Principles of Business Sustainability Performance (Essay Sample)

Principles of Business Sustainability Performance
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Principles of Business Sustainability Performance
Introduction
The traditional view on business performance for a long time has only been seen in terms of meeting shareholders value. In order to succeed in achieving this objective, entrepreneurs must focus on taking appropriate actions that will enable the business improve its processes and ultimately maximise profits for shareholders. The focus when using this approach is on financial objectives of the business. However, the new concept of business sustainability requires businesses to look at performance in terms of financial objectives, social and environmental objectives and incorporate ongoing ethical and responsible systems in its entire processes
(Bansal & Mark, 2014, p.74). The new move is fast growing and currently, businesses are expected to incorporate sustainability in their financial reporting framework. Among the key factors fuelling this move is the global response to climate change, rapid depletion of the natural resources and the new wave whereby corporations are seen as agents of social, economic and environmental change in the society. This concept is guided by the nine principles of business sustainability; financial return, transparency, the value of products, employment practices, governance, economic development, business relationships, ethics and protections of the environment. However, for the sake of this paper we shall look at the first four ranked in order of priorities that is; financial return, transparency, the value of products and services and finally protection of the environment.
Why they are positioned and ranked in this way
Sustainability being the need to meet current desires and expectations without comprising the future is complex however the measure can be done through qualitative indicators based on the highlighted principles above. Financial return is a key component not only of sustainable development but a key measure of deliverable to all stakeholders. Focussing on profitability whether margins or in absolute sense is a right direction for any entity however sustainability demands that tactical plans and strategies must be in place to ensure growth in numbers as well qualitative spheres that incorporate all the stakeholders including the physical environment. Financial return being the core objective of any entity is central to all the other components of sustainability. Emphasis on transparency is equally important since it helps in the achievement of proper allocation and utilization of the entity’s resources in a sound manner that is beneficial to all the stakeholders (Bansal & Mark, 2014, p.28). According to Edgeman and Eskildsen (2013) stated that to achieve business transparency, the organisation will focus its energy on strategies and policies that instil sound corporate governance structures, proper internal control systems as well as reporting mechanism that will endear the entity to operate above board. Customers constantly ask questions that demand quality product and services. In fact, customers would more keen to know the source of the products, how they are made, the various components used, why the service is being offered in given way time and place. The answers to these questions require an all-inclusive disclosure and reporting mechanism that takes care of their interest. The demand for superior products and excellent services by customers will require that the company continuously apportion substantial level of financing to research and development in order to come up with better ways of production ,superior products and services that meet the needs of the ever-changing business environment that is today. The protection of the environment is important to the success of any business entity in ensuring sustainable growth and development. A Recent focus on clean and green energy by most firms in the global economy is factual evidence that environmental conservation is being championed more in ensuring the survival of most firms and in attaining sustainable development (Rennie, 2008, p.24). A firm’s physical environment consisting of people, employees and natural environment, government. All plays a key role in the ensuring the survival of the entity into the future. More firms have embraced corporate social responsibility as well as environment reporting in their financial statements as material disclosures because of their importance in promoting good corporate citizenship and image.
All in all, it’s imperative to note that the rankings of these four principles in that in order and the linkages between them are important. This is because the principals do not act in isolation but rather they complement each other in aiding the company to attain a sound sustainable development agenda. It’s vital to have sound economic return to achieve superior products and services through technological innovations, put strategies that ensure transparency in reporting to all stakeholders and maintain a responsible corporate responsibility strategy in the organisation. This is what defines the linkages between these components of sustainability in performance for any entity.
Key drivers for each
The key drivers of sustainability in performance are but not limited to competition for resources amongst several players and needs, the changing environmental and climatic conditions, the globalisation of the economy and communication and connectivity amongst others. Resources are generally scarce, wants, needs and players are many thus the scramble for the limited resources has made a lot of individuals and entities to devise ways and strategies to ensure flow of operations that will likely to proceed to the unforeseeable future (Schaltegger, Windolph & Hцrisch, 2014, p.146).The need for sound allocation of resources amongst competing needs by an entity and ensuring a delicate balance that will not jeopardise operation and returns is necessary. This driver fuels growth through the sustainable performance principles in that it ensures sound allocation and proper financial management that will in turn enhance superior quality and value of products and services offered to customers. The fact that resources are scarce is a good reason that proper planning, scheduling, allocation and reporting mechanisms must be adhered to at all times. The desire for transparency is further fuelled by this drive since all disclosures relating to utilisation of resources, and efficiency levels must be in place. Constant oversight through proper implementation of strong corporate governance structures in areas risk management, audit internal control structures and governance are core deliverables in this area. Further being a good corporate social responsible citizen that takes good care of the environment as well is far much motivated by this driver.
The desire to have a clean and a well preserved physical environment is a commitment that most entities must make. The increased toxic emissions from industries in the globe have caused a great change in the climate conditions all around the world. The quest for green lean and cheaper energy has set firms to more research on alternative energy sources that will not only help maintain the environment but reduce production costs significantly, This is; therefore, a strong driver of growth in financial returns, as well as environmental reporting, has been adopted by most entities. This incorporates aspects physical environment, corporate social responsibility, as well as the effects of the firm’s activities to the environment. These are key aspects of transparency, environmental protection as well the value of product and services to the customers (Edgeman & Eskildsen, 2013, p.173).
The world has become a global market. Entities these days depend on others, and even their operations are affected by factors and players outside their boundaries. Globalisation has brought even inter-sectoral competition. Opening up of markets and even access to capital is being improved through rapid globalisation. The principal of financial return, value of services and products are broadly enhanced through this value driver. With the open market, more sales can be generated and hence returns enhanced. Sound reporting leads to more transparency as investors are spread all throughout the globe due to globalisation thus their interest must be catered for at all times.
The impact upon the firm
According to Booth (1997) the impact of these key principals and the drivers on the performance of the firm are measured both in qualitative and quantitative fronts (p.17). The key aspects of qualitative measures are based on cost accounting, resource allocation and capacity utilization activities. The financial reporting of the financial positions including the value of the firm are best presented through financial statements such statement of financial position, income statement, statement of changes in shareholders’ equity, cash flow statements. The result of these sustainability performance principles is shown through indicators such as net income growth, return on assets, cash flow position, and the size of the balance sheet. The other qualitative aspect that must be carried on the financial report pertains to disclosures on the board composition and qualification, environmental reporting, corporate social responsibility, key ratios like P/e and Eps. These entire have a bearing on the direction on which is going.
Qualitative measures mainly are used for internal decision-making purposes. The aspects discussed here aid in resource allocation through competing needs, prioritization of needs and enhancement of performance effectiveness. C...