3 Reasons Why Companies Fail at Sustainability (with Solution)
Date: 08 June 2021 (Length: 6 minutes)
Executive Summary There are three reasons why companies fail at sustainability:
1).The management has misconceptions towards sustainability – Especially when many executives think of sustainability as CSR. While sustainability is a long-term activity; a way to integrate environmental, social, and economic dimensions into the corporate’s operations.
2).The lack of strategy and the disconnect between sustainability and the business – A well-designed and properly implemented strategy is the first step to realizing sustainability.
3).Companies do not know how to motivate employees toward sustainability – Many companies fail because they believe that they have a sustainable business model. However, what is most important for sustainability is to change organizational culture and values
Sustainability is a hot topic today. Companies are finding themselves on the front lines of the conversation, with a pressure from stakeholders and industry peers. While many companies succeeded, some failed. The purpose of this article is to explore some of the reasons why companies fail at sustainability, and to offer an explanation as to how companies can successfully navigate these times.
There is a significant misconception among management about what sustainability is. Firstly, many executives think of sustainability as CSR: Corporate Social Responsibility, which focuses mainly on corporate donations to charity or corporate volunteerism. Although these two terms do make a contribution to society, there are some subtle differences between them. CSR is a form of short-term activity or a certain project. Most of the time, these activities or projects are inconsistent with the core business. When they’re not aligned with the core business, management doesn’t pay that much attention to such issues and turn out to be a burden for the organization. While sustainability is a long-term activity; a way to integrate environmental, social, and economic dimensions into the corporate’s operations such as reducing waste, assuring supply chains, developing new markets, building its brand. It’s also an organic process that requires management to make changes in business operations, organization structure, and processes. Secondly, many executives think that sustainability is not profitable. In fact, companies with a more sustainable business model, in the long run, will be more profitable. In 2018, Bank of America Merrill Lynch found that firms with a better ESG record than their peers, produced higher three-year returns, were more likely to become high-quality stocks. Companies need to find ways how to integrate sustainability into their current business operations and find opportunities within it. These two misconceptions lead many executives to consider sustainability as a kind of expensive and time-consuming task that will disrupt their everyday operations.
#2 Lack of clear strategy
Some executives do not have clear, adequate sustainability strategy or action plan. The disconnect between sustainability and the business can be seen in how companies approach the issue. While these companies are primarily concerned with achieving short-term goals such as reducing energy use, there is no clear vision or strategy as to how an organization will address its broader issues of sustainability. This disconnect is something that is often cited by business leaders who wish to take action on sustainability but fear it may be too costly, or that it will conflict with the organization’s core business. A well-designed and properly implemented strategy is the first step to realizing sustainability. It should guide executive decisions, company policies and business operations. So, how to come up with a clear sustainability strategy? The core of corporate sustainability strategy is to clearly identify business goals. You can state what business goals you wish to accomplish. Then, you can frame sustainability as a set of goals and strategies that you would like to achieve in the next five, ten or twenty years. After that, it is very crucial for each executive and department to have a clear mutual understanding of how their processes impact the environment along with other business units This will help them determine if they are part of the problem or part of the solution.
#3 Companies do not know how to motivate employees toward sustainability
Many companies fail because they believe that they have a sustainable business model. In fact, what is most important for sustainability is to change organizational culture and values which are deeply rooted in all company structures, practices and procedures. Cultural change is a challenging and expensive endeavor. This is a huge shift that many businesses are not ready to handle, which is why it’s so often overlooked. We’ve summarized an easy and cost-saving way from the research of conservation psychology studies people’s attitudes and behaviors toward the natural environment. Researchers have found seven ways to motivate greater environmental action. Which are as follow:
1.Equip them with the right knowledge: Your employee needs to know why an action is important and how to do it. People are often hesitant to do something unfamiliar, so being able to try new actions in a small way can be comforting. The pilot program is a good low-risk strategy.
2.Help them process information: People are more affected by stories than by abstract statements. This means that you can make certain topics or issues easier to understand by using a story.
3.Leverage the leaders: People look to their leaders. If others they respect are doing or endorsing behaviors, they are likely to follow them.
4.Make actions easy and enjoyable: You’ve probably heard this before, but it’s worth repeating: people are more likely to do things if they enjoy them. This can mean offering rewards for certain actions, or making the action as easy as possible
5.Allow participation: Companies must empower employees to be a part of the discussion, and assist them in understanding how their day-to-day tasks are connected to the larger goal
6.Take one step at a time: You’ll likely change many things in your company’s systems and processes at once, which can your employee can get overwhelmed. So, it’s easier to take small steps than huge leaps.
7.Set rewards: A great way to keep people moving forward is to offer them rewards when they achieve certain goals. This can be a tangible reward such as a “bonus” or an intangible one, such as a smile and appreciation from the organization’s top leaders.
In conclusion, in order to successfully implement and maintain sustainability strategy in your company, it should start with the management, and all stakeholders, have the right mindset toward “sustainability”. It is important for each stakeholder to believe that sustainability is not only good for the environment, but can also bring value and benefits to the core business. As all stakeholders agree to take a serious action, this will, consequently, reflect on a clear goal and strategy for sustainability. Last but not least, employees are the most important part of this whole thing, as they’re the one who drive your strategy to happen in the business operation.