CSR versus Core-Business Sustainability

Corporate Social Responsibility and sustainability are being used by businesses interchangeably. While the government of India envisioned CSR to catalyse philanthropic effort among businesses, sustainability – or core-business sustainability – entails transforming a company’s business model to achieve sustainability outcomes.

Core business sustainability refers to the integration of the principles of sustainability into the business’s entire value chain, instead of operating as a separate engine driven by the organisation’s CSR effort.

Although global reporting and assessment frameworks like Carbon Disclosure Project (CDP) and Alliance for Water Stewardship (AWS) are gaining traction today, Indian businesses’ participation is still low. Lack of awareness is a key reason for this absence. For example, in CDP’s 2018 Global Water Report, out of a total of 2114 companies that responded to requests for data, only eight were Indian.

Cost considerations are a major deterrent to sustainability. Even though businesses are able to acknowledge the business case for sustainability, the cost implications and the often long gestation period between adopting sustainable practices and their impact on the bottomline discourage businesses from making these investments.

Why should companies invest in core-business sustainability?

1. Sustainability anticipate future risks:

Hundreds of executives at leading firms now allocate time to devise a fully funded, corporate sustainability strategy. Risks and opportunities create the pressure points that trigger Board Directors to shape and invest in sustainability strategies.

2. Lever for market differentiation:

In a global economy dependent on cross-border trade, complex supply chains, and diverse workforces spanning the globe, companies are increasingly confronted with environmental issues, such as climate change, water scarcity, and pollution, as well as social factors, including product safety and relationships with regulators and the communities in which they operate. In this context, ESG can directly impact a company’s competitive positioning. Therefore, managing environmental and social factors is simply part of sustaining a competitive advantage in today’s economy

3. Increases profitability:

Research shows that companies with high ESG ratings have a lower cost of debt and equity, and that sustainability initiatives can help improve financial performance while fostering public support.

Businesses with a global footprint demonstrate a multi-faceted approach to sustainability. In addition to fulfilling regulatory requirements, these businesses can be seen as working towards highly articulate problem statements. International businesses are said to have a stronger focus on sustainability due to “an overall higher capacity to develop more innovative solutions to survive and exhibit comparative advantage in complex situations,” according to the international publication Central Bank Review. These businesses also demonstrated a more cross-functional approach in addressing their sustainability issues such as Diversity and Inclusion.

Link between core-business sustainability and the SDGs

With rapidly shifting economic and environmental priorities, businesses across the world are witnessing disruptions in their business value chains. These disruptions can be spontaneous, as the recent COVID-19 pandemic, or they could be an outcome of the gradual environmental and social degeneration. In light of this shifting ecosystem, companies, both global and domestic, need to be well equipped with a sense of emerging trends that are grounded in ethical considerations, to be able to operate sustainably. SDGs present an all-encompassing framework to businesses that wish to traverse this path.

A 2018 global survey conducted by the World Business Council for Sustainable Development (WBCSD) revealed that 74% of the businesses felt that SDGs offer them the opportunity to focus their sustainability strategy better, followed by 66% who felt that they offered them an opportunity to innovate and provide business solutions to social problems. Integrating core-business sustainability could open economic opportunities worth up to $12 trillion and increase employment by up to 380 million jobs by 2030.