Public pressure and legislation has affected the way that businesses operate. Generating monetary gain and profit to its shareholders was the main aim of traditional business models. This narrative has shifted towards a business model that still generates money, but one which is considerate of the social and environmental values.
Three public pressure waves have given rise to the current environmental agenda. The first wave brought the realisation that resources are in fact limited, which propelled the formation of environmental legislation. The second wave affected the production of technologies to become sustainable, while the third wave focused on the phenomenon of globalisation. These pressure waves affected the way that governments act. Each wave brought about different actions which seemed to ease citizens’ concerns. This meant that policy-makers had the crucial role of instilling a certain responsibility in businesses, that reaches beyond profit and extends to social and environmental performance.
Businesses are being held accountable for providing products that are sustainable, from the raw materials, to the production process, to the final product.
The first pressure wave brought about environmental legislation in the Organisation for Economic Co-operation and Development (OECD). The Brundtland report in 1987, ‘Our Common Future’, brought about the second wave, introducing the term ‘sustainable development’, which was then overused by the political mainstream. This abetted the generation of the movement of green consumerism, however, the downwave that followed in 1991 brought about public concerns about ‘mad cow disease’ and genetically modified foods. The third wave materialised in 1999 with globalisation. The issue of governance for sustainable development was firmly embedded in the global agenda, due to the 2002 UN World Summit on Sustainable development. The US which helped set off and lead the first two pressure waves, has not progressed and is still experiencing a downwave with issues such as climate change.
Through the fourth and fifth waves, the chrysalis economy will emerge and evolve. The chrysalis economy incorporates three aspects of the economy.
The first is a guide to novel forms of capitalism that will lead the global economy. The second is the changing roles of business leaders and citizen CEOs, that will have to adapt to the new business environment together with a new value system. The third will be about the management tools needed to help business leaders cope in a sustainable business environment.
Without levels of public commitment, support and government involvement, businesses will not be able to survive considering this emerging reality.
Companies will have to re-evaluate their whole strategies to grow in the 21st century and generate novel ways of value creation. Long established businesses, such as chemical companies, have to re-think their strategies and new businesses need to incorporate the value of sustainability and social issues into their company’s code of conduct.
Will science together with societal values be innovative enough in the business world, and will the business world be ready to continuously adapt to create a sustainable earth?
Danielle Martine Farrugia is a science communicator at the Department of Physics at the University of Malta, project manager of Malta Café Scientifique and founder and host of Radio Mocha.
Did you know?
• Anhedonia is a word of Greek descent that explains a disorder that makes it impossible to feel pleasure.
• Clouds appear white as they reflect the sunlight.
• SPF stands for Sun Protection Factor, which is a measure of how well a sunscreen will protect your skin from harmful radiation that causes sunburn, damages skin and can contribute to skin cancer.
• Johnathan is a 184-year-old giant tortoise living on the tiny Atlantic island of St Helena.
• The chemical that gives chilli peppers that spicy taste, capsaicin, cannot be tasted by birds. Birds can therefore eat the spicy peppers and help spread their seeds.
For more trivia see: www.um.edu.mt/think
• Corporate social responsibility (CSR) continues to generate interest from both academics and practitioners in understanding the impacts of CSR on the firm’s performance. The study goes to show that firms are not ‘good’ or ‘bad’ but engage in both CSR and corporate social irresponsibility (CSI). The research conducted shows that firms engage in CSR to compensate for the firm’s past misgivings, or because of the company’s ethos. One novel aspect shows the correlation between CSR and CSI. Significant financial returns will be seen for those companies that are being socially responsible which might encourage managers to be more sustainable. Companies seem to want to be held accountable and act more conscientiously.
• A study published in the Journal of Marketing studied six different types of CSR; environment, products, diversity, corporate governance, employees and community. The aim was to analyse whether marketing of these six efforts would have an increased effect on the long-term firm value and stock price. Results from this study show that through the combination of marketing and CSR, shareholders gain a 3.5 per cent in stock returns. This is dependent upon the type of activity. Of the six types of CSR efforts studied, firms only benefitted from five, except for philanthropy and charitable giving. Remuneration is large when shareholders are aware of the firm’s efforts to be environmentally conscious, improve products, generate a varied workplace and use sustainable resources. An extremely important aspect is to execute a strong marketing strategy to effectively communicate the benefits of CSR which translates in a bigger payoff.
For more science news, listen to Radio Mocha on Radju Malta every Saturday at 11.05am.