Corporate Sustainability and Corporate Social Responsibility – Do Companies Know the Difference?
I recently attended a marketing event where the speaker’s panel consisted of various company executives from the mining industry. In addition to their mining operations a majority of these companies had retail outlets. Since the manufacturing end of the business has a significant impact on the environment I asked what they were doing in terms of green marketing. They answered with how they were contributing to fighting AIDS in South Africa. While I applaud this effort, they failed to answer my question. Were they avoiding answering my question or were they confusing corporate social responsibility and corporate sustainability?
To see if there is difference between the two terms we have to first define what sustainability or sustainable development is. The “Daly Rules” of sustainability is defined, as renewable resources such as fish, soil and groundwater must be used no faster than the rate at which they can regenerate. Nonrenewable resources such as coal, oil and gas must be used no faster than renewable substitutes for them to be put in place and pollution and wastes must be emitted no faster than natural systems can absorb them, recycle them or render them harmless.
Thomas Dyllick and Kai Hockerts in Beyond the Business Case for Corporate Sustainability defines Corporate Sustainability as, “meeting the needs of a firm’s direct and indirect stakeholders (such as shareholders, employees, clients, pressure groups, communities, etc.) without comprising its ability to meet the needs of future stakeholders as well.” The Australian government defines Corporate Sustainability a little bit closer to the “Daly Rules.” They see corporate sustainability as, “encompassing strategies and practices that aim to meet the needs of the stakeholders today, while seeking to protect, support, and enhance the human and natural resources that will be needed in the future.”
Corporate Social Responsibility according to the World Business Council for Sustainable Development defines corporate social responsibility as, “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the work force and their families as well as a local community and society at large”. In Capitalism and Freedom Milton Friedman defines corporate social responsibility as. “There is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say engages in open and free competition without deception or fraud.” Neither of the corporate social responsibility definitions touches upon sustainable development, which is the ability to renew natural resources at a rate equal to its ability to regenerate.
Looking at the definitions above there is a difference between corporate responsibility and corporate sustainability. Corporate responsibility concentrates more on the non-financial societal activities that a company contributes to whereas corporate sustainability concentrates on both the impact of environmental factors on a company and the company’s impact on the environment. This was a point Michael E. Porter and Forrest L. Reinhart stated in their article A Strategic Approach to Climate, “Companies that persist in treating climate change solely as a corporate social responsibility issue, rather than a business problem will risk the greatest consequences.” Porter and Reinhart believe that businesses need to look both “inside out,” which they define as a company’s impact on climate and “outside in” on how climate regulatory change may affect the business environment in which the company competes. (October 2007 Harvard Business Review).
If we take a look at the mining companies that I discussed at the beginning of this article, there are several ways in which a business can take action from a corporate sustainability perspective. First, mining companies would have to take a look at their own mining operations. Their impact on mining the land, the fuel that they use in running the mining equipment, and how they will restore the land once they have exhausted the mines resources. From the retail store perspective it would have to take a look at product packaging, transportation of goods and services, and store operations. These are just a few of the considerations that this particular business would have to look at under its corporate sustainability efforts. As you can see, the company’s corporate sustainability efforts are very different from their corporate responsibility efforts of fighting AIDS in an area they currently mine in. Both efforts are important but each one impacts the businesses economic and strategic position differently.
Going forward, with stronger legislation being enacted on a businesses impact on the environment, it is strategically imperative that companies know the difference between corporate responsibility and corporate sustainability.