UK Government in Encouraging Sustainability in Businesses - Essay Example

 Introduction Integration of sustainability within business practices has been a rising trend over the past two decades both in small and large enterprises. Indeed many major businesses have successfully integrated sustainability concerns within their mission statements and spend quite a considerable amount to meet sustainable levels of doing business (McKinsey & Company, 2011:1). Although there has been ample research and interest on sustainable business practises, recent research has began focusing on the role of different stakeholders to ensure sustainability in businesses (Simola, 2012:473; Gibson, 2012). One of the least researched stakeholders has been the government and the significance of the role they play in encouraging companies to improve their sustainability performance (Steurer, 2010). This research analyzes how important the role of government is, compared to other stakeholder pressures, in encouraging companies to improve their sustainability performance within the UK business environment. The concept ‘sustainability’ and how this relates to business The concept of sustainability first became prominent with the publication of the Bruntland Report in 1987. The report defines sustainability as “meeting present needs without compromising the ability of future generations to meet their own needs” (Petrini and Pozzebon, 2010:363; Ameer and Othman, 2012:61). The concept of sustainability has evolved overtime since it was first defined. In earlier days, it was mainly an operational concern that focused on defensive strategies to cut waste and reduce organizational footprint. It then evolved and took a more strategic stance with focus shifting to value chains and innovation from waste and cost reduction. Right now, the concept pervades all organizational decision making (Chouinard, Ellison, Ridgeway, 2011:1). This trend clearly shows a move towards rendering the term sustainability in business redundant as it will simply be how business is done. However in the present, businesses are consciously incorporating sustainability into their business decisions. A recent survey by McKinsey & Company (2011) shows that many organizations are actively integrating and incorporating sustainability principles into their business operations, and the reasons behind this go far beyond reputation management. A sustainable business hence genuinely delivers environmental, economic and social benefits simultaneously in its operations while minimising the damage to society and the environment (Nidumolu, Prahalad, and Rangaswami, 2009:1). Most businesses express their sustainability goals through corporate social responsibility (CSR) commitments. CSR within an organisation is often composed of practises, policies and programs that are integrated throughout the business’s operations from decision making, processes to supply chain, which aim at ensuring current sustainable business operations taking into consideration future impacts (Petrini and Pozzebon, 2010: 364; Baumgartner and Ebner, 2010:77). Companies are increasingly inclined to incorporate society’s expectations of ethical business practices into their business strategies as a way of not only responding to pressures from stakeholders such as employees and consumers among others, but also exploring opportunities that create competitive advantage for the company. Assessment of the role of UK government in encouraging sustainability in businesses as compared to other stakeholders Governments around the globe have increasingly grown aware of the significance of encouraging sustainability in businesses. In the UK, the government has played a critical role in encouraging sustainability in businesses. The government’s role in sustainability adoption often takes a regulatory approach. This is unlike other stakeholders of an organisation which have different key roles to play in encouraging sustainability, for instance, employees focus on productivity while consumers demand ethical products and services (Steurer, 2010; Bell, 2002:15). The key instruments governments use in encouraging sustainability in businesses mainly includes legislation, policies, public investments and fiscal mechanisms along with an emphasis on voluntarism on the part of the businesses. Policy interventions act as supportive frameworks for businesses in striving to attain sustainability and often occur at different levels, that is, at regional, national and local. For UK businesses, often the EU policy interventions set the framework in some areas of sustainability adoption. For instance the EU Energy Taxation Directive, the Ecodesign Directive, the Emission Trading Scheme, or the Ecolabel Regulation are some of the policy regulations on a macro level that obliges businesses to adopt more sustainable operations (Groezinger and Tuncer, 2010:7). The UK government has so far encouraged sustainability in businesses through providing supportive business environment that encourage competitiveness and innovation to maximise available market opportunities in the move towards a low carbon economy. Over the last few years, the UK government has shifted its role from government to governance, whereby the government encourages increased engagement of different stakeholders in ensuring sustainability and encouraging dialogue (Steurer, 2010). For instance, the UK’s Market Transformation Programme (MTP) is just one of the efforts towards encouraging businesses to produce sustainable products, especially those products which consume large amounts of energy and emit hazardous waste such as vehicles. The key emphasis in the government’s role is in ensuring that a regulatory framework as well as supportive policy are in place. The UK government has focused on promoting and shaping CSR in companies which is deemed as voluntary initiatives of the businesses. Accordingly, the UK government has acknowledged in its CSR website the need for businesses to adopt CSR initiatives. While the government sets the standards for the CSR, for instance standards in health and safety, environmental protection and employment laws, legal compliance with such standards is encouraged through CSR and through fiscal incentives (Steurer, 2010: 51). While the government generally takes a participative approach to policy formulation and encourages a voluntary approach to sustainability adoption, Webb and Morrison (1999:230) note that voluntarism cannot exist in a regulatory vacuum and neither can it be used to replace regulation and law. Hence even where businesses are encouraged to voluntarily adopt sustainability standards in their businesses, such standards have to be set by a regulatory body. Comparing the importance of the government’s role in encouraging sustainability in businesses to other stakeholders, it can be clearly noted that unlike other stakeholders, which may impact specific businesses, the government has a wider area of influence in the sustainability agenda. For instance, a regulation requiring payment of abatement fees after a certain level of emission is surpassed by a business would impact businesses across the country. How each business responds to the regulation is what differentiates the level of impact that such a regulation has on a business adopting sustainable processes (Steurer, 2010). This is unlike the impact that other stakeholders would have. For instance, customer’s demand for ethical cosmetic products not to be tested on animals would highly influence changes in business processes within the cosmetic industry rather than impact other industries such as the automotive industry. This clearly shows that the government has a wider reach. In addition, since governments mainly take a regulatory stance in encouraging sustainability, their role is more concerned with requiring businesses to comply with the set legislation and regulations. This is unlike other stakeholders whose impact in business sustainability is more spontaneous responding to changing in trends. For instance increase in consumer awareness of the need to preserve the environment may lead to higher demand for environment friendly products, like fuel efficient cars. However, this demand has to build up overtime for it to have any significant impact on whether businesses will switch to producing sustainable products (Bell, 2002:15). On the other hand, competitor’s adoption of a certain sustainable way of doing business that enhances competitive advantage would encourage a business to adopt the same methods so as to remain competitive in the market. Focusing on the automotive industry in the UK, the government has impacted regulations with regard to emissions standards and has also set ground where it provides incentives for the adoption of more environment friendly and fuel efficient cars. For instance the European Union’s voluntary Automotive Fuel Economy Agreement with Automobile manufacturers selling vehicles in EU countries, the UK included, set the tone for more fuel efficient vehicles with less carbon emission to be sold in the UK. This focus on sustainability in the automotive industry resulted in an increased demand for fuel efficient vehicles as well as innovation of better greener cars by various manufacturers. The market value for low carbon environment friendly products in the UK grew by 4.3% in 2010 from £ 112 billion in 2009 (Clark, 2010:6). This clearly shows an upward trend towards sustainability in businesses. The key drivers of sustainability in this industry mainly include high fuel costs which shift the industry to focus on higher fuel efficiency, rising consumer awareness on green products and collaboration between UK government and automotive manufacturers whereby an equal environment and regulatory framework, which encourages inward and home grown investments, is encouraged (DTI, 2011:2). In essence, the government is the driver in this case as it not only sets standards but also makes other stakeholders aware of what entails sustainability, which translates into pressure on businesses to adopt sustainable ways of doing business. Conclusion In conclusion, it can be noted that the key emphasis in the government’s role is in ensuring that a regulatory framework as well as supportive policy are in place. The UK government has focused on promoting and shaping CSR in companies which are deemed as voluntary initiatives of the businesses. Unlike other stakeholders, the government has a more controlled and stronger impact on encouraging businesses to adopt sustainability. This is because businesses have to operate within the confines of the set standards. However, within these standards, the government rather encourages voluntary compliance, while providing incentives for inward and home grown investments, especially in the automotive industry. 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