Organizations in every business and industry have operations that intertwine with environmental, social, and governance (ESG) concerns. Awareness of the importance of ESG has led business investors and executives to increasingly focus on these considerations, making them a key component in modern corporate leadership.
Nationwide, the corporate position on the “E” part of ESG – environmental concerns and corporate sustainability – has evolved over the years. Sustainable management once represented a minor factor in business operations. Now, it’s considered by some corporate leaders as equally significant as profits.
MBA graduates who earn an online Master of Business Administration degree reinforce their understanding of sustainable business practices, allowing them to provide critical leadership in this important and growing area.
Sustainable Business: The Emergence of ESG and the Triple Bottom Line
Financial firms now encourage more capital investment in business strategies and actions that incorporate corporate sustainability. Two factors drive this trend.
One is the majority of public acceptance, including business executives, that human consumption of fossil fuels substantially contributes to climate change. It’s also clear that government leaders cannot (or, in some cases, will not) do enough to solve the issues.
The other is that consumer expectations have changed, with more people than ever preferring to buy products and services from companies that incorporate sustainable practices into business operations. An example of this comes from a recent study from Deloitte that found that 64 percent of Gen Zers would pay more money for a sustainable product.
What Is ESG?
ESG covers the three main areas where businesses can take actions that improve a company’s “social license to operate,” benefiting a company’s bottom line while reducing the environmental impact and well-being of the communities within which it operates.
- Environmental. This covers sustainability issues, including reducing waste and lowering emissions in manufacturing, the supply chain, product development, and corporate facilities (known as Scope 1, 2, and 3 emissions).
- Social. This includes creating a diverse and inclusive workforce and achieving equitable access to resources for all people, especially those in underserved areas.
- Governance. This includes transparency in business operations (such as making the source of product materials available to the public), diversity on the boards that govern companies, and tying executive pay to success on environmental and social metrics instead of just short-term financial gains.
What Is the Triple Bottom Line?
The triple bottom line refers to profits, people, and the planet. It’s another way of considering the ideas proposed in ESG. It supports the concept that business success should not be based on profits alone but on how they operate in several critical non-financial areas.
- Waste reduction. Reducing hazardous wastes created through corporate activities. This can range from manufacturing waste to product packaging.
- Emissions reduction. Lowering the amount of carbon dioxide and other greenhouse gasses that contribute to global warming.
- Clean energy, increased efficiency. This touches every part of business operations. Examples include converting a commercial fleet to electric vehicles or reducing business travel for sales representatives.
The Business Case for Corporate Sustainability
In a recent report, McKenzie & Co. wrote that the “overwhelming weight of accumulated research” shows sustainability investments lead to higher equity returns. They also reduce downside risk and can lead to higher credit ratings.
Organizations that put sustainable business practices to work position themselves to win public trust and reduce the risk of running afoul of ever-changing regulatory measures. Companies that practice sustainability and focus on the triple bottom line also tend to attract the most talented and creative employees.
Focusing on sustainability has become a significant trend in business management. Companies like the multinational food and nutrition company ADM have emerged as sustainability leaders, promoting a more holistic approach to business. ADM’s chief sustainability officer Alison Taylor told Grist, “We not only have the reach, but we also have the capital and the leverage. We’re able to really make an impact on a micro-scale and on a larger scale.”
Jobs concentrating on sustainability and ESG are more widespread than ever, including C-suite positions like chief sustainability officer or industry ESG consultant. Entrepreneurs with knowledge of the best business sustainability practices increase their opportunities for success.
The Online MBA From NMU Global Campus
Earning an online MBA from NMU Global Campus prepares students to become business leaders and incorporate sustainable business strategies into the companies they help lead. The program’s curriculum allows professionals to develop ethical, creative, and collaborative skill sets.
Students gain strategic management, financial analysis, managerial accounting, and accounting research expertise. They can choose either a traditional MBA curriculum or an accounting concentration. Elective courses for MBA students explore quantitative topics (such as business structure and decision-making) and qualitative topics (such as managerial communications).
NMU Global Campus also offers online students the opportunity for industry internships and real-world collaborations with experienced professionals with expertise in guiding modern businesses.