Project Sustainable Design

Management (revised 10 24 2012)

Systems approach to corporate
sustainability
A general management framework

A za p a g i c , A . ( 2 0 0 3 )
Tr a n s I C h e m E , Vo l 8 1 P a r t B , 3 0 3 - 3 1 6

Outline
Introduction
2. Corporate Sustainability Management System (CSMS)
1.

(1)
(2)
(3)
(4)
(5)

Sustainable Development Policy

Planning
Implementation
Communication
Review and Corrective Action

1. Introduction(1)
Industry must play a prominent role in creating a sustainable

future (Azapagic and Perdan 2000).

The challenge of sustainable development for any business is to

ensure that it contributes to a better quality of life today without

compromising the quality of life of future generations.
If industry is to respond to this challenge, it needs to demonstrate a

continuous improvement of its triple bottom line, i.e. economic,

social, and environmental performance, within new and evolving
governance systems.

Corporate sustainability

1. Introduction (2)
European Commission (EC) drew up policies and legislation t0

encourage corporate social responsibility (CSR) from polluter

pays legislation through producer responsibility policies to core
labor standards and social governance and span all industrial
sectors, from primary extraction to consumer products.

A number of business benefits of addressing sustainable

development concerns.

ex: cost savings; lower health and safety costs; lower labor costs and
innovative solutions; easy access to lenders, insurers, preferential loans
and insurance rates; best practice influence on regulation; companys
reputation; market advantage; ethical investors.
However, translating the benefits of sustainability into the usual

financial measures is not always easy or possible to quantify direct

financial benefits of corporate sustainability, and often, even if they
are obvious, they may have longer-than-usual pay-back times.
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1. Introduction (3)
There are no generic off-the-shelf management frameworks to

managing corporate sustainability.

Individual, usually large, companies or sectoral organizations are

developing their own, tailor-made systems, based on their needs.

There is a need to develop a general framework to facilitate

convergence and standardization of corporate sustainability

management approaches. ()
A framework would be applicable to enable understanding of the

key sustainability issues and actions needed, measure of

performance, and communicate with sustainability policies and
progress toward sustainability to relevant stakeholders.
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2. Corporate Sustainability Management System

(CSMS)

If a corporate sustainability strategy is to be successful, it must

emerge from and be embedded into the business vision and
strategy in an integrated way of economic, environmental and
social risks.

The CSMS consists of five stages:

1. Policy development
2. Planning
3. Implementation
4. Communication
5. Review and corrective action

General framework for CSMS

Stage 1: Sustainable Development Policy

Before a sustainability policy can be formulated and put into

practice, the following has to be carried out:

Demonstration of leadership and commitment to sustainability

()
Identification of threats and opportunities ()
Identification of stakeholders ()
Identification of sustainability issues ()

Demonstrating leadership and commitment

to sustainability

The CEO, management board and senior management team have

a critical role. Showing commitment to sustainability and how
the vision integrates economic, environmental and social
performance is part of that process.

This commitment should be explicitly stated in the sustainable

development policy by direct actions.

One of the ways would be to appoint a sustainability champion,

who would be responsible for the management and
implementation of the CSMS.

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Identification of threats and opportunities

Strategic opportunities and threats may include technical,

legislative, environmental, social, and other factors. All
potentially leading to financial threats or opportunities.

Key subjects for information

New and proposed legislation ()

Industry practices, standards, and future trends
()
Technical developments ()
Competitors strategies ()
Community interests and pressure-group activities
()

Opportunities for working with other companies within a sector

should be assessed. Companies within sectors work together may
achieve greater opportunities.
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Potential threats and opportunities (1)

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Potential threats and opportunities (2)

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Identification of stakeholders

The possible importance stakeholders place on sustainability concerns

and time-scales.
Deciding which aspects of sustainability a company should target.
A stakeholder analysis can be a useful way to identify areas of potential
conflict among stakeholder groups before they materialize.
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Identification of sustainability issues

Sustainability issues can be identified in a number of ways,

including consultations with stakeholders and using any findings

at the sectoral level. (
)
Carrying out a pilot-case study based on a representative business

activity or a part of business can also help in identifying the key

sustainability issues. ()
Economic issues
Environmental issues
Social issues

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Economic issues
Economic viability of business is at the heart of sustainable

development.
Two types of economic issues are relevant for business: micro-level

and macro-level concerns.

Micro-level issues are related directly to the economic performance

of a company and include the usual financial measures such as

sales, turnover, cash flow, profit and shareholder value.
Macro-economic issues link corporate performance with

considerations at the national and international levels.

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Environmental issues
Most companies are already aware of the main environmental

impacts associated with their activities.

For a better understanding of key environmental issues and more

effective solutions, it may be helpful to identify sources of

environmental problems by business area (e.g. production,
transport, procurement, products, etc.). ()
The impacts along the whole supply chain should be considered,

using the appropriate life cycle approaches (Azapagic 2000).

()

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Social issues
Human development and welfare

Education and training

Health and safety
Management competence

Equity

Wages and benefits

Equal opportunity and non-discrimination

Ethical considerations

Human rights
Cultural values
Intergenerational justice

These categories take into account both the interests of employees and

those of the wider communities and aim to make business more equitable
and ethical.
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Stage 2: Planning

The following has to be carried out:

Establishing the baseline ()

Sustainability SWOT analysis
Setting objectives and targets ()
Developing action plans ()
Identifying key personal and assigning responsibilities
()
Identifying and allocating resources ()

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Establishing the baseline (1)

Before a business can set sustainability objectives and targets, the

baseline must be first found out.

Measuring a baseline economic, environmental and social

performance should be based on the key sustainability issues

identified in the previous stage of the CSMS.
A set of sustainability indicators has to be developed for these

purposes

Consideration of the whole supply chain

Quantitative whenever possible

For some aspects of sustainability, qualitative descriptions may be

more appropriate.
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Establishing the baseline (2)

In many cases an issue translates directly into an associated indicator,

such as profit is both a sustainability issue and an indicator. ()

In some cases an issue will expressed by several indicator, such as air

emissions can include discharges of NOx, SOx and particles.

Based on a large number of performance criteria, it may be useful to use

integrated indicators. ()

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Sustainability SWOT analysis (1)

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Sustainability SWOT analysis (2)

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Setting objectives and targets

Objectives and targets may be set in terms of emission levels,

waste generation and energy usage per tonne of output, or perhaps

number of working hours lost due to accidents or illness.
Objectives are clear, concise and, wherever possible, expressed as

measurable targets.
Sustainability objectives complement the companys existing

business strategy.

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Developing action plans

Further step in preparation for the practical implementation of the

sustainability strategy.
Based on the set objectives and targets.
Taking into account the identified key sustainability issues and the

related business areas.

The action list should also include the responsibilities and the

time-scale for each activity.

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Identifying key personnel and assigning

responsibilities
The role of the board ()

The board could charge a director with line responsibility for the
companys sustainability policy and strategy.
It could enable an easier integration of the CSMS and bridge of the
existing functions and staff roles.

A Sustainability Management Team () could be

formed.
The responsibility for sustainability also needs to be linked to the

companys recognition and promotion systems.

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Identifying and allocating resources

Some financial resources will be required to set up and implement

the CSMS. This would mainly be indirect costs, though staff time
contributed in the various stages of CSMS.
Some direct costs will also be incurred for some projects. They

would be defined in the implementation stage.

It is important that these costs are identified and budgeted for, so

that the implementation of the CSMS is not hampered by the lack

of financial resources.

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Stage 3: Implementation (1)

This stage involves identifying sustainability priorities and aligning

them with business priorities.

A monitoring and reporting system is also established in this stage.
Normally a three-to-five-year plan with one-year milestones will be

needed.
The implementation of a sustainability strategy requires broad

consultation, training, awareness raising and motivating.

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Stage 3: Implementation (2)

The following has to be carried out:

Priority actions and alignment of business and sustainability

priorities
Identifying projects for integration of sustainability into
business practice
Identifying the appropriate tools
Measuring and monitoring
Data availability and collection
Awareness raising, training and motivating
Overcoming barriers

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Priority actions and alignment of business and

sustainability priorities
Key sustainability issues identified in the first stage of the CSMS

should be used to guide the identification of priority actions for

business.
Sustainability and business priorities would be naturally aligned.
A major challenge in developing and implementing a sustainability

strategy is to reconcile these different time-scales.

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Identifying projects for integration of sustainability

into business practice
The projects should target the hot spots identified for each

business area, e.g. production, transport, products, procurement,

employees, etc. ()
Good procurement practices can also assist companies in becoming

more sustainable.
A useful compilation of the case studies that describe specific

projects used by different companies to integrate sustainability into

business practice is provided by the WBCSD (2002).

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Identifying the appropriate tools

Two types of tool are distinguished to help implement a

sustainability strategy:
tools for achieving cultural change
tools for measuring and improving the level of sustainability
The three most useful tools for managing change are corporate

strategy, change management programmes and formal risk

management procedures.

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Measuring and monitoring

Measuring and monitoring is one way to ensure that sustainability

objectives and targets are being met.

Give a good indication of the direction in which the company is

going from sustainability.

Provide data for internal and external communication.
Sustainability indicators are used, such as GRI. ()

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Data availability and collection

A important issue in the implementation of the CSMS is data

availability and collection. ()

It is therefore necessary to establish which data are already

available and where in the company they can be obtained.

It is also important to have an idea of the effort that will be

required in collecting the data and carrying out sustainability

assessments.
To minimize the amount of effort for data collection, it may be

advantageous to develop a centralized data collection system with a

unified database format.
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Awareness raising, training and motivating

It is not an easily achievable task as the level of knowledge and

understanding of the concept of sustainability and what it

involves on the practical level is often limited.
Most employees enjoy being part of and contributing actively in

an organization that is committed to operating in a socially and

environmentally responsible manner.

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Overcoming barriers
Potential barriers

Available staff time and resources ()

Financial priorities, rendering everything else less important
()
Difficulties in expressing the benefits of sustainability in
monetary terms ()
Pay-back times longer than usual
Lack of awareness and understanding of the principles of
sustainable development and what can be done on the practical
level. ()

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Stage 4: Communication
Effective communication is essential for promoting the concept of

sustainable development.
Developing Meaningful internal and external reporting

procedures and outlining the companys sustainable development

objectives and comparing performance against them.
A sustainability reporting enables external communication.

()
Sustainability reporting can be used to provide information about

challenges and achievements to the stakeholders and help to

maintain transparency and to respond to emerging issues and
pressures.
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Stage 5: Review and Corrective Action

The review periods can vary and normally range from 3 months to

one year.
Identified and an appropriate corrective action followed to ensure

that the targets are achieved in the next planning period.

After the first CSMS cycle, a company may also wish to assess how

good its sustainability strategy is, by using the questionnaire.

()

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