36
1 Introduction
Global companies recently have shown an increasing interest in being engaged in
sustainability initiatives and integrating it to their business management strategies
through broadening their accountability beyond economic performance to include
social and environmental aspects (Labuschagne et al. 2005 ). There are a number of
driving forces behind their engagement: government regulation and intervention,
stakeholder pressures, economic profi t, globalization, business concern for society
and the environment, technological advancement, social activism and so on (Estein
and Buhovac 2010 ). The direct intervention of governments at regional, national or
international level is one of the drivers. Governments are highly encouraging companies to improve their environmental and social performance while maintaining
their economic benefi ts (Simpson et al. 2004 ). A number of legislation and regulatory initiatives have been established to promote technological advancement
(Carraro and Galeotti 1997 ).
The development of methodological tools, databases, guidelines and procedures
are being supported by governments so as to promote sustainability practices in
businesses that can contribute to the transition towards a more sustainable economy.
Some examples from the European Union (EU) are the EC directive on disclosure of
non-fi nancial and diversity information by large companies, which requires companies with more than 500 employees to include information about their environmental and social performance in their annual reports (EC 2014 ), the EC’s strategy on
corporate social responsibility (CSR), which encourages companies to have in place
a system that integrates consumer concerns, environmental, ethical human rights
and other social aspects into their business operations and core strategy with close
collaboration with their partners (EC 2011 ). A number of national governments have
also established policy initiatives to promote sustainability practice by businesses.
Besides governments’ interventions, there are also other driving factors for
companies’ commitments to sustainability initiatives. One is the change in consumers’
behavior towards sustainable consumption patterns. Consumers have become more
concerned about the environmental pressure associated with products for their consumptions. They are showing commitments to buy products with relatively less
impacts and they would like to be linked with companies that are environmentally
and socially responsible (Perrini et al. 2010 ; Cherian and Jacob 2012 ). Companies
that place sustainability initiatives into their business strategies are attracting more
consumers and at the end making more profi ts. This phenomenon could stimulate
and may lead companies that are not active in sustainability practice to be engaged
so as to improve their competitiveness (Ginsburg and Bloom 2004 ; Lacy et al. 2010 ).
Corporate sustainability reporting (CSR) initiatives are also serving as an internal and external driver for companies’ sustainability initiatives. They encourage
employees and stakeholders to be engaged in sustainable business practices at the
same time they could also increase competition and threats within and across
industries (Porter and Kramer 2006 ). Economic globalization, which is characterized
by its global, liberal and open economy (Dinda 2004 ), technological advancement
that reduces material intensity and pollutions, social activism that creates awareness
about the environmental and social pressure and force governments to set a
E.D. Gemechu et al.
1 Introduction
Global companies recently have shown an increasing interest in being engaged in
sustainability initiatives and integrating it to their business management strategies
through broadening their accountability beyond economic performance to include
social and environmental aspects (Labuschagne et al. 2005 ). There are a number of
driving forces behind their engagement: government regulation and intervention,
stakeholder pressures, economic profi t, globalization, business concern for society
and the environment, technological advancement, social activism and so on (Estein
and Buhovac 2010 ). The direct intervention of governments at regional, national or
international level is one of the drivers. Governments are highly encouraging companies to improve their environmental and social performance while maintaining
their economic benefi ts (Simpson et al. 2004 ). A number of legislation and regulatory initiatives have been established to promote technological advancement
(Carraro and Galeotti 1997 ).
The development of methodological tools, databases, guidelines and procedures
are being supported by governments so as to promote sustainability practices in
businesses that can contribute to the transition towards a more sustainable economy.
Some examples from the European Union (EU) are the EC directive on disclosure of
non-fi nancial and diversity information by large companies, which requires companies with more than 500 employees to include information about their environmental and social performance in their annual reports (EC 2014 ), the EC’s strategy on
corporate social responsibility (CSR), which encourages companies to have in place
a system that integrates consumer concerns, environmental, ethical human rights
and other social aspects into their business operations and core strategy with close
collaboration with their partners (EC 2011 ). A number of national governments have
also established policy initiatives to promote sustainability practice by businesses.
Besides governments’ interventions, there are also other driving factors for
companies’ commitments to sustainability initiatives. One is the change in consumers’
behavior towards sustainable consumption patterns. Consumers have become more
concerned about the environmental pressure associated with products for their consumptions. They are showing commitments to buy products with relatively less
impacts and they would like to be linked with companies that are environmentally
and socially responsible (Perrini et al. 2010 ; Cherian and Jacob 2012 ). Companies
that place sustainability initiatives into their business strategies are attracting more
consumers and at the end making more profi ts. This phenomenon could stimulate
and may lead companies that are not active in sustainability practice to be engaged
so as to improve their competitiveness (Ginsburg and Bloom 2004 ; Lacy et al. 2010 ).
Corporate sustainability reporting (CSR) initiatives are also serving as an internal and external driver for companies’ sustainability initiatives. They encourage
employees and stakeholders to be engaged in sustainable business practices at the
same time they could also increase competition and threats within and across
industries (Porter and Kramer 2006 ). Economic globalization, which is characterized
by its global, liberal and open economy (Dinda 2004 ), technological advancement
that reduces material intensity and pollutions, social activism that creates awareness
about the environmental and social pressure and force governments to set a
E.D. Gemechu et al.