lumber company that owns timber reserves could harvest all of its timber resources in one year generating a significant profit for that one year. However, if in doing this the company ignored the costs and losses associated with destroying the forest and the ability of the forest to continue to produce timber, then the net impact could be negative. By depleting the resource base of the company, short-term gain can lead to long-term financial failure for the company. This example highlights the need for sustainable thinking in business. For business to be sustainable in a financial sense, businesses must increasingly consider the longer term and broader consequences of decisions.

Beyond just the company's own bottom line, a "next step" for businesses is to consider not only their own long-term financial performance but also broader societal, environmental, and social impacts. This so-called triple bottom line (TBL) considers business from economic, environmental, and social perspectives and measures business performance based on net impact on profit, people, and planet. This approach to business will be increasingly relevant to students of business and in other fields as global populations and demand for energy, water, and other resources increase and our planet faces resource shortages. Over the next fifty years, the world's population is expected to grow from 6.8 billion to 9.5 billion, and the demand for energy and other resources will follow.

The primary aspects of sustainability considered in this book are profit and planet. Much of the framework and concepts relevant for environmental sustainability also apply to social sustainability and several of the case study chapters highlight examples of businesses, such as Seventh Generation, Green Mountain Coffee Roasters, Stonyfield, and Simply Green, incorporating social issues into their decision making.

For businesses that consider TBL and sustainable business practices, it is increasingly not about deciding whether to focus on (earning) profits, or (saving) the planet, or (caring about) people. Instead, it's about focusing on all three. When McDonald's reduces the packaging with their food, they help the environment, contribute to public health (by reducing toxics in the atmosphere), and they also help their economic bottom line. Enlightened self-interest occurs when companies (or individuals) help others and, in the process, help themselves. When McDonald's uses less packaging for their hamburgers, French fries, and other food items than in the past, this reduces their costs of materials and disposal costs while at the same time it helps the environment. Reducing packaging is an example of a sustainable business practice that can benefit a private company and also society at large.

In the longer term, all businesses rely on the sustainability of societies' resources, including energy, food, and material resources, for their success and survival. Thus it can be in all businesses' long-term interest to act with concern for the sustainability of society's resources.