Redefining sustainability

The collapse of financial markets and a slowing down of the global economy have resulted in many corporations focusing on planned and survival-based activities, such as cost control and risk/exposure management.

The challenge for business now is to transcend compliance obligations and move towards truly sustainable operations, taking a holistic approach to environmental, social and economic values.

This has become a key competitive issue and is increasingly likely to become a differentiator between those who succeed and those who do not.

Sustainable development, introduced in the Brundtland Declaration of 1987, is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

The declaration links global inequity to environmental degradation, a link for which there are examples dating back centuries, with numerous examples apparent within every country today where business, societies and systems have not been forward looking enough to mitigate seemingly predictable events.

Integration of sustainability into business practice presents a number of significant challenges, not the least of which is confusion over the concept of sustainability itself, and what this means in an individual business context.

The term sustainability is open to subjective interpretations from varying perceptions. For example, many businesses still approach sustainability in terms of environmental sustainability alone, independent of economic and societal considerations which may have competing and conflicting priorities.

Increasing societal awareness and perceptions also extend into the collective social will and ultimately policy and regulatory mechanisms, as is currently being evidenced in Australia.

While the awareness for sustainability solutions may be high, the need to identify and implement them is tempered by reduced internal budgets and resources along with more immediate operating concerns.

While the business imperative for becoming sustainable has never been more prominent, the obligation to adhere to the requirements of an increasingly complex regulatory regime has become foremost in businesses’ short-term priorities.

The proliferation of existing and emerging state and federal legislation, regulations, policies and programs, including the proposed Carbon Pollution Reduction Scheme (CPRS), the Energy Efficiency Opportunity (EEO) and Energy Efficiency in Government Operations (EEGO) programs, Federal Mandatory Renewable Target (MRET), the Federal National Greenhouse and Energy Reporting Act, the Victorian Renewable Energy Target Scheme (VRET), Victorian Environment and Resource Efficiency Plans (ERET), NSW Energy Savings Action Plan (ESAP), and the NSW Greenhouse Gas Reduction Scheme (GGAS), to name but a few, has resulted in organisations striving to meet compliance obligations.

With environmental awareness at an all-time high and the economy at an all-time low, we are now at a turning point, with businesses and governments being forced into action. The flood in promulgation of regulations, guidelines, programs and incentives is starting to bring about change.

For instance, the National Greenhouse and Energy Reporting Act 2007 will require many corporations to report greenhouse gas emissions and energy consumption and production figures. Corporations triggering the defined thresholds for GHG emissions, or energy consumption or production, will be required to report performance data which will be publicly available.

Eventually, transactions arising from the proposed CPRS will start making their way into corporations’ financial statements.

A common theme regarding implementation of sustainability is the need for significant behavioural and cultural shift within organisations to move beyond 'business as usual' or redefine what this term means in practice.

This includes a long-term view of risk, a redefinition of the role of a business, its value and purpose, and an understanding of how a culture of sustainability can be embedded throughout organisations and extending to their supply chains, in order to give this buzzword life beyond a mission statement or annual report.

The challenge for business today is one of adaptation and change management, and central to that is the development of appropriate metrics and monitoring systems.

If sustainability involves linking problems of consumption and poverty with pollution, resource degradation and resulting conflict, then its solutions must also require innovative linkages. These include linkage between environmental science with politics and people's daily lives.

Another critical linkage is that between the social and environmental sciences and economics. Increasingly, economic factors will dictate where and how much the environment will be exploited, yet the economic value of resources has historically not been considered in economics and is still only at a relatively premature level.

The diamond water paradox has the potential to become the ultimate irony as is beginning to be realised by the dramatic rise in the cost of water, now that the resource has become diminished and more is understood about the recharge rates of natural systems.

To be sustainable, any system or business requires three elements:

• the right indicators,
• the right incentives, and
• the right principles of justice.

The third element suggests another crucial link which is fundamental to sustainability but has long been overlooked — the link between ethics and commercial gain.

Setting the right indicators is an essential step towards sustainability, noting you cannot manage what you do not measure. However, the increase in sustainability metrics over the years means that organisations should review metric suitability.

Good indicators will tell you how well a system is meeting societal and environmental needs; or whether it’s productive capacity is being improved or eroded. In setting indicators, the focus should be on aligning the espoused values of an organisation with its values in action.

 *David Rogers & Neil Salisbury, ENVIRON Australia Pty Ltd.