The Meaning and Purpose of a Sustainability Report (SMUnit VII-3of 4)

Explain what is meant by a sustainability report. Briefly describe its purpose. Your response should be at least 200 words in length. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

Learning Objectives
Upon completion of this unit, students should be able to:
1. Evaluate strategy for its ethical and environmental impact on the firm
and its stakeholders.
Written Lecture
Strategy, Ethics and Profit
If the strategy of the business leads to initiatives that are within the law, does this
make the strategy an ethical one? Does it make the company ethical? Debate
exists over the meaning of ethics in a firm when it comes to the day-to-day
operation of strategic implementation. For example, consider the question of
profit. Strategy exists to steer the company toward a position of sustained
competitive advantage. Competitive advantage results in profit. Should the
company therefore focus exclusively on profit? If this was the sole focus on the
company, would the company be an ethical one?
Some may well say “no.” If profit is the only goal, where do employees and
customers fit in? Where does the local community fit in? Does the focus on the
attainment of strategic advantage and profit diminish the company’s role in
society? Should a company not be more caring?
The counterpoint to such an ethics-based argument is to start from the
perspective of the shareholder. The shareholder trades money in return for
shares in hopes that such a transaction may result in returns. For those of us
who have retirement accounts, chances are that we are all shareholders of
companies in one form or another, whether through stock holdings or mutual
funds. What would you do as a shareholder if a company elected to make less
profit in order to attempt to be more ethical? Perhaps you would not find a lesser
stock price (and presumably less comfortable retirement) to be ethical treatment
toward you as an investor. You may well sell your shares to a company more
focused on profit!
The Employee and the Community
Another way to view the question of ethics is to see it from the view of the
employee and community. If your employer treated you poorly--presumably as a
means of making more profit-- what would you do? Perhaps you would quit and
work somewhere else? What would the company then do? Seek to replace you
and incur expense in the process. More expense leads to lower profits, so the
maltreatment of employees is not necessarily consistent with sustained
profitability.
But how should we think about the community in which the firm operates? How
does the community benefit if the company does nothing more than focus on
Reading
Assignment
Chapter 10:
Business Ethics/Social
Responsibility/
Environmental
Sustainability
Key Terms
1. Bribes
2. Bribery
3. Business Ethics
4. Code of Business
Ethics
5. Environment
6. EMS (environmental
management system)
7. ISO 14000
certification
8. ISO 14001
certification
9. Social policy
10. Social responsibility
11. Sustainability
12. Whistle-blowing
BBA 4951, Business Policy and Strategy  2
profits? A profitable company will hire local workers and pay wages that are in
turn spent in the community. Both the company and the employees pay taxes
that support the community. This leads to the conclusion that a profitable
company is good for a community, and as long as it is operating within the law,
may well be considered ethical due to the good produced by its profits.
Finally, we have seen how the employee, the stockholder, and the community
may benefit from a company’s focus on sustained competitive advantage and
profit. Where does the customer fit it? The customer will spend money only on
those things that are valued by the customer. If the customer is willing to pay for
something that is valued, then the customer wins when the transaction is made.
Consider some arguments against profit that insist that companies focusing
solely on profits tend to take shortcuts with product offerings and cheat the
customer. In this case, if you bought something and then found that you were
cheated, what would be your likely response? Probably you would return the
product and not buy from the company again. If the company cheated all
customers, the company would go out of business (or at least fail to earn profits
on a sustained basis)! This suggests that a focus on a sustained competitive
advantage and sustained profits is an ethical activity, and therefore strategies
seeking this goal may be ethical.
Environmental Sustainability
To what degree should a firm include sustainability in its strategy? The answer is
that it depends. Sustainability infers the use of practices that support
environmental responsibility, but there is not necessarily a single definition.
Responsibility toward the environment can mean a number of different things.
For example, there are laws in place that protect the environment, so companies
that adhere to the law could be considered to practice sustainability. On the
other hand, the promotion of sustainability is generally intended to be something
above and beyond that which is required by law. For example, a company may,
as a matter of policy, promote aggressive recycling. If a company did this, would
it be a good thing? Perhaps it would, if recycling were more efficient (i.e. less
costly) than acquiring materials in other ways. Should, therefore, a company
spend more on sustainability activities than they otherwise would if profitability
was the only guide? There are two schools of thought. One school suggests that
a company should do this, and as a result, shareholders will have to live with a
lower stock value (and perhaps be a bit worse off in retirement!). Another school
of thought suggests that companies should focus only on business, and that
shareholders are free to sell stock or use dividends as they see fit—and
therefore may use such gains to pursue their own sustainability initiatives.
When it comes to the strategy of the company, which school of thought or
specific direction should managers pursue? The guiding principle should be to
make sure that any sustainability initiative really does save energy as well as
money—and does achieve the stated goals of the initiative. That being said,
companies often do things in the name of sustainability more as token efforts to
buy goodwill from the public. If public good will is a key part of the company’s
strategic positioning, then in this case sustainability activities may be considered
a cost of doing business, much like public relations or advertising. Although
there is nothing wrong with this approach to sustainability per se, and many
companies do engage in it, it must always be remembered that there is a
difference between promotion of a popular concept and actually implementing
initiatives.