How businesses can build a better future

Abstract

The goal of this paper is to show that businesses perform better if they incorporate sustainable and ethical business practices and Environmental, Social, and Governance (ESG) metrics into their business strategy. This paper shows it is actually advantageous for them to do so. We will explore 3 different businesses of different sizes. Diamond Tropical Hardwoods, is a small sustainable furniture and lumber company with a large environmental and social impact. Dicks Sporting Goods is a medium-sized business that has proven its corporate social responsibility and strong character/moral values. Finally, we will see BNP Paribas, a massive investment bank with a large social influence and impactful ESG initiatives. We will use these 3 cases to explore each of the different elements of ESG and business ethics and how they can benefit all stakeholders and increase the value of an organization.

Shared Value in Sustainable Business Strategy

Businesses have been integral in value transfer in today's society. Most people go to work, their value or work is monetized by business, and they are compensated for it. This compensation may be used to purchase products or services to add value to one’s life. A successful business uses resources to create value and allocates its compensation or revenues to run effectively. Historically, business has been a profit-maximizing enterprise. Businesses aim to maximize value while minimizing costs and prioritizing short-term financial gain. This leads companies to miss important customer needs and ignore the broader influences that determine their long-term success. Businesses have an important decision to make. Will they continue to operate in a narrow focused profit maximization strategy or adopt a comprehensive social impact strategy? It is clear that businesses that implement strategies that consider social impact will be rewarded and outperform companies that do not consider the social and environmental impacts of their strategy. Michael E. Porter and Mark R. Kramer wrote in a Harvard Business Review Magazine article titled Creating Shared Value ” the solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. We believe that it can give rise to the next major transformation of business thinking.” [1]

We look to sustainable business strategy to guide our decision-making. Operating an ethical business requires minimizing impacts on the planet, future generations, and society. Many investors now will use ESG metrics to evaluate companies as these considerations are valuable to understand a company's longevity. In this paper, I will review three different examples that have inspired me through their ethical and sustainable business practices. We explore environmental impact and ethical sourcing at Diamond Tropical Hardwoods, social impact and diversity initiatives at BNP Paribas, and corporate social responsibility at Dicks Sporting Goods and how their strategy does a fantastic job at creating shared value and impacting their communities while producing profits.

How Diamond Tropical Hardwoods, a small family owned business, found success.

Businesses have been integral in value transfer in today's society. Most people go to work, their value or work is monetized by business, and they are compensated for it. This compensation may be used to purchase products or services to add value to one’s life. A successful business uses resources to create value and allocates its compensation or revenues to run effectively. Historically, business has been a profit-maximizing enterprise. Businesses aim to maximize value while minimizing costs and prioritizing short-term financial gain. This leads companies to miss important customer needs and ignore the broader influences that determine their long-term success. Businesses have an important decision to make. Will they continue to operate in a narrow focused profit maximization strategy or adopt a comprehensive social impact strategy? It is clear that businesses that implement strategies that consider social impact will be rewarded and outperform companies that do not consider the social and environmental impacts of their strategy. Michael E. Porter and Mark R. Kramer wrote in a Harvard Business Review Magazine article titled Creating Shared Value ” the solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. We believe that it can give rise to the next major transformation of business thinking.” [1]

How Dick’s moral stance generated revenue and goodwill

Businesses are under more scrutiny than ever before. Social media has given the stakeholders and the public a new platform to voice their opinions. Businesses have always been involved in politics. Today, they must adopt core values and take clear stances on important issues. We will study the case of Dicks Sporting Goods and their response to the 2018 shooting at Marjory Stoneman Douglas High School, in Parkland, FL. In response to the events, Dicks decided to stop selling assault-style rifles and only sell firearms to those 21 years and over. This decision changed the expectations for businesses and their corporate social advocacy.

In a case study published by Elon University, it was discovered Dick’s decision to change policy regarding gun control was not driven by its primary stakeholders. [11] Instead, it was influenced by secondary stakeholders - individuals without direct influence on the company. Dicks even anticipated this. They were quoted saying, "We weren't expecting it to be a well-received decision by many of our customers." as many are gun owners. Despite this, Dicks took this opportunity to express their values as an organization. It was received well. An analysis of public comments on Dick’s Twitter account revealed, “Around 70% of the tweets (n = 2,095) expressed gratitude or positive sentiment. Neutral (14.8%, n = 443) and negative attitudes (15.4%, n = 461) were present in fewer tweets.” [5] The positive tweets and support did not come without action. Many shoppers posted their gratitude and photos of themselves shopping at various Dick’s locations.

In this case, we have seen how businesses that express moral and ethical values have a positive impact on their overall success. With the rise of social media and communication, it is important to stakeholders that the business communicates its mission, vision, and values to all.

How BNP Paribas generates social impact as a bank

While banking hasn't typically been viewed as an ESG-focused industry, BNP Paribas stands out as a pioneer in driving sustainable development within the banking sector. Through their Corporate Social Responsibility (CSR) and Sustainable Development Strategy (SDS) they have been able to generate valuable impact. This includes 12 commitments implemented in 4 areas: economy (effective financing of the economy), employees (responsible approach to employees and their development), society, and environment (supporting energy transformation and counteracting climate change). [7] BNP has a variety of social impacts which we will explore internally as well as externally. With over 200,000 employees in over 73 countries, BNP’s social structure is very impactful as it can affect many people. Internally, the bank has committed to various diversity and inclusion programs developing friendly, comfortable work environments for all employees. This is apparent as their employee culture is focused on individual growth and social advocacy. Employees created a company-wide “Women Changing BNP Paribas,” the aim of which is to strengthen the role of women in the organization. This led to an initiative to have more women in executive committee positions and IT sectors while also promoting employee well-being through support programs. This creates a strong and motivated working culture and environment that leads to more productive and happy employees.

Externally, the BNP has also been committed to maximizing its social impact. The bank is involved in many charities and supports a wide range of social groups and organizations. They have shown support for the LGBTQ+ community, either through flying their flags on buildings or removing gender requirements from credit cards. BNP is a leader in social impact bonds, supporting the development of innovative products such as the Impact Contract, a financial tool that helps finance social and environmental innovations through a new type of public-private partnership. [7] BNP Paribas allocated €333 million in 2022, through dedicated funds where they provided support to underprivileged populations and the development of small economic projects and in particular help women entrepreneurs in emerging countries. Microfinance institutions are a valuable door opener for those with an idea but with no access to conventional loans. These institutions have been able to provide over 280,000 beneficiaries, 95% of them women, the funds to start their business which to created over 1.3 million jobs since their start in 1989. [9]

BNP Pariba's commitment to sustainability has continued to allow it to dominate and be the top bank in the European Union. The social initiatives of ESG and sustainability across business practices at BNP have allowed it to maintain to be a leader in the space, and it is refreshing to see a bank that is not conventionally associated with the environment or social impact have such an influence.

Business and their performance

Businesses perform better when they minimize negative impacts and show moral and ethical values. From minimizing environmental impacts to implementing DEI (what is it)targets to being an activist, businesses are held accountable for all of their efforts. We have seen through these case studies how three different businesses in 3 completely different industries all yielded better returns as they implemented sustainable and ethical strategy components into their business model. We see firms that embody and abide by these components performing well over the long term and continuing to do well despite regulations and increased strictness. As we see a global shift in policy and mindset about our environment, these firms operating with ESG strategy and shared value in mind will be in a better position and be able to capitalize on this shift of values.

Impacts

The impacts of implementing a sustainable business strategy are vital to addressing some of the world’s most pressing problems. Climate change, income inequality, depletion of natural resources, human rights issues, fair working conditions, pollution, racial injustice, and gender inequality are some common examples. Operating a business to address these issues will yield many benefits for the business and all stakeholders.

TThe benefits of sustainable and ethical business models allow companies to minimize risks, develop a competitive advantage, take advantage of sustainable product growth opportunities, and create change. Through the use of these models, we can see that the risk a company faces actually decreases. In addition, being a sustainable brand/organization will help protect your corporate reputation and brand by building goodwill and trust with all stakeholders. If employees 8 are forced into unsafe working conditions and are injured or worse, the reputation of the company will be damaged. If you build your strategy around these principles, you will avoid these consequences and contribute towards the transition of our society. Sustainability does not hinder progress, it does the opposite. Businesses with strong purpose and mission actually attract higher quality candidates, as they value a purpose-driven and impactful work environment. As these values become more and more important to individuals and more companies begin to advertise and track their impact, the value of sustainable products will rise as well. When an organization has sustainability incorporated into its product, they are able to capture a larger market share, as those ESG-conscious stakeholders will not invest in damaging companies. Corporations should be held accountable as they are drivers of change. As an individual, it may seem daunting and impossible to leave your impact. Your personal impact may not seem like much in comparison to a multi-international corporation, but the individual role is much more important. As we have seen, businesses will continue to exploit to maximize profits. Consumers and stakeholders need to set a precedent for the expectations of business. Through this, massive impacts can be made. If a business is forced to change processes to be more ethical and sustainable, the true role of consumers is revealed. Whenever you look at an individual’s impacts, it does not seem like a lot, but consumer strength is in the numbers. If we come together and demand higher standards to ensure our planet and people are protected.

My approach to business after these lessons

Our case studies show that businesses will be rewarded for transitioning into ethical and sustainable business models. Corporations are implementing more ESG strategy components, and stakeholders continue to reward them for doing so. I am currently studying and pursuing a career in business and aim to own my own business. These considerations are vital in decision-making about my career, industry, or business model. I have seen that businesses with a mission-driven sustainable model outperform others in the current market. The examples in this essay are just a few. There are many impactful businesses that are changing lives and innovating to make our world better. I recently started my first business venture and kept these principles in mind. Our company, Forevergreen will track users' carbon emissions and footprint through its simple carbon calculator. We will educate users about their overall carbon footprint and provide trustworthy carbon offset solutions to reach net-zero. Our company's goal is to educate as many people as possible about their carbon emissions, so they can understand what contributes most to global emissions and adjust their behavior. This could mean purchasing from verified net-zero companies instead of high emitters, adjusting habits to reduce overall carbon, or investing in carbon-backed securities like carbon offset credits. We offer planting trees directly through our reforestation projects. Our team understands the value of creating shared value and believes in lifting everyone up together. *Being selfish and profit-driven can only give you so much.* As an aspiring entrepreneur, I aim to build something that creates value in other people's lives, making the world a better place. I strongly believe that this new venture can do that. Carbon is the most well-known greenhouse gas and without understanding its impact on Earth in the future, as global temperatures rise, the environment and its resources will be invaluable. I have learned, through these businesses, and others, that a mission-driven impact-first model will allow me to build something I can be proud of.

It is important that we as stakeholders learn about business practices and support those who do good. Stakeholders are the key to progress, and it is up to us to hold businesses accountable and 10 push them to be better. I am confident in our society and trust that people want to protect our earth and their fellow humans. I am excited to see the innovations in business as we develop our society.