Course: BUSS6171

Effective Period: 2021

The Why’s of Sustainability in

Business: From Financial Benefits to
Transformed Corporate Cultures

Session 03
Learning Outcome

• Describe the benefits and challenges of sustainability business

practice
Benefits and Challenge of Sustainability
Business Practice
Company Mission

• While the question is a simple one, referring to why the company exists?
• Milton Friedman, a Nobel Prize winner from the Chicago school of
economics, developed the concept that the purpose of business is to
maximize profit for the shareholders.
• This narrow concept had numerous implications for consumers, employees,
and the environment because they were not a priority for many companies.
• Companies exist for a particular reason: to provide a particular set of goods
and services for society.
Benefits and Challenge of Sustainability
Business Practice
Company Mission

• Based on business and organizational ethics theory, this framework

distinguishes between three types of organizational practices:
noncompliance, social responsibility, and sustainability.
Benefits and Challenge of Sustainability
Business Practice
What does a sustainable mission actually look like?

• To operationalize this, the following are examples of four mission

statements for a household goods manufacturer that parallel the four stages
of sustainability :
– Stage 1 (survival):
Foster innovation to create quality consumer goods at affordable prices
with fair returns to our investors.
– Stage 2 (environmentalism):
Create environmentally friendly household products while meeting the
needs of our customers.
– Stage 3 (social responsibility):
Promote healthy homes and happy communities through a restorative
economic system.
– Stage 4 (sustainability):
Improve the lives of people, health of their environments, and quality
Benefits and Challenge of Sustainability
Business Practice
What does a sustainable mission actually look like?

• Action 1: Establish your sustainability mission by explicitly indicating how the

raison d’être of your company answers a sustainability need.
• Action 2: Translate your sustainability mission into concrete indicators and
measure them to determine success.
• Action 3: Use your core values to uphold your mission even if there are
short-term costs involved in addressing crisis situations.
Benefits and Challenge of Sustainability
Business Practice
What does a sustainable mission actually look like?

• Action 1: Establish your sustainability mission by explicitly indicating how the

raison d’être of your company answers a sustainability need.
• Action 2: Translate your sustainability mission into concrete indicators and
measure them to determine success.
• Action 3: Use your core values to uphold your mission even if there are
short-term costs involved in addressing crisis situations.
Sustainability Mission: Key Lessons and
Actions
• The key lesson from Seventh Generation is that an organization can
better address sustainability by focusing on the social need that its
products and services are attempting to fulfill rather than only on
product/service, price, and differentiation.

• Action 1: Establish your sustainability mission by explicitly indicating

how the raison d’être of your company answers a sustainability need.

Note: Refer the case in the book

Sustainability Mission: Key Lessons and
Actions
• The key learning from Interface’s experience is that sustainability is about thinking
big when it comes to sustainability goals, taking into account every actor and aspect
of the business ecosystem, and then proceeding to measure progress in a tangible
and accountable way. The selection of sustainability goals and process for achieving
them are crucial for sustainability. CEO Anderson did not decide to simply reduce
the waste Interface was generating by a certain percentage; he instead decided to
solve 100 percent of the problem. This goal represented the guiding light in all the
actions while creating inspiration, engagement, and pride for the staff at Interface.
The organization has been working steadily and incrementally to achieve the goal.

• Action 2: Translate your sustainability mission into concrete indicators and measure
them to determine success.

Note: Refer the case in the book

Sustainability Mission: Key Lessons and
Actions
• The J&J and Toyota cases clearly demonstrate that living the mission
and values of the company pays in the long term even if the
organization has to incur financial costs in the short term. The contrary
is also true: ignoring the mission of the company for the sake of short-
term gains jeopardizes both the short- and long-term financial
performance as well as reputation of the firm.

• Action 3: Use your core values to uphold your mission even if there are
short-term costs involved in addressing crisis situations.

Note: Refer the case in the book

Case 1: Philip Morris International

Can all companies take the journey toward becoming a sustainable

enterprise? Philip Morris International (PMI) is the second-largest tobacco
company in the world, with reported revenues in 2013 of $80 billion and $7.7
billion in net earnings.24 Yet PMI represents an interesting case to study in
terms of sustainability. While PMI champions its sustainability strategy, which
in 2013 contributed $39 million to charity, reduced its CO2 emissions by 30
percent, recycled over 80 percent of its waste, and engaged in fair agricultural
practices toward tobacco producers, its core products are cigarettes and other
tobacco products, which of course are highly detrimental to the health of
consumers as well as those nonconsumers who frequently share the same
geographic space as tobacco consumers.
Defenders will argue that the company is simply meeting a market need,
and is doing so in a more sustainable way than its competition. Through
marketing its products, however, PMI can also be accused of encouraging
harmful habits such as smoking. As published on its site, PMI’s goals are
“to provide high quality and innovative products to adult smokers,
generate superior returns for shareholders, and reduce the harm caused
by smoking while operating our business sustainably and with integrity.”25
With a global workforce of ninety-one thousand people, a collection of
eighty thousand tobacco producers, and a customer base many multiples
larger, PMI has a tremendous impact on the environment and society.
The company also states that it wants to reduce the harm caused by smoking.
Consequently, PMI is investing in four different reduced-risk platforms, as described below:

Platform 1: An electronic holder that heats tobacco rather than burning it, thereby creating
a nicotine-containing aerosol with significantly fewer harmful constituents compared to
cigarette smoke.

Platform 2: A pressed-carbon heat source that once ignited, heats the tobacco without
burning it in order to generate a nicotine-containing aerosol.

Platform 3: A chemical process to create a nicotine-containing aerosol.

Platform 4: An e-cigarette—a battery-powered device that produces an aerosol by

vaporizing a nicotine solution.
In addition, PMI is moving toward aggressive 2020 goals to reduce the
negative externalities its operations have on the environment.

Are its current actions and investments enough to become a sustainable

enterprise?
If you were André Calantzopoulos, the current CEO, what would you do?
What would be your long-term vision for PMI to make it a sustainable
enterprise?
Would you keep the same mission?
Is it possible for PMI to become a sustainable enterprise, or are all
businesses in the tobacco industry doomed with regard to pursuing stage 4
sustainability?
Transformative business sustainability
• The concept of transformative business sustainability consists of:
– a multi-layer model of units (i.e. different businesses or other
stakeholders); and
– a network of e-footprint sources in business applying an EE
approach.
Transformative business sustainability

A Multi Layer Model

• When each unit’s e-footprint is made visible and accounted for in the
demand and supply chain network, we propose that business
sustainability converts into a multi-layer model as shown in Figure in
the next slide. Each layer represents a unit in the network of e-footprint
sources.
• Each unit should strive for a zero-sum e-footprint cycle in order to
minimise and, in extension, optimise the total e-footprint of the
demand and supply chain network.
Transformative business sustainability

A Network of e-footprint sources

• Each unit must be in a position to minimise and optimise its e-footprint

on Earth’s life- and eco-systems. However, in order to achieve
transformative business sustainability it is crucial to create routines and
processes within each unit.
• This may create a ripple:
– in the network of e-footprint sources;
– on business sustainability policies; and
– practices in procurement, production, distribution, the market and
among consumers.
• The essence is that Earth is the ultimate unit or stakeholder of origin
and destination of the network of e-footprint sources
Transformative business sustainability

A Network of e-footprint sources

• Each unit must be in a position to minimise and optimise its e-footprint

on Earth’s life- and eco-systems. However, in order to achieve
transformative business sustainability it is crucial to create routines and
processes within each unit.
• This may create a ripple:
– in the network of e-footprint sources;
– on business sustainability policies; and
– practices in procurement, production, distribution, the market and
among consumers.
• The essence is that Earth is the ultimate unit or stakeholder of origin
and destination of the network of e-footprint sources
References
Textbook:
Francisco Szekely and Zahir Dosa, Beyond The Triple Bottom Line, 2017, 1 st
ed, MIT Press, ISBN 7980262035966

Others:
• https://www.unicef.org/indonesia/media/1626/file/Roadmap%20of%20
SDGs.pdf
• Indonesian’s Financial Authority Service Regulation – POJK 51/2017
• Jiazhe Sun, Shunan Wub,and Kaizhong Yang, “An ecosystemic
framework for business Sustainability” in Business Horizons (2018) 61,
59—72.
• https://online.hbs.edu/blog/post/business-sustainability-strategies
Assignment 3
• In a group of 2-3 students, please write a short memo (no more than
750 words) to convince the board of directors to start sustainability
reporting. In the memo, students must identify potentials challenges
and come up with practical solutions to convey that sustainability
reporting is feasible and beneficial for the company in the long-run.
Thank You