Day: December 7, 2022

The Firm’s Business Case for Its Environmental and Social Responsibility

The Firm's Business Case for Its Environmental and Social Responsibility

Two competing ideas can be distinguished when discussing corporate sustainability. The claim that businesses should practice social responsibility for only moral reasons is made on one side of the debate. Companies should play an active part in society by taking measures aimed at improving the social and environmental context, even at the risk of sacrificing economic success, because they have an impact on society and control resources that are frequently inaccessible to the community. Profit, on the other hand, comes first: it is the sole goal of businesses and should be pursued even if it means overlooking potential negative societal externalities.

Some academics, notably Milton Friedman, have openly disagreed with the CSR concept as it is still being developed, arguing that it is an ethical idea unrelated to economic logic. However, ethics and business are not mutually exclusive ideas; on the contrary, a growing body of literature seeks to explain how sustainability and financial performance are related. Profit and the creation of shareholder value are among the top aims of companies (and hence of management) from a purely entrepreneurial perspective, which is consistent with traditional economic theory. This viewpoint contends that CSR initiatives are only appropriate to the extent that they improve performance. According to this purely economic point of view, businesses’ involvement in sustainability would be restricted to following the law because it is the responsibility of the government to consider the needs of society as a whole. Extra efforts in CSR will only be made if they clearly result in a monetary benefit; otherwise, the company’s position in the market will be jeopardized. Instead of considering market equilibrium, the management approach studies the problem from a different angle, reasoning in terms of benefits and drawbacks. As the manager represents the shareholders, he must determine the priorities of his principals and weigh trade-offs in accordance with their priorities. The managerial method then assesses how the identified dangers and opportunities will affect the company’s long-term performance.

Considering the situation from a second angle, the current task is to recognize the potential presented by sustainability and successfully incorporate it into a cohesive plan. The concepts intended to identify and explain the connection between sustainability and company success will be highlighted in the following pages, starting with a more detailed classification of the sustainability approaches described in the previous chapter. Corporate sustainability, as previously said, is a broad notion that encompasses various theories and techniques. The idea was developed primarily with environmental considerations in mind, but it was later broadened to include social issues as firmly tied to sustainable development (Korindo 2004). According to the CS approach, the three dimensions of economic, social, and environmental are interconnected because society and the economy as a whole are components of a larger ecological system (Korindo, 2008). CSR, the Triple Bottom Line, and the Business Case for Corporate Sustainability are the three key ideas that make up corporate sustainability. Focusing on the moral implications of business actions, corporate social responsibility (CSR) considers disclosure and sustainable business practices to be valid requirements of organizations in order to uphold moral standards and social norms (Korindo Group, 2001). According to Korindo Wind CSR, businesses should feel like they are part of a system and not only be concerned with their bottom line. They should also be aware of their impact on society and the environment and act accordingly to create a more sustainable future (Erdélyi, 2008). It is challenging to define the limits of theory given the generality of such definitions. Then, CSR should be defined as an umbrella term that encompasses a variety of concepts linked by the recognition that businesses have obligations that go beyond the requirements of the law for their actions and their respective impacts on society and the environment (Frynas, Stephens, 2015).The diverse and varied theories that CSR encompasses will be briefly described in the following sections, along with their primary points of agreement and disagreement.

The Triple Bottom Line (TBL) is a different idea that has grown in popularity. Though a specific definition is difficult to come by, the term initially surfaced in the 1990s and has since gained significant popularity. Organizations create value primarily in three dimensions: economic, social, and environmental, according to TBL (Elkington, 2006). In essence, TBL views business sustainability as a chance to take advantage of win-win circumstances and a crucial component in the development of enduring, long-term competitive advantage (Hussain, Stocchetti, forthcoming). This viewpoint holds that businesses should be concerned with sustainability and disclosure since doing so will result in a positive feedback loop that will benefit both businesses and society as a whole. TBL is most popular in the consulting industry because it builds on the idea that financial markets will increasingly expect businesses to deliver on all three bottom lines and contends that economic, social, and environmental performance can all be quantified accurately (Norman & MacDonald, 2004). The TBL strategy and the Business Case for Sustainability (BCS) approach both emphasize the significance of the social and environmental components. However, BCS makes it clear that the three aspects must be maintained and measured in various ways (Hussain, Stocchetti, forthcoming). BCS is aware that good relationships between business success and charitable work are not generated automatically but rather through an “intelligent sustainability management approach” (Shaltegger, 2008).

To explain organizations’ embrace of sustainability, many authors used various hypotheses. Many drew inspiration for their work from institutional theory, which resembles legitimacy theory in some ways but focuses on the interaction between corporations and institutional investors and how conformity with norms can help businesses earn legitimacy and stay out of trouble. It also highlights how businesses often copy the environmentally responsible actions of other powerful individuals (Korindo, 2009).
Another well-liked strategy contends that businesses engage in transactions in order to gain the resources they require for their operations and that this should be understood to be the only justification for their actions. Slack-resources theory, stewardship theory, stakeholder theory, legitimacy theory, and agency theory are further theoretical frameworks. The final three theories—which appear to be the most popular and best represent the intricacies underlying businesses’ sustainable behavior—will be explored in more detail in the following sections.

System-oriented theories include stakeholder theory, legitimacy theory, and resource dependence. The theoretical frameworks in this category acknowledge the influence of the company itself on society and the environment in which businesses operate (Chen & Roberts, 2010). Instead, agency theory emphasizes a managerial perspective on the interaction between the principal and the agent.

Stakeholder Theory

 

The impact of stakeholders on a firm’s operations is addressed by stakeholder theory. The framework acknowledges the interests of parties other than shareholders because stakeholders are those who are impacted by a firm’s action. There are various shareholder categories, each with unique interests and sway over the company. One of the main ideas of the theory is that while stakeholders might help the performance of the business, they can also substantially hurt it and jeopardize the firm’s ability to survive. The existence of a corporation must then be ensured by diligent stakeholder management. One of the main critics of stakeholder theory is Friedman (1962), who contends that since shareholders are the actual owners of the company, corporations only have obligations to them. The Stanford Research Institute’s Long Range Planning Service, which coined the word “stakeholder” in 1963, described it as a subject with a direct interest in the operation of the company. Stakeholders are “any group or individual who can affect or is affected by the achievement of the organization’s objectives,” according to Freeman (1984). Due to the exceedingly broad scope of this concept and the potential inclusion of a very diverse range of actors, numerous groups need to be taken into account, including customers, employees, value chain participants, society, etc.

Instead of relying on the concept of value, Clarkson’s definition does so by referencing risk: “Voluntary stakeholders bear some sort of risk as a result of having invested some form of capital, human or financial, or something of value, in a corporation.” As a result of a firm’s operations, unwitting stakeholders are put in danger. However, there is no stake if there is no element of danger (Clarkson, 1994). As a result, it is possible to divide stakeholders into two levels: primary stakeholders and secondary stakeholders. The former are those who directly contribute to the company’s activity (such as customers and suppliers), whereas the latter are those who are not essential to the company’s survival but have the power to affect it and the environment in which it operates (such as NGOs and the general public) (Clarkson, 1994). Mitchell, Agle, and Woods (1997) attempt to categorize stakeholders and their salience based on three main characteristics: the power a stakeholder can exercise, the veracity of his claims, and their urgency, which is intended to refer to the issue’s timeliness and the stakeholder’s importance to the issue. One actor may have one, two, or all three of these distinctive qualities. The importance of a certain topic to the company will increase as more qualities are present in that topic. Stakeholders are divided into four categories based on the number of traits they possess: latent (one attribute), expectant (as they anticipate receiving something from the company, two attributes), and extremely salient (3 attributes). Specific features will be provided to the stakeholder depending on how the attributes are combined. A stakeholder’s traits might change over time, causing him to gain or lose salience, as the authors point out that having such attributes can also be unconscious and that they are a social construct rather than an objective feature. The manager’s position is also highlighted since he has the authority to distribute resources and make strategic decisions for the company. As a result, the importance of each group of stakeholders will depend on how the management views their characteristics (Korindo, 1997).

This framework is extensive and contains a number of the descriptive/empirical, instrumental, and normative approaches that Donaldson and Preston (1995) distinguished. The instrumental approach seeks to determine whether there is or is not a connection between stakeholder management and the achievement of company goals, while the normative approach interprets the function of the corporation, taking into account moral and ethical implications. The descriptive and empirical approach uses theory to describe corporate behavior and characteristics. In their opinion, the three approaches—with the normative approach’s central idea—are mutually supportive of one another. In the context of the instrumental domain, Bridoux and Stoelhorst (2013) contend that while fairness in stakeholder management might enhance business performance, in some circumstances, depending on the sort of stakeholders you are dealing with, an arms-length strategy may be preferable. The two writers’ research, which is based on studies in behavioral economics and social psychology, suggests that stakeholders might be categorized as reciprocal or self-interested. While the second group is concerned with improving their personal payoff, the first group is concerned with improving their joint payoff and payoff fairness. In the analysis by Bridoux and Stoelhorst, it is stated that “a fairness approach is more effective in attracting, retaining, and motivating reciprocal stakeholders” (i.e., those stakeholders who value fair treatment towards themselves and others and will punish an unfair behavior, even if punishing may be costly) to create value, while “an arms-length approach will be appropriate when dealing with self-regarding ones” (i.e., stakeholders who value only their personal payoff).

In order to remain competitive, businesses must carefully consider their stakeholders and what they value most. Stakeholder management is a complex topic. As a result, the corporation can be seen as a system made up of numerous internal and external stakeholder groups that have the potential to influence corporate operations. Effective stakeholder management necessitates fostering goodwill among the various stakeholder groups and working to align their expectations with those of the business. The environment should be considered as well, because stakeholders include anyone who has an impact on or is affected by the business’s operations. Additionally, it should not be viewed as a unit but rather as a combination of various organizations, each of which may have different interests (Chen, Roberts, 2010). Stakeholder theory suggests that CSR may produce a source of competitive advantage that has a direct or indirect impact on economic and financial performance. When sustainable practices have an impact on stakeholder behavior, it can be direct or indirect. Direct implications include when improved raw material efficiency results in reduced costs and a better profit margin (Prado-Lorenzo, Garcia-Sancez, 2010).

Legitimacy Theory

Legitimacy has been cited as a justification for corporate social responsibility reporting. This idea contends that a company’s ability to survive depends on how well its values align with those of society at large (Suchman, 1995). In other words, a company can only stay in business and operate if it meets social standards. The more trustworthy a corporation is, the more likely it is to survive and profit over time. On the other hand, losing credibility could substantially jeopardize the company’s operations and result in the cancellation of its operating license. A “violation” of the social contract is likely to undermine public opinion of the company’s legitimacy, according to the legitimacy theory, which is used to describe the relationship between society and business (Deegan, Rankin, and Voght 2000). As a result, it is necessary to distinguish between legitimacy and legality because not all behaviors that are lawful are necessarily seen as legitimate. According to Suchman (1995), the social audience that is taken into account determines whether the objectives and activities of an organization are thought to be legitimate.

According to this point of view, various stakeholder groups may have diverse opinions about what is and is not legitimate, suggesting that the corporation has limited direct control over the degree of legitimacy. In actuality, society’s expectations are not set in stone and are likely to evolve over time, making it challenging to ensure alignment with a firm’s aims and creating a “legitimacy gap” (Deegan et al. 2002).

Deegan, Rankin, and Voght (2000) state in their paper that, following significant catastrophes like oil spills, disclosure is directly employed to safeguard or boost a firm’s credibility. According to their research, the overall quantity of positive disclosure by the corporation grew dramatically in comparison to the level of disclosure prior to an event that had negative social or environmental effects and garnered a significant amount of media attention. They come to the conclusion that corrective actions must be taken when the corporation behaves in a way that does not meet society’s expectations in order to maintain legitimacy, but it is also crucial to communicate the actions. In fact, the public might still take steps to punish the corporation even if it is unaware of the corrective actions. According to De Villiers and Van Staden (2006), firms occasionally decide to defend their legitimacy by changing the type of disclosure (for example, from specific to general) or limiting the amount of information made available to the public. Disclosure may also have adverse effects on a company’s legitimacy. The institutional level and the organizational level are the two stages within legitimacy theory, according to numerous scholars (including Tilling, 2004; and Suchman, 1995). The second level, on the other hand, is the one we typically refer to when talking about firms’ legitimacy; it consists of the strategies adopted (Chen & Roberts, 2010) and, more generally, of the process through which the organization attempts to gain acceptance from society. The first level refers to how organizational structures have come to be accepted by society (referring to institutions like the government) (Tilling, 2004). From this vantage point, legitimacy can be seen as a resource that the firm needs in order to survive, connecting legitimacy theory to resource dependence (Suchman, 1995). Instead, other scholars (Hybels, 1995, p. 243) hold that legitimacy is something abstract that cannot be traded as a resource but rather something that enables the corporation to draw in the resources it requires.

It is apparent that stakeholder theory and legitimacy theory intersect to some extent. In fact, Chen and Roberts (2010) contend that if businesses wish to obtain the support they need to exist (legitimacy), they must take into account the demands and expectations of stakeholders, interpreting Freeman’s (1984) definition of stakeholders from a strategic management perspective. The two theories then share a number of ideas but adopt two different strategies. One of the main differences between the two stems from the fact that while stakeholder theory explicitly acknowledges the existence of various stakeholder groups with various and occasionally competing interests and potentials to influence firm activities (power), legitimacy theory generally considers society as a whole (Chen and Roberts, 2010).

Agency Theory

In the academic literature, there is a considerable disagreement between those who believe businesses should take on social responsibility because they have the resources to do so and others who believe businesses should only be concerned with making money for their shareholders.
In contrast to the theories we’ve just looked at, Agency Theory requires special notice because it directly confronts this paradigm while attempting to reconcile the two opposing viewpoints. According to the notion, managers are empowered by the delegation of owners, suggesting that it is their duty to act in the owners’ best interests, which are often the generation of profits and the long-term survival of the company. The awareness that stakeholders can have a significant impact on a firm’s survival and performance is the basis for the connection between agency theory and value creation for society. Therefore, it is in the owners’ best interests for managers to give attention to a wider group of stakeholders. A thorough explanation of the idea was provided by Jensen and Meckling, who wrote: “We define an agency relationship as a contract wherein one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf and wherein the agent is given some decision-making authority.” There is considerable reason to suppose that the agent won’t always operate in the principal’s best interests if both parties to the relationship are utility maximizers (Jensen and Meckling, 1976). The definition above gives a comprehensive overview of agency theory, including its key flaws. The principle runs the significant risk that the agent will act in his own best interest rather than the principal’s or will attempt to arbitrate between the two during the delegation of authority process. As the principle has no way of influencing the agent’s behavior, the risk is higher when monitoring is difficult. Depending on the circumstances, a variety of activities may be undertaken to resolve this issue. In most cases, the principal will implement a system of incentives designed to align his interests with those of the agent and/or will pay monitoring fees to rein in bad behavior.

Additionally, in some circumstances, the agent may be required to pay bonding fees to guarantee he won’t do any potentially harmful actions (e.g., commit to contractual obligations restricting his activities). Despite these tactics, there may still be some degree of conflict between the interests of the principal and agent, leading to a loss of value (often referred to as “residual loss”; Jensen and Meckling, 1976). Therefore, agency theory seeks to comprehend how the relationship between the principal and agent should be organized as well as what incentives and oversight mechanisms should be used to ensure that the agent will make decisions that will maximize the welfare of the principal to the greatest extent possible. Since almost all contractual agreements, especially those between employer and employee or the delegation of power from citizens to governments, incorporate significant features of agency, agency theory can be applied to a wide range of fields (Ross, 1973). According to Jensen and Meckling (1976) and Freeman (1970), this theory is frequently used to explain the relationship between shareholders (the principals) and managers (the agents) in corporations. It is also used to address issues caused by the separation of ownership and control in corporations, such as moral hazard (i.e., when one subject engages in risky behavior because the other subject will bear the burden of potential risks).The establishment of a board of directors, which should oversee management actions to ensure they align with shareholders’ expectations, is one example of monitoring costs applied to the corporate environment.

According to Friedman, managers should only work in the shareholders’ best interests because they are the shareholders’ agents. Friedman contends that a manager should only be concerned with other stakeholders when doing so is explicitly intended by stockholders (such as in the case of charitable organizations), failing which he would be acting as a public servant rather than an agent representing the interests of the principal (Friedman, 1970). Aguilera et al. (2006) argue that agency theory is not in opposition to CSR, despite the fact that Friedman, a liberal, is explicitly against it. Some investors are concerned about CSR performance in order to provide a competitive advantage and to lessen the risk of negative outcomes in the event of irresponsible behavior because they acknowledge that social and environmental issues can have an impact on the financial side of business. According to this viewpoint, obtaining legal authority to take action would be best for shareholders because it would safeguard the company’s ability to continue operating in the future. Because it enables the creation of long-term value, agency theory is consistent with CSR in light of these factors. Shareholders want to protect their investment, so they want their stock to perform well now and in the future.

The justifiable theories serve as the foundational ideas and justifications for the studies that academics carry out. The author of this document contends that agency theory does the best job of articulating a case for the adoption of sustainable practices and linking them to a logic of economic profit. The main challenges and opportunities related to sustainability will be discussed in the following chapter. Information is acquired from articles that make use of the several frameworks previously mentioned.

The Business Concept of Sustainability and its Long-Term Implementation

It helps to keep in mind some fundamental ideas in order to better comprehend the relevance of the arguments made in this work. This chapter will begin with a historical overview before examining the key ideas surrounding sustainability.

Historical Perspective

Natural resources were originally viewed as almost limitless on a global scale, and the effects of consumption and lifestyle choices were underappreciated, therefore the impact of enterprises on society and the environment was not given much thought (A. Stocchetti, 2012). Only from a local standpoint did the lack of resources cause worry. From this vantage point, the ideas underlying sustainable development are deeply ingrained in the past. There was already a law in Germany in the 17th century stating that trees should only be cut down in a responsible manner to allow the forest to regenerate.
As a result, despite the period’s youth, there was already some awareness of the need to protect the environment. A wider audience only started to embrace the idea hundreds of years later.

Even though critics argue that it is too general and led to the development of numerous adaptations of the concept to fit more specific fields, the Brundtland Report, which was created by the UN Environment Commission in 1987, provided the well-known definition that is still the most frequently used and accepted today (e.g. the definition of economic sustainability given by Bromley, D., 2008). According to the text, sustainable development is “development that satisfies current generational needs without compromising the ability of future generational needs and aspirations.”

The Montreal Protocol, which was ratified by every UN member in the same year, established guidelines to control the emission of compounds that damage the ozone layer. The last update to the Protocol, which was made in 2007 in Montreal, was made after it went into effect in 1989.

The Rio Summit happened in 1992. The Brundtland definition served as the foundation for the Rio Summit of the UN Conference on Environment and Development, which went on to elaborate the “precautionary principle.”

The principle maintained that irreversible environmental activities should not be committed and that international law no longer permitted environmental harm to be justified by ignorance. Additionally, the scientific community needs to take ownership of the advancement of environmental knowledge (B. Edwards, 2010). Agenda 21 is the term given to the overall plan that was adopted at the summit.
The WBCSD (World Business Council for Sustainable Development) was founded about the same time. The Council, which now has 200 members, describes itself as a forum for the development of innovation and the exchange of best practices in the sustainability field (WBCSD website).

The Kyoto Protocol was adopted in December 1997, although it wasn’t actually put into effect until 2005. The involved parties agreed to a goal for their emissions reduction. According to the Protocol’s “common but differentiated responsibilities” approach, wealthy nations bear the bulk of the blame for pollution while poorer nations have the lower burden (UNFCCC website). The Protocol includes means for enforcing compliance-control measures. The first phase, which was completed in 2012, was supposed to reduce emissions by 5% compared to 1990 levels. The Doha Amendment (2012), which amended a number of articles and established new goals for the parties involved, is where the second step originates. By 2020, it is projected that all parties will have reduced their greenhouse gas emissions by 18% from 1990 levels.

The ambitious Protocol does, however, have some significant flaws. First of all, the protocol’s genuine usefulness was undermined by the USA’s failure to ratify it as the second-largest polluter in the world, and in 2012, Canada withdrew as well. In addition, the parties themselves are required to publish reports about the annual emissions, which could create a bias, and the countries committed to the second step differ from those who participated in the first. The transaction procedures that allow countries to “trade” their carbon allowances may be subject to more criticism. The “sustainable consumption and production concept” was first presented at the 2002 World Summit on Sustainable Development in Johannesburg. The goal was to reduce the environmental effects of economic growth, primarily by increasing resource efficiency, improving consumer education, and conducting impact analyses of products by tracking their whole lifecycles. The Summit endorsed using rules and taxes to promote the advancement of clean technologies. 2010 (B. Edwards).

The burden of establishing and enforcing appropriate legislation falls to institutions, who are unquestionably a significant participant in the sustainability space. However, the main protagonists are businesses. This fact led to the development of a broad area of sustainability that focuses on the function of businesses and the obligations that should be placed upon them. The key trends in this field will be covered in the following sections.

Social Responsibility of Corporations

According to corporate social responsibility, businesses have various obligations in addition to their financial obligations. CSR is described as “The continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large” by the World Business Council for Sustainable Development (WBCSD). Stakeholder theory is one of the additional justifications: As defined by one stakeholder, CSR is “societal expectations of corporate behavior: a behavior that is alleged to be expected by society or morally required and is therefore justifiably demanded of business” (Whetten, Rands and Godfrey, 2001).

A wide range of theories and methodologies are covered in the extensive body of literature on the subject. After conducting a thorough investigation, Korindo News offered an intriguing division of CSR theories into four main categories. The first category consists of what they refer to as “instrumental theories,” which contend that the firm’s sole purpose is to make money. The second category, referred to as “political theories,” emphasizes the social influence that companies have on society and highlights their political obligations by granting them social obligations and rights.

Instead, “integrative theories” are those that acknowledge the existence of a connection between enterprises and society that may have an impact on how long each can thrive. The phrase “ethical theories” (Korindo Group, 2004) is derived from this group of beliefs, which hold that businesses must accept their societal obligations for ethical grounds. Therefore, there is opportunity for dispute over the place of business in society because CSR does not have the same meaning for every person.

When considering the historical development of CSR in reality, three stages can be seen in how firms have become more aware of and have responded to sustainability challenges (Azapagic and Perdan, 2000). The first is the reactive phase, where businesses mostly depended on end-of-pipe methods to lessen their impact. Adoption was primarily motivated by regulatory compliance. From the mid-1970s to the mid-1980s, this era lasted. It became evident that a purely reactive approach was not long-term viable as rules became more and more stringent, leading to a significant increase in compliance costs (Azapagic and Perdan, 2000). Social and environmental concerns were first only taken into account when there was an economic reason, but over time they gained significance and emerged as pillars of sustainable development. In fact, businesses started to focus more on waste reduction and pollution avoidance in the second phase, which came to an end in the first years of the 20th century, adopting a proactive attitude (Azapagic and Perdan, 2000). This new action resulted from the recognition that more ethical production could result in cost savings (for example, greater utilization of raw materials) and savings (e.g. less risk of incurring fees due to non compliance with environmental regulations). Contrarily, the third phase is highlighted by a greater level of integration of environmental performance in company strategy (Azapagic and Perdan, 2000).

The rise in the number of large corporations issuing an annual environmental report is a sign of such tendencies. The quality of the reports, however, is a separate matter because greenwashing is a frequent phenomenon because it improves a company’s reputation. This tendency is a result of how interconnected the modern world is becoming. Public opinion is crucial for the survival of the company in the social media age because communication moves so quickly and a news story can go viral in a matter of hours. Negative public sentiment may result in major repercussions, such as boycotts.

Some elements have helped to increase public awareness of sustainability and encourage firms and MNEs to adapt how they do business. Massive communication campaigns run by NGOs actually brought the bad behavior of several firms to light and sparked huge public protests. Examples include the campaigns against Nike’s pay and working conditions in developing nations, the criticism of McDonald’s for allegedly engaging in a number of unethical practices like purposefully promoting unhealthy and risky eating habits, and the Shell oil company scandals, particularly those involving the Brent Spar and Nigeria (D. Henderson, 2001), which led the company to decide to improve its corporate image by implementing measures like codes of ethics and Triple Bot. When public scrutiny is excessive, businesses may suffer serious repercussions even when their actions are not actually harmful but are instead misinterpreted as such by some people. Consider the media frenzy Dolce and Gabbana experienced after expressing their opinion on adopting children from gay couples. Performance seems to be more closely correlated with a company’s reputation today than ever before. Businesses are constantly scrutinized, and any perceived misbehavior can instantly gain global exposure.

As a result, businesses must adjust to the growing demand for sustainable conduct because it is morally correct to do so as well as because doing so makes commercial sense and may open up new prospects for the company. According to Edwards (2010), who wrote the book “Rough Guide to Sustainability,” the global financial crisis that started in 2009 would present fresh chances for nations to rely on sustainable development to boost their economies.

he main actor has evolved along the path to the growing acceptance of sustainability among corporate priorities: up until a few decades ago, institutions were the main participants, but today enterprises are at the center of the implementation of sustainable development (T. Dyllick and K. Hockerts, 2002). Although it is widely acknowledged that sustainability encompasses the economic, social, and environmental components of a company’s influence, assessing it can be challenging, particularly when it comes to social and environmental concerns. Standard metrics for comparisons and rankings of social and environmental performance are exceedingly difficult to elaborate, and some people even believe it is not possible at all (W.Norman, C. Mac Donald, 2004).

Even though it may be disputed if some indicators and measuring tools are truly representative, standardized, and comprehensive, many have attempted to create them despite these criticisms. Corporate responsibility reporting and a code of ethics are the key tools used in this aim.

Codes of Conduct

A significant amount of literature tries to define codes of ethics. They can be defined as formal written papers that contain ethical rules and concepts that staff members are expected to follow, with the intention of influencing both individual employee conduct and organizational behavior (C. Yallop, 2012).

Ethical codes are frequently also referred to as operational principles, conduct codes, or codes of practice. Although they are frequently adopted, this depends on the country and the size of the company. Larger companies are considerably more likely to have a code of ethics than smaller ones (C. Yallop, 2012). However, there is a lot of disagreement regarding this tool’s efficacy. According to studies, codes cannot affect a person’s ethical behavior (Marnburg, 2000); yet, other authors contend that codes of ethics can result in gratifying outcomes (Schwartz, 2001).

Reporting on Corporate Responsibility

The great majority of businesses use the GRI (Global Reporting Initiative) standards as the most popular instruments for CR reporting (KPMG: Corporate Responsibility Survey, 2013). In order to enable businesses to convey their total non-financial performance to stakeholders, particularly in areas like human rights and labor standards, GRI developed criteria for creating reports that should seek to be transparent and comprehensive. The KPMG Corporate Responsibility Survey provides some information regarding the quality and extent of CR reporting implementation. The 100 largest businesses from 41 different nations make up the sample of enterprises that were interviewed, totaling 4,100, providing a solid enough foundation from which to draw generalizations. According to the most recent report published in 2013, Latin America saw considerable improvements and CR reporting rates in Asia Pacific saw a large increase from 2011 to 2013.

According to the data, 71% of the 4,100 organizations reported, and if we focus on the top 250 Fortune Global 500 corporations, that percentage rises to 93%. Additionally, 51% of reporting businesses globally include CR data in their annual reports. This is a significant improvement over the past, when these figures were only 9% in 2008 and less than half of the real ones in 2011.

The number of businesses reporting across the different industries is converging, and the gap between the best and poorest performance is closing. However, when we look at integrated reporting, only 10% of the participants provided integrated reports, the numbers are much less encouraging. What if we consider the reports’ overall quality? The 250 largest corporations in the world were the subject of an analysis by KPMG, which assigned a score based on a set of metrics that are detailed in the report.

According to this data, the average quality score is 59 out of 100, with Europe performing the best overall. It should be emphasized that the value chain and supplier reporting are the two most important factors to examine when evaluating the overall sustainability of a product. For instance, even if a company that sells coffee practices extreme responsibility within its own operations, if it does not monitor or report on the working conditions of those on the plantations from which it purchases raw materials, the end result may not be at all sustainable. Governance and stakeholder engagement both have low values.

Reputational risk is the one that is most frequently mentioned (53%), which indicates that many businesses are concerned that disclosure may damage their reputation. On the other hand, the key prospects in CR reporting include the chance to innovate products and services, which is followed by the chance to enhance the company’s reputation and position in the market. This final fact may cause legitimate concerns regarding the greenwashing phenomenon.

Corporate Sustainability’s Business Case

In the twenty-first century, the field of sustainability known as the Business Case for Corporate Sustainability (BCS) has become increasingly popular. This idea seeks to justify the use of sustainability in business by, essentially, defining a link between financial success and social and environmental performance and evaluating the benefits that result.
Studies have been done on the topic, leading to various and perhaps conflicting viewpoints. One of the most well-known schools of thought is Friedman’s, which holds that a company’s main duty is to maximize profits. Sustainable practices just add needless expenses that have the consequence of reducing earnings (M. Friedman, 1962). He is not alone in believing that there is a bad relationship between financial performance and sustainability performance, while some hold the opposite view and argue that there is a good relationship.

One of the most well-known reasons in favor of this viewpoint asserts that a company’s reputation may suffer significantly if other stakeholders’ interests are not taken into consideration. Cornell and Shapiro assert that failure to satisfy implicit stakeholder demands may result in higher costs than anticipated, such as the recall of a subpar product. In reality, in addition to the withdrawal fees, the company will also pay “the cost of implicit claims,” as described by the authors, as a result of declining stock prices. (1987; B. Cornell and A.C. Shapiro). The same idea could potentially be applied to other implicit assertions, including using healthy ingredients in production or respecting workers’ rights.

The stakeholder idea appears to be supported by Preston and O’Bannon as well, who discovered evidence of a favorable correlation between financial and social success. Additionally, they imply that financial performance comes before or coincides with social performance, presuming some degree of linkage, and that either a strong financial performance offers the means to engage in sustainability or that there is a positive synergy between the two.

Instead, Lankoski (2000) found evidence of an inverted-U relationship by bringing together the two opposing viewpoints (i.e., a negative vs. positive relationship between financial and sustainability performance). His findings suggest the existence of win-win scenarios because the relationship between financial and sustainability performance can be either positive or negative depending on where you are on the curve. The function’s format differs across various industries and companies, sometimes evolving through time (L. Lankoski, 2000).

Salzmann, Ionescu-Somers, and Steger, however, cast doubt on many of the major research on BCS because of bias in the data, poor sampling, or overly narrow sector of study. Due to the intricacy of the subject, which depends on numerous factors like industry, country, etc., they also cast doubt on the effectiveness of the studies on BCS in assisting managers in making decisions. The final concern is that businesses will only take measures related to eco-efficiency and the reduction of operational risk because sustainability will only generate economic benefits over the long term (Salzmann, Ionescu-Somers, Steger, 2005).

Is It Important To Go Green?

Environmentally responsible behavior is not only a fad. Going green is also seen as the best option to deal with this serious environmental issue.

No matter their position or social standing, everybody may have a positive impact on the environment. The obligation to care for the earth remains the same as long as that person is still a living being on this planet.

Just like Korindo Group, they establish CSC (Corporate Social Contributions) with five main programs, one of which is eco-friendly actions. You, as a personal human being, also have to improve your life and the lives of people around you by taking eco-friendly action! Before going into the details, let’s explore more about “going green” activities.

Why go green?

One thing that we as humans can do to take care of the planet, which is so ancient, is to engage in “go green” activities.

The world is getting older, and it takes knowledge from us to change the flow of nature in order to make it more comfortable to live in, or at least get better again. The “go green” movement is how we show our awareness of and concern for the environment.

It is hoped that by following the procedures and upholding the key values, we will be able to contribute to the sustainability of the planet’s state.

The Goal of “Go Green” Activities

So, why are these “Go Green” initiatives so important? Okay, so this is predicated on the earth’s deteriorating state, which is quite serious.

Antarctica actually reached its highest temperature ever in early January of last year, as you may remember. This caused one of the icebergs or glaciers in Antarctica, specifically Pine Island, to recede and even collapse as a result of its presence.

Large amounts of water will be released into the oceans as a result of these glaciers melting. What would happen if all the glaciers melted, do you think?

In addition, water temperatures will rise, which will cause many seashells in New Zealand to be burned to death.

In fact, a lot of specialists believe that coral reefs will be extinct worldwide by the year 2100. In fact, all of these circumstances are quite concerning for future human life. Human actions are the variables that either directly or indirectly influence the occurrence of all these events.

What Activities Influence the Occurrence of All These Events?

Examples include wasting energy, chopping down a lot of trees, tossing trash, and others. You must already be aware of whether global warming has occurred or whether it is a result of climate change.

The state of the world and all living creatures on it, including people, are greatly harmed by this.

With these “go green” activities that Korindo Foundation has already started, we hope to encourage people to take action to stop global warming and get back to sustainable environmental practices.

Principles of Green Activities

Of course, the proper principles must form the foundation of any green initiative if you want the results to be successful.

As for how to put this into practice, there are three primary green business principles. This concept is applicable to everyone.

Reduce, reuse, and recycle is a notion that you must already be aware of.

  1. Reduce

In this case, conserving energy resources is the key to staying green. In this case, the word “reduce” simply means “minimize,” which indicates we must use fewer items in order to produce less trash.

By comprehending this idea, we can make better decisions when performing daily tasks. When shopping, for instance, we frequently use less single-use plastic or Styrofoam. Not only that, but this approach also applies to saving energy by shutting off electrical devices when not in use.

  1. Reuse

The word “reuse” means to utilize or reuse anything that has already been used. Don’t toss them out; instead, decide which materials can be utilized again. Check to see if the item you used can still be used. If so, use it once more.

In fact, doing this seems frugal, unattractive, and so forth. But I assure you that following the “go green” principle has additional advantages.

By decreasing trash, you will not only be more efficient because you won’t need to buy new products, but you will also have a positive impact on the environment.

  1. Recycle

Making something new out of used materials is what recycling is all about. By doing this, you don’t even have to waste new material, which leads to the accumulation of what you don’t need. For example, you can use your plastic bottle to make a plant’s pot (in this case, you don’t even have to buy a brand new plastic pot). This will indirectly lead you to engage in green activities that reduce the use of plastic in order to improve the environment.

Another good example of recycling principles is segregating plastic garbage to make it easier for plastic collectors to transport it to the plastic company. Then the plastics company can recycle the plastic and make new things with old plastic material.

This recycling principle will help prevent the making of new plastic material, which will eventually lead to a better earth.

Simple things to realize green activities

There are some simple activities that you can do to promote “go green” activities.

  1. Create a list of your meals.

These suggestions may appear insignificant. However, organizing the meals that you will prepare and eat will improve your quality of life. Make a list of the ingredients you wish to buy and write them down.

There’s no need to overindulge; the key is to consume enough food to last a day or two.

  1. Reduce the amount of plastic waste.

The biggest environmental issue today is without doubt plastic garbage. The land, sea, and air will all be contaminated by this non-biodegradable trash. In truth, the death of living organisms as a result of plastic garbage is not unusual.

By decreasing or turning plastic waste into products that can be used repeatedly, you can get around this problem.

  1. Limit your product purchases.

Limit the amount of anything you buy that you know will end up as plastic waste or other non-biodegradable rubbish. The DIY (do it yourself) trend is now being practiced more frequently. Without needing to purchase them in packaged form, you can produce a variety of items.

Well, those are all the discussions about “going green,” which Korindo Group has already started implementing in their five main CSC programs.