Social Sustainability Offers a Better Way to Operate a Business
With the dynamic global economy evolving so rapidly, many businesses are facing a critical junction regarding their purpose and role in society. Social sustainability offers a new way forward that is better for stakeholders—and better for society.
May 31, 2021Updated 1 day ago
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Corporations and businesses have historically been driven by greed and profitability. This is not unexpected, in part because of the widespread adoption of Milton Friedman’s shareholder theory that states, “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.”
Workers piling up money to build the wealth of business owners.UncleFredDesign/Shutterstock
In other words, business success has been based solely on achieving financial gain/returns at the cost of society, the Earth, and humanity.
But now, some corporations are switching from only serving shareholders to serving all stakeholders. Over the last couple of years, many things have changed in the business world. Companies are changing how they think about their constituents (i.e., customers, employees, the greater community, society and investors).
Kris Lin-Bronner, Strategic Adviser for Dr. Bronner's Magic Soaps, and others discuss the wide-scale erosion of trust between companies and consumers.
Affirming this sense of change, in 2019, the Business Roundtable released a statement officially redefining the purpose of corporations to serve not only investors but also their workers and community. In other words, instead of just creating profit for shareholders, the statement added four additional purposes: delivering value to customers, investing in employees, dealing fairly and ethically with suppliers, and supporting local communities (including being environmentally sensitive and incorporating sustainability practices).
This statement was signed by 181 CEOs and demonstrates the internal shift among the world’s leading corporations. Sustainability and corporate social responsibility are no longer trends in business, but are now viewed as legitimate strategies that all businesses can use to address risk and create opportunities. As they strive for positive impacts on all stakeholders rather than simply fulfilling financial responsibilities, some businesses are truly becoming a force for good.
"Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term," said Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of Business Roundtable. "These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
This structural change can also be brought about through stakeholder capitalism, or the idea that a company's everyday practices could affect stakeholders, not just the typical understanding of the bottom line.
As consumers demand that businesses address the "social side" of sustainability, those that heed this call enjoy greater success. Historically corporations have directed their "people" efforts externally via their foundations, but integrating those programs has been able to streamline both customer desires and corporate profits.
Consumers increasingly expect companies to take an active interest in solving social problems. Socially conscious business models are expected by many customers, especially younger ones.
Increasingly, consumers expect their companies to engage with top social issues in their communities. For millennials and Gen-Z in particular, this is a non-negotiable.
And the data bears that out. The consultancy Porter Novelli found that 66 percent of Gen Zers "believe it is no longer acceptable for companies to be silent on social justice
issues." And a whopping 72 percent of Gen Zers "believe companies have more responsibility than ever before to address social justice issues."
Another study from Georgetown found the same to be true for millennials. This generation accounts for some $1 trillion in annual consumer spending, and for them, the social responsibility of companies is top of mind. Some 81 percent said they "expect companies to make a public commitment to good corporate citizenship.” And 73 percent were even willing to pay more for sustainable products.
As the authors of the study wrote: "By almost any measure, Millennials place a premium on corporate social responsibility (CSR) efforts."
And businesses are responding by integrating their social efforts into their business model. Those that have followed this path are seeing increased success.
For instance, Whole Foods has established the Whole Planet, Whole Kids, and Whole Cities Foundations to contribute to initiatives promoting healthy eating and broader food access in underserved communities—an effort that brought increased brand loyalty to the neighborhoods in which it operates. Original CEO John Mackey has been an icon in the social sustainability space and advocates for identifying a higher purpose for your business.
Other companies that may not have incorporated social commitments directly into their business model take steps to demonstrate it nonetheless through strong corporate social responsibility policies.
In 2020, U.S. businesses large and small stepped in to address social problems that are not being tackled by governments that are having a direct impact on their workforce, consumers, and the local community, especially during the COVID-19 pandemic. The corporations and businesses that stepped up to help, have received positive social media recognition, increased brand loyalty and a variety of other benefits to their reputation.
Nike, for instance, is an excellent example of how corporate responsibility can translate to major profits. The ad Nike published of Colin Kaepernick following his kneeling protest for Black Lives Matter may have sparked a boycott of some Nike consumers, but it also paid off big time for the brand. Nike saw their value increase by $6 billion and their stock go up 5 percent.
In short, as one survey found: "corporate social responsibility pays off."
The way that sustainability has been measured is changing. It used to be based just on environmental impact. Now it is based on social impact too.
Historically, sustainability in the business world has been measured by a businesses' impacts on the environment. Sustainability used to be measured with this single set of metrics.
Third party organizations (NGOs) and governments (national and local) for decades have been measuring the impacts that corporations have on the natural world through state level environmental reporting.
The name of the game was compliance: i.e. abiding by existing environmental laws and regulations in order to not actively destroy the natural world. Actively making the community a better place was rarely part of the equation.
Since the 1970s, starting with the Clean Water and Clean Air legislation, the Environmental Protection Agency began monitoring and regulating how businesses interact with the environment. This included preventing businesses from polluting as well as protecting local animals and land.
The EPA is part of the executive branch, so its regulations and enforcement have changed over time, with former President Barack Obama being more strict on enforcement where former President Donald Trump often focused on deregulating. The environmental responsibility of corporations was therefore often tied to the whims of the president and his administration.
Today, sustainability is measured through the concept of the triple bottom line. The triple bottom line is made up of people, planet and profit.
This is a 10-minute interview with Lisa Geason-Bauer of Evolution Marketing, and discusses companies adopting TBL's and Certified B-Corps with Dr. Patrick Hillberg from Oakland University.
Businesses traditionally think about "bottom line" profits, but these often fail to measure external costs, like harm to people or the planet. Triple Bottom Lines take these into account.
The United Nations defines sustainability as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” as well as “harmonizing three core elements: economic growth, social inclusion and environmental protection.”
While more and more people are aware of the environmental aspect of sustainability, as well as the necessity of balancing these efforts with financial success, the third pillar of sustainability, social inclusion (i.e. people side), is not as well understood.
It means incorporating social impact not just into a business plan but into the very ways in which they profit.
Social sustainability in business can take many forms. What they all have in common is the drive to achieve more than just financial gain.
A new plan for people and planet has just launched (Sept. 2015) - the UN Global Goals for Sustainable Development. Tell everyone! add your very own intro to this star-studded video and share it with the world: http://wethepeople.globalgoals.org
The social side of sustainability encompasses a business’s commitment to people and purpose. Businesses accomplish this by making social investments in communities to improve quality of life, create jobs, and partner with other businesses to solve social problems. A company’s diversity and inclusion efforts are often viewed as one of the aspects of social sustainability, as well as working with local government or the nonprofit community to help build resilient and equitable local social systems (i.e. via educational or workforce development programs). It could also refer to a company’s impact on community development structure through housing, investment, and equity.
And social sustainability business models come in many iterations, too. A business's positive impact can take shape through a variety of ways.
Whether it be as a Certified B Corporation, a social enterprise, or a comprehensive corporate social responsibility policy, an increasing number of businesses are seeking to make a positive impact on the world around them. Each of these operational systems serve to hold the business accountable for more than just profit-based metrics of success, meaning that success in business is based on the impact the organization has on all of its stakeholders: employees, consumers, community members, citizens of the world and more.
In the same grain of purpose and profit being inseparable, social enterprises seek to maximize profits while also maximizing social benefit. This occurs by using profits generated to fund socially responsible endeavors. This follows the principle that purpose and profit are inseparable.
A Cream City Conservation Corps Conservation and Trails Crew collects firewood for sugar maple harvesting at Neighborhood House Nature Center in Neosha, Wisconsin.
Social enterprises that you may be immediately familiar with include Goodwill, which uses profits to fund employee training for people with disabilities. A social enterprise is unique in that it directly addresses a social need and is profitable, it does not rely on charitable donations. Instead, it leverages innovative business skills and sources of capital to alleviate certain societal problems. They achieve financial success by making a social impact, and one cannot be accomplished without the other.
In Milwaukee, Cream City Conservation and Consulting works with environmental and community service organizations to address internal cultures and practices that contribute to workforce homogeneity. Additionally, the Cream City Conservation Corps program trains and employs young adults age 15–25 whose social identities are traditionally underrepresented in the environmental industry. The program is supported by community partnerships and profits from the consulting end.
Certified B Corporations address sustainability from a holistic perspective. The entire certification process for B Corps is based around two prongs: social and
When you buy from, work for and do business with Certified B Corporations, you vote for what you believe in. Learn more at votebcorp.com
A Certified B Corp is a business that is legally bound to balance purpose and profit by considering the impact of business decisions on all stakeholders involved including employees, suppliers, customers, the environment, and community. Companies are audited by a third party, the nonprofit B Lab. The audit is based on a comprehensive B Impact Assessment that measures all facets of a company’s operations and how its business model impacts the company’s stakeholders. B Corps are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability.
One example of a B Corp making a positive impact on communities globally is Cora, which seeks to provide eco-friendly feminine hygiene products, increases access to feminine products in developing countries, advocates for female education, and speaks against taxing these types of products as non-essential goods. Since the company’s inception, Cora has donated over a million sanitary products to women in Kenya and India. It also has donated over 100,000 feminine products to women living below the poverty line in the United States. Other B Corps range from huge household names such as Danone North America and Ben & Jerry’s to local Wisconsin product makers such as Rebel Green, Zyn, Just Coffee Cooperative, and Tribe 9 Foods, demonstrating that this business model is achievable and scalable.
Businesses with robust corporate social responsibility programs are experiencing a plethora of benefits. From happier employees to more satisfied investors, the benefits of socially
responsible businesses are far-reaching.
One of the increasingly relevant benefits being that as a new generation of employees enter the workforce, many expect their employers to have values that align with their own and are taking measures to positively engage with their communities. Working for a company they can be proud of is something that Generation Zers prioritize during their job search. Moreover, there’s not always a dichotomy between financial viability and doing good. In actuality, there has been a huge shift in recent years as investors are not only attracted to businesses that are sustainable and socially responsible but actively turning away from those which are not.
Additionally, like employees and investors, customers are increasingly utilizing community impact, sustainability, and commitment to a higher purpose to help them differentiate between brands. The idea of voting with your wallet has truly come to fruition as consumer purchases today reflect their values and political beliefs more so than ever.
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