Sustainability in Business

Sustainability (in terms of business sustainability)

The importance of sustainability has been enhanced in the King IV report on corporate governance. Although application of King IV is voluntary for most organizations, it is a requirement for companies listed on the Johannesburg Stock Exchange.

The King IV report addresses sustainability as follows:

“Sustainable development, understood as ‘development that meets the needs of the present without compromising the ability of future generations to meet their needs’, is a primary ethical and economic imperative. It is a fitting response to the organization being an integral part of society, its status as a corporate citizen and its stakeholders’ need, interests and expectations.

The survival and success of organizations are intertwined with, and related to, three interdependent sub-systems: the triple context of economy, society and the natural environment. In the South African setting, addressing inequality in society through economic transformation is a good example of a challenge that affects all three these sub-systems in which the organization operates.

Organizations and their leadership need to intentionally interact with, and respond to, the challenges and opportunities presented by the dynamic system of the  triple context in which it operates and the capitals that the organization uses and affects, with the aim to achieve the creation of value over time. Such an integrated approach is the hallmark of sustainable development and it is for this reason that the organization’s core purpose, its risks and opportunities, strategy, business model performance and sustainability are presented in King IV as inseparable elements of the value creation process.”

King IV requires that organizations report at least on an annual basis on sustainability as a basis for good corporate governance (amongst other issues to be reported on as well, although there is a clear link to sustainability in all cases). The requirements of King IV includes that strategic planning must include all the spheres of sustainability (termed financial sustainability, environmental sustainability and social sustainability). Reporting will focus on the progress toward achievement of the strategic goals of the organization, as well as the current performance regarding sustainability.

Many people worldwide are aware of the fact that the success of organizations, at present and into the future, depends on the concept of sustainability. The wide definition of sustainability is:

“The ability to continue a defined behaviour indefinitely”.

As seen in the King Report, sustainability is based on 3 pillars:

It can also be shown as follows:

Thus we have 3 sub-definitions:

Environmental sustainability: The ability to maintain rates of renewable resource harvest, pollution creation and non-renewable resource depletion that can be continued indefinitely.

Economic sustainability: The ability to support a defined level of economic production indefinitely.

Social sustainability: The ability of a social system, such as a country, to function at a defined level of social well-being indefinitely.

The 3 sub-definitions form the 3 pillars of sustainability. Many organizations and authorities world-wide view the 3 pillars as separate entities, and manage them as such. They are, however, interrelated. For example, as the great recession of 2008 has demonstrated, weakness in the other pillars can directly weaken the environmental pillar. Because of economic impact, governments are cutting back or postponing stricter environmental legislation or investment, because of economic considerations. If the recession evolves into a full scale depression, we will see that feeding the population will become a much larger priority than saving the environment.

The social pillar is also important. If a war breaks out, environmental sustainability will have zero priority. If a nation lives in dire poverty, the environment is pillaged with little or no regard for the future.

The models depicting the 3 pillars are simplistic and give equal priority to each system. This is, however, not correct. The biosphere that we live in should be the largest. Inside the biosphere we find the human system, which consists of 2 subsystems, social and economic.

When groups of people agree to form a government, they form a social contract to increase their general welfare. Looking at the overall system in this way makes it clear that environmental sustainability must be the highest priority, because the carrying capacity of the environment determines the common good delivered by the social system and the economic system.

How does this relate to SHEQ management in organizations? Does ISO in any way consider sustainability in its broader context? The three basic management system standards, ISO 14001:2015, ISO 9001:2015 and ISO 45001:2018, actually addresses these three areas of sustainability.

The first of these standards to appear was ISO 14001:2015, the standard for environmental management systems. In section 0.1, Background, it states: “Achieving a balance between the environment, society and the economy it is essential to meet the needs of the present without compromising the ability of future generations to meet their needs. Sustainable development as a goal is achieved by balancing the three pillars of sustainability.”

ISO 9001:2015, the standard for quality management systems, which focuses heavily on the financial performance of the organization, which appeared a week later, in the same section states: “The adoption of a quality management system is a strategic decision for an organization that can help to improve its overall performance and provide a sound basis for sustainable development initiatives.

Unfortunately, ISO 45001:2018 for health and safety management systems is quiet about sustainability. But if we look a bit further, at SA 8000:2014, the international standard on social accountability, we see that its requirements for health and safety are significantly more than for the other sections. And some of the other section requirements are in line with labour law requirements, which we have to comply with in terms of the requirements of the standards. I think it is safe to assume that ISO 45001 is addressing social aspects, at least partially. It is also not uncommon to see that organizations place the labour law acts and regulations requirements with the health and safety management system. (SA 8000 can be downloaded free of charge from the web)

Considering the above, we can draw the following diagram:

It is also wise to apply other standards that are available as well. I have mentioned SA 8000:2014, which is a management system standard. It has been issued by Social Accountability International. Other standards that could contribute to sustainability include (but is not at all limited to!):

·         Financial management (Sarbanes-Oxley Section 404 / King IV)

·         Sustainability development (BS 8900)

·         Business continuity (ISO 27001)

·         Information technology service management (ISO 20000)

I hope that this article gives a bit of insight into sustainability, and how it applies to the ISO standards.

Please visit our website at www.sheqmanagementsystem.co.za.

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