What is Corporate Sustainability? How to Achieve it in Business?

What is corporate sustainability

The world is currently facing various challenges related to sustainability, including climate change, resource depletion, and social inequality, etc. These issues impact how people live and profoundly affect the operations and development of numerous global businesses. Companies must incorporate sustainable business approaches and balance economic growth while addressing issues related to sustainable operations. These have become challenges for companies worldwide nowadays.

According to the findings from PwC’s 2023 Global Consumer Insights Pulse Survey, more than 75% of consumers are willing to pay a higher price for products due to factors like the use of eco-friendly materials and traceable product sources. This indicates a rapid increase in consumer awareness of ESG in recent years. In this trend, businesses looking to stand out in a competitive market must adopt proactive sustainability strategies. 

With a commitment to providing digital workflow services for businesses, Kdan integrates the concept of sustainable practices by combining services with paperless offices, exemplifying sustainable actions, and leading partners toward the goal of sustainable business practices. Building upon this foundation, this article will delve into the definition of corporate sustainability, offering strategic recommendations and relevant assessment methods.

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What is Corporate Sustainability? How is it Different from ESG?

Before delving into the discussion on corporate sustainability, it is essential to understand the concept of “sustainable development.” As early as 1987, the World Commission on Environment and Development, during the 42nd session of the United Nations General Assembly, introduced the definition of sustainable development through the “Our Common Future” report. It proposed that sustainable development occurs when human needs and desires are met while ensuring that future generations have the opportunity to develop. From this definition, it is clear that sustainable development aims to balance the development of various industries and human activities with the possibilities for the well-being of present and future generations.

Corporate sustainability, built upon the concept of sustainable development, focuses on the sustainable principles that businesses can adopt to operate profitably while also considering long-term sustainability. It emphasizes that enterprises can achieve this through corporate sustainability practices and strategies.

However, sustainable development and corporate sustainability are broad concepts that require concrete actions for implementation. The United Nations Global Compact introduced the term “ESG” (Environmental, Social, and Governance) in 2004, defining it as the key performance indicator for corporate sustainability. Through these three major aspects, businesses can plan specific corporate sustainability strategies and evaluate their performance, effectively implementing sustainable business practices.

In summary, “corporate sustainability” is a more abstract concept representing the integration of sustainable development principles into business operations. On the other hand, “ESG” is more specific, serving as practical indicators and dimensions for businesses to implement sustainable practices. For example, a company committed to “corporate sustainability” upholds this principle by addressing the E, S, and G aspects to achieve corporate sustainability goals.

Corporate-sustainability-vs-ESG
Source: Kdan

Why Should We Embrace Corporate Sustainability? What Are the Benefits?

Building Trust with Investors and Consumers

PwC released the “2023 Global Investor Survey” and “2023 Global Consumer Insights Pulse Survey” in 2023, revealing that a significant 75% of investors and consumers expressed that incorporating sustainable strategies into business operations and product manufacturing would greatly increase their likelihood of investment or consumption. It is evident that corporate sustainability is no longer merely a theoretical concept; when implemented effectively, it strengthens the brand image of companies and boosts confidence among investors and consumers. This strategy becomes a mutually beneficial approach for all three parties involved – consumers/investors, companies, and society.

Mitigating Operational Risks Stemming from Environmental Changes

Before climate change and global warming gained widespread attention, the primary focus for most investors was companies’ financial performance, with less emphasis on issues like community feedback and environmental protection. However, a report presented by Aon Insurance Brokers in July 2023 highlighted that economic losses due to natural disasters (earthquakes, storms, etc.) in the first half of 2023 amounted to approximately $194 billion (about NT$6.09 trillion). As research also indicates that Earth’s resources are insufficient to sustain current lifestyles, more and more companies realize that environmental protection and climate change are not mere rhetoric but factors that genuinely affect business operations. Consequently, companies are taking a wide range of proactive measures to address risks associated with natural disasters, such as altering operational strategies towards sustainability and adopting risk mitigation strategies like catastrophe insurance. These efforts aim to reduce operational risks that may arise from the climate crisis.

Enhancing International Competitiveness of Products

As discussions on corporate sustainability continue to gain momentum globally, governments are also beginning to focus on this issue. Over 130 countries worldwide have committed to achieving net-zero carbon emissions by 2050, with corresponding legal regulations being introduced. Many countries are prioritizing carbon emission reduction and control initiatives for transnational goods that generate substantial emissions during trade and product transportation. For instance, the European Union, among the world’s top four economies, introduced the “European Green Deal” and the notable “Carbon Border Adjustment Mechanism” (CBAM), effective from October 2023 with full implementation in 2026. CBAM mandates that importers must obtain CBAM certificates based on carbon emissions to introduce products into the EU market. For non-EU producers, providing evidence that the product’s carbon costs have been paid in non-EU countries offsets the CBAM certificate procurement cost. For multinational enterprises, adapting business strategies in response to corporate sustainability becomes a significant advantage. Compared to competitors not implementing sustainable practices, they stand to gain higher international competitiveness.

How Can Companies Achieve Corporate Sustainability? 

After understanding why companies need to embrace corporate sustainability, the focus shifts to how to achieve these sustainability objectives. As mentioned at the beginning of this article, corporate sustainability is a broad concept, and today, many people categorize it into the three dimensions of ESG (Environmental, Social, and Governance) for planning. The following outlines preliminary strategies for companies, including home care businesses,  to implement sustainable business practices, specifically addressing ESG indicators.

Environmental

The “Environmental” dimension involves implementing measures to protect the natural environment, such as greenhouse gas emissions control, reducing water usage, or committing to carbon-negative, etc. Specific strategies include:

a. Reducing the carbon footprint generated in the production processes of products and services

Manufacturers can shift to recyclable packaging materials and avoid excessive packaging. Both product manufacturers and service providers can digitize processes, embracing paperless offices through methods like online document delivery and electronic signatures.

b. Supporting and urging suppliers to use renewable energy as a basis for collaboration

Influential companies like Apple have advocated for a decarbonized global supply chain and mandated their suppliers to use clean, renewable energy. By leading in this manner, companies not only achieve internal carbon emission control but also influence partners to collectively work towards environmental sustainability, establishing a firm position in corporate sustainability.

Social

While the “Social” dimension may seem abstract, it encompasses any aspect related to “human activities.” Companies can initially categorize this dimension into two aspects: employees and societal issues, making improvements in each area.

a. Sustainability in human resources: create a “Happy Workplace”

Begin by examining their current employee welfare policies and comparing them to the “World’s Best Workplaces” lists assessed and published by major organizations. Companies can reference the efforts made by these enterprises in caring for their employees and evaluate their own situations for implementation. Common measures include regular salary adjustments, flexible working hours, remote work options, etc., allowing employees to balance work and life.

b. Addressing societal issues and providing timely support

Focus on prevalent societal concerns such as inadequate education resources for marginalized groups or challenges faced by women in the workplace and incorporate support for these issues into products, services, or internal policies to assist. For example, Deloitte has been actively involved in improving education and living conditions for rural children and launched the “WorldClass Initiative” in 2018, aiming to enhance the competitiveness of underprivileged groups through systematic education and training.

Governance

In terms of corporate governance, companies can proactively disclose their corporate sustainability plans, enhance information transparency and security, and strengthen organizational structures to increase trust among employees, investors, and customers.

a. Increasing awareness of information security to protect the company and consumers

In the current information-intensive society, companies should pay increased attention to information security by measures such as: regularly assessing internal employee and device preparedness for information security, conducting social engineering drills, and ensuring that employees are familiar with potential security threats.

b. Enhancing internal controls and thoroughly implementing them

Recognizing that many corporate scandals originate internally, investors often evaluate the internal organizational structure. Companies should ensure transparency in decision-making processes, strengthen internal control mechanisms, and establish anonymous reporting ways to detect and rectify events damaging to the company’s interests, such as bribery receipts, at an early stage.

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How to Evaluate Whether a Company Achieves Corporate Sustainability?

The PwC “2023 Global Investor Survey” also highlighted a significant concern among investors, with as many as 95% expressing skepticism about the sustainability performance presented in corporate sustainability reports, considering them to contain “unsubstantiated claims” and possibly indicative of “greenwashing.” In light of these concerns, accurately assessing whether a company has achieved corporate sustainability has become a critical focus for both companies and investors.

Follow upcoming sustainability regulations, prepare sustainability reports, and undergo third-party certification

Many professional investors believe that corporate sustainability disclosures lacking third-party professional certification have limited credibility, as companies may include misleading information to present a favorable sustainability image. Therefore, it is recommended that companies, when preparing sustainability reports, adhere to international sustainability standards and regulations, such as the EU Corporate Sustainability Reporting Directive (CSRD) and the sustainability disclosure standards issued by the International Sustainability Standards Board. This ensures that investors can cross-reference and gain confidence in the reports through professional certification.

Refer to corporate sustainability ratings

Given the diverse aspects of sustainability and varying definitions by each company, several authoritative institutions provide sustainability ratings. Examples include:

a. Morgan Stanley Capital International (MSCI):

MSCI rates approximately 8,500 global companies based on the ESG dimensions, ranging from the best AAA to the worst CCC.

b. FTSE Russell:

FTSE Russell rates around 7,200 global companies on a scale of 0-5 based on the ESG dimensions, with higher scores indicating better performance.

c. Sustainalytics:

Sustainalytics evaluates over 10,000 global companies, focusing on corporate governance, critical ESG issues, and unique issues companies may face. Scores are categorized into five risk levels: negligible, low, medium, high, and severe.

d. B Lab:

B Lab has certified over 7,000 B Corporations globally, assessing companies across five dimensions: governance, employee care, environmental friendliness, community care, and customer relationships. Companies scoring over 80 points can apply for certification as a B Corporation.

These institutions have developed comprehensive scoring systems they believe best represent corporate sustainability, providing investors with valuable reference points. As third-party assessment and certification entities, these rating systems are considered more trustworthy by investors. Companies can regularly review these scores to understand their own or other companies’ effectiveness and strategies in corporate sustainability, adjusting business decisions to align with the goals desired by numerous institutions and investors.

Corporate sustainability rating agencies
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Partnering with Kdan for a Sustainable Future

Kdan has been dedicated to sustainable initiatives by offering a range of digital workflow services, including PDF Reader, Kdan Office, and DottedSign. While assisting businesses in achieving their digital transformation goals, these services also contribute to reducing the environmental impact caused by paper waste and physical commuting. In terms of employee welfare, social issues, and corporate governance, We have implemented various policies to make a positive impact on the environment and society. Through these small actions, we hope to raise awareness among more businesses about different practices and possibilities in sustainable operations. Together with Kdan, let’s stride towards a sustainable future!

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