Can businesses really achieve their goals without causing unpleasant footprints in the society? As the saying goes: ‘you cannot make an omelet without breaking eggs’. Many countries or communities in which businesses operate face significant challenges in air or noise pollution, environmental degradation, economic hardship, infrastructure decay, and more. For example:
Research on “Economic Burden of Sand Dredging on Artisanal Fishing in Lagos State, Nigeria” found that “fishermen in the dredging area incurred higher cost per day”, and suggested that “this may be attributed to cost incurred on long distance travelled to catch fish in order to avoid [sand] dredging [business] area”. Speaking on the loss of biodiversity, the Director General of the NCF stated that “…dredging in some places has been largely responsible for the loss of breeding habitats…” Nationwide, sand dredging is leading to the loss of biodiversity, impairment of fishing activities, coastal erosion, damage to farmlands, and buried infrastructure in Nigerian waterways such as bridges, jetties, electric cables amongst others.
This underscores the fact that there is a relationship between business’ drive to maximise profit and the health of the people as well as the ecosystem. No business exists in vacuum, rather, long term existence of businesses depend on their responsible actions towards the society and environment in which they operate, more so in their profit sustainability. Such relationship is called ‘sustainability’, a word that is gaining momentum in the contemporary society.
According to Financial Times, business sustainability is the “process by which firms manage their triple bottom line, such as their financial, social, and environmental risks, obligations, and opportunities”. Sustainability entails that businesses have fundamental responsibilities in promoting human rights, fair labour practices, decent jobs, environment conservation, anti-corruption and more. This has gained great momentum in recent times, especially, considering the impacts of organisational quest for profit maximization and ill treatments of workers, host communities and the environment.
Sustainable businesses have begun to reap from their responsible business practices. Firms that lead on environmental and social issues also lead in financial performance, easily attract and retain talented employees, experience less financial and reputation risk, and enjoy good relationship with host communities as well as other key stakeholders. Such businesses are resilient and survive external shocks because they are intimately connected to healthy economic, social, and environmental systems. By integrating sustainability into strategies, policies and procedures, organisations are not only keeping their socio-environmental responsibilities, but are setting the stage for long-term success.
Can Supply Chain Be Sustainable?
One of the most affected areas of sustainability issues in the recent times is the supply chain. The last few decades have greatly experienced the spread of supply chain and production plants from developed countries to low-wage developing countries where there are lower social standards in the workplace. The consequences of s a supply chain that jeopardises the ecosystem or negatively impact on people reflect a company’s value system, and has lot of implication to brands reputation. For example:
the collapse of the Rana Plaza building in Bangladesh is, to date, the deadliest disaster in the history of the garment industry worldwide. About 3,639 workers toiled in five factories housed in the Rana Plaza building producing clothing for some U.S., Canadian and European clothing labels and retailers. The standard working shift was from 8:00 a.m. to 10:30 p.m., with just two days off a month and an average of 19 cents per hour. When the workers refused to enter the eight-story Rana Plaza factory building on April 24, 2013 at 8:00 a.m. because there were large and dangerous cracks in the factory walls, the owner, Sohel Rana, brought paid gang members to beat the workers, hitting them with sticks to force them to go into the factory. Managers of the five factories housed in Rana Plaza also threatened not to pay the poor workers for the month of April failure to return to work, which meant that there would be no food for them and their families. While they were forced to go in to work at 8:00 a.m., after about 45 minute the building collapsed. About 1,137 were confirmed dead at Rana Plaza.
Nigeria is not an exception, multi-national companies, especially those operating in the oil and gas sector have been severally accused for similar operational negligence which has a lot of social and environmental implications. Other industries such as finance and communication have also been accused of poor employment contracts which result to poor wages and excessive daily work time.
How Can Organisations Become Sustainable?
A number of sustainable practices exist to help firms build a long-term profitability, ensure a long-term existence that is hinged on responsible and ethical practices that facilitate cohesion across key stakeholders:
Sustainability impact assessment
The first step to run a sustainable business starts with conducting a Sustainability Impact Assessment (SIA). SIA is a non-financial audit that involves in-depth assessment of the potential economic, social, human rights, and environmental impacts of business activities with ultimate goal to create economic value, healthy ecosystems and strong communities. By engaging in SIA, organisations understand: the implications of their economic pursuit to social welfare; how the organisation interacts with the external environment; the resources used or affected by an organisation; and the organisation’s ability to produce value for different stakeholders.
Unfortunately, this is often misunderstood by some people to only imply an obligation to care for the environment and people, but it is more than that. It can be undertaken out of management concern for seeking out business opportunities and efficiencies, creating competitive edge, managing stakeholders and potential business risks to set the stage for long-term business success. With this in mind, SIA is increasingly being used by sustainable organisations as a measure of overall performance.
Community and stakeholder engagement
Stakeholder engagement is the process by which an organisation communicates with and learn from host communities, customers, employees, regulators and other key stakeholders that can either positively or negatively affect or be affected by business activities.
Host communities represent a segment of a company’s most important assets and have great impacts on brand reputation. Maintaining good relations with host communities is essential for the success of every business. This implies that companies should ensure safe and healthy working environment, and impact positively in the economic sphere of their host communities.
Engagement is not only about pushing out messages, but understanding opportunities and threats, finding common ground and involving stakeholders in joint decision-making for the long-term existence and profitability of business.
Environmental management system
An Environmental Management System (EMS) is a set of processes and practices that enable an organisation to reduce its environmental impacts and increase its operating efficiency. Companies are increasingly facing constraints related to their impacts on ecosystem services and natural resources depletion in regions in which they operate. This requires that companies should adopt a strong environmental policy and management system (EMS) to improve their environmental performance, reducing raw material consumption, prevent unsustainable waste disposal, and reduce total direct and indirect GHG emissions including CO2. They need to formulate good environmental policies that consider people and communities that may be directly or indirectly affected by their operations, as well as conduct periodic environmental impact assessments. Companies that are environmentally responsible are more likely to improve their environmental performance in a cost-effective way, avoid conflicts with their host communities as well as sanctions from environmental regulators.
Sustainability reporting and disclosure
Sustainability reports have increasingly become the platform through which companies communicate their performance on social inclusion and environmental related issues. Companies are required to report on all material aspects of local activities annually in line with recognised local or global standards. Maintaining transparency through appropriate reporting and disclosure, and monitoring it at the board level accords the company the opportunity to earn regulators trust and social license to operate from the host communities.
Engaging in annual sustainability assessment and reporting helps local communities and concerned stakeholders to understand the impact of business on critical sustainability issues such as climate change, human rights, corruption, and more.
Life cycle analysis
Those organisations wanting to take a large leap forward should systematically analyse the environmental and social impact of the products they use and produce through life cycle analysis, which more accurately measures impacts.
However, embedding sustainability in the business is vital for a peaceful co-existence with host communities, and ensures a long-term existence and economic viability of the business. This means that business long-term profitability is hinged on responsible and ethical practices that facilitate cohesion across key stakeholders.
Retrospect
- Why Extractive-Based Nations Fail: Between Resource and Knowledge-Based Economies
- 2018: The Nigeria We Want
- Towards The Bleak Future of Crude Oil: What Nigeria Should Do Now
- Fiscal Sustainability: Between Nigeria’s Debt Plan and the 2018 Budget
- Mainstreaming Street Hawking in a Formal Economy: An Inclusive Approach to Development
- Nigeria’s Economic Growth in 2018 and the Hope of the ‘Common Man’.
- The Reality of Nigeria’s Recession Exit: Between GDP Growth and Sustainable Development
- Financial Inclusion: Are Nigerian Banks Getting it Right?
Reference
- Factory Collapse in Bangladesh. Institute for Global Labour and Human Rights
- Guidance on Social Responsibility. International Organization for Standardization
- Primer: Business Sustainability. Tima Bansal, Network for Business Sustainability, September 28, 2017
- Social Audits And Multinational Company Supply Chain: A Study of Rituals of Social Audits in the Bangladesh Garment Industry. Muhammad Azizul Islam, Craig Deegan, Rob Gray, 2015