Running head: SUSTAINABILITY AND GREENNESS AS AN ISSUE OF SRI LANKAN MANAGERS 1

SUSTAINABILITY AND GREENNESS AS AN ISSUE OF SRI LANKAN MANAGERS

Abstract Sustainability can no longer be considered apart from an organizations core strategy. Addressing the triple bottom line the economic, social and environmental outcomes- within business has key implication for long term success. Although there is a long way to go, among some Sri Lankan business entities there is a significant improvement in the way that companies of all sizes, of all sectors and in all locations view at sustainability and greenness. Leading organisations no longer view the challenges narrowly in terms of risk mitigation or brand enhancement. Instead they see the complexities as providing opportunities for innovation as well as enhancing consumer, investor and wider public relationships which, in turn, contribute directly to the overall sustainability of the business. Sustainability is gradually rising up the agenda locally, with governments, organisations and, notably, the media and wider public paying attention.

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Contents Abstract.....................................................................................................................................1 Contents....................................................................................................................................2 1. Introduction..........................................................................................................................3 2. Sustainability and Greenness as an Issue...........................................................................4 3. Recommendations................................................................................................................8 Bibliography...........................................................................................................................10

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1.

Introduction

The worlds population is increasing at a rate of 1.14% per annum and it continues to use the natural assets of planet earth faster than nature can regenerate them. Consequently, companies cannot carry on business as usual and have to learn to make more with less. They have to integrate the sustainability issues pertinent to their businesses into their long-term strategies and communicate to their stakeholders the positive and negative impacts which their operations have, socially, environmentally and financially.

The phrase sustainable development was popularized in the 1992 Earth Summit in Rio de Janeiro. In a sustainable society nature/people should not be subjected to: Increasing concentrations of substances from the earths crust (use of finite resources) Increasing concentrations of substances produced by society (pollution) Physical degradation through over- exploitation of ecosystems. Society people to conditions that systematically undermine their capacity to meet their needs in the future. As such, the elusive goal of sustainability as it is also called is to make decisions and carry out programs and projects in a manner that maximizes benefits to the natural environment and humans and their cultures and communities, while maintaining or enhancing financial viability. (http:/www.sustreport.org/business/report/intro lg.html) Businesses need to make money. This is a fundamental value for any for-profit organization. It needs to create value for shareholders no matter what other goals and principles the management brings into the organization. Supporters of sustainability insist that it makes good business sense. Approaches such as eco efficiency are based on the

SUSTAINABILITY AND GREENNESS AS AND ISSUE OF SRI LANKAN MANAGERS 4 premise that reducing waste and inefficiency in production processes can save money and protect the environment at the same time. The Life cycle analysis looks at an entire organization in terms of input and output helping to identify inefficiencies that drain profit and produce waste including pollutants.

Another method of assessing corporate sustainability is to evaluate company performance according to the costs and benefits to the corporations finances, the communities where it operates and the impact to the natural resources. All these approaches are new to the business world. Therefore it is necessary that the business objectives of the company such as profit and sustainability are consistent with very sound environmental management or sustainable principle. The Royal Dutch/Shell Group of Companies Chairmans statement on the Sustainability Report being My colleagues and I are totally committed to a business strategy that generates profits while contributing to the well-being of the planet and its people. We see no alternative. This is a starting point for Sri Lanka managers to identify issues on sustainability and greenness and take appropriate steps to address same.

2.

Sustainability and Greenness as an Issue

Development and implementation of sustainability strategies are often an important challenge faced by contemporary managers of Sri Lankan business entities. Mangers are often challenged as to how to manage the impossibility of simultaneously improving social, environmental, and financial performance, the three elements that make up sustainable performance. Mangers are pressured to deliver profits and their performance is typically measured primarily on how successfully they deliver. So, there is often difficulty obtaining an alignment of strategy, structure, systems, performance measures, and rewards to facilitate effective implementations of sustainability and greenness drives. Highlighted herein are some of the key issues faced by our own mangers in relation to sustainability and greenness concerns. a) Sri Lanka being a third world country mainly focuses on the basic needs of the population as a whole. Hence the issue of sustainability and greenness is not a primary focus

SUSTAINABILITY AND GREENNESS AS AND ISSUE OF SRI LANKAN MANAGERS 5 on the national agenda. Though there are conferences where government leaders acknowledge issues and agree upon solutions there is no real follow up and implementation. Hence no real changes are made. This lack of governmental commitment on sustainability issues has in turn a reflective impact on the Sri Lankan companies and society as a whole and as a result the focus on companies on this issue as an integral business priority is nonexistent, especially so in the government sector which consists of majority of the workforce in the country. The issues relating to environmental, economic and social sustainability are not easily defined .The Companies do not engage in educating and skilling managers in order that they give proper leadership and direction to Sustainability in organizations. b) While many large business in Sri Lanka have come to realize that sustainability is critical to their strategy, many small to medium sized businesses either arent sure how to implement sustainable practices or arent convinced of the benefits for their business. In some instances though top management drive their organizations towards sustainability at an operational level the managers pursue other goals while smaller businesses struggle maintaining profitability, sustainability may seem like an expense or an effort that they cannot afford with limited resources. In reality, a sustainable strategy can save money and can be implemented in any size organization. Further sustainability can add financial value for the business through enhanced revenues and lower costs. Revenues can be increased through increased sales due to improved corporate reputation. Costs can be lowered due to process improvements and due to decrease in regulatory fines. c) Especially in the Sri Lankan context the managers face issues due to the newness of the concept of sustainability and the lack of related technology to address those issues. For companies to embrace and implement sustainability there need to be alternatives that are readily available. There is no proven or basis to believe that a concept would work and many managers are not willing to take the risk. Certain issues may be recognized however there is often no technology to support a sustainable solution. Most often there are also no visible role models for managers to emulate for successful sustainability strategies. The best practices standards are more often than not global and cannot be easily interpreted in a Sri Lankan context. d) The abundance of natural resources in Sri Lanka and the ignorance of the people that resources are needed to be preserved for future generations have resulted in the people

SUSTAINABILITY AND GREENNESS AS AND ISSUE OF SRI LANKAN MANAGERS 6 not focusing on environmental and sustainability issues. Employee engagement too should be a crucial driving force for the delivery of sustainable strategy. Persuading people to change requires effort engaging both the rational mind and the emotional heart. This persuasive role needs to be played by the managers while driving sustainability in their organizations. Thus the most crucial challenge that the managers face is the support of the employees. It is about more effective engagement of the employees. It is very difficult to obtain support of the employees often when sustainability focuses on problems that have not occurred yet and when they are on preventive measures rather than on solving current problems. e) Sustainability should be seen as a business imperative and part of the core strategy of business entities. In most business entities the approach to sustainability and greenness is driven by wrong reasons such as to enhance the corporate image by projecting and exaggerating their efforts which are limited to the publishing of corporate social responsibility reports and the annual reports. Quoted herein is such a catchy section extracted from an annual report of a Sri Lankan company. XYZ Company promotes a paperless culture where employees are encouraged to use electronic communications, online approvals and other web- based applications, and to print documents only when required. Document workflows are automated, which minimizes paper usage. XYZ Company also successfully carries out a waste reduction and recycling drive where the companys wastepaper is collected and recycled, which weighed to 13,725 Kgs in 2010, and saved: 233 Trees, 436,180 Litres of Water, 54,900 Kwhs of Electricity, 24,087 Litres of Oil, 41 Cubic meters of Land Fill. A particular reader may accept above as a highly positive approach toward sustainability. However in the absence of year on year comparison of the amount of waste paper collected or ratios such as kilograms of waste paper per employee compared against norms it is indeed difficulty to come to a conclusion whether emphasis on savings are used to enhance corporate image or whether there is truly an impact on sustainability.

f) The managers and business entities have failed to understand the broader concept of sustainability and in most instances business entities just concentrate on recycling. Recycling involves a cost and it involves further utilization of resources. Instead, reduction of resource

SUSTAINABILITY AND GREENNESS AS AND ISSUE OF SRI LANKAN MANAGERS 7 utilization and reuse too, are much more important. In this regard the main issue faced by the Sri Lankan mangers is to find ways and means of improving efficiency in order to prevent the degradation of earths finite amount of resources. Hence Sustainability should be built in from the start by design it cannot be bolted on after the fact. Sustainability should provide a holistic view of the key impacts across every stage.

g) Government regulations and industry codes of conduct require that companies must increasingly address sustainability. Noncompliance with regulations may be costly, since regulatory noncompliance costs to companies include: - Penalties and fines - Legal costs - Lost productivity due to additional inspections - Potential closure of operations - The related effects on corporate reputation h) It is difficult to implement the proper systems to track sustainability and to evaluate the impacts of sustainability on financial performance and the trade-offs that ultimately must be made. Often, it is unclear how trade-offs between financial and environmental or social performance should be made. There is considerable uncertainty about how shareholders will respond to these trade-offs. Moreover, the trade-offs keep changing at certain times, shareholders may want the company to place substantial weight on social performance and the environment, whereas at other times they may want the company to place more weight on short-term profits. i) The costs of implementing sustainability are also constantly changing. For example, potential technology improvements may make it far cheaper to implement pollution reduction later rather than earlier. In most cases when sustainability is thought to provide financial benefits, the benefits can, at best, only be measured over long time horizons, which makes it difficult to measure the impact of social and environmental performance and to quantify the resulting benefits. In a tropical environmental setting such as Sri Lanka, manufacturing entities can effectively use roof areas of buildings for installation of solar panels to transforms the solar energy into electricity. However, the solar panels are highly costly and sometimes return on

SUSTAINABILITY AND GREENNESS AS AND ISSUE OF SRI LANKAN MANAGERS 8 investment may take 20 to 30 years. Therefore the running cost of the company increases significantly even though near perfect answers to sustainability is available in some instances. Thus, the constant uncertainty about how far to move toward sustainability, the constantly changing emphasis on and costs of implementing sustainability, and the long-time horizons therefore make it difficult to implement sustainability in the same way that other strategic initiatives are implemented j) In western countries consumers are prepared to pay a premium price for green products and some times premium can be as high as even 30 %. However, in Sri Lankan market demand for green products are not that high and further due to comparatively small market, mangers of business are compelled to pass a higher cost to a given consumer. As such if a sustainability or greenness imitative cost significantly to an enterprise manager may face the issue of at least sharing part of the cost with consumers. So higher prices of commodities coupled with lack of pricing opportunities may force managers do not see sustainability as creating a competitive advantage. k) In time to come resource management is likely to become a pressing issue. This would demand involvement of managers in measuring potential resource risks, reducing resource usage, mitigating potential damages from over use, devising alternative sourcing strategies. Thus addressing of sustainability concerns will demand improvement of managerial skills in specialized areas such as resource management. l) The organizations to be truly practicing sustainability and greenness need to ensure and collect information about suppliers energy management, carbon management, waste management practices, product composition etc. for the managers to take the right decisions. In this regard, for Multinational companies which have sustainability as a priority in the organization suppliers practices with regard to sustainability is almost as important as their own.

3.

Recommendations

Mangers should ensure that, corporate social responsibility should not eclipse a companys determination to bring in profit. Owners have a right to a fair return on their investments, but other stakeholders; employees, neighbors, governments also have legitimate claims on a companys agenda. Corporate obligations are more complex than a single minded

SUSTAINABILITY AND GREENNESS AS AND ISSUE OF SRI LANKAN MANAGERS 9 pursuit of equity value. A handful of companies in Sri Lanka are showing that Henry Ford was not far from wrong: build good products (or services) and treat employees well and more often than not, profits will follow.

Thus, we would like to propose following recommendations in order to drive sustainability and greenness initiatives among mangers of Sri Lankan business community.

Senior management should review their approach to sustainability issues and benchmark against similar organizations locally, globally, in order to further knowledge, build capacity and strengthen position.

Boards of organizations need to factor in sustainability issues into their decision making and strategy setting. Both risk and opportunities related to sustainability should be first reviewed when addressing strategy and then followed up by effective performance management. Management, their employers and related global bodies, together with civil society, need to work together to integrate sustainability issues into organizations. Management have a key role in providing sustainability related information to support strategy and decision making, but they need to update their skills and knowledge to help devise and implement processes for integrating sustainability issues into their organizations.

Management should familiarize themselves with both local and global legislation and regulation relating to sustainability issues.

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Bibliography Corporate Sustainability Reporting. (n.d.). Retrieved 03 30, 2011, from http://www.sustreport.org: http://www.sustreport.org/business/report/issues.html Dye, F. (n.d.). What Are the Different Types of Sustainability Issues. Retrieved 04 05, 2011, from www.wisegeek.com: http://www.wisegeek.com/what-are-the-different-types-ofsustainability-issues.htm Gibbons, C., & Barman, T. (2010). Sustainability in Emerging Markets. London: Chartered Institute of Management Accountants. IBM and the Environment 2009 Annual Report. (n.d.). Retrieved 04 02, 2011, from www.ibm.com/environment: http://www.ibm.com/ibm/environment/annual/IBMEnvReport_2009.pdf Natioanal Development Bank PLC. (2011). NDB Bank Annual Report 2010. Colombo.