Sustainable Management Definition & Top 10 Best Practices in ‘24

According to the Edelman Trust Barometer 2022, around half of individuals think businesses are not doing enough to address challenges such as climate change, economic inequality, and systematic injustice (See Figure 2). It suggests that many corporations’ profits are based on a lack of understanding of environmental and societal challenges which is not sustainable.

• We live on a planet with finite resources. 
• Consumers and investors consider companies’ ESG practices when deciding whether to buy their product or invest in them.
• The number of environmental-related lawsuits are on the rise.

All of these trends highlighted the need for a more holistic management perspective and execution than the current management approach. Therefore, in this article we introduce sustainable management and its best practices in depth.  

Figure 2: People expect more from businesses to minimize societal problems:

What is sustainable management?

Sustainable management takes into account the fact that irresponsible economic actions make it difficult to preserve the division of labor and a livable planet in the long run. It is concerned with people’s long-term well-being, including the business itself. It aims to find answers on how we may meet our needs without harming future generations’ natural and social resources. Three elements constitute sustainable management:

• Long-term profit: The estimated future incomes of the enterprises are added together to calculate corporate value. As a result, from a financial standpoint, businesses should avoid making decisions that are solely profitable in the short term and consider long term consequences of their actions. 
• Environmental sustainability: Earth has finite resources and waste capacity, and pressuring it to the point of exhaustion yields no long term economic benefit to anyone. As a result, sustainable management measures the environmental impact of its operations and develops strategies like adopting:
  • Circular economy practices, 
  • Minimizing corporate carbon footprint and 
  • Ensuring supply chain sustainability to minimize its environmental burden.
• Societal sustainability: Harmony inside the firm, which enables effective division of labor, has an impact on long-term profits. Corporate harmony is associated with employee satisfaction. As a result, sustainable management implements policies to improve corporate inclusivity and uses societal metrics like gender pay gap to track progress.

Why is sustainable management important now?

According to Deloitte, 97% of businesses are impacted by climate change and environmental issues, either directly or indirectly, as a result of:

• Extreme weather. 
• Regulatory changes.
• Stakeholder pressure, or both (See Figure 3). 

According to a report almost 70% of executives see climate change as a concerning issue which threatens more than their businesses.

From a societal standpoint, nearly half of women consider that a company’s stance on gender issues influences their decision. Unfortunately, gender inequality is only one of the social challenges. Almost 60% of the individuals claimed to have been subjected to prejudice in 2021. When we consider job environments that are exclusionary based on race, gender, lifestyle, and other factors, it means that organizations who are less concerned about social problems are missing out on a significant portion of the population as potential employees. 

Figure 3: Top 5 climate change related issues that affect businesses: 

Top 10 Sustainable Management Best Practices

1. Take a holistic approach: Systems thinking helps companies to become more sustainable. It is a perspective that looks for industrial symbiosis or uses unimagined wastes as a resource to produce goods. Systems thinking is associated with “thinking outside of the box”. For example, waterhaul sources its sunglasses from ghost nets in the ocean. Such breakthroughs are more likely to develop at a company with employees from various backgrounds and disciplines.
2. Determine and measure key metrics periodically: Without measurement it is impossible to assess whether the business is sustainable or not. Companies can use ESG and circular economy metrics such as resource productivity, corporate carbon footprint, CEO pay ratio etc. to determine their level of sustainability. Following the initial assessment, businesses should set a time frame for evaluating their progress toward sustainability goals. As a result, businesses should have a schedule for measuring their sustainability on a regular basis.
3. Prioritize environmental and social issues your business should solve: Trying to reduce your total environmental and social impact at once may result in inefficiency. Firms begin by focusing on their most significant business sustainability risks. New regulations concerning carbon labeling and accompanying carbon taxation, for example, can be a big headache for a company with a large product carbon footprint. In such cases, focusing on reducing CEO pay ratio would be unnecessary. 
4. Come up with a roadmap: Companies should look for solutions to reduce their environmental and social costs. The strategy for any company can differ depending on the industry, corporate capabilities, and prioritized objectives. For more information you can read our ESG best practices article.  
5. Work with other sustainable companies: Only collective action can totally fix environmental and social problems. As a result, creating a supplier code of conduct that rewards sustainable businesses while punishing unsustainable ones can be advantageous. Thanks to such initiatives, you can lower your product’s carbon footprint and the likelihood of brand-damaging controversies. Starbucks, for example, faced difficulties in 2020 as a result of partnering with a child labor supplier.
6. Modify your recruitment policy: The old corporate paradigm has changed, and so should HR practices. Companies may prefer applicants who have completed interdisciplinary programs in order to foster a holistic perspective within the organization. There are, for example, sustainable management and technology programs, and hiring people from these departments rather than traditional business administration departments can help companies achieve their sustainability goal faster. Also, HR policy should be unbiased towards any social group to ensure inclusivity of the company.
7. Nudge the corporate culture: Corporate culture is an important aspect of implementing strategies successfully. To have an enabler culture, companies can provide training regarding social and environmental issues. 
8. Seize product-service model: Because the corporation always owns the goods as an asset, renting or leasing products rather than selling them directly to the end consumer ensures product stewardship. Corporation benefits financially from the extended life of its products, thus, service models ensure product durability and repairability.   
9. Consider carbon offsetting: You can assist green initiatives through carbon offset credits while your company works toward achieving the appropriate degree of sustainability. You can nudge your customers to be part of your carbon offset strategy. For instance, KLM’s passengers can pay an extra fee for supporting KLM’s reforestation initiative. 
10. Get international 3rd party certificates: Many businesses engage in greenwashing (i.e. using sustainability in their marketing without changing their business practices). ISO, GRI, SAAB etc provide international certificates that verify  sustainability achievements of your business from a 3rd party perspective and ensure that you work towards globally accepted sustainability goals.

You can read our article on sustainability case studies to see real life implementations of sustainable management.

You can also read our Top 7 Carbon Footprint Calculator Software/Tools for Businesses to find a tool for automating your carbon footprint assessment.

To learn more about sustainable management you can reach us:

This article was drafted by former AIMultiple industry analyst Görkem Gençer.