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fi nes for violations, they need to compensate wrongdoings, and need to earn the
license to operate from the local communities by avoiding negative impacts. These
are called regulatory and legal risks. There are possibilities for damaging corporate
reputation, i.e. reputational risks, from media and NGO campaigns for not meeting
stakeholder expectations such as workers’ health and safety and labor practices,
and safe living environments for local communities. Market and product risks can
also occur when customers move to other products with better sustainability performance or when governments and organizations impose sustainable procurement
policies.
On the other hand, there are several value creation opportunities for companies
with superior sustainability performance for each risk category mentioned above. It
is possible to obtain additional revenues from environmentally and socially superior
products through a premium. Moreover, high sustainability performance of companies can positively infl uence the desire of customers to buy their products (brand
image), the desire of employees to work for them (preferred employer) and the
desire of investors for providing long-term capital (blue chip status or good rank in
indexes such as Dow Jones Sustainability Index). Companies with superior sustainability performance can differentiate their products in the market against competitors to
attract new customers and, consequently, create a competitive advantage. Business
to Business (B2B) companies can help their customers, i.e. end-producers, to meet
their sustainability goals by supplying superior intermediate products. In essence,
the existence of a company or its profi t making capacity can be affected by several
ways described above through various risks and opportunities created by sustainability
performance and stakeholder reactions. This shows the overlap between shareholder
and stakeholder value which are interdependent and interrelated.
2.3 Business Functions/Activities
Businesses deliver products and services through the co-ordination of various
activities. The main activities are innovation, business development, procurement/
sourcing, marketing and sales, and production/operations. Figure 11.1 shows
business functions and their contribution to sustainability in a company. Every
activity of the organization has an infl uence on its sustainability performance.
Therefore, integration of sustainability in business requires understanding of various business functions that deliver specifi c business activities in a company, and
proper metrics should be developed to support decision-making.
The main activities of innovation are developing new products with novel, additional or improved functionality, improving existing products (e.g. by implementation of alternative process/manufacturing routes), and developing new processes to
recycle waste. Business development is mainly involved in fi nding new applications
or opportunities in different markets through collaboration with existing or prospective customers or by means of strategic alliances with other companies. It also
defi nes the fi nal product and positioning strategy and fi nds opportunities for the
B.M.K. Manda et al.
fi nes for violations, they need to compensate wrongdoings, and need to earn the
license to operate from the local communities by avoiding negative impacts. These
are called regulatory and legal risks. There are possibilities for damaging corporate
reputation, i.e. reputational risks, from media and NGO campaigns for not meeting
stakeholder expectations such as workers’ health and safety and labor practices,
and safe living environments for local communities. Market and product risks can
also occur when customers move to other products with better sustainability performance or when governments and organizations impose sustainable procurement
policies.
On the other hand, there are several value creation opportunities for companies
with superior sustainability performance for each risk category mentioned above. It
is possible to obtain additional revenues from environmentally and socially superior
products through a premium. Moreover, high sustainability performance of companies can positively infl uence the desire of customers to buy their products (brand
image), the desire of employees to work for them (preferred employer) and the
desire of investors for providing long-term capital (blue chip status or good rank in
indexes such as Dow Jones Sustainability Index). Companies with superior sustainability performance can differentiate their products in the market against competitors to
attract new customers and, consequently, create a competitive advantage. Business
to Business (B2B) companies can help their customers, i.e. end-producers, to meet
their sustainability goals by supplying superior intermediate products. In essence,
the existence of a company or its profi t making capacity can be affected by several
ways described above through various risks and opportunities created by sustainability
performance and stakeholder reactions. This shows the overlap between shareholder
and stakeholder value which are interdependent and interrelated.
2.3 Business Functions/Activities
Businesses deliver products and services through the co-ordination of various
activities. The main activities are innovation, business development, procurement/
sourcing, marketing and sales, and production/operations. Figure 11.1 shows
business functions and their contribution to sustainability in a company. Every
activity of the organization has an infl uence on its sustainability performance.
Therefore, integration of sustainability in business requires understanding of various business functions that deliver specifi c business activities in a company, and
proper metrics should be developed to support decision-making.
The main activities of innovation are developing new products with novel, additional or improved functionality, improving existing products (e.g. by implementation of alternative process/manufacturing routes), and developing new processes to
recycle waste. Business development is mainly involved in fi nding new applications
or opportunities in different markets through collaboration with existing or prospective customers or by means of strategic alliances with other companies. It also
defi nes the fi nal product and positioning strategy and fi nds opportunities for the
B.M.K. Manda et al.