The sustainability challenge of business in South Africa
Date
2018
Authors
Kramer, Diane
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
Since the 1800’s the world has seen rapid population growth and even faster
economic growth. Higher living standards are linked to improvements in life
expectancy for billions of people. However, these perceived benefits come at a
cost, where this progress highlights that humanities production and
consumption patterns are exceeding the planets supply limits; and therefore
unsustainable. (Nedbank, 2014).
This growing concern around the consumption and production behaviour of
humanity is described in the literature as a concern to find equilibrium between
the three pillars of sustainability; economic, social and environmental.
Satisfying the needs and wants of humanity is a daunting challenge in light of
population growth, depletion of irreplaceable resources, climate change,
poverty, the lack of energy, water and access to minimum basic services. Longterm
sustainability, shared value creation and an urgent response to climate
change are emerging as key imperatives to consider when providing for the
needs and wants of 7.4 billion people (and at an effective rate).
Over the past two decades, a shift in business strategy has emerged, moving
from that of a narrow view focusing on the individual corporate economic
mandate of growing profits for shareholders, to a broader view, which
encompasses social and environmental shared value creation. This new
approach is to create equilibrium between the three pillars of sustainability.
Numerous definitions and methodologies have emerged over the past 50 years
of how business is supposed to achieve this balance, which in itself has created
a divergent and slow response to long term holistic sustainability.
The research therefore sought to identify the response of the largest South
African companies to the sustainability challenges of climate change and the
warnings for assuring sustainability on the planet; where global warming is
slowed down to 2C within the next 15 years, whilst remaining competitive in the
market place.
From the review of literature, common key sustainable development (SD)
drivers and activities are identified to achieving sustainability. Some of the
common social drivers emerging from the literature are; fair and compliant
governance, leadership, innovation, corporate culture and its evolution into
corporate citizenship and individual behaviour change. Some of the common
environmental drivers emerging from the literature are climate change and
global warming, biodiversity protection, innovation and renewables, energy,
water, and waste.
The concern for business is to overcome the insufficient time remaining to
mitigate the impact of population growth and to find the global solutions to
create sustainability between people, profit and planet.
The literature highlights perceptions around upfront costs of SD activity, which
are argued as having either a positive or negative impact on company profits.
The research report therefore investigated if there is a relationship between SD
and economic performance and if that relationship is positive or negative.
The research therefore focused on understanding if the largest companies
operating in South Africa are succeeding in their attempt to mitigate negative
impacts of production and consumption behaviour, to reduce long-term costs,
understand risks and improve impact, whilst remaining competitive in the
market place.
This research report resulted in identifying a negative relationship between
corporate SD activity and Return of Net Assets (RONA). This could be
attributed to many factors or combinations of them, which are discussed in the
results section of the research. However, it is clear from this research that
relying on the scenario of ‘business as usual’ presents undeniable risks.
The most likely explanation for this negative relationship is that more time and
research is required to fully measure and understand the impacts of social and
environmental change. The true impact of corporate SD change has not yet had
enough time to yield a conclusive result and therefore its true value to creating
balance between the pillars of sustainability could be underestimated.
Therefore, the main recommendation from this research, even though the
results proved a negative relationship between economic performance and SD,
is that the academic view that business takes seriously the first mover
advantage by adopting sustainable development activities throughout their
value chain and to shift their view from narrow to shared-value, is supported.
Leaders must embrace sustainability as the most important imperative facing
the short and long-term outlook for their business and humanity. If not, the
results could be disastrous for current and future generations, ultimately
affecting the balance between all three pillars of sustainability and economic
profit long-term. Sustainable development should therefore be embraced into
the DNA of the business culture, as the main driver of economic performance
and not pushed aside as a compliance cost on the short-term bottom line.
In conclusion, shifting the business focus from a narrow view of shareholder
profitability to the broader view of shared-value creation is required. Fulfilling
this recommendation will help create a viable planet, able to provide the needs
and wants of current and future generations.
Description
MBA Thesis
Keywords
Business enterprises -- Environmental aspects -- South Africa. Industrial management -- Environmental aspects -- South Africa. Sustainable development -- South Africa