Syamal Gupta*

Business perspective of sustainable development
Growing environmental concerns, coupled with public pressure and increasingly stringent regulations are changing the way people do business across the world. Protecting the organisation’s capital base is a well-accepted business principle. Yet, companies do not generally recognise the possibility of extending this notion to the world’s natural and human resources.

If sustainable development is to achieve its potential, it must be integrated with the planning and measurement systems of business enterprises. According to the International Institute of Sustainable Development (1992), companies should be “…adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today, while protecting, sustaining and enhancing human and natural resources that will be needed in the future”.

This highlights business’s dependence on human and natural resources, in addition to physical and financial capital. Although its activities are circumscribed by consumer preferences and governmental regulations, business is the agent for many measures which can help mitigate environmental change.

The concept of sustainable development needs to be incorporated into the processes of a business. This dimension of business strategy does not mean new management methods need to be invented. Rather, it requires a new orientation and extensive refinements to the prevalent systems and practices — a new mindset.

Sustainable development is good business in itself. It creates opportunities for suppliers of ‘green consumers’, developers of environmentally safer materials and processes, firms that invest in eco-efficiency, and those that engage themselves in improving social wellbeing. Besides earning the goodwill of society, such enterprises will also have a competitive advantage vis-à-vis its competitors.

Though economic growth, ecological balance and social progress have always been on the sustainability agenda, far greater emphasis is being placed on social progress and, specifically, on what business is doing to contribute to this goal and how its delivering that contribution.

Dynamic role of business: Developing partnerships
Industry analysts recognise a natural progression of businesses through a number of phases since the 1970s: from basic compliance with environmental regulations to broader concerns and, finally, to a proactive setting of goals that embrace environmental, social, and ethical concerns.

Market forces have played a big role in the progression from the era of mechanics to the era of physics to the era of biology. Market institutions combine three elements that compel dynamism and a search for ways to use materials more efficiently: source reduction (material conservation), pollution prevention and residuals recycling.

There is general acceptance that governments, businesses and civil society have to interact constructively to find solutions to the challenges of sustainable development. The Johannesburg Summit generated concrete partnership initiatives by and between governments, citizen groups and businesses. The aim is to create a pool of resources and expertise that will help tackle global problems on a global scale.

According to Bjorn Stigson, president of the World Business Council for Sustainable Development, the redistribution of roles and responsibilities based on the changing perceptions of the stakeholders within the new tripartite world has created two sustainable agendas for business:

The business agenda: This pertains to what companies need to do in their everyday operations to become eco-efficient, reduce environmental impact and create more value with reduced impact. Radical market changes and heightened awareness among various stakeholders have led to a greater focus on the ‘triple bottom line’, based on approaches that will move towards the goals of environmental protection, social wellbeing and economic development simultaneously.

The political agenda: This would be set and steered largely by forces from outside the business sector. It would focus on the framework conditions within which business must work. Governments’ best role may lie in restructuring the ground rules: environmental and health regulations, tax codes and incentives for ‘green’ investments and practices.

Many business leaders have begun to realize that achieving truly sustainable enterprises will require going beyond incremental improvements in product and process efficiency to restructuring markets and changing the economic incentives that drive enterprise and consumer behaviour. The new set of ground rules offers progressive businesses fresh commercial opportunities to distinguish themselves from competitors on the basis of innovation, product quality and environmental performance.

The ‘sustainable’ company
Sustainable development provides decision makers with an additional benchmark against which business strategies and performance can be assessed. Benchmarking policies that promote sustainable development provide a system to explore the commitment to principles of sustainable industrial development.

This benchmark information will be a vital starting point for companies, regulators and the public as they explore new ways of working towards a co-regulation partnership.

The evaluation criteria for a sustainable company could include:

• Environmentally sound products, processes and services.
• Integration of sustainable development and economic growth.
• Extent of reduction of risks and hazards to human health and the ecosystem.
• Community/stakeholder participation in sustainable development commitments.

Smaller companies often lack the knowledge and resources to make significant changes in their organisations or technologies. With incentives lacking and the financial benefits of going green remaining controversial, there is a need for more focus on ensuring that sustainable industrial development is compatible with profitability.

The growth of innovative programs and self-regulation are important indicators of change. But the steps taken so far represent just the start of a complex and lengthy transition to more sustainable enterprises.

Balancing growth and the environment
Many businesses have incorporated initiatives in their business operations and culture through environmental management systems, voluntary codes of conduct, performance indicators and regular reports to stakeholders. Multinationals such as British Petroleum and Shell have been investing in the development of renewable energy products and services; they are diversifying in anticipation of future markets.

Here I want to cite the example of the Tata Group, one of the most respected industrial houses of India. The group has been consistent in integrating social and environmental issues, and it has long recognised that sustainable solutions had to be rooted in the principles of ecology, equity and ethics, in addition to those of economics.

The road ahead
We want a better world, a better environment, peace and prosperity. But our path is fraught with enormous challenges, environmental, social and economic. Our development efforts must be complemented by technological innovations that extend the reach of knowledge and learning to the remotest corners of the earth. Education and literacy must necessarily be brought to a level that will help create awareness among people and support sustainability.

Business, as the principal engine of wealth creation, can no longer afford to de-link itself from the economic and social impact of its goals and processes. It is against this broader canvas that international cooperation is imperative in order to address cross-boundary and global environmental challenges.

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This is an edited version of the paper, titled 'Business and sustainable development', that Mr Gupta presented at the Commonwealth Business Forum held in London in September 2002.

Uploaded in December 2002