© Jakob Utgård. Last updated 16.8.2026

Introduction to sustainable business

The example of Posten Bring shows he central challenge of sustainable business: companies rarely operate as simply sustainable or unsustainable. They deliver essential services, employ thousands, and support local communities, while also emitting CO₂, firing people, and exposing workers to precarious conditions. How do we make sense of this mix of positive and negative impacts? The concept of sustainable development offers a starting point. The World Commission on Environment and Development (1987) defined it as meeting “the needs of the present without compromising the ability of future generations to meet their own needs.” Applied to business, this means a sustainable company contributes to society’s needs today without undermining the conditions that allow future generations to do the same. Needs can be defined as universal and objective conditions that must be met to avoid serious harm and enable people to participate meaningfully in society (Doyal & Gough 1991). Unlike wants or preferences, needs are not subjective or culturally relative

Companies can both satisfy needs and hinder the satisfaction of needs. Firms produce useful products and services, give meaning and salaries to their employees, direct profits to their owners, and support local communities and charities. Living standards have increased rapidly, with much higher incomes, longer life expectancy, and more opportunities for most people. Business has contributed to this through innovation and economic growth. At the same time, business pollutes, causes climate change, use lots of material resources, often accept harassment and inequality in the workplace, and are sometimes responsible for poor working conditions in the supply chain.

One perspective on business sustainability is to look at the total impact of a company, product, or activity on society and the environment. A company’s impact is the effect or changes in needs satisfaction becuase of the company’s operations. How does the company contribute positively, and negatively, to needs satisfaction? To summarize its impact, a company must look at all its positive and negative effects today and in the future. Rather than talking about sustainable or unsustainable companies, it is better to think of degrees of sustainability, from truly unsustainable to truly sustainable. The more positive and less negative impacts, the more sustainable. Figure 1-1 shows a simple model of this (inspired by Jørgensen & Pedersen 2018).

The amount of impact is difficult to judge. Some actions are so bad that they get a large weight, even if they only impact very few people, and who the action impacts should also be considered (some groups are worse off in the first place)

Markets Create Value, and Externalities

Markets are very effective at creating value. When a buyer and a seller agree on a trade, both are typically better off: the buyer gets something they value more than the price they paid, and the seller receives more value than if they were to not sell the product or service. This mutual benefit is the logic of market exchange. But many transactions also affect third parties who were not part of the trade or agreement and who bear costs or receive benefits they did not choose or pay for. In economics, these spillover effects are called externalities (Pigou 1920).

Negative externalities arise when a transaction imposes costs on others. A factory that discharges waste into a river transfers a real burden onto downstream communities who played no part in the exchange. The firm and its customers benefit; others pay. Because these costs do not appear in the firm’s accounts, it has no financial incentive to reduce them. This is the central economic reason why markets tend to produce unsustainable outcomes. When firms do not pay the full cost of their activities, they will generate more harm than is socially desirable. Greenhouse gas emissions are the most consequential contemporary example, the costs of climate change are distributed across the globe and across generations, while the benefits of the activities that produce them are captured by companies and their owners.

Externalities can also be positive. A firm that develops a new vaccine or a cleaner production technology creates benefits that spill over to others who did not contribute to the investment. Because the innovating firm captures only part of the value it creates, markets systematically underinvest in research, public health, and green technology.

Most of the major sustainability challenges in business, such as climate change, biodiversity loss, water scarcity, poor labour conditions in supply chains, are fundamentally problems of negative externalities. The sustainable business challenge is therefore in many ways to “internalize” externalities.

The Triple Bottom Line

Sustainability in business is thought to have three dimensions: the social, economic and environmental dimensions (Elkington 1997). This is also called the triple bottom line, which is the idea that firms have three types of results – social results and environmental results, in addition to the traditional financial results. Sustainable firms manage combine the three dimensions.

• The environmental dimension deals with managing environmental impacts including resource use and pollution.
• The social dimension deals with managing social justice – how does the company impact employees, customers, workers and other groups in society?
• The economic dimension deals with the company’s economic impact. To be sustainable the company needs to have a healthy financial situation with enough incomes to pay the costs and an acceptable return on invested capital.

Corporate social responsibility, ESG and sustainability

Sustainable business or business sustainability has related concepts in corporate social responsibility and ESG.

• Corporate social responsibility (CSR) has been defined as “‘the social responsibility of business encompasses the economic, legal, ethical, and discretionary [later referred to as philanthropic] expectations that society has of organizations at a given point in time” (Carroll 1979, p. 500)

• ESG stands for “environmental, social, governance” and is used mainly in finance as a term to measure sustainability performance of companies, to be used in investment decisions.

The UN sustainable development goals give direction for business               

In 2015, 17 world Sustainable Development Goals (SDGs) were created by all the United Nations members. These goals are intended to be reached by 2030, in collaboration between governments, civil-society organizations and businesses.  The aim was to contribute to “peace and prosperity for people and the planet”, and the SDGs acknowledge the interdependence between social and environmental sustainability.

Each goal has 8-12 targets attached to them. For instance,  SDG 14 (Life below water), have seven outcome targets: Reduce marine pollution, protect and restore ecosystems, reduce ocean acidification; sustainable fishing, conserve coastal and marine areas; end subsidies contributing to overfishing,  increase the economic benefits from sustainable use of marine resources, and three  means of implementation targets: To increase scientific knowledge, research and technology for ocean health; support small scale fishers; implement and enforce international sea law. Each target has one or more indicators used to measure whether the target is reached: For instance, target 14.1 has one indicator: “Index of coastal eutrophication and floating plastic debris density”.

The UN monitors progress towards the SDGs. In the latest progress report the situation is concerning – 15% of targets are on track, 48% moderately or severely off track, and 37% are in stagnation or regression. 

Many businesses use the SDGs in their sustainability initiatives, to focus their efforts and to communicate their commitments to the public. The importance of business was recognized when designing the goals. However, the SDGs are designed as country-level targets, and it is not clear exactly how firm should use them. The large number of targets and indicators are overwhelming and makes it easy to “cherry-pick” the targets that make the company look good. It has been suggested that firms engage in SDG-washing, by using the goals in a superficial manner without making any changes in corporate practices (Heras-Saizarbitoria et al. 2022).

Business could be more (un)sustainable

Most companies have profit maximisation as the goal. This means that they try to increase income and reduce costs. For instance, emitting CO2 can be done cheaply or at no cost, while renewable energy alternatives are typically much more expensive. The cheapest labour costs are often found in countries with poor working conditions and weak labour regulation. This is not only a question of “corporate greed”, but competition from other companies sometimes force or influence a company to choose the least sustainable options (Schleifer 2004).

Public regulation can solve this problem but is often not implemented due to competition among countries and resistance from voters and companies. Sometimes sustainable options can give higher incomes for companies, but often not enough to cover the additional costs. Also, companies sometimes lack the knowledge and internal processes to become sustainable.

On the other hand, we can also ask why companies are not even less sustainable? Companies make investments in sustainability with small and uncertain expectations of getting a financial return, but they still make them, due to different types of pressures from inside and outside the company, and out of concern for doing the right thing.

Comprehension questions

• How would you define sustainable business?
• Provide some examples of positive and negative impacts from a company
• Explain the three parts of the Triple Bottom Line and why each is important.
• What is the difference between corporate sustainability, CSR and ESG?
• Choose one UN SDG and describe how a business might contribute to it

Exercises

• Check the website and sustainability report (pdf) of Posten Bring. List the positive and negative impacts on human needs satisfaction from the company’s operations.

Discussion case: Must the Ice-cream Truck Become Silent?

Read the discussion case Must the Ice-cream Truck Become Silent, and answer the questions at the end of the case

References

Doyal, L., & Gough, I. (1991). A Theory of Human Need. London: Macmillan.

Heras-Saizarbitoria, I., Urbieta, L., & Boiral, O. (2022). Organizations’ engagement with sustainable development goals: From cherry-picking to SDG-washing? Corporate Social Responsibility and Environmental Management, 29(2), 316–328. https://doi.org/10.1002/csr.2202.

Jørgensen, S., and Tynes Pedersen, L. J (2018). RESTART sustainable business model innovation. Springer Nature. https://library.oapen.org/handle/20.500.12657/23128  

Elkington, J. (1997). Cannibals with Forks: The Triple Bottom Line of 21st Century Business. Capstone.

Pigou, A. C. (1920). The economics of welfare. Macmillan.

Shleifer, A., (2004). Does competition destroy ethical behavior? American Economic Review 9, 414–418.

World commission on environment and development (1987). Our Common Future. https://sustainabledevelopment.un.org/content/documents/5987our-common-future.pdf