News — Sustainability issues increasingly impact businesses, including higher costs, risks, and operational disruptions due to extreme weather and other climate change effects. Companies also face ethical concerns about human rights, inequality, pollution, and stakeholder demands for more responsible behavior. However, sustainable business is more achievable and financially rewarding than ever, with the potential for significant market opportunities and cost savings.
In her research, and , focuses on sustainable innovation. Zietsma mainly explores the individual, organizational, and collective efforts to make and resist significant, large-scale change in the context of sustainability and other social justice issues.
In this Q&A, Zietsma explores advice, research, and resources to implement authentic, successful, and sustainable business practices.
What factors make a sustainable business goal achievable, especially regarding voluntary governance?
In today’s polarized environment, our business engagement partners are telling us about three primary factors keeping them on track to achieve their sustainable business goals. First, as has always been true, if the business case for a sustainable goal is strong, it is much easier to win the support of internal and external stakeholders to continue their efforts. The “good” news is that the business case has never been easier to make. Second, many companies publicly set decarbonization goals and incorporated sustainability into their company purpose over the last few years. Many of those companies are continuing to adhere to those targets. Third, when businesses have strong exposure to markets that demand sustainability through regulation or culture, those firms tend to stick to their sustainability goals.
Many companies express that they must choose between financial security and environmentally sustainable practices. What barriers exist to implementing successful, sustainable practices?
This argument holds less water these days, especially if one takes a longer-term perspective than the next quarterly results. Renewable energy is mostly cheaper than fossil fuel energy. Conserving more energy and materials through product design and operations usually saves money. Climate and social risks are increasing dramatically, and they are being priced into both insurance (if it is available) and capital costs. Younger employees are more committed to companies that are more environmentally sustainable.
Despite these business case effects, barriers exist. Some activist shareholders, old-school managers, or other stakeholders still cling to the belief that firms must only be interested in the very short term, and they try to force firms to avoid sustainability investments. Other firms have pinned their hopes on carbon capture technology that might help them avoid operational change – that technology has not yet proven broadly viable.
Finally, the infrastructure needed for transformative change is often inadequate — especially the electricity grid. We need a public policy framework that supports infrastructure upgrades or, barring that, collective business — and non-profit-driven initiatives that allow us to overcome this major hurdle.
What advice do you have for leaders driving institutional change towards sustainability?
Work with others. While firms can act on many things individually, sustainability problems are often collective action problems. We all have to transition to new ways of operating at the same time. We can learn from each other in pre-competitive information sharing, and we can collaborate on important initiatives. Companies that do not figure this out will not survive. If most companies don’t figure this out, humanity will not survive. Leaders need to lengthen their time horizons and imagine better futures, with others, then work together to make them happen.
How can organizations ensure their sustainability initiatives are authentic and not greenwashing?
Organizations should first ensure their sustainability initiatives are net positive, vs. window dressing. The can help. Leaders should publicly commit to their sustainability initiatives to hold themselves accountable. They should involve middle managers and employees throughout the organization in implementation plans to ensure specific values, goals, and timelines are embedded in operations and culture. Ross School of Business and Erb Institute faculty member for this. They should embed these goals and timelines into measurement and reward systems and discuss them with their suppliers and business partners to involve them in the initiatives. They should ensure their corporate political strategy is consistent with their goals — see the for guidance. They should communicate their progress on sustainability initiatives in corporate communications, such as annual reports and investor calls. Ross and Erb Professor Tom Lyon is an internationally recognized expert on greenwashing – his has additional information.
How do you see sustainable business practices evolving over the next decade amid growing environmental, technological, and social challenges?
While political conditions around sustainability are difficult in the United States at the moment, environmental, technological, economic, and social drivers continue to push for more sustainable business/societal practices. We need to address climate change now to enable people to thrive. Most leading countries and many of the best minds in the world are taking action, and we are seeing some successes. While I would prefer a stronger policy framework in the United States and more emphasis globally on pricing business externalities to incentivize firms to act consistently with societal good, the move toward more sustainable business practices is unstoppable. Business is a key force for innovation and action, and we need to meet this challenge.
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