Sustainability and Management

An International Perspective

Ülkü Yüksel, Kıymet Çalıyurt

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9780367605964
• eBook ISBN: 9781317048008
• Topic: Business
• Subtopic: Business General
• Index: Business

In the wake of the 1987 Brundtland Report, sustainable development has become key to the management systems within businesses, and a means by which companies can increase their long-term value. Being a 'sustainable company' increasingly means 'staying alive in business' and has become a necessity for all kinds of enterprises, from the micro-sized to global corporations. In more recent years, many companies, and indeed governments, have looked at sustainability as a means to combat the multiple challenges of environmental accidents, global warming, resource depletion, energy, poverty and pollution.

However, being sustainable or maintaining sustainability is not an easy task for a company's management function. It needs continuous support and engagement from the board, the executive management, staff and other stakeholders alike. Additionally, it brings extra costs to the company in terms of hiring trained staff, organising continuous training in the company, publishing sustainability reports and subscribing to a rating system. Sustainability must be nourished by a company's board as well as by all of its departments, such as accounting, marketing and human resources. By the same token, it is not enough for a company simply to declare itself a 'sustainable business' or rely on past measures and reputation; sustainability is an ongoing activity and one which has to be proved by periodically disclosing sustainability reports, according to international rating systems.

In Sustainability and Management: An International Perspective, K?ymet Çal?yurt and Ülkü Yüksel bring together international authors from a variety of specialisations to discuss the development, aspects, problems, roadmap, trends and disclosure systems for sustainability in management. The result is a lively, insightful exposition of the field.

Part I
Sustainability and management in Europe

1
The flawed logic of sustainable development

David Crowther and Shahla Seifi

1 Introduction

The logic of the economic system under which the world operates is predicated on an assumption that development is possible and that the pricing system mediates the acquisition of the additional resources required for that development. This is perfectly in accordance with the assumptions made by Brundtland and accepted ever since. Consequently governmental attention has been focused upon the operation of the pricing system with a desire to reduce transaction costs and the various rounds of GATT¹ /WTO² as a mechanism for reducing the transaction costs of international trading. Meanwhile environmentalists have been showing that the resources of the world are overused and usage is not sustainable at this level, and there is starting to be a general understanding of the meaning of resource depletion.

While this has been occupying the minds of people in the developed Western world, a number of countries have adopted a strategy of rapid growth and economic development. Principal among these have been the BRIC countries. These countries have access to a large proportion of the remaining natural resources of the world while also having large populations and therefore great scope for rapid economic growth. This development therefore puts a lot of pressure upon the world economic system and has the effect of bidding up the cost of resources and placing a limitation upon the possibility of development by increasing the cost of economic activity and diverting resources into the bidding process instead of into production. This has the effect of reducing the pace of development and placing tension on the world economic system.

Now let’s have a review of the details of remaining resources available in these countries. China is the largest country in the world as well as the fastest growing in terms of GDP – with a consequent demand for resources in terms of energy and raw materials. It has deposits of every one of the 150 minerals found so far in the natural world. The amount of proven deposits in the country has been made clear for 135 of them. Of these, more than 20 rank in the forefront of the world. Ranking first in the world, in proven deposits, are 12 minerals: tungsten, antimony, titanium, vanadium, zinc, rare earth, magne-site, pyrite, fluorite, barite, plaster stone, and graphite. Ranking second and third are six: tin, mercury, asbestos, talcum, coal, and molybdenum; and ranking fourth are five: nickel, lead, iron, manganese, and the platinum family. China ranks third in the world in the deposit of 45 important minerals. It is one of a few countries where mineral deposits are rich and varieties are fairly complete.

Brazil is also a rapidly developing country. It contains the Amazon jungle with therefore considerable access to both timber and to mineral resources such as quartz, diamonds, chromium, iron ore, phosphates, petroleum, mica, graphite, titanium, copper, gold, oil, bauxite, zinc, tin, and mercury.

The main natural resources of India are iron ore, bauxite, and copper ore. India is one of the major producers of iron in the world. Gold, silver, and diamonds make up a small part of other natural resources available in India. A major portion of the energy in India is generated from coal. It is estimated that India has around 120 billion tons of coal in reserve, enough to last for around 120 years. Huge reserves of petroleum have been found off the coast of Maharashtra and Gujarat. Additionally, electrical energy is generated by hydroelectric power, coal, and nuclear energy. Half of the hydroelectric power is generated by snowfield reservoirs high up in the Himalayas. Huge dams have also been built across many major rivers to produce electricity and water for irrigation.

Russia is the world’s largest mineral and energy supply and is known as an “energy superpower”, containing 22 per cent of the world’s oil, 16 per cent of the world’s coal, and 40 per cent of the world’s natural gas. It is also very well known for its trees, and has 20 per cent of the world’s timber and wood. The most common natural resources are iron ore, nickel, coal, gold, diamonds, furs, petroleum, zinc, aluminium, tin, lead, platinum, titanium, copper, tungsten phosphates, and mercury. It also has the world’s largest oil reserves, the second largest coal reserves, largest lead reserves, largest reserves of water in lakes, the largest diamond deposits, the second largest potassium reserves, and enormous fish reserves.

Not only do these four countries contain a significant proportion of the world’s reserves of raw materials but they are also rapidly developing countries with development fuelled by their raw materials. One effect of this is that the resources available to other countries in the developed world are constrained by this rising demand, with a number of possible consequences.

2 Sustainability in the present

The world is moving into a different era, an era in which it is recovering from a severe economic crisis while also grappling with the consequences of climate change, and therefore there are a number of issues which become more important for manufacturing companies. One of these is that of managing in a post–Hubbert’s Peak world (Kerr 1998), which requires ever more efficient use of energy. Efficient operations make for least cost of manufacture and this in itself is a factor in the development of sustainability (Waeyenbergh and Pintelon 2002). To address this problem requires a holistic approach which integrates corporate social responsibility (CSR) into all the operations of the company, including its production and maintenance activities. It also requires a different approach to risk management. It has implications not only for the products which are manufactured but also for how those products are produced, both at the level of the individual firm and at the levels of the national and global economies.

The question of sustainability has risen to prominence in recent times – not just in the business world or in the academic world but in popular consciousness. It seems that everyone is concerned with sustainability and that this has been brought about by a general acceptance of the existence of climate change and by a general recognition of the problems stemming from resources depletion. Indeed, many people can talk knowledgeably about their carbon footprint (Wiedman and Minx 2007) and about Hubbert’s Peak, and many businesses are making statements about their aim for carbon neutrality (Weidema et al. 2008).

An important component of production and of sustainability is that of risk management. This too provides an intersection with operational requirements, as minimizing exposure to risk makes a company both more socially responsible and more sustainable but also reduces cost in the longer term (Aras and Crowther 2008). Often, however, the methodologies for the evaluation of risk are deficient in their effectiveness of evaluating – particularly of environmental risk. In order to fully recognize and incorporate environmental costs and benefits into the investment analysis process, the starting point needs to be the identification of the types of costs and revenues which need to be incorporated into the evaluation process. Once these types of costs have been identified, then it becomes possible to quantify such costs and to incorporate qualitative data concerning those less tangible benefits which are not easily subject to quantification. The completion of an environmental audit will enhance the understanding of the processes involved and will make this easier. In considering environmental benefits, as distinct from financial benefits, it is important that an appropriate time horizon is selected which will enable those benefits to be recognized and accrued. This may imply a very different time horizon from one which is determined purely by the needs of financial analysis.

It will be apparent therefore that there is considerable synergetic relationship between operational procedures and CSR as many of the issues are shared. It should also be apparent that the minimization of the use of resources is central to this concern – both environmental resources and financial resources. Indeed, the way to minimize the use of financial resources is through the minimization of the use of environmental resources, and this is particularly apposite to any consideration of energy utilization. This will become more important in the future as energy costs continue to rise because of the increasing scarcity.

This scarcity increases the costs of operation, and a manufacturing plant tends to be energy-intensive, which concomitantly increases the cost of production. So an efficiently operating plant makes for an efficient and low-cost company. This makes sound financial sense but it also makes the company socially responsible because it is minimizing the use of environmental resources. Additionally, it is socially responsible because efficient operations also mean a minimization of pollution and waste.

3 The Brundtland Report

In 1983 the United Nations established the World Commission on Environment and Development (WCED) under the chairmanship of Gro Harlem Brundtland. It subsequently became known as the Brundtland Commission, and its report, “Our Common Future”, is typically known as the Brundtland Report. The commission was created to address a growing concern ‘about the accelerating deterioration of the human environment and natural resources and the consequences of that deterioration for economic and social development’. In establishing the commission, the UN General Assembly recognized that environmental problems were global in nature and determined that it was in the common interest of all nations to establish policies for sustainable development. The report highlighted the urgency of making progress toward economic development that could be sustained without depleting natural resources or harming the environment and thereby raised the profile of a concern for sustainability which had previously only been expressed by some NGOs. It was primarily concerned with securing global equity, and with redistributing resources towards poorer nations whilst encouraging their economic growth. The report suggested that equity, growth, and environmental maintenance – the Triple Bottom Line – are simultaneously possible and that each country is capable of achieving its full economic potential whilst at the same time enhancing its resource base. The report also recognized that achieving this equity and sustainable growth would require technological and social change. Our Common Future was published by Oxford University Press in 1987. The report deals primarily with sustainable development and the change of politics needed for achieving that....

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of contributors
• Foreword
• Acknowledgements
• Introduction: the need of sustainability in management
• PART I Sustainability and management in Europe
• PART II Sustainability and management in Asia
• PART III Sustainability and management in the Far East
• PART IV Sustainability and management in Australia, the USA and Brazil
• Index