The 3 Pillars of Corporate Sustainability

Corporate sustainability is an approach to conducting business that creates sustainable, long-term shareholder, employee, consumer, and societal value. It pursues responsible environmental, social, and economic (or governance) strategies and it’s become a buzzword in companies big and small.

Walmart Stores, Inc. (WMT), McDonald’s Corporation (MCD), and other large corporations have named sustainability as a key priority.

The three pillars of a corporate sustainability strategy include the environmental pillar, the social responsibility pillar, and the economic pillar. They’re referred to as pillars because they support sustainable goals.

Understanding Corporate Sustainability

Corporate sustainability practices typically fall under the umbrella of ESG: environment, social, and governance practices, the three pillars. Corporations implement ESG to reduce their environmental footprint or to accomplish other objectives that can benefit society. This relates to SRI or socially responsible investing from an investor’s point of view.

Sustainability is often defined as meeting the needs of the present without compromising the ability of future generations to meet theirs. A company implements sustainable practices by reducing its consumption of limited resources or finding alternative resources with fewer environmental consequences.

Sustainability’s three main pillars represent environmental concerns, socially responsible practices, and economic cooperation.

The Pillars by Other Names

The three pillars are also informally referred to as people, planet, purpose, and profits.

• People implies being aware of the impact of operations and products on employees, customers, and the community at large.
• Planet refers to protecting the world that supports us and improving the shape that it’s in if possible.
• Purpose relates to the reasons why a company operates as it does and whether the mission continues to make sense given three pillar priorities.
• Profit encourages companies to assess the feasibility of their direction, operations, and projects.

The Environmental Pillar

The environmental pillar often receives the most attention. Many companies are focused on reducing their carbon footprints, packaging waste, water usage, and other damage to the environment. These practices can have a positive financial impact in addition to helping the planet. Limiting the use of packaging materials can reduce spending and improve fuel efficiency.

Walmart keyed in on packaging through its zero-waste initiative. It pushed for less packaging throughout its supply chain and for more of that packaging to be sourced from recycled or reused materials.

One of the challenges with environmental issues is that a business’s impact isn’t always clearly discernible. It may not be fully accounted for if all externalities aren’t considered but there’s often dispute about the cost and impact of such items even if they are. This could mean that there are externalities that aren’t reflected in consumer prices.

The all-in costs of wastewater, carbon dioxide, land reclamation, and waste generally aren’t easy to calculate because companies aren’t always the ones on the hook for the waste they produce. The practice of benchmarking tries to quantify those externalities so that progress in reducing them can be tracked and reported in a meaningful way.

The Social Pillar

The social pillar ties to the concept of social license. A sustainable business should have the support and approval of its employees, stakeholders, and the community in which it operates. How such support is secured and maintained varies but it comes down to treating employees fairly and being a good neighbor and community member both locally and globally.

Businesses can refocus on retention and engagement strategies with their employees. These can include more responsive benefits such as better maternity and family benefits, flexible scheduling, and education and development opportunities.

Companies have come up with many ways to give back for community engagement, including fundraising, sponsorship, scholarships, and investment in local public projects.

A business needs to be aware of how its supply chain functions on a global social scale. Is child labor involved in manufacturing products? Are people being paid fairly? Is the work environment safe? Many large retailers have struggled with these issues in the face of public outrage over work-related tragedies that can reveal unaccounted-for risks such as the Bangladesh factory collapse in 2013.

The Economic Pillar

The economic pillar of sustainability is where most businesses feel they’re on firmer ground. A business must be profitable to be sustainable.

Profit can’t trump the other two pillars, however. Profit at any cost isn’t what the economic pillar is about. It relates to compliance, proper governance, and risk management. Most North American companies typically incorporate such activities but they’re not the global standard.

This pillar is sometimes called the governance pillar. It refers to boards of directors and management aligning with shareholders’ interests as well as those of the company’s community, value chains, and customers.

Investors may want to feel certain that a company uses accurate and transparent accounting methods and that stockholders are given an opportunity to vote on important issues. They may also want assurances that companies avoid conflicts of interest in their choice of board members, don’t use political contributions to obtain unduly favorable treatment and don’t engage in illegal practices.

The inclusion of the economic pillar and the acceptance of profit make it possible for corporations to consider and agree to sustainability strategies. The economic pillar provides a counterweight to extreme measures that corporations are sometimes pushed to adopt such as abandoning fossil fuels or chemical fertilizers instantly rather than in phases. 

The Impact of Sustainability

The main question for investors and executives is whether sustainability is an advantage for a company. It certainly can be when it’s properly implemented. Sustainability strategies have been borrowed from other successful business movements such as Kaizen, community engagement, the BHAG (Big Hairy Audacious Goal), and talent acquisition.

Sustainability provides a larger purpose and some new deliverables for companies to strive for. It can help them renew their commitments to basic goals such as efficiency, sustainable growth, and shareholder value. A sustainability strategy that’s publicly shared can deliver hard-to-quantify benefits such as public goodwill and a better reputation.

Sustainability represents an opportunity for some companies to organize diverse efforts under one umbrella concept and gain public credit for it. Sustainability means facing business practices that could ultimately hurt their operations for other companies. Sustainability and a public commitment to its essential business practices may grow to equal the importance of compliance for publicly traded companies.

How to Implement Corporate Sustainability

Corporate sustainability can be a worthwhile goal given the potential benefits for a company, its employees and customers, its shareholders, the greater community, and the planet.

The four Ps—people, planet, purpose, and profit—have become interchangeable with the three pillars. They may prove more useful when explaining sustainability because they break the pillars’ overarching categories down into more descriptive and meaningful watchwords.

The original three Ps of people, planet, and profit were created in the 1990s by corporate sustainability advocate John Elkington. They were a way to underscore the growing importance of a triple bottom line rather than the conventional, single bottom line of profit.

“Purpose” has been added to reflect the interest of a growing number of consumers in a company’s organizational purpose and the difference it desires to make in its community or the larger global community where social and environmental impacts are concerned. These general points can serve as a guide as you plan a corporate sustainability program or project.

• Become familiar with the fundamental principles of people, planet, purpose, and profit and prepare to incorporate them into your company culture.
• Assess the current state of your business needs, goals, and opportunities.
• Review business priorities and decide what sustainability goals are appropriate.
• Create a mission statement that aligns with sustainability goals to help underscore the direction you want your company to take.
• Be sure to get buy-in from top leadership and management.
• Invite feedback from stakeholders. Shareholders, employees, suppliers, other partners, customers, and even the greater community should understand the potential benefits of a more socially aware way of doing business.
• Establish strategies that will help you achieve your sustainability goals.
• Select a tracking method and the personnel who will manage it to measure change and results.
• Consider performance incentives for outcomes that relate to the four principles.

The Bottom Line

Sustainability encompasses the entire supply chain of a business. It requires accountability at the primary level and through the suppliers all the way to the retailers.

It could reconfigure some of the global supply lines that have developed based solely on low-cost production if producing something sustainably becomes a competitive edge for supplying multinational corporations and end-users. That scenario depends on how strongly corporations embrace sustainability, however, and whether it’s a true change of direction or just lip service.