Sustainability term has become one of dominant issues of twenty-first century, as what is stated by Glen and Gardon (1998) in Dunphy and Benveniste (2000) that toward twenty first century, world opinion will be united on a single goal how to achieve sustainable development. Without exception of business sector, nowadays many companies have try to show their active contribution to a sustainable development. One of the indicators of this change is the rising number of corporate sustainability reports, the adoption of standardized management systems such as ISO 14000 or EMAS as well as guidelines and official recommendations for environmental and social reporting is the another example.
So what is sustainability mean? Why is it necessary? How can corporation actively take park to the sustainable actions? All will be tried to be answered here.
What is Sustainability?
The well-know broad definition of sustainability is taken from sustainable development that described in Brundtland Report (WCED, 1987). Based on the report, Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
The above definition emphasizes the “need” and the “long term” that introduces an principle of achieving equity between the present and future generations. Based on this definition, sustainability can be regarded as a driver of every efforts and actions to accomplish the “need”- the need to make the society “keep in existence”-where our people have ability to develop and grow, our businesses exist in some form, and our environment continue to provide good foods for us.
Sustainability can also be considered as new global value and ethics. Although there are certainly still many differences of opinion around sustainability, but there are also many points of agreement. Perhaps, the consistency of understanding of sustainability is the agreement that sustainability is an integrated approach to social, environmental and economic concern in decision making, recognizing that all three are necessary (Gilding, 2000).
As value and ethics, it must be part of culture and become a guideline for every our activities. Dunphy and Benveniste (2000) describes, the activity than can be consider as sustainable actions, if it:
- Enhance the planet capability to maintain and renew the environment and protect all living species.
- Improve society’s ability to maintain itself to solve its major problems.
- Maintain a decent level of welfare for present and future generations of humanity.
- Improve and increase the productivity of organization and maintain best of corporate performance.
Those actions are addressed to achieve specific goals that can be comprised in two: ecological and human sustainability. Ecological sustainability is referring to how make an organization and a community to contribute to sustainable economic development by actively involving protecting and renewing the environment, while human sustainability is referring to how to build human capability and skill for sustainable high level organizational performance and for community and societal well-being (Dunphy and Benveniste, 2000).
There goals is instead of the traditional development goals, which concern about economic improvement in a broad sense by emphasizing to economic growth per se but rather on ‘qualitative improvement in human well-being. In traditional way, environment is not account as determining factors. Environment is put out of external of the growth and development (Benveniste, 2000)
So what is sustainable mean for corporation? As we know a corporation is one element of an economy, and the economy is one of a society. So, corporations contribute to the sustainability or un-sustainability of a society and the planet as a whole.
Corporate impact on the natural environment, they work forces and society at large can affect the sustainability of the environment and society. They make their impacts through many ways related with their business process. Diesendoft (2000) describes direct and indirect business activities that contribute direct input to the environment and society such as their choices of raw material and suppliers, land use, geographic location, manufacturing processes including creating of waste and pollution, organizational structure, financial arrangements, management systems, employment and work practices, consumer service, community activities, uses of information and lobbying.
CSR and it associate with Sustainability concept.
In many cases, sustainability implementation in business is always associated with Corporate Social Responsibility (CSR) practices of a company. Base on The world Business Council for Sustainability Development in its publication “Making good Business Sense” written by Lord Holm ad Richard Watts, Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. Based on this definition, CSR practices focus on human well being, especially for people who live around of company activities (employee and local community). This understanding is also supported by Kotller and Lee with their CSR definition as a commitment to improve community well-being through directionary business practices and contributions of corporate resources.
Kottler and Lee(2000) emphasize the word discretionary, voluntary and community well being. as key elements of CSR idea. Based on their understanding, discretionary means business activities are mandated by law or moral and ethical in nature. Voluntary is referring to business commitment in choosing and implementing these practices and making these contributions. This definition also describe as socially responsible and will be fulfilled through the adoption of new business practice and/or contributions, either monetary or non-monetary. The term community well-being in this definition includes human condition as well as environmental issues.
Hawkins (2003) clearly describes about correlation of CSR and sustainability that become centre discussion in many literatures. He reveals that even though in the reality there both concepts emerge from opponent parties that have different concerts. CSR term becomes somewhat of a millstone for the business community, creating a whole new device of pressure in what is an increasingly complex trading environment. On the other hand, the concept of sustainability is an idea to conserve resource sounding by NGO to generate support. Nowadays, CSR and Sustainability concepts cannot be separated. Perhaps, the most appropriate description of both terms is that CSR is a form of sustainability implementation on the below level (business community).
Why is change for Sustainability necessary?
In the last twenty years, human being has done a profound change in the economy. This change as well as bring to dramatic shift in our society and environment. Gilding (2000) notices from 1970s to mid 1990s, there are several conditions that can be marked as the shift:
- The environment issued has moved from the fringe to the mainstream. The environmental issues now become a basic park of society’s value and beliefs. Although this condition is claimed as the victory environmentalism, but rapid change environment is obviously contribute for human life: global warming issue, as example, is believed responsible for fault of harvesting cops in several countries.
- Capitalism, liberal and free market democracy has won the ideological in community. This puts ‘business’ as an organizational form a centre stage of any debate about future shape of society. This capitalism victory has put ‘business’ as an organizational form very much at centre stage of any debate about the shape of society.
- Capitalism also makes the role of government has changed. Dominance of economic rationalism in western countries forcing government out of historical roles and removing resource form. In other sides, there is also an element of democratic choice-people are realizing that competition and market force are often a better mechanism for getting desired result.
- Civil society has matured into the role of mainstream player in policy debate and in controlling business excesses. With the retreat of government, and the rise of the global corporation, there has not been a commensurate increase in the authority of international institutions. In this context, civil society has risen to the challenge and is increasingly taking a direct policing role through the market and a direct democratic role in international for a such as UN treaty negotiation. At a local level, communities are demanding and getting a much greater direct say in what types of developments occur in their local region. They are flaming what ‘market based democracy mean in their country. We are effectively seeing the rise of the ultimate ‘global regulation’.
- Globalization is undeniable. However, this is not just rise of free tread and the spread of global capital, it is a shift in the way we think as a society. Globalization has dramatically reduced ‘barriers to entry’ among nations. The internet for instants, create the rapid grow information technology. Every people from different country can gather information on large multinational that they seek to monitor.
- Technology has changed from being an exciting source of new products to make our lives easier and more interesting, to being the creator of revolutions with the power to interesting our society and take us dramatically forward (or backward).
- There has been a communications revolution, driven by globalization and technology shifts, which has transformed the way the media affects our lives.
Entire facts above mean that world is in change. This change brings new implications for human being, included in business. Business nowadays is faced to new economy, a knowledge economy, coordinating and control is no longer work, whether it can be inside companies or across communities. Knowledge becomes everything, either knowledge that is commercialized into intellectual property based products, or knowledge that is business process focused. This in turn means that role of employee shifts, if before employees as part of the coordinating and control industrial machine, nowadays they are part of the knowledge capital of a company. People in many cases stop becoming cost centers and star becoming knowledge assets (Gilding, 2000)
Gilding (2000) also states that a knowledge economy is a fast moving, the fast will eat the slow. Many mayor industrial corporations are struggling with this fasting movement. Building key capability for value adding and innovation are the main key success factors in this process. Parallel with the increase of demand for sustainability implementation of society, leaders and agent of change should commit and show sustainability as a competitive advance of the firm.
Another of the implications of these trends is that business is required to respond the sustainability challenge with integrated approach. It is not just about taking into account the social or environmental concerns of stakeholders. It is rather recognizing the several integrated shift are occurring that, when taken together, are changing the nature of the economy in significant ways (Gilding, 2000)
One more implication of the trends is that brand and reputation taken to centre stage in importance. This is because in the knowledge economy, the sources of competitive advantage change. For example, many companies now tend to invest in creating best knowledge worker rather than to maintain low production costs, an rather relying on government, regulator and politicians, it is better build positive images with community and stakeholders. Benn (2003) describes how unethical corporate behavior on stock prices are continues down. So develop partnership with community and stakeholders are a way to seek solution before conflict raised.
Since the Brundtland report and the Rio conference, Governments around the world agreed to take park in Sustainable Development and pollution prevention. This affects to the policy and regulatory how to integrate the development with the sustainability principles. The incentive buys and The “user pay” principles for example, has emerges as a key driver of corporate change. In essence, government are now working towards ensuring that those who create the risk pay for them (Dunphy, 2007)
To sum up, we are now in synergistic range of our economy. In this era many of the assumptions on which our current society was build are rapidly fading in relevance. We are in effect in the middle of a transition from a industrial economy to a knowledge economy. The ability to quick respond of this shift will determine corporation’s competitiveness.
The ways toward Sustainability
Benn (2004) categorizes the stage toward sustainability in an organization in 6 phrases.
Rejection is an attitude corporation which tries to show its domination on all resources-employee, community infrastructure and ecological environment – There is a strong belief that the firm simply exists to maximize profit. Environmental costs are viewed as burden for their business operation. Any other claims by the community are dismissed as illegitimate.
Non-responsiveness, usually, this condition happens due to lack of awareness. This kind of corporation tends to ignorance rather than take active position to a corporate ethics broader than financial gain related with environment and social sustainability actions. Firm in this type can keep exist, generally by creating or maintaining a compliant workforce. Firm tends to ignore community and health and safety issue where possible. The some attitude is also showed to the environment. Its environment consequences are taken for granted and if negative, disregarded.
Compliance, in this step corporation have tried to reduce the risk as reselections to minimize sanction and try to meet with minimum standard or regulations as an employer or producer . In this step corporation is reactive to growing legal requirements and community expectation for more sustainable practices.
Efficiency, in this stage, company begins to incorporate concept of sustainability as an integration part of their activities. This is reflection of growing awareness on the part of various level of management to seek advantage of implementing of sustainable practices. In particularly, seek practices related with human resource and environmental policy can be used to reduce costs and increase efficiency.
Strategic Pro-activity, for this stage, corporation has seen sustainability practices as something important as part of business strategy. Firm’s strategic elite view sustainability as potential competitive advantage. Their commitment to sustainability is strongly embedded in the quest for maximizing long-term corporate profitability.
From above categories, Benn (2004) suggests the most important change should be done by companies in the phases of rejection and non-responsiveness. So how the company in there phrases can embrace the concept of sustainability in their organization? Dunphy et al (2007) promotes four winning formulas:
1. The corporation has to focus on building key capabilities for value adding and innovation.
2. The corporation has to develop and utilize the corporate competences needed to develop and enact there business strategies in human and ecological sphere.
3. The corporation develops process that institutionalize and systematize there capabilities so that the organization is no longer reliant upon key individuals for best –practice operation
4. Corporation must be embrace into local communities so that they are sensitive to community needs.
The four formulas should be incorporated in corporate action for sustainability. Corporation has to try to move from efficiency goal to strategy by introducing new tools and techniques, linking operation process to sustainable strategy, creating innovation in new product and service process improvement opportunities, creating enabling structures and design, building employee knowledge and commitment, executive leadership and stewardship and developing distinctive stakeholder strategies.
For making entire strategies above work, company needs to:
(1) Focus on Cultural Change
According to Benn (2004) human resource function should be a crucial element in sustainable change. The most mayor barrier to the change may be that employees see the natural environment as a technical issue and difficult to understand. Achieving compliance with environmental laws may require new technological solution or programs to enable cleaner production technologies and improve worker health and safety.
This opinion is supported by Doppelt (2003), he said that the primary reason why some sustainable efforts is fail, it is because of underlying through patterns, outlooks and behavior of employees. Failure to modify thinking and perspectives permits old decision-making and activity patterns to remain intact. On the other world, to success the sustainable change programs must be integrated with efforts to change the culture of organization.
How does a sustainability-change effort transport organizational culture? According to Dunphy and Griffiths (1998), company should focus on generating organizational structure that can contributed to human satisfaction, growth and development while also contributing to the profitability and knowledge relevant to effective conduct of micro-and macro-elements of organizational change. They also stress the rule of change agent in this stage. Change agents should penetrate and do intervention at an individual and/or group level, the focus moved subsequently to the management of large scale corporation restructuring and to forging links between change management of large scale corporation restructuring and forging links between change management practices and the emerging discipline of corporate strategy.
At the level of individual, Griffiths (2000) suggests that management should redesign of job to enhance an individual’s autonomy in decision making and to individual employee’s work to the organization’s central purpose. Redesign of job is purposed to generate greater organizational commitment and employee satisfaction. This opinion is parallel with Emery and Thorsrud (1969) in Benveniste (2000), that promote six psychological aspects to motivate people in workplace, which can make work to be meaningful:
- Be challenging
- Provide the opportunity to learn
- Allow for a certain degree of decision making
- Provide social support and recognition
- Be work that the individual can relate to their social life
- Be work at the individual feels leads to desirable future.
From there six psychological requirements above, It show clearly that people want work to be meaningful and relevant-not only in terms that people want of their own lives, by providing individual challenges, but also in term of the wide social context in which their live. Work is essence, needs to have a purpose beyond work. It must meet not only individual needs but also social needs.
Meet individual and social needs at work is about creating working environments people want to be a part of and company profiles that people want to be associated with (Benveniste, 2000). There are a number of factors that determine and successful restructuring in organization:
- viewing human resources as a source of sustained competitive advantage
- re-thinking what people around can do effectively
- seeing people as assets that can be develop and recognizing from what they can expert for a long term return on investment (Cascio, 1997 in Benveniste, 2000)
Another necessary factor for balance individual and social need of employees is how company can create opportunity that can encourage employee give their big contribution to the company while enjoy their life out of work. This issue has grown in significance with the realization the world of work and world of family and home. Friedman, Cristensen and DeGroot (1998) in Benveniste outline three management principles that reinforce a commitment to work/life balance:
- Manager need provide open discussion to discuss business priority as well as to identify employee’s personal and work priorities.
- Manager has to recognize and support their employees as whole people, understand that knowledge, skills and experience can cross the personal/work divide.
- Manager has to dare to make experiment in what way work is done to match business goals with employee’s personal goal.
Making a serious commitment to addressing work/life balance issues is not simple matter of implementing a few flexible workplace practices, but it is need a changing attitude and making fundamental culture change (Benveniste, 2000).
At the level of the work group or business unit, Griffiths (2000) suggests the improvement for new organization change should be focused on designing architectures that could be benefit individuals and organization. In this stage, team-based organization should be implemented, where in this model, job can be in turn broken down into semi-autonomous work team. The team-work will make up of skilled individuals who could take responsibility for planning, scheduling, quality and consumer service in the production of goods or services.
Team based organization required supportive organization systems in particular practices, such as in recruitment and selection, remuneration system and in distribution of resources to value-adding activities. This model also request significant modification of hierarchal management structure (Lawler, 1992). This idea also stated in an series paper managing change and transition which published by The Harvard University, one of key success factors of change is reduce the hierarchy structure before an organization truly change-ready. The reason are:
- In hierarchical organizations, decisions are made from top to down through intermediaries. Generally, people resist solutions imposed by people who lack familiarity with day-to-day operations.
- A certain number of entrepreneurial employees-people who like to try new things and who convenience with taking risks.
- Hierarchical organization, tend to keep bureaucracy (the protectors of “how we do things around here”) and a sense of entitlement among employees—that is, a sense that “If I just stay in my little cubicle and continue doing what I’ve always done, my job will be guaranteed.” Both things are enemy of the change.
- Change can be effective if every elements of the change have willingness to collaborate and motivate each others. Unfortunately, in hierarchical companies tend to tell people what to do than get employees to collaborate.
On the other works, Hierarchical model doesn’t facilitate collaborative work- one of important skill that needed by employees to involve actively in change process.
(2) Develop technological support for learning process in work place
In Knowledge era, organization is intangible assets-skill knowledge and information-are more valuable than tangible assets (plant and equipments). Employees are not only people who contribute for sustainability, they also target for the sustainability practices. In many cases they its most value asset only until the organization experience a crisis and then they are seen as disposable. Indeed, Even the organization does not downsize, the stated value should placed on people is often demonstrated by low pay and failure to invent in employee competence development or to use fully employees’ knowledge and skills (Dunphy et al, 2007). Intellectual, knowledge and skill of employee should be seen as capital for future of organization.
Corporation can achieve human efficiency by downsizing and retrenchment. There policy may create financial benefit for the corporation. But in many cases, downsizing just results short time cost cutting and poor work environment. Dunphy et al (2007) suggests it is better corporation try to maximize their human capacities; so the efficiency for organization can be created through having the requisite number of people, mixing employee skills to achieve the goal efficiently and strengthening for future development. This can be done by:
- Developing human resource information system. Getting Change process successfully, acquisition, sharing knowledge, continuous learning environment and the elimination of demarcations in workplace are needed. Employees are expected to be flexible and adaptive, and able to respond quickly. And Technological Information is main point to delivery of this capacity. Nevertheless, it just determine 25 per cent of the successful learning environment, the remaining 75 per cent will be determined by effective knowledge management strategy Ruggles (1998).
- Developing training to enhance managerial and supervisory skills or core competences. Training is one way to up-grade employee skills. Gollan (2000) describes an American Management Association (AMA) survey about the correlation between increased training budgets and larger profit and productivity in organization. 75% survey show the increasing budget in training had increase profit and nearly twice as likely to improve worker productivity that company which cut their training expenditure.
- Introducing new technology or outsourcing of areas that can be identified as not cost-efficiency. Introducing new more efficient technology to support working is one of successful factors to help employee quickly respond for the change. Nevertheless, not all supporting technology should be provided by company. For efficiency reason, company can outsource some technology from other providers.
(3) Introduce and develop Technological and process support for ecological sustainability.
In the area of ecological sustainability, the sustaining organization should seek the definition of sustainable itself as an integral part of the ecology. It takes up resources from environment, processes then end and returns them to the earth. From this circle process, corporation certainly needs its own growth by ensuring that nature can keep supply them sufficient row material, so it is important to the company to keeping environment condition not in damage.
Many companies have viewed that achieve environmental sustainability, environmental action should be treated as separate from the core process involved in operation of the organization. It is fundamentally error. In contrast, environmental actions are not just able to be parallel with the core business activities; moreover it can create efficiency (eco-efficiency) for the company. Considering environmental actions as separated process from the core business can make environmental improvement will costly, as opportunities for savings through integration of environmental objectives with other organizational objectives will be lost. And it makes it difficult to gain staff commitment, as environmental responsibilities become an additional burden on top of what are often already crippling workloads.
Eco-efficiency is the good reason for company to embed environmental action. Eco-efficiency is a single term that introduced by the World Business Council for Sustainable Development (WBCSD). Eco-efficiency is a management philosophy which encourages business to search for environmental improvements that yield parallel economic benefits. It focuses on business opportunities and allows companies to become more environmentally responsible and more profitable. It fosters innovation and therefore growth and competitiveness.
Eco-efficiency calls for businesses to attain more value from lower inputs of materials and energy and with reduced emissions. It applies throughout a company – to marketing and product development as much as to manufacturing or distribution. It is concerned with three broad objectives (WBCSD):
1. Reducing the consumption of resources: This includes minimizing the use of energy, materials, water and land, enhancing recyclability and product durability, and closing material loops.
2. Reducing the impact on nature: This includes minimizing air emissions, water discharges, waste disposal and the dispersion of toxic substances, as well as fostering the sustainable use of renewable resources.
3. Increasing product or service value: This means providing more benefits to customers through product functionality, flexibility and modularity, providing additional services and focusing on selling the functional needs that customers actually want. This raises the possibility of the customer receiving the same functional need with fewer materials and less resources.
Implementing eco-efficiency in a company’s business processes is first and foremost about navigating for opportunities. Such opportunities for more eco-efficiency can be found in four areas: First, companies can re-engineer their processes to reduce the consumption of resources, reduce pollution and avoid risks, while at the same time saving costs. (Levins et al) Second, by cooperating with other companies, many businesses have found creative ways to re-use their byproducts. In striving for zero-waste or 100%-product targets, they have found that the so-called waste from their processes can have value for another company. Thirdly, companies can become more eco-efficient by redesigning their products. Fourth, some innovative companies not only redesign a product, they find new ways of meeting customer needs. They work with customers or other stakeholder groups to re-think their markets and re-shape demand and supply completely. Too many customers needs today are met in a material- and energy-intensive way. There are different, and better, ways of satisfying those needs (WBCSD).
Other suggestions are also promoted by other scholars who interested in the subject how private sectors embrace environmental concept in their day to day process. There is no certain formula to gaining environmental successful. However, company may able to consider Dunphy et al(2007) description about this below characteristics of winning formula for creation of eco-efficiency organization:
1. Establishment of measurement systems to monitor performance in key area of energy, waste and quality. Such Life Cycle Assessment (LCA), Eco Productivity Index of Design for Environment.
2. Develop environmental programmes, either in internal process or in external by doing collaborative initiative with other companies.
3. Building strong support of the initiative by middle management and senior management. For successful environmental program, it is needed strong commitment of management from top level to middle level.
4. Systematic identifying significant Inefficiencies, unnecessary steps in production or service process, pool layout, physical waste, all technologies and wasteful producers.
5. Accessing the tools availability to address there issue: such as TQM, eco-design or eco-industrial concepts
6. Piloting initiative in variety of business units and progressively integrating them cross the organization
7. Measuring and monitoring the cost the improved systems using both “hard” measures (financial improvement, waste reduction, productivity quality) and “soft” measures (capacity development, knowledge transfer, change agent development, consumer awareness, and value change in employee)
8. Including external stakeholder in the sustainability/eco-efficiency process.
9. Linking human capacities and knowledge to generate new value-adding and innovation opportunities.
(4) Develop relationship with external stakeholder
Business alone cannot achieve sustainability. To achieve sustainability, corporation needs inputs from other parties, especially from government and communities. Either government or communities contributes to give feed-back and outcome for corporate actions. The parties have ability to collect process and diffuse knowledge of a technical and specialized nature to find rapid and innovative solution related with product and service contribute to solve environment issue (Dunphy et al, 2007).
In addition, external stakeholder relation can also contribute significantly to efficiency because they are often strongly affected by reputation of a company. This can be valued as reputation capital. It needs long time to build reputation capital. Petrick et al. Suggest four steps how to build reputational capital related with sustainability:
- Provide leadership education to manager and all levels of organization in area of stewardship and behavioral skills so that sustainability competences can be a commonplace
- Create senior executive roles for co-ordination of stakeholder relations that impact on reputational capital
- Conduct an annual audit of global reputation
- Use competitions for various product, organizational, social and leadership reawards to develop and maintain reputational capital
SUMMARY
Sustainability can be regarded a driver of change, new value and ethics that should be used as guidelines for achieve goal to better environment condition and society well being. Since sustainable idea is new economic paradigms, so corporations certainly play importance role to pursuing the goal of sustainability. They can show their real contribution for sustainability by accelerating their business practices with sustainable missions.
Moving to engage in sustainability practices is not a simple reason for companies. Although this has become global trend, companies need to develop conducive environment in their organization to make employees and stakeholders actively participate in implementing the sustainability practices. There are 4 basic elements that need to develop for sustainable corporation: focus on culture change, develop technological support for learning practice in workplace, introduce and develop technological support for ecological sustainability and develop good relationship with external stakeholders.
Sustainability practices cannot be separated with global business trend movement, therefore to keep existing and surviving in this global era, business need to accelerate its day to day activities with sustainability demand in our global community.
Reference
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