Adopting Sustainability to Drive Business: Driven to Sustainability by the Expectations of Stakeholders
We explore how the expectations of customers, suppliers, and business leaders are setting the agenda for sustainable business
By definition a stakeholder has a ‘stake’ in your business. They are the very essence of your existence and ability to survive and prosper. The stake in your business does not have to be a monetary investment, it can be a time or resource investment.
Anyone who has an investment in your business is generally keen to ensure it is protected, and that they will get their investment back, sometimes with interest!
Here are some examples of stakeholders and their typical interests:
|Employees||Working for a responsible business, to be treated fairly, equitable reward, development opportunities, to be associated by reputation with a strong employee brand|
|Investors||Return on financial capital employed|
|Customers||Trust in products or services being purchased, responsible sourcing of products (supply chain), environmental responsibility, price|
|Industry bodies||Compliance, reputation,|
|Government/Regulators||Environmental and social responsibility, compliance, tax revenues|
|Media||Raising public awareness, exposing scandal and wrongdoing, globalizing local issues, accountability of big business/industries, communicating policy|
|Communities||Responsible environmental performance of industrial neighbours, fair wealth distribution|
Table 1. Stakeholders and their interest in your business
Stakeholders expect a return on their capital
As the above table demonstrates, stakeholder expectations are a major driver that encourages businesses to adopt sustainable practices. Put simply, this happens because stakeholders are looking to protect their own interests.
Sustainable practices are those that introduce controls, efficiencies, improved engagement and communication and greater responsibility. These are all practices that support improved overall performance. Stakeholders require information about the sustainable practices that are in place, in order to give them the assurance their investment is being protected.
It is likely that you or people in your business are already aware of these expectations but perhaps have not associated it was the term sustainability or corporate responsibility.
There is more than one type of capital employed in a business
Traditionally businesses only take into account the return on economic investment. This paradigm is changing with more and more stakeholder expectations being placed on returns of social capital and natural capital.
Social capital is invested by communities (including individuals) that provide a workforce and customers that allow your business to exist.
Natural capital is invested from the environment in the form of resources, water, clean air, stable climate, etc.
There are very active and influential spokespeople who act on behalf of communities and the environment to protect the capital being used by business. These voices include Governments, employees, NGO’s, the media and the general public.
Now that we’ve shown the power of stakeholders, let’s briefly explore some of the issues surrounding one of the hottest sustainability topics affecting business today – supply chain…
Understanding where you are in the supply chain
Every business, irrespective of size needs to better understand where it sits within the supply chain. Whether you are a B2B or B2C business, you will almost certainly have suppliers and you be one yourself.
Customers want to know what they are buying, and increasingly this means understanding whether it has a sustainable providence across the supply chain.
Some of the common questions that customers are requesting as part of their procurement process are:
- Do you have an environmental/sustainability policy?
- What are the carbon emissions associated with product?
- Are raw materials ethically sourced?
- Can you support your claims? (i.e. assurance over organic or free range claims, responsible forestry, recycled, etc.)?
- Are workers in production fairly treated (i.e. no forced labour, child labour)?
- Have human rights been respected?
- Have you established any sustainability related performance targets?
In the UK, all major supermarket chains have comprehensive sustainability programs in place, and all of them are expanding their supply chain programs to include all suppliers and encouraging their suppliers to ask the same questions of their suppliers. In the future, suppliers will be replaced if they cannot provide robust responses to end-customer requests.
Businesses of all size need to establish systems and processes to better understand their stakeholders and their stakeholder needs.
It is increasingly important to understand your own supply chain, and being able to communicate and respond with credibility to questions from the people you supply.
Gathering robust data from across your own business on your environmental and social impacts is an essential starting point to be able to do this. Once you have established your ‘internal’ position, the next step is look beyond your walls and start two-way conversations with your suppliers, with regulators, with communities, and with your industry peers.
Questions you should consider include:
- Who are my stakeholders and what are they saying about sustainability?
- Is my supply chain secure, transparent, and reliable for the future?
- What is the rest of my industry saying and doing?
- Am I subject to current or future regulation that could impact my business (note that this could be indirect regulation, eg. taxation on energy or water consumption causing price increases)?
In the next article I describe how sustainable business practices can create both tangible and intangible value for business reflected in company valuations and profitability. 3: The Intangible Value Created by Sustainable Business Practices
Simon Humphrey is the UK Managing Director for Impact Sustainability. Impact sustainability provide sustainability performance management software. Note: All images and diagrams included in this document were designed and created by Simon Humphrey.