By Sabari R. Prasanna and Zinaida Grabovskaia
Metropolia’s part-time lecturer Sabari R. Prasanna, who teaches Business students on supply chains, visited Master’s program in Industrial Management and raised awareness of social and environmental issues in supply chains. It was an important visit that created discussion on sustainability issues across the whole supply chain with supply chain managers and professional purchasers. Master’s students of Industrial Management program are full-time professionals who are involved in decision-making and selecting suppliers on a daily basis. As sustainability becomes an ever more important issue for businesses, students were interested to discuss the ways how sustainability can be increased thought the efforts of both, responsible business and responsible consumers (Prasanna, 2015).
What is sustainability and what it means for companies? A change to sustainable ways of doing business is a welcoming change, actively supported by legislation in many types of business sectors. Companies themselves also use sustainability as a competitive advantage. Energy companies, for example, use environmental benefits of alternative energy as an argument for being more attractive than, for example, fuel-based energy. Railways argue that they are more sustainable than road transportation since they create much less environmental pressures, and so on.
Yet, companies still have to ‘sell’ this expensive change of becoming more sustainable to their shareholders. The old logic of ‘increase revenues – decrease costs’ is still very much prevalent in many businesses. Such businesses often argue for ‘reducing pollution by 10%’ rather than asking themselves How can we stop polluting? This logic of small steps is very much ingrained in public opinions as well, promoted by lobbyist and some politicians. In practice, to become more sustainable, companies need first to convince their shareholders that such a change is needed. Further on this road, the idea of running sustainable business practices should also win over priorities of financial profits (Epstein & Roy, 2001).
As a result, the companies that wish to become more socially responsible, environmentally friendly and overall more sustainable, still need to make a lot of efforts to promote sustainability to their own shareholders. However, the stakeholders in doing business sustainably create a much wider community than the shareholders of any company. In case of an environmental disaster, or a human right violation, it is a much wider community that is affected, not just the immediate shareholders of a business. Thus, to influence shareholders, it is necessity to make first of all the stakeholders (i.e. a wider community) more interested in sustainability. This is a very powerful group that votes with their money, and can simply boycott an ugly business by refusing to buy from them. Nowadays, there are many examples of such consumer voice.
As consumers, we have a huge power. However, what we know as consumers is yet very little, and – regrettably – there is often little interest in sustainability. As a result, consumers may not know that there are sometimes ugly things happening at the front end of the supply chain. There is a shocking example of cocoa firms kidnapping children to work as forced child labor in Ivory Cost. There is a film in Youtube about it. We all consume chocolate, but few know how cocoa suppliers commit horrible crimes in pursuit of reducing costs. Another example is production of palm oil that has led to massive deforestation in Malaysia and Indonesia, leading to rapid reduction in the Orangutans population due to disappearing rain forests. These are examples of violations done in pursuit of increasing shareholders value by lowering costs, and show what may happen, if no constrains are put to such practices.
Here, legislators can lead the change by demanding the companies to become accountable for sustainability (as done, for example, in Sweden). With support from legislators, the new way for a business to look at sustainability is from the perspective of the triple bottom line (TBL) – stressing social, economic, and environmental elements. It means that not just profits, sales and products should be important, but also wider values beyond that – social and environmental perspectives, as well as wider economic and human rights issues.
Still, there are many questions around sustainability, and managers are often confused – is there a moral mandate to practice sustainable ways of doing business? Who will pay for it? Is there any business opportunity in sustainability? Sabari believes that this last question is the most important one. If a business can create value from sustainability, then it raises sustainability to a totally different level of interest from business and stimulates innovating sustainable practices.
To support responsible business on this way, there exist many encouraging examples from forerunning companies (such as Fazer Group). There are also examples of change in conceptual understanding of running business sustainably by big names in business science (such as Prof. Philip Kotler). Kotler was the father of the famous ‘4Ps’ – a marketing mix that drives profitability: Product, Price, Place, and Promotion. In one of his recent editorials in ‘Journal of Marketing’, Kotler indicates sustainability as a fifth critical element in addition to his well-known 4Ps, and argues for sustainability as a vital issue for any business (Kotler, 2011). Universities are also very active in promoting responsible buying and even coined a new term, pro-sumerism. One example is a podcast about research by Georgetown University, USA (Deloitte Insights, 2018).
A lot of positive things are currently happening across many sectors. Holland abolishes the use of gas cars (only hybrids and electric cars will stay), companies in Norway start cleaning the ocean, etc. Policy makers together with general public come up with better practices to save the future. The only possible answer is to re-think the old paradigm of ‘increase revenue – reduce costs’. To make it happen, the pressure should come out from the public, so that it will make business to change the old harmful practices. As managers, in everyday decision making as well as in personal life, we all need to exercise our influence toward more sustainable ways of doing business, and through becoming more sustainable in our decisions as consumers.
Sabari R. Prasanna is a Doctoral candidate at Hanken School of Economics specializing in humanitarian supply chain management, who is finalizing his PhD studies and is a part-time teacher in Metropolia’s Business school, Myyrmäki campus. He used to be an Assistant Professor in BIM, India. Sabari is currently interested in supply chain sustainability and making it attractive for business.
Zinaida Grabovskaia (PhL) is senior lecturer and head of master’s program in Industrial Management at Metropolia UAS. The program specializes in service business especially for big industrial players.
Epstein, M. J., & Roy, M. J. (2001). Sustainability in Action: Identifying and Measuring the Key Performance Drivers. Long range planning, 34(5), 585-604.
Deloitte Insights (2018). Turning Consumers into Prosumers for Ethical Shopping: Interview with Neeru Paharia: [Podcast]. Available from: https://www2.deloitte.com/insights/us/en/multimedia/podcasts/nudgeapalooza-2-behavioral-economics-insights.html
Kotler, P. (2011). Reinventing Marketing to Manage the Environmental Imperative. Journal of Marketing, 75(4), 132-135.
Prasanna, R. S. (2015). Management Ingredients to Embrace the New Paradigm: Green. European Business Review, 27(3), 318-333.