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Build sustainable, competitive firms

RESPONSIBLE investing and corporate sustainability are beginning to be an imperative for competitive business in emerging economies.

Rodney Ndamba

Global investors are considering investing in sustainable companies as part of adhering to responsible investing values.

To date, the United Nations has been on the front in promoting responsible and sustainable investing under the United Nations Principles of Responsible Investing (UNPRI) while the United Nations Global Compact (UNGC) has been driving principles on sustainable business leadership for corporate sustainability.

However, questions can be asked on how Zimbabwe has been doing when it comes to responsible investing and corporate sustainability values, and what does it take to be a sustainable company.

This article attempts to outline responses to these issues while concluding with practical steps from case on how to build a sustainable company. Ultimately, sustainable companies are an outcome of responsible investing through investors seeking sustainable returns by influencing companies towards corporate sustainability.

According to the University of Cambridge’s Institute for Sustainability Leadership (2014), “Responsible investing is an approach to investment that explicitly acknowledges the relevance of the investor of environmental, social and governance factors, and of the long-term health and stability of the market as whole.

It recognises that the generation of long-term sustainable returns is dependent on stable, well-functioning and well-governed social, environmental and economic systems” in a company an investor may invest.

As such, developing sustainable and competitive companies in Zimbabwe is an imperative if corporate and national competitiveness is to be achieved.

In terms of responsible investing in Zimbabwe, this is an area that institutional and individual investors are still to embrace unlike South Africa which has its Code on Responsible Investing in South Africa (Crisa).

To date, this code has helped shape the business and corporate culture towards corporate sustainability. For a better understanding, corporate sustainability is defined by the UN-Global Compact as a “company’s delivery of long-term value in financial, environmental, social and ethical terms”.

While corporate sustainability is subject that is still to enter corporate leadership in Zimbabwe, it is a fundamental for any business that is geared for long-term success and competitiveness. Demonstration for corporate sustainability through sustainability report has so far received lukewarm reception.

For companies around the world that have achieved corporate sustainability, they have always been associated with their application of the Global Reporting Initiatives (GRI) Sustainability Reporting Guidelines as a business model.

For those who followed proceedings at the 2015 Davos conference in Switzerland, you notice that companies in Singapore were among the top 10 Global Corporate Sustainability companies.

This could be attributed to the drive by Singapore Stock Exchange (SGX) to demand companies to demonstrate sustainable business practices through sustainability reporting. SGX is moving to make sustainability reporting mandatory for their companies alongside countries like India.

The UN-Global Compact has outlined principles for corporate sustainability which takes Principled Business (1) that observed human rights, labour rights, environmental responsibility and guard against corruption; will of Strengthening Society (2) through actions and collaboration in contributing to sustainable development.

Further, it takes Leadership Commitment (3) that adheres to sustainability principles and commit to Reporting Progress (4) on transparency of business practices through sustainability reporting.

Lastly, companies will need to consider Local Action (5) by viewing sustainability practices through a local lens because it is through the local operating environment where impacts and opportunities are derived.

An honest application of these principles, could potentially address competitiveness issues that are bedevilling our local companies in Zimbabwe.

To demonstrate the practical approach, a case of Marks and Spencer (UK) is shared from their experience.

Mike Barry, head of Sustainable Business (M&S) shared 10 steps of embedding sustainability in the Business Green magazine (2010), which are customised in this article.

Key to building sustainable and competitive companies is embedding sustainability (economic, environmental, social and governance) which involves the interconnectedness of an organisation’s decisions in the three spheres of sustainability as defined in a framework by Jeffry Unerman of Manchester Business School (Hopwood et al, 2010), which includes negative and positive impacts on the environment, society and economic activities.

To begin with, a company needs a “vision” (1) to improve from its current business practices by embedding environmental, social, and governance. A vision for sustainability should be considered with an ultimate goal to retain customers, suppliers and staff while attracting responsible investors.

Business strategist gurus like Michael Porter have illustrated that corporate sustainability should be part of the overall strategy for gaining competitive advantage.

However, realising the vision for a sustainable company takes good “leadership” (2) with a vision to align business strategies with sustainability ambitions. In Zimbabwe, it now calls for paradigm shift among business leadership development towards sustainability.
With a strong leadership commitment for corporate sustainability, a “plan” (3) would be necessary to guide how the whole strategy will be implemented, measured and responsibilities distributed.

A plan will enable a heuristic approach that allows finding opportunities and setting priorities in sustainability (Stoner et al, 2008) while allowing sustainable decision making processes.

To attain good results from the plan, “individual accountability” (4) will be key as the process of embedding sustainability cannot be achieved single-handedly.

The whole process requires everyone within the company to be involved. According to Accounting for Sustainability (Prince Charles of Wales Project)’s Sustainability Decision-Making Model, there is need to consider your stakeholders.

This means that you will need to consider an inside-outside strategy (Covey, 2004) to drive a paradigm shift. In assessing accountability and performance in all business angles, an approach such as Kaplan and Norton’s Balance Scorecard (BSC) can be useful.

A distinctive fundamental in sustainability is that it is an ongoing process that requires continued “innovation” (5). The company will need to come out with unique products and services that are environmentally friendly and meeting expectations of stakeholders.

Innovation is something difficult to prove attaining unless your customers confirm it. As such, the company will need to “interact differently with your stakeholders” (6) so as to reflect an effective stakeholder capital management. Once you begin to speak of sustainability and environmental responsibility to your stakeholders, they will begin to appreciate how they are part of your company. Therefore, there will be need to “work with your supply chain“ (7) to ensure that they also appreciate your values.

Delivering corporate sustainability cannot be achieved without some form of “partnership” (8). Stakeholders play a critical role in achieving sustainability.

You will need to partner with your customers, suppliers and investors etc. Some organisations such as The Institute for Sustainability Africa (Insaf) have played a role in developing capacity of companies towards corporate sustainability through Sustainability Reporting Training Programmes.

Through its experience so far, The Institute for Sustainability in Zimbabwe was licenced to be a GRI Certified Training Partner in Sub-Saharan Africa, working to support various companies in the region toward corporate sustainability.

As companies begin to be confident in developing their sustainable business practices, they will need to compete or collaborate (9) with others so as to identify areas for improvement.

The overall strategy of competing or collaborating is to perfect any loose ends in your practices. Ideally, the quote from General Charles de Gaulle, a French Army General which says “aim for the top, It is less crowded there” will matter at this stage. Participating in some form of competition provides a basis for evaluating performance.

Lastly, the journey to building a sustainable company takes more than leadership but “courage” (10) to convince staff, board of directors, shareholders and stakeholders that sustainability is actually good for the business.

Sometimes, achieving the vision for sustainability requires pushing harder to overcome some obstacles because “operating in an environmentally, socially and economically sustainable manner is one of the most urgent challenges organisations are faced with today” (Hopwood et al, 2010).

In fact, good leadership needs to see the goal of sustainability through to attain the benefits of reputational and stakeholder capital, cost reduction, brand name, and competitive advantages that attract investors interested in business success with long-term returns and success. Building a sustainable company is a process that take leadership commitment for differentiation towards competitiveness beyond borders.

Rodney Ndamba is founding head of the Institute for Sustainability Africa. These articles are coordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society, email kadenge.zes@gmail.com

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