Introduction to Entrepreneurship Sustainable Business Case Book Volume 1 Chapter 1 Sustainable Business Core Concepts Frameworks AND Sustainability Lectures Part 1 2 All businesses must focus their economic performance ensure profitability and attractive return on investments operate legally SUSTAINABILITY idealized state of human fulfillment satisfaction health and prosperity that exists from generation to generation meeting needs of present generation without compromising the ability to meet the needs of future generations At a Private Level sustainability can be a management strategy to help businesses set goals and prioritize resource allocations first as financial sustainability short term gain can lead to long term financial failure businesses must consider broader long term consequences of decisions Step 1 sustainability for long term financial performance Step 2 focus on TRIPLE BOTTOM LINE people profit the planet businesses rely on the sustainability of society s resources for success and survival GOALS 1 Do WELL financially successful 2 Do GOOD environmentally socially giving back to society Benefits from Sustainable Business Practices Reduction in energy materials use and waste costs Reduction of legal risks and insurance costs Differentiation in products services Innovation to create new products services to serve new markets Enhancement of investor interest Increased attraction and retention of employees customers 1 Internal Motivation MAXIMIZE PROFITS viability profitability PRIVATE MARKET TRANSACTIONS purchase sales of goods services between businesses other businesses and consumers EXTERNAL COSTS externalities type of market failure costs experienced by party not directly involved in the private market transaction Externalities market failures justify gov t intervention in form of restrictions regulation policies taxes negative externality subsidies positive externality and or defining property rights TAXES generate revenue to support government policies program raise costs of goods and discourage use of certain resources can help correct market failures associated with externalities Barriers that impede decisive action Lack of understanding of sustainability what it is what it means to entrepreneurship Difficulty modeling business case for sustainability Flaws in execution of sustainable business practices High risks and uncertainty Over enthusiasm over ambitious agenda Lack of sincerity commitment only for Publicity Public Relations reasons Concerns for additional costs Failure to properly execute plans 3 4 of top company boards give attention to sustainability only 10 actually implement sustainability plans DISCONNECT exists between INTEREST in sustainability and TAKING ACTION Sustainable business practices source of COMPETITIVE ADVANTAGE Private companies can create self sustaining solutions to environmental problems from which society can benefit significantly Systems Approach 2 types 1 OPEN SYSTEM business receives information and uses it to interact dynamically with the environment encourages survival and prosperity likely to atrophy and vanish 2 CLOSED SYSTEM business isolates itself from external environment doesn t take in new info INSIDE OUT LINKAGES firm impacts society through normal business operations OUTSIDE IN LINKAGES environments social conditions influence and impact business operations to effectively create a sustainable business a business s entire systems operations must be mapped analyzed and understood Systems perspectives allow businesses to understand their position relationship in larger environmental and social system MILTON FRIEDMAN economist social responsibility of business use its resources and engage in open and free competition without deception or fraud believed government is the only legitimate vehicle for addressing social concerns COPRPORATE SOCIAL RESPONSIBILITY business model concerning the financial societal and environment impacts on decision making giving back to society STAKEHOLDER includes owners investors employees consumers and all that are affected by the actions of the corporation STAKEHOLDER AGREEMENT formal process of relationship management in which company engages with a set of stakeholders in order to align and advance their and their stakeholders mutual interests intuitively incorporates key stakeholders needs and values within the business s strategic day to day decision making process Role of consumers in motivating sustainable practices Environmentally responsible consumers consider many factors before buying Impact of materials and processes used to manufacture package goods How products are distributed disposed of Company s broader corporation philosophy on the environment Company s support of public environmental education programs Environmental organizations provide consumers with resources they need to make environmental responsible buying decisions Ex Climate Counts Green Alliance Deepening Engagement in Sustainability Practices Creating shared value acting to provide meaningful benefit to society and consumers as well as value to the business Each company should analyze its own systems sort out own sustainability issues and rank them in terms of potential impact o Identify environmental impacts of actions o Determine which impacts the business can benefit most from addressing o Determine most effective ways to address it is in each company s best interest to identify a manageable number of sustainability initiatives Perspectives of Human Economic Interaction with Environment 1 ECOLOGICAL LIMITS TO GROWTH CONCEPT continued growth in global economy would lead to global overpopulation and economic collapse as a result of increased ecological damage and decreased resources the demands of human population exceed earth s carrying capacity collapse can be avoided with changes in policy behavior and technology laws of supply and demand as resources become scarce market reduces use by decreasing prices increased demand for scarce resources can guide allocation to investment in technology and innovation resource scarcity can be effectively addressed by economic 2 NO LIMITS TO GROWTH CONCEPT earth has limited resources and human activity can negatively impact market forces effectively signal society scarcity but there are limits Markets often fail to properly price natural resources that are treated as free goods EARTH S RESOURCES Energy water soil and biodiversity BIODIVERSITY strengthens the overall