Current Business Context
Geopolitical power imbalance such as Russia-Ukraine war, Gaza and Israel conflicts, and Middle East conflicts have bought shocks on long-term business growth prospects and created turbulent business economic environment. Social unrest has further impacted the business security and negative outlook on today’s business growth.
The global risk report has highlighted extreme weather events, critical change to Earth systems, biodiversity loss and ecosystem collapses as the top three global concerns anticipated over the next 10 years (Global Risks Report, 2024). These key concerns will lead to the increase in supply chain risk, consumer risk and credit risk.
Persistently elevated inflation in many countries and high interest rates are weighing heavily on economic growth. Visible economic downturn with a risk of new economic shocks would-be an unmanageable tipping point of sustainability. These factors have created a dilemma on business leaders to find out sustainable business growth prospects.
Sustainable Business Growth
“Our common future”, also known as the “Brundtland Report” published by The United Nations in 1987 has emphasized the sustainability as the development, which meet the needs of the present generation without compromising the ability of future generations to meet their own needs (Brundtland, 1987).
In other words, ‘‘you can have your share or your wellbeing, but you should leave enough for others as well’’.
Sustainability should create blend and balance between economic, social and environmental goals. It should comprise of financial sustainability (profit), social sustainability (people) and environmental sustainability (planet) which creates “the Triple Bottom Line” (TBL) (Virakul, 2015).
Sustainable business growth emphasis on the process of expanding a business with the economic, social and environmental considerations over the long term. All the aspects including social, economic and environmental are equally important in the sustainable development. But in practice, these aspects have been operationalized in an isolated manner from each other in the last few decades.
The business should balance the profitability with positive impacts on society and the environment. It should focus on developing environmental and social dimensions in addition to the traditional measures of profits.
Leadership Challengers
- Stakeholders’ Short-term Expectation
Today’s market competitiveness has encouraged companies to focus on short term profit maximization considering the economic profit concept. Stakeholders have given more emphasize on the bottom-line economic profit of the business. The core business is aligned to profit maximization objectives rather than sustainable business growth.
The current economic environment has also created more limitations on management in respect of implementing sustainable concepts. Most of companies have misapplied Tripple Bottum Line’s concept as Corporate Social Responsibility (CSR) considering only the economic benefits. Learnership is facing challenges to match these short-term profit objects along with the long-term sustainability standards.
- Resistant Mindset to Change
The traditional and legacy organization structures have created significant pressure on leadership to make changes in the process. These structures have established ways of doing things that may not aligned with today’s needs for innovation, technological advancements and agility of the organizations. Further, this has resulted to lose competitive advantage of the business in the long run.
Business sustainability efforts are continuous and evolutionary, requiring companies to be open-minded to deal with change. Strategic, tactical and long-term operation decisions of the companies need to meet the needs of today, without negatively impacting the future.
- Resource Allocation Challenge
Business resource allocation is a critical aspect of businsess that involves distributing money, time, personnel and materials resources over various projects to achieve busniess goals effectively. Cost-of-living crisis, disrupted supply chains for food and energy, cyberattacks are disrupted the resource allocation decisions over sustainable practices (Global Risks Report, 2024).
These factors have created dilemma situation over the business leaders at the time of resource allocation decisions of the business. The focus on adequate resource allocation for sustainable initiatives such as innovative technologies, employee trainings, social and environment projects may be missed due to these conflicting scenarios.
- Less Focus from Regulatory and Compliance Authorities
United Nations Sustainable Development Goals (UNSDGs), The Paris Agreement – international treaty on climate change that was signed in 2016, ESG Regulations, and various governmental and non-governmental organizations have bought regulations and frameworks to implement the sustainable standards and goals.
However, the authorities have given less priorities or no major initiatives for the real implementation of sustainability practices. This has also resulted the inability of seeing the economic and strategic benefits integrated in the social and environmental values due to political agendas. Hence, the business leaders are in conundrum situation when interpreting and applying these requirements.
- Measuring and Reporting Challenges
Integration of sustainability into accounting is a real challenge specially relating to social and environmental reporting. The profits are measured in dollars and the question; how to measure social and environmental capitals. Currently, companies are using various measurement indexes and regulations such as Dow Jones Sustainability Index, Bloomberg SRI Index, and Morgan Stanley Capital International Index.
Due to the voluntary disclosure requirements, the importance and value of the reported information are diluted. Further, AI-generated misinformation and disinformation – falsified information, are damaging the accurate measuring and reporting information.
Leadership Blueprint
Leaders should focus on creating a balanced approach where economic success is achieved alongside positive social and environmental impacts, ensuring that the business contributes to a sustainable future. Building a robust solution by focusing following factors would leads to achieve sustainable growth of the business.
Blueprint Model for Sustainable Business Growth
- Alignment of Company Vision, Mission with Sustainable Goals
Positive vision, mission statements will emphasize on the management’s commitments to achieve those for long term organizations existence. The leaders should focus on embedding social and environment factors along with the economic benefits when establishing these statements.
As an example, the Tesla mission statement is to “accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible”. This statement provides high level commitment from the leaders of the company to develop environment friendly electric cars for the society.
- SMART Goals and Strategies Focusing on Sustainable Growth
“All our dreams can come true, if we have the courage to pursue them” is a famous quote from Walt Disney (n.d.). SMAT goals and strategies help to pursue the company’s vision and mission to reality. Management should get out of their legacy systems and develop the business model linking with SMART (Specific, Measurable, Achievable, Realistic, and Time-bound) objectives.
The management strategies of the company such as operational, sales and marketing, human resource, financial management should be focused on developing sustainable business concepts. The top management commitment and importance of sustainability, should be considered when developing these business strategies with the stakeholders involvement. These strategies will guide management to focus on the sustainable future of the business.
- Leadership, Culture, Training and Technology
Top management commitment, governance structure, strong ethical policies, measurement and rewarding structure and stakeholder’s involvement create baseline for the success of sustainable business growth. Leadership integrity is one of the critical factors of the business development. Leaders should be honest, truthful and straightforward in personal as well as professional life which brings roads to business success.
Today we are dealing with multicultural environments and various cultural factors which should be embedded to the organization structure. Core values align with cultural dimensions such as employee recognition, customer satisfaction, customer relationship and social responsibility will help to increase the shareholders wealth and business growth.
Training and development are most important to articulate all these factors to the organizational structure. Positive attitudes relating to the business future, behavior and characteristics of leadership can be developed through various education and training programs.
Companies must bring innovative sustainable models to survive in the future market. The innovative sustainable thinking in business, such as Elon Musk Tesla inventions has resulted to boost their organization performance during short time span and become most growing brands in the world. Customers demand and recognition over these products are been increasing recent years, which emphasize the company value creation from the sustainable business.
- Resource Management, Risk Management, Financial Management and Reporting
Top management should develop responsible and accountability organization structure and system controls for efficient and effective resource management. Human resource, Financial Resource, Materials and Time are most important to manage for optimal output. Resource management models, soft wares, AI generated tools will help planning, organizing, monitoring and controlling the resources. Implementing sustainable resource management strategies offer benefits such as increased profitability, enhanced brand reputation, improved customer loyalty, and leads to better risk management.
Risk management aspects are important to minimize resource wastage, compliance issues, and reputation damage. Risk identification, analysis, evaluation, consultation and monitoring process help to be ready for the potential challenges. Simulation analysis, scenario analysis, heat map, root cause analysis, matrix and template can be used to integrate the risk management process. Those businesses which understand these connections and are seizing the opportunity to develop capabilities and pilot new operating models that are more in line with a net-zero, nature-positive future.
The best collection of data and reporting of sustainability relating to all three aspects of the TBL will grant the company an immense competitive advantage over the other competitor. Lack of proper recognized financial management reporting framework has discouraged practical application of many corporates. Development and application of unique integrated measurement, reporting and rewarding system at international level is important to govern the application of sustainability concept.
- Collaborate with External Parties
Business sustainability efforts are continuous and evolutionary, requiring companies to be open-minded to deal with change. Strategic, tactical and long-term operation decisions of the companies need to meet the needs of today, without negatively impacting the future. Businesses can drive more significant and impactful sustainability outcomes through strategic partnerships, resource sharing and joint projects with shared goals.
Investment on renewable energy source, recycling of waste, reforestation programs, energy conservation, employee well-being programs and various community impact & social benefit programs are showing the corporate commitment over the sustainability. The business alone cannot resolve the sustainability challenges facing the world and therefore there is a need for social partners or stakeholders to be involved at global level to achieve this for the long-term sustainability of the whole society.
Forward looking
Encourage rewards for innovation would lead to a competitive advantage and success in the corporate journey towards sustainability. Elon Musk innovations and differentiations such as Tesla Electric Car, Space X program, Sola City, Sola Gigafactory, Electric Jet, etc… have created significant sustainable growth prospects in future world.
Sustainability has become the paradigm for the organization’s success by balancing three aspects of economic, social and environment. The Multinational Companies (MNCs) pay a vital role in this task. Small and Medium Enterprises (SMEs) also have commitment, transparency, accountability, and responsibility towards this task. Companies like Amazon, Apple, Microsoft, Google have significantly increased sustainable activities and reporting in recent decades compared to other multinationals.
References
Bruntland Report (1987): Our Common Future, Report of the World Commission for Environment and Development, WCED, New York(NY).
Kotter, J. P. (2007) Leading Change. Harvard Business Review, Jan 59-62.
Virakul, B. (2015), “Global challenges, sustainable development, and their implications for organizational performance”, European Business Review, Vol. 27 No. 4, pp. 430-446.
World Economic Forum. (2024). The Global Risks Report. World Economic Forum. Retrieved from http://wef.ch/risks202
Tesla (2024): About the Company (n.d). Retrieved from
https://www.tesla.com/about
