Business Sustainability and Ethics

Sustainable development, corporate social responsibility, stakeholder theory, and accountability form the four pillars of a sustainable business. Business sustainability is an evolving concept that managers view as a replacement for the traditional growth and profit maximization model. In recent years, there has been considerable discussion about “business sustainability” in the business, academic, and popular press. This term is often used alongside, and in some cases as a synonym for, terms such as “sustainable development” and “corporate social responsibility.” But what is business sustainability? How does it relate to the aforementioned terms, and why does it matter?

Business sustainability can be seen as a new and evolving paradigm in business management. The term “paradigm” is intentionally used in this definition because business sustainability is a replacement for the traditional model of growth and profit maximization. In “business sustainability,” while growth and profitability are important, the company is also obliged to pursue social goals, especially the goals of sustainable development (protecting the environment, social justice and equality, and economic development). The concept of business sustainability has drawn elements from four other well-rooted concepts:

Like the concept of sustainable development, corporate social responsibility (CSR) is a broad and interactive concept. In general, social responsibility refers to the role of business in society. The underlying assumption of social responsibility is that corporate managers have an obligation to consider and address the needs of society, rather than acting solely in the interests of shareholders or their own personal interests. In many ways, social responsibility can be seen as a negotiation, and the central question of this negotiation is not whether corporate managers have a duty to attend to the needs of society, but rather the extent to which they have a duty to consider these needs.

The fourth and final underlying concept of business sustainability is corporate accountability theory. Accountability means a legal or moral obligation to give an account to someone to whom one is answerable. Accountability differs from responsibility in that responsibility refers to a person’s duty to act in a particular way, whereas accountability refers to a person’s duty to explain, justify, or report on their actions.

Sustainable development is a broad and interactive concept that seeks to balance the need for economic growth with environmental protection and social equity. The term first appeared in 1987 in the book “Our Common Future,” published by the World Commission on Environment and Development (WCED). The WCED described sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Stakeholder theory, short for business stakeholder theory, is a relatively modern concept first introduced by R. Edward Freeman in his 1984 book “Strategic Management: A Stakeholder Approach.” Freeman defines a stakeholder as “any group or individual who can affect or is affected by the achievement of an organization’s objectives.” The central premise of stakeholder theory is that the stronger your relationships with the community, the easier it will be to achieve the company’s business objectives. Conversely, the worse your relationships, the harder it will be to achieve these goals. Strong stakeholder relationships are based on trust, respect, and cooperation. Unlike social responsibility theory, which is primarily a philosophical concept, stakeholder theory is essentially a strategic management concept and is primarily for business owners. The goal of stakeholder theory is to help businesses strengthen their relationships with external groups to create a competitive advantage.