What if sustainability becomes non-negotiable?

In this article, we look at the influences combining to make that non-negotiability a likelihood and how businesses can respond.

Market-driven economies have become the pre-eminent model worldwide over the last 50 years. Many companies have thrived and grown to the point where some command financial power equivalent to small countries.

With this power has come increased responsibility, both assumed by business and expected by the public and governments. The so-called triple bottom line has become the accepted way of expressing that responsibility. It's the idea of balancing financial performance with a company's social impact on employees, customers and suppliers, and its environmental effects, including climate-change contributions. These elements are summarised as people, planet and profit.

Managing these additional factors – people and planet impacts – on top of generating shareholder value, is not seen as a burden by most successful companies. That's because the work is seen as boosting their efficiency and resilience. As Yuki Kusumi, Group CEO of electronics giant Panasonic, put it: “Squarely addressing various societal issues, including global environmental issues, and taking up the challenge of making a greater contribution to the development of society and the resolution of pressing issues will also lead to further improvement of business competitiveness.”

Kusumi’s comment reflects the fact that sustainability has a double meaning. On the one hand, it can denote safeguarding the planet and its environment and resources that support our species. But it can also refer to the sustainability of individual businesses to continue to generate today’s profits tomorrow, next year and in 20 years’ time. The two aspects are interlinked.

Triple bottom line

Companies have always been diligent about their responsibility to shareholders to maximise profit. It is their directors’ fiduciary duty under company law in many jurisdictions. Duties to manage environmental issues started as straightforward regulatory requirements to avoid polluting ground air or water, but have evolved into something more complex.

As investors and the fund managers they employ have increasingly prioritised environmental and social factors, corporations have striven to demonstrate their sustainability credentials. They have published more and more information on supply chain standards and resource conservation. Since companies have largely been free to choose how and what they report, some have been criticised for cherry-picking data to make themselves look better. At worst there have been accusations of “greenwashing”, and at best criticism that businesses are marking their own homework.

External voluntary accreditation systems such as the Global Reporting Initiative (GRI) and the Carbon Disclosure Project have emerged to offer some external verification. All except the smallest companies are driven by their investors or their larger corporate customers to have achieved certification to these and/or ISO standards. For example, ISO 14001 for environmental management systems or ISO 45001 for safety and health.

Dr Christopher Davis, IOSH's Thought Leadership Manager, says the expectations on businesses to certify their systems and metrics is already making sustainability a non-negotiable issue.

“I think the sort of growing power and influence of voluntary standards, and the increasing expectations put on businesses by ESG frameworks, are making it such that businesses will be putting themselves at a competitive disadvantage if they weren’t to engage in that sustainability piece," he said.

Regulatory push

As measuring environmental and social performance has become more important to investors, credit agencies and supply-chain customers, regulators have moved reporting standards onto a statutory footing. The Corporate Sustainability Reporting Directive affects around 50,000 companies trading in the EU. It requires annual reporting of metrics and initiatives on social and environmental factors that are material to a business’s operations. The UK government is expected to bring in similar legislation. In the US, the Securities and Exchange Commission (SEC) has issued regulations on climate disclosures and plans to issue new ones on human capital disclosures.

The imperatives for businesses to reduce negative impacts and reduce waste are not just driven by governments, but by the people that elect them. While the exact focus shifts as terms like “corporate social responsibility”, “sustainability”, “purpose”, “people-centred organisations” come and go, the central idea that society expects businesses to prioritise more than just making money is unchangeable.

And a subset and important constituent of any society is the workforce. Shifts in workers’ expectations of the employment relationship mean that most people, and particularly the most talented and potentially loyal, are increasingly reluctant to work for organisations that do not treat them well or act with responsibility. Research by Gartner in 2023 found that employees who experienced a sense of purpose in their work were four times as likely to stay with an employer as those who didn’t.

People centred

The people third of the triple bottom line encompasses everything from inclusive employment practice to community outreach and supply chain labour standards. At its core is the health, safety and wellbeing of an organisation’s own workforce. IOSH believes keeping employees safe, healthy and well is critical to maintaining engagement and commitment to an organisation’s continued success. 

Athletic footwear and clothing corporation Nike Inc has set itself some challenging targets to improve its environmental and social impacts by 2025. Its 2023 Impact Report highlighted a 69 per cent cut in greenhouse gases from its facilities since 2020 and 100 per cent of waste diverted from landfill at tier 1 manufacturing sites. IOSH has worked with Nike, piloting a programme with its largest suppliers to enhance safety governance and leadership.

Over the last three years, Nike noted a 47 per cent reduction in lost-time injuries among its tier 1 suppliers. One of these suppliers is South Korean-based manufacturer Changshin, which also has offshore facilities in Vietnam, China and Indonesia. The company was recently assessed by IOSH to achieve our business assurance certification. This followed a collaborative process to identify and fill the gaps in the sustainability of its arrangements to protect and nurture employees.

“We were keen to gain independent verification of the work we’ve done to build a mature safety and health culture throughout our operations,” said Changshin’s Assistant Director (RSM), Grace Ko. “IOSH’s business assurance certification process was the perfect way for us to do this. Staff at all levels engaged with this work and it provides clients with extra confidence of our commitment to worker safety.”

Separate analysis by the US National Safety Council found that safety and health interventions in Nike’s supply chain between 2021 and 2022 had generated an estimated $619,000 in financial value for the suppliers, $170,000 in societal value and $6.7 million in reputational value for Nike.

Integral thinking

Dr Davis says that integrating sustainability into a business’s operations, rather than treating it as an add-on or a reporting duty, is essential to reap the benefits. “There will inevitably be some strong tides in the other direction,” he said, "such as a procurement function wanting, understandably, to find the lowest possible price for materials. So, a kind of a structural revisioning might be required and that needs buy-in from business leaders to be holistic.”

This revisioning involves reviewing policies and practices, testing whether businesses are using up resources – material and human – at a faster rate than they can be replenished. IOSH is able to help businesses assess whether their policies and strategies are well aligned with sustainability principles. IOSH can help guide your organisation through that process.

Our online resources, including toolkits and e-learning modules, provide a thorough grounding in sustainability practice. Our regular sustainability-focused events – webinars, workshops and conferences – will give you insight into how to improve the efficiency and resilience of your organisation. Our comprehensive portfolio of services and the unique IOSH model of safety can help you understand your current position to determine the next steps.

Sustainability management, both environmental and social, is already well on the way to being a non-negotiable part of doing business successfully. Now is the time to embrace the potential that it offers to make businesses fit to thrive in an uncertain world.