Business and Sustainability

This chapter provides a framework for Part I on the Business Implications of sustainability. First, the chapter reviews the business landscape of sustainability and how various business models of different companies impact on the broad concept of sustainability as discussed in this book. Second, it presents the two main schools of thought around the notion of materiality which determine the scope of sustainability disclosure. One perspective focuses on the “outside-in”: how sustainability impacts a business and its financial performance (financial materiality). A second perspective focuses on the “inside-out”: how a business impacts the environment, people, and society (sustainability impacts also called impact materiality). Combined, they form what is referred to as the double materiality of sustainability. The chapter explores the broad spectrum of conceptual frameworks at the intersection of sustainability and business. These concepts can range from Corporate Social Responsibility (CSR) to Environmental, Social, and Governance (ESG). The latter, after becoming investors’ main sustainable investing strategy (see Chapter 8), has become the primary approach to corporate sustainability. The chapter discusses ESG data and presents the main sustainability disclosure frameworks which are critical to investors to assess risks, opportunities, and sustainability impacts so as to price financial instruments (Carroll, 1999). Lastly, the chapter introduces the concept of an impact economy and concludes with a discussion of the changes that could be made to address sustainability. The chapter concludes that to become truly sustainable, businesses must consider their 360° impact on society — from their business model to the human and environmental impacts of their products and services.