Why Sustainability Is Key to Business Performance

The social and economic impact of the financial crisis in 2008 not only sent shockwaves throughout the world, it also galvanized a growing movement of citizens and business leaders who wanted companies to be more socially and environmentally responsible.

“Maximizing shareholder value had been at the heart of corporate strategy for decades, but with taxpayers bailing out banks and financial institutions, it was abundantly clear that the shareholder is not the only stakeholder.

For Rodolphe Durand, Professor of Strategy at HEC Paris, it is no longer enough for companies to focus on objective economic factors and financially viable business models. Integrating sustainable innovation, inclusive growth, as well as social and environmental impact into their corporate strategy, now makes real business sense.

This shift in mindset can open up opportunities for companies to innovate differently and achieve economic growth. It can also be a major source of competitive advantage. Patagonia, the outdoor equipment firm, is just one example. Driven by its ethical policies, the company has achieved annual sales of over $750m.

“If you don’t consider the social inequality that exists in the market you operate in, if you don’t analyze the environmental impact of your operations, I think you are shooting yourself in your own foot,” states Professor Durand.

In response to increasing public concern about the social impact of companies, a new landscape of national and transnational regulation has begun to emerge. Finance has also started to find ways to leverage its power for social good.

Striking the right balance between positive social impact and economic performance has also meant rethinking business education. This motivated Professor Durand to found the Society & Organizations Center at HEC Paris. It brings together over 40 researchers, professors and doctoral students from multiple disciplines who carry out research, teach and implement ideas to ensure that the purpose of business goes beyond maximizing shareholder value.

“Our role as business school professors is to educate the people who make decisions, and make them aware of the consequences that their decisions can have – not just for themselves or their organization but for the world we live in,” affirms Rodolphe Durand.

“You can no longer just be an organization that solves problems in a mechanical way. The mentality of customers is changing so you have to think about why you’re doing what you’re doing and for whom.” – Professor Rodolphe Durand

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Click here to download the HEC Paris White Paper SOCIETY & ORGANIZATIONS: WHY SUSTAINABILITY IS KEY TO BUSINESS PERFORMANCE

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