Running a corporate sustainability blog, I sometimes take for granted that everyone’s aligned on key terms. But after conducting a corporate sustainability survey recently, along with hearing some people use terms like corporate sustainability and ESG interchangeably, I realized that there’s a lot of variance with terminology in this space.
So, to start the year with more clarity and lay the groundwork for a ramp-up of this blog, here we’ll take a closer look at what corporate sustainability means and why it’s important.
What Is Corporate Sustainability?
The meaning of corporate sustainability can vary a bit depending on who you ask. But, in general, corporate sustainability seems to have a common thread of finding a balance between a company’s core business operations and its impact on people and the planet.
"Corporate sustainability, as I see it, involves the responsible and ethical management of business operations to strike a balance between economic success, environmental stewardship, and social impact,” says Sam Ramadori, CEO of BrainBox AI, a tech company that helps companies reduce carbon emissions from buildings, including through optimizing HVAC usage.
“To our clients, it means making strategic decisions that not only benefit their bottom line but also contribute positively to the environment and society,” he adds.
However, not every company is at the point of making a positive impact. For many, focusing on corporate sustainability is an exercise in first reducing harm, in the sense that it’s not sustainable — i.e., viable — for businesses to continuously operate in a way that hurts the environment and society. Eventually, there comes a point where there are no more natural resources to extract or people can not be exploited any further.
Thus, a sustainable business is one that operates at a level where its environmental and societal impact can continue indefinitely, although in reality that requires the cooperation of others, as we all share this planet.
How Does Corporate Sustainability Differ From Other Environmental Terms?
Corporate sustainability is sometimes used as a synonym for ESG or other environmental terms, like being eco-friendly. While there’s some crossover, these terms have different meanings.
"Corporate sustainability, ESG (Environmental, Social, and Governance), and eco-friendly practices share a common goal of fostering responsible business practices, but they differ in scope and focus,” says Ramadori.
Perhaps a better way to look at these terms is to view corporate sustainability as an overarching principle, while terms like ESG and eco-friendly refer to more specific areas.
“Corporate sustainability is a holistic management philosophy and strategy on how the company’s environmental, social, and economic impacts should be managed to minimize negative impact and maximize positive impact for long-term survival,” says Dr. Nancy Landrum, professor of sustainable business transformation at Munich Business School, with a doctorate in strategic management and corporate social responsibility.
“ESG, on the other hand, is a risk management and financial investment strategy. ESG looks at how these external environmental, social, and economic forces are impacting the company’s financial performance and the risks they pose for investors,” she adds. And “eco-friendly is a descriptor of a product or practice regarding its environmental impact.”
Why Is Corporate Sustainability Important?
By definition, something that’s unsustainable can not last indefinitely. Just like a business can not operate forever with unsustainable financial practices, society can not operate without corporate sustainability. And increasingly, companies themselves need a corporate sustainability strategy in order to have staying power amongst customers, employees, investors, and other stakeholders.
“Corporate sustainability is crucial for several business reasons, but when it comes down to it, we have to change the way we operate our economies and serve our citizens, or we are putting our very survival at risk if we don’t address the climate change challenge we are facing,” says Ramadori.
Not only do citizens suffer if businesses do not adopt corporate sustainability practices, but companies themselves would face additional challenges as climate risks intensify.
“The World Economic Forum states that four of the five biggest global risks for humanity over the next 10 years will be environmental. We already know these environmental risks will impact weather, supply chains, access to resources, profitability, and more,” says Dr. Landrum. “Companies need to proactively plan in order to have the best chance of resilience and success.”
That planning should arguably include an overarching corporate sustainability strategy, with more specific sustainability-related goals falling under that umbrella.
“I believe companies must embrace a comprehensive corporate sustainability strategy, with clear sub-strategies and goals to address their emissions across the many facets of their organization,” says Ramadori.
Yet if sustainability goals like shrinking your carbon footprint to net zero are treated interchangeably with overarching corporate sustainability strategies, then other important corporate responsibility objectives that are not strictly about emissions, like achieving the UN Sustainable Development Goals (SDGs), could be missed.
That’s why it’s important to gain clarity on the definition of corporate sustainability. As companies put together an overarching strategy that balances economic, environmental, and social factors, they can then determine more specific sustainability initiatives needed to achieve that balance — e.g., reducing carbon emissions while increasing biodiversity via improved land management, or reorienting their supply chain to work with vendors with lower emissions and fair trade practices.
Don’t Get Trapped by Definitions
While there’s value in defining corporate sustainability and other sustainability issues, it’s also important to not get so semantic about these areas, to the detriment of positive momentum on sustainable business practices. For one, not everyone agrees on the exact definition of corporate sustainability, and that’s okay.
“One of my research areas is to study the stages of corporate sustainability. So, in fact, I do think it is possible that the definition of corporate sustainability varies among companies. It varies based upon the company’s motivation for sustainability and its degree of integration of sustainability,” says Dr. Landrum.
It might be helpful for companies to define and publicize what corporate sustainability means to them, as some might take a stronger view on, say, the importance of having a positive impact compared to a neutral impact. Both can be sustainable in a literal sense but have different outcomes.
But if the only thing that a company does is set definitions, then that’s not as powerful as a company that, say, uses less en-vogue terms like corporate social responsibility (CSR) while taking steps like implementing energy efficiency measures that improve overall environmental health. Ultimately, corporate sustainability requires action.
Learn more about what corporate sustainability initiatives look like in practicality and how sustainability performance can boost business performance: See our articles on how a strong environmental pillar supports areas such as employee engagement and product quality.
Disclosure: Our parent company, JournoContent LLC, has clients involved in sustainability-related areas, among others. The owner of Carbon Neutral Copy, Jacob (Jake) Safane, has investments in sustainability-related companies, among others.
As such, conflicts of interest related to these and other investments/business relationships, even if unintended, may exist at times. Please email email@example.com if you'd like further clarification on any issues.