26 May 2014

Some of today’s new sustainability challenges

Sustainability today means much more than just managing the social and environmental issues associated with a company’s operations and products. All industrial activity inevitably impacts both the natural world and society – and a responsible approach that takes account of sustainable development and results in social approval – are key success factors today. Sustainable development is a megatrend that is shaping our global operating environment in many different ways. Along with globalization, it brings not only risks but valuable new business opportunities as well.

Companies have a major responsibility to develop new and more resource-efficient solutions. Profitable operations are a prerequisite for launching innovations that can be scaled up and have a real significance in terms of sustainable economic growth. ‘Cleantech’, an area that is receiving so much attention these days, is basically about improving productivity through better energy and resource efficiency. It is also about responding to the challenges intrinsic to sustainable development by leveraging completely new business opportunities. New technological innovations are creating green growth and new products such as biofuels and new types of service concepts through what is known as the Industrial Internet.

Sustainable development often continues to be linked primarily to reducing companies’ and society’s environmental footprint, however. Industry has a long track record of improvement here, spurred on by past environmental catastrophes. Environmental performance has been regulated for decades and international standards and reporting principles covering environmental management are now widely used everywhere around the world. Many new business opportunities have been opened up, in fact, thanks to tougher regulations; the incentives and the requirement to reduce CO2 emissions and switch over to renewable energy sources are a good example here. Aiming for greater energy and resource efficiency also makes sense from a financial standpoint and helps promote the introduction of more environmentally benign solutions.

The expectations of companies’ key stakeholders are increasing all the time, however. The growing ethical consumption trend is not only a reflection of people’s greater interest in their environmental footprint, but also of their concerns about the conditions under which the products they buy are produced. Ethical, social, and human rights questions are receiving increased attention and bringing new challenges for the business world. These questions are not nearly as strongly regulated as environmental issues and often tend to be based solely on compliance with various international recommendations and voluntary standards. Companies’ value chains are often very long and complicated today and this makes it difficult for companies to set targets for and monitor their performance in areas where there are still large differences in local legislation, conditions, and culture.

Should a company automatically sever its links with a supplier that does not meet the same sustainability standards that it does itself or reach out and help a supplier like this to become a sustainable company? Can we demand Western-style labor contracts in developing countries, where the local population see the opportunity to work long hours for certain periods of time as a plus for employees? Should responsible and sustainable companies stay out of markets where corruption is rife, or can operators and IT companies help promote greater democracy in these countries by offering people the means to communicate openly? Would many popular movements even get off the ground today without the help of social media and mobile technology?

What we can say is that we remain faced with many difficult ethical questions. The global project is far from complete yet!

Kirsi Sormunen
(born in 1957)

M.Sc. (Econ.).
Member of the Board since 2013.
Independent member.