The challenges companies face in Corporate Sustainability and the 2030 Agenda

What is Corporate Sustainability?

There are many definitions of corporate sustainability. One of the most well-known is the one proposed by the United Nations Global Compact, which states that sustainable institutions are those that, "in addition to generating financial profitability, create environmental, social, and economic value in the medium and long term, thus contributing to progress and the well-being of the communities where they operate and of future generations".

While this is an interesting definition, I propose approaching sustainability through the concept of "impact." In my view, a company is sustainable when it proactively works to measure the impacts it generates in all areas (social, environmental, and governance). Once this is done, the institution must be able to anticipate and mitigate its negative impacts and work to maximize its positive impacts.

Sustainability based on "impact" is an approach increasingly used within the European Union. This is because the term sustainability has suffered some discredit over the years. It is undeniable that some brands have marketed themselves as sustainable simply by engaging in philanthropic environmental initiatives, for example. Meanwhile, these brands have sometimes neglected their true commitments to social, environmental, and corporate governance responsibilities.

In light of the above, it is not surprising that corporate sustainability has often been closely linked to Green Washing in environmental matters or Pink Washing in gender equality.

Corporate Responsibilities before Philanthropy

Returning to the first paragraph of this article, where the concept of corporate sustainability proposed by the United Nations Global Compact is addressed, I agree that a company's obligation to be profitable is a prerequisite for sustainability. Otherwise, the company would struggle to sustain itself long enough to support a sustainable future.

This approach is illustrated by Carroll's Pyramid. According to this model, a company has economic obligations. Additionally, the company should comply with the law and behave ethically with its stakeholders. Only after fulfilling these responsibilities should philanthropic actions be implemented.

Benefits of Corporate Sustainability

Sustainability policies have been shown to generate significant benefits for companies that implement them. Below are some key advantages:

Economic advantages

Sustainability policies primarily offer a competitive advantage. Interestingly, whenever we discuss this advantage, we tend to think of it as an external competitive advantage. A company that is socially and environmentally conscious can attract new consumers and gain access to new markets more easily.

While this is true, in my view, the main competitive advantage in terms of sustainability is internal. For example, in circular economy terms, a sustainability-oriented design (eco-design) allows for a reduction in material usage during the production process. Likewise, introducing more modern and optimized machinery helps lower energy consumption in manufacturing. In this regard, the World Business Council for Sustainable Development (WBCSD) has indicated that companies implementing concrete energy efficiency measures can reduce their operating costs by up to 30%.

Positive impact on the company’s reputation

According to Marta Carrió in her Corporate Reputation Management Manual, there are four main pillars that ensure a company's reputation. The first is the quality of its products, processes, and resources. The second is performance in economic and innovation terms. The third is responsibility, and the fourth is attractiveness.

Based on this, it is clear that corporate responsibility and sustainability are essential elements for an institution to have a strong reputation. Furthermore, since reputation is an intangible asset built over the long term and requires a lasting foundation of trust with all stakeholders, sustainability and Corporate Social Responsibility (CSR) policies cannot be merely circumstantial or time-limited. Instead, long-term, stable policies must be established.

Attraction and retention of talent

To attract and engage talent, companies must connect with the values and expectations of new generations. According to a report published by Randstad, “Workmonitor 2024”, 35% of Generation Z respondents stated that they would not work for a company that does not make a proactive effort to be more sustainable. Meanwhile, the “Deloitte Global 2024 Gen Z & Millennial Survey” highlights that "in Spain, nearly nine out of ten millennials (87%) and Gen Z (84%) express that their organization’s purpose is important to their job satisfaction and are more likely to reject jobs or employers that do not align with their values".

Key factors for implementing sustainability in companies 

Below are some key steps that I believe are crucial for successfully implementing sustainability:

1. Reflecting on corporate purpose. Sustainability should not consist of a set of isolated strategies and actions disconnected from the company’s mission. Modern businesses should focus on their mission and on meeting the expectations of all their stakeholders, both internal and external. As a result, their mission should include aspects such as worker well-being, not just environmental care.
2. Selecting material topics based on real business impacts. The era when a company could call itself sustainable - and publicly communicate it - simply for sponsoring a local football team with €100 is over. In this regard, Directive (EU) 2022/2464 of the European Parliament and Council, dated December 14, 2022 (CSRD), already mandates certain companies to report on corporate sustainability according to established parameters. Among other things, a company’s non-financial report must include a sustainability risk analysis and an assessment of the real impacts the company has in social, environmental, and governance areas.
3. Setting specific, challenging goals, strategies, and actions. Implementing sustainability should go hand in hand with achieving SMART and ambitious goals. Many sustainability reports are hundreds of pages long, covering a wide range of topics but failing to delve deeply into any of them.

If a company wants to meet stakeholders' expectations regarding sustainability, the first step should be to establish measurable objectives and clear, well-defined KPIs for reporting purposes.

Corporate sustainability for SMEs

According to the latest data provided at the end of 2024 by the Ministry of Industry and Tourism, Spain has nearly 3 million small and medium-sized enterprises (SMEs), specifically 2,942,716, employing more than 11 million people.

Given these figures, it is clear that the SME sector is critically important to sustainability, both in scale and impact. The challenge, however, is that, as noted by Ángel Luis Martínez of INEAF, "in sustainability matters, SMEs have had limited resources, lack of access to technology, and fewer capabilities to comply with complex regulations".

Specific challenges faced by Small and Medium-Sized Enterprises 

Globally, the International Innovation Barometer 2024 (Ayming) reports that 78% of companies have allocated up to 20% of their annual budget to innovation. In Spain, the outlook is less optimistic. According to data from FI Group, "the number of companies engaging in R&D activities has declined, with 606 fewer companies in 2023, bringing the total to 11,284. This reduction has been mainly concentrated among microenterprises and SMEs, whereas large companies have increased their R&D investment".

Beyond financial challenges, many SMEs also struggle with measuring sustainability-related metrics. A notable example is calculating their carbon footprint.

Conclusions

Sustainability stands out as a significant opportunity for companies today. To seize this opportunity, businesses must establish a corporate purpose that creates value and meets the expectations of all stakeholders. In this regard, SMEs should receive incentives for innovation to ensure the transition toward circular economy policies.

If you want to learn more about sustainability, circular economy, and become an expert in these topics, I recommend the Master in Sustainability and Corporate Responsibility at EAE Business School, an institution that is part of Planeta Formación y Universidades.