© Jakob Utgård 2025.

Introduction to sustainable business

Sustainable development is “to meet the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development 1987). A sustainable business operates in a manner that satisfies the needs of the current society, without compromising the opportunities of future generations.

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.

What are needs? 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. In their theory, Doyal & Gough identify two basic human needs: Physical health and autonomy (the ability to make informed choices and act upon them) These basic needs are satisfied through a set of intermediate needs, which represent the social and material conditions required in any society. Doyal & Gough (1991) list 11 such intermediate needs: Adequate food and clean water, protective housing and a safe physical environment, a non-hazardous work environment, health care, security in childhood, significant primary relationships, physical security, economic security, safe birth control and childbearing, basic education and access to information.

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. I often think in the following way:

Business sustainability = Positive impact on needs satisfaction (current and future) – negative impact on needs satisfaction (current and 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)

Externalities

In economics, externalities are the effects of a market transaction on others than the buyer and seller. A classic example of negative externalities is pollution, which often influences the local water and air quality, but the buyer or seller of the polluting products are not affected by this, but “externalize” the cost, in this case the negative effect of pollution. Externalities can also be positive, a company developing new technology that benefits the whole society, for instance a vaccine, will only get part of the benefits from its innovation. Many issues in business sustainability are related to managing 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 (are they useful?)                    

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

• Select a company that you have some knowledge about. List the positive and negative impacts on human needs satisfaction from the company’s operations.

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.

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