Why sustainable business is critical
Over the last two decades, the wide concept of sustainability has seized the interest of businesses and trades, and several attempts have been made to build subsets of it, such as sustainable business.
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The concept of sustainable business was initially unacknowledged (as in Ghana), but the current global view displayed by many corporate industries demonstrates that it is more than just a shift in conventional business regulations or a green idea.
In this edition, I will focus on the origins of the concept of sustainable business in terms of corporate governance.
No entity wants to be "singled out" for not pursuing the sustainability agenda, regardless of whether they are American pharmaceutical companies, British environmentalists, Chinese plastic manufacturers, Danish banking service providers, Ghanaian manufacturing companies, or Jewish business owners, because sustainable businesses (SBs) and innovations have become the sermon for a new way of doing business.
A variety of frequently held ideas about the link between human actions and the physical world are called into question by the subject of sustainable business hence this generation’s claim that it is a new phenomenon may not be entirely correct, because there were ecological and business problems prior to the Industrial Revolution, even if they were minor in comparison to the crisis the planet is currently facing, and the notion that we must act quickly rather than thoughtfully is challenged.
Caradonna attests to this by listing a number of changes in England in the 1800s that show that environmental andhow business challenges have always been at odds with nature, as follows:
• The Imposition of technology; for example, coal-powered steam, which resulted in the exploitation of millions of tonnes of coal every year
• The destruction of the past; which includes economic developments combined with the sale of communal lands, has transformed pastoral environments.
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• The manufacture of needs; validated the development of marketing items that created "new" consumer requirements in a deregulated market.
• The ordeal of labour; forcing an artisan to become unemployed or labour moving from home to the shop or factory;
• the service of the state; establishing a government-aided industrialisation, tax breaks and financial incentives which fuelled consumer revolution; finally,
• The conquest of nature with industrialisation was the first human endeavour to overstretch their ability beyond nature; thus, this assists in understanding how different types of technology have influenced generational attempts to dominate or overcome nature, creating a specific type of damage.
According to Monks and Minow, business issues such as corporate meltdowns, frauds and other disasters have resulted in the destruction of billions of dollars of shareholder wealth, the loss of thousands of jobs, the criminal investigation of dozens of executives, and record-breaking bankruptcy filings since 2002.
Although the 1990s were similarly troubled, the magnitude differed, but the combination of these issues precipitated the requirement of corporate governance.
Corporate governance
The above issues materialised because of organisational flaws. A lack of internal controls, risks associated with powerful individuals or business activities, a lack of ethical behaviour, risks associated with dishonest individuals or involvement of key executives, auditors, bankers or dishonest executives and politicians are examples of cases that contributed to corporate failures involving Enron, Parmalat, the Royal Bank of Scotland and Olympus Corporation.
Many people and entities have suffered as a result of these company failures, including stakeholders, employees, pension funds and suppliers, as well as the economic effects on the communities or markets in which these failed companies worked.
On a broader scale, business failures affect everyone, thus the question is why have such incidents happened and how could it be avoided in the future?
Corporate governance provides a logical rationale for rules and responsibilities, clarity and admissions capable of preventing similar situations in the future, and governments have shown interest in accomplishing similar feats to restore confidence in financial markets using corporate governance since the beginning of 2001.
To comprehend the significance of corporate governance, one must first understand what it is and how it may promote corporate responsibility and sustainability.
What then is corporate governance?
According to N.R. Narayana Murthy “the term ‘corporate governance’ is susceptible both to broad and narrow definitions. The important point is that corporate governance is a concept, rather than an individual instrument.
It includes debate on the appropriate management and control structures of a company.
He further explained that “it includes the rules relating to the power relations between owners, the Board of Directors, management and, last but not least, the stakeholders such as employees, suppliers, customers and the public at large.”
And Commonwealth Association for Corporate Governance says it is essentially about leadership:
• leadership for efficiency;
• leadership for probity;
• leadership with responsibility;
• leadership which is transparent and which is accountable.
These concepts demonstrate that corporate governance addresses both shareholders and stakeholders, as well as internal company issues.
It also assists an organisation in achieving its corporate objectives and hence functions as a performance monitor.
As previously said, the few but not exhaustive relevance of corporate governance is acknowledged because it is important to a well-managed firm as it provides optimal operational efficiency
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• It aids in ensuring that a company's controls are adequate and suitable.
• It prevents single individual dominance
• It streamlines interactions between management, the board of directors, shareholders and stakeholders.
• It ensures that the company is managed in the best interests of its shareholders.
• It promotes fairness, openness and accountability in order to improve company performance and management.
Ama Eson-Mensah is a journalist whose primary interests are sustainable business, photography, society and culture, sports and tourism.
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