Role of HR in driving sustainable business practices
Sustainable business practices are increasingly appearing on the radar of businesses around the world on account of changing public perception. The HR function will thus play a key role in addressing the critical success factors for implementing sustainable business practices.
A true sustainable organization is able to generate long-term benefits by creating a virtuous cycle between economic, social and environmental considerations. Often, organizations fail to implement sustainable business practices due to:
- Inadequate integration with business strategy
- Lack of support from leadership
- Limited understanding and involvement of employees at all levels
- Absence of systems and processes that institutionalize sustainability
What is sustainable development?
Corporate Social Responsibility (CSR)
Corporate social responsibility (CSR) implies the ethical behaviour of businesses toward society. While sustainable development forms a wider concept, CSR is business’ way and responsibility of delivering on the overall aim of sustainability.
Sustainability governance in India
To achieve social and economic goals and environmental protection, the Government of India (GoI) has engaged in a number of interventions in the past few years. As a part of this, it has made expenditure on CSR initiatives mandatory for all companies.
Benefits of sustainability for businesses
- Sustainability activities help companies to improve their reputation in terms of visibility and social responsibility. It also helps in building public trust in business.
- Companies can convince potential equity investors about the viability of their business models and assure them of reduced risk.
- Superior sustainability performance can allow companies to engage better with stakeholders, leading to reduced agency costs, transaction costs and funds cost, along with accurate analysis forecasting.
- By integrating sustainability issues into their wide enterprise risk management (ERM), organizations reap indirect financial benefits such as avoidance of litigation costs.
- Initiatives such as environment protection and reduced wastage across the value chain enable increased efficiency and process streamlining.
- Sustainability activities help organizations create trust worthiness and reach a wide variety of customers.
- Trust is a valuable commodity; a 2009 report on firm reputation revealed that reputed leaders performed 22% better than the Standard & Poor’s (S&P) average and with 88% higher stock prices than average.
- Sustainability initiatives such as employee volunteering programs enrich work experience and build team skills.
- Companies that are active in the sustainability space can position themselves as responsible, progressive and dynamic in the talent market.
- Companies are taking up projects such as reducing emissions and the carbon footprint on an ongoing basis to promote a green environment.
- Environmental initiatives can significantly impact climate change and energy use effectiveness.
How HR can help in implementing sustainable business practices?
HR can help organizations succeed in implementing sustainable business practices. They can assist in delivering the following key outcomes to drive the organization’s sustainability agenda by:
- Creating a sustainable vision, mission and strategy
- Building an aligned leadership pipeline
- Creation of appropriate organization structure and governance mechanisms to drive the sustainability agenda
- Development of key HR capabilities to drive sustainability and create sustainable HR systems and processes
- Creation of an agile organization able to learn and adapt to changes triggered by the internal and external environment
Click here to learn more about EY’s corporate social responsibility programs.