Sample Assignment Achievement of Economic Sustainability
A biggest challenge for the companies in today’s world is economic sustainability. Huge companies are working for the achievement of economic sustainability in this highly competitive world. The social and environment sustainability must be achieved to achieve economic sustainability. The challenges faced by the organizations for the achievement of sustainable growth are discussed in this part.
When someone starts the business, the person or a firm always wanted to survive for a long period of time. And continuing the same phenomenon in the long run with profits is sustainability. Under the concept of sustainability, scarce resources are used keeping in view the positive social and environmental consequences. Economic sustainability is correlated with social and environmental sustainability. The companies come across various barriers like financial short termism, resistance to change, failure to track expenses, recession, government regulation, social inequality and several other challenges for the achievement of economic sustainability. But along with the main aim of profits, companies should also aim at completing social and environmental responsibilities. Socially ethical and environmentally ethical approaches are the way to sustainable development. The different case studies will help in understanding the challenges and solutions for achievement of economic sustainability. Also the achievement of sustainability is more difficult in developing countries as compared to the developed countries.
Sustainability refers to the term where same phenomenon is continued for years using the scarce resources. Sustainability has its four subsystems namely economic, social and environmental and institutional (Spangenberg, 2005: 47).
2.1 Economic Sustainability
In narrow sense, economic sustainability is defined as utilization of scarce resources to keep business capable of surviving for years and yielding profits. The various policies are designed inside the organization to stay in the business and these policies have impact on both society and environment (Doane & MacGillivray, 2001: 3.1.2). In wider terms, economic sustainability of an economy allows its residents and society to prosper. The interests of the society and environment are also considered with better standard of living of the residents in the economy (the city of north Vancouver).
3.0 The Business of staying in Business
Economic sustainability can also be defined as “the business of staying in business”. Long term survival is the key to sustainability. It is the integral part of sustainable development (Rodrigues Regional Assembly, 2009: 208).
Diagram 1. Sustainable Development Areas
Source: Rodrigues Regional Assembly, Final SIDPR, July 2009.
The above mentioned approach is known as “triple bottom line” approach. When the business continuously makes profits, there is a greater probability of that business to sustain for a long period of time. The British Standard for Sustainable Development (BS 8900:2006) defines sustainable development as “An enduring, balanced approach to economic activity, environmental responsibility and social progress” (Pojasek, 2009).
3.1 Economic Sustainability Orientation
The companies which are more oriented towards the economic sustainability have greater competitive benefit and long term market success. But at the same time, social and ecological balance needs to be maintained by making the best possible use of available resources (Schmidt Saling & Reuter, 2004: 81)
Eco-efficiency can be achieved by environmental improvement during the product life cycle.
Eco-efficiency= Environmental performance throughout the entire product life cycle/Total cost of ownership
(Schmidt, Saling & Reuter, 2004a: 82)
Socio-efficiency can be achieved by improvement in standard of living, better work conditions of the workers, fair trade with other countries and various other factors during the product life cycle.
Socio-efficiency= Social benefit throughout the entire product life cycle/Total cost of ownership
(Schmidt, Saling & Reuter, 2004b: 82)
4.0 Economic Sustainability Strategy Making Process
The first step includes determination of organizational goals and objectives to achieve economic sustainability. Each and every goal should be designed keeping in view the socio-eco-efficiency. When the goals are designed, then the next step is to allocate the goals to different departments in a particular organization. All departments should work for the achievement of key objective. Then the action plan is formulated which details how the goals were to be achieved. Responsibilities are also assigned under the action plan. Finally, day to day work must be according to the action plan. The action plan specifies the timeframe within which the work has to be completed and the day to day work must be in accordance with the same (Wilson, Smith & Dunn, 2007: 14)
5.0 Implementing Economic sustainability through A-B-C-D Analysis (Natural Step)
Economic Sustainability is implemented through A-B-C-D Analysis which is described as under: Awareness Building-The strategies and policies are made clear to all the staff members and the common goal remains sustainability.
Baseline Mapping-The resources and the product cycle are checked for the impact on the society. Creating Vision and strategic plan-The vision of sustainable business is created from the current position and planning is done at each and every step to achieve the same.
Down to Action-At this step, the plan is converted to action by all the departments.
6.0 Barriers in Achieving Economic Sustainability
Strategy making process for implementation of economic sustainability is met with various difficulties. All these barriers and obstacles are described below:
6.1 Financial short-termism
The main barrier among the employees of the organizations to economic sustainability is the pressure of the short term financial results of the business. This lead the employees to focus more on short term rather than long term profits (UNEP News Centre, 2012).
6.2 Low awareness of business imperative
The things that contribute to the economic sustainability of a particular business are not familiar among the employees in an organization ( UNEP News Centre, 2012). Here comes the need to spend some money on training and development of the employees.
6.3 Resistance to change
The employees of the organization feel resistant to change, this creates difficulty to achieve the main goal of sustainability (wiseGEEK). Employees should be made well versant with new changes going to be implemented within the organization.
6.4 Failure in tracking expenses (wiseGEEK)
Sometimes, the failure to track expenses of the company leads to rising costs with lesser profits. In this case, company hires the consultants for tracking the expenses and cutting down the same from immediate effects with the main target of achieving sustainability in this highly competitive world. 6.5 Recession in the economy (WorldWatch Institute, 2012)
6.5 Recession in the economy (WorldWatch Institute, 2012)
Recession in the economy leads to the lesser demand of different products produced by different companies. With lesser demand, profits of the company are effected which in turn, effects sustainability. Long term recession is also not good for the health of the economy. This situation is actually beyond the control of entrepreneurs as this is the outer world phenomenon.
6.6 Government Regulations (Hoffman & Bazerman, 2006: 17)
The government regulations are designed keeping social and environmental considerations which are not in direct support to the sustainability of different businesses. And the corporate have main motive of sustainability rather than social and ecological balances.
6.7 Lesser social inclusion and social inequality (Sardina, 2011a)
The corporate can make profits in the short run by ignoring the social inclusion and inequality. But to sustain the business, the social inequality has to be reduced which act as a challenge for the corporates in the current world.
6.8 Lesser money spent on science and technology (Sardina, 2011b)
When less money is spent on the advancement of science and technology, then the probability of business to stay long becomes very less. There is a need for the organizations to become more aggressive towards science and technology in this highly competitive world.
Besides the above mentioned challenges, there are several other challenges too, which a company had to face like political instability, depleting scarce resources, trade relations with other countries and various other obstacles in the achievement of economic sustainability.
7.0 Ethics and Economic Sustainability
The firms cannot sustain for long in the market without ethics. The firms simply wanted to abide by the laws without paying due importance to ethical issues. This can cause irreparable damage to the image of the company. Ethics are embedded into social and environmental approaches to sustainable development. ‘Doing the right thing’ is very important for the organization from point of view of the society as well as environment (CIMA: 3).
8.0 Social issues and Economic Sustainability
Social issues include the relationship of corporate with the community that is within the organization and outside the organization also. The corporate should aim at maintaining health, safety, welfare of the employees, training and development of the employees, equal opportunity to all, respecting the employees, maintaining work-life balance and reducing accident rates to achieve economic sustainability (KIER: 4-6)
9.0 Environmental issues and Economic Sustainability
Environmental issues includes protection of flora and fauna and their habitats, use of scarce resources in a way that they would not deplete and available for use by the future generations, complying with the laws and a number of infinite factors for achieving economic sustainability (KIER: 2)
10.0 Case Studies
The concept of economic sustainability will be clearer from the following case studies
All the food and packaging of McDonald’s comes from sustainable sources. It includes health and safety of the employees of their suppliers and humane treatment of the animals in their supply chain. They ensure that their food and packaging is causing minimum impact on the environment. The Sustainable Supply Steering Committee of McDonald’s comprises 6 members (McDonald’s Best Practices). McDonald’s works not only for their economic sustainability but also for their suppliers. In 2007, McDonald’s worked for the improvement in working conditions in the farms from where it purchased only 1.5% of Florida tomatoes annually (Bilson, 2010). These are the reasons for flourishing McDonald’s from 1960s. One of the biggest challenges faced by McDonald’s is that they do not directly do business with many parts of their extensive supply chain. But to achieve sustainable supply vision, they make their supply system safer, efficient and reliable (McDonald’s Corporation, 2009: 29). The main goals of McDonald’s include sustainable supply chain, nutrition & well-being, environmental responsibility, employment experience and community (McDonald’s Corporation, 2009: 6-7).
10.2 Marks and Spencer
Marks and Spencer popularly known as M&S found that the sustainability issues had driven their sales in previous years. The company faced lots of challenges in attaining sustainability. One of the main challenge before M&S was to improve energy efficiency, recycling waste in stores, finding better ways to source wood and fish. But the commitments of the company helped to overcome the challenges and achieve economic sustainability (M&S, 2009: 1).
GSK has four key areas of focus
Diagram 2. GSK areas of focus
For sustainable business growth, GSK aims at improving the health of the people all around the world, protection of scarce natural resources, development of people and supporting communities and being open and honest for the work done by the company. The company faces the challenge of being highly regulated by government agencies for being a pharmaceutical company. GSK’s Approach to sustainability includes thinking differently about research and development to build Sustainability (Henderson).
11.0 Regulatory Policies and Sustainable development
Government designs regulatory policies which entrepreneurs complain that the frameworks impose constraints on innovation and competitiveness. These regulations should be more in favor of welfare and growth and should always be in public interest. With the design of new regulations, the work of entrepreneurs start for the necessary adjustments. Independent advisory bodies exist in Australia, Germany and United Kingdom. The United Kingdom’s Better Regulation Task Force in 1998, laid the principles of transparency, accountability, targeting, consistency and proportionality (OECD Draft Report, 2010: 19).
12.0 Importance of Economic Sustainability for Small Companies
It is very difficult for the companies to survive in this world with aim of profits only. The companies should aim at sustainability rather than survival. It is more difficult for small and medium sized industries to survive as they face challenges of barriers to entry, higher costs with lesser sales in the starting. With lesser profits, costing is effected which in turn affects spending on society and environment. But the companies can achieve sustainability if their environmental plan is according to the size of the business and the plan should be feasible (Miller J, 2010: 1).
13.0 Challenges for achieving sustainability development (Anonymous, 2010)
13.1 Challenges faced by Developing Countries
The developing countries are more focused towards economic growth. Developing countries are dependant on developed countries for their economic growth. The challenges faced are extreme poverty, rising population, depletion of scarce resources, greater foreign debt, epidemic diseases, greater political instability as compared to developed countries. All these factors effect the economic sustainability of different businesses.
13.2 Challenges faced by Developed Countries
The developed countries are more focused towards environmental sustainability. They have more advanced technology but lesser demand for the products as compared to the demand for the products in developing countries.
Concluding the whole discussion, it is very important for the companies to follow the path of economic sustainability. To sustain in the long run is not easy but also not impossible. The various types of companies come across the different types of challenges in achieving economic sustainability. Every company, whether it is a small company or a large company, wants economic sustainability, but overcoming the barriers becomes difficult for most of the companies. Also, if the business achieves social-eco efficiency, then the business is said to be successful. Doing the right thing is of great importance to the organizations. Public image is created for those companies only which are ethically sound. Otherwise, a company will not be able to survive in the long run. The government regulations for preventing environment must be in consideration with sustainability criterion. Efficient managers while devising strategies, should keep action plan in accordance with the sustainable development. The scarce resources were to be used by companies keeping in view the need of future generations. And the same scarce resources are available to future generations also.
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