Therefore, in taking day to day decisions, a business needs to provide a clear and consistent methodology for making decisions with consideration of the business’ strategic sustainability objectives.
Embedding sustainability in decision making helps management achieve a balance of both financial and non financial objectives. Leading businesses around the world that have integrated sustainability decision making tools in their business believe that the approach has helped management prioritise sustainability matters while building a corporate brand supported by financial successes.
One such tool is the Sustainability Decision-Making Model developed under the Accounting for Sustainability Project. This model provides a clear decision making framework for companies on a road to embedding sustainability with their business strategy.
As such, this article explores some of the practical elements of utilising a Sustainability Decision Making Model in three phases in Products/Service-oriented companies. Embarking on a road to sustainability requires commitment, decisiveness and leadership. A
commitment to sustainability can be seen by how a company makes its decisions. Major companies around the world that have achieved success have turned to consider sustainability impacts and opportunities in making business decisions. To achieve this, the Accounting for Sustainability Project (Hopwood et al, 2010) outlines the following fundamental phases:
Products/services range sustainability
This phase commands a clear understanding of a few steps that enable prioritising a product or service that needs improvement. A company will need to identify relevant environmental, economic and social issues in order to note significant sustainability issues. Typical issues that can be explored could relate to biodiversity conservation, salaries and working conditions, expenditure in local economy, contribution to tax/revenue, community health and safety, renewable energy and water use etc. A company will need to appreciate how these variables impact on the company’s sustainability objectives.
Furthermore, a company will need to proceed to understand and evaluate expectations of its stakeholders from its products and services. Therefore engaging customers, suppliers, regulators, shareholders, lenders, communities and others will be fundamental to gain an understanding of associated sustainability issues. Stakeholders tend to provide an early warning for any impending risks relating to a company’s products or services.
Having a clear understanding of sustainability issues and stakeholder expectations will help identify policies and practices that have implication on the sustainability of the company’s products and services. Such a review will assist management in identifying the company’s position on sustainability, performance and its improvement.
Overall, the review process helps identify key areas that a company may want to work with, suppliers, and the research necessary to improve current market sustainability practices. Further, the review results have potential for the organisation to understand its stakeholders’ expectations while strengthening its policies and management practices.
Analysing product sustainability
The process of assessing specific products or services requires a close look with particular attention to suppliers. Suppliers have the potential to damage a company’s brand if sustainability issues are not attended to, as they form part of a company’s value chain system. Therefore, it will be important to understand suppliers’ sustainability context in relation to environmental and social issues. Particular attention should be paid on how suppliers are managing sustainability impacts and how they ought to improve to match your expected sustainability products or services standards.
Once key issues have been identified, there will be need for an action plan for improvements in identified concerns with suppliers. For many companies, agreeing with suppliers on a sustainability rating system will be crucial to safeguarding the company’s products or services as well as brand name. However, improvement may also come at a cost. Therefore, it will be necessary that potential costs are identified and addressed. However, a progressive assessment has potential to strengthen relationships with suppliers.
Improving product performance
At this stage, the process involves integrating information obtained in earlier phases into the decision making process of the company. The integration process enhances delivering the organisation’s sustainability strategy and policies by allowing enriched information to be provided in sustainability decision making as a core principle. As such, products or services’ sustainability information can be incorporated in performance assessment. Once sustainability has been integrated within products and service profiles, future performance of suppliers, products or services will need to be continually monitored.
Finally, to successfully embed a sustainability decision making model in an organisation’s systems, successful companies such as Cadbury, Schweppes, Tesco and Sainsbury have shown that there is need for board and senior management commitment and a clear understanding of sustainability drivers of the company. Notwithstanding any challenges that may be faced, the company may need to integrate key sustainability issues with the company’s business strategy.
The implementation of a sustainability decision making model requires that it becomes a shared responsibility when staff has received the necessary training and capacity development. Continued performance appraisal will be integral for meeting targets and objectives. Companies like Novo, BT, AVIVA and others that have implemented sustainability decision making models in consideration of their suppliers, customers and investors, have marginally outperformed their industrial counterparts in both financial and non financial aspects.
Rodney Ndamba is an ACCA member and Vice Chair of the ACCA Zimbabwe Executive Network Panel. He can be contacted on: Ndamba.email@example.com or firstname.lastname@example.org. Views expressed in this article are those of the writer not ACCA.