Firms should show sustainable behaviour too: IIM-A study

Says firms should pursue 'triple bottom line perspective' which includes economy, social as well as environmental sustainability dimensions

While firms focus on financial and social performances in the interest of their shareholders and stakeholders, an Indian Institute of Management, Ahmedabad (IIM-A) study suggests a third dimension - sustainability.

According to the study, in order to enhance their performance and bottomline, firms should pursue 'triple bottom line perspective' which includes economy, social as well as environmental sustainability dimensions.

Titled 'Broadening the Concept of Sustainability and Measuring its Impact on Firm's Performance', the working paper has been co-authored by IIM-A faculty and members Bipul Kumar, Piyush Sinha, PR Shukla and Abhishek.

"There is an enhanced awareness among the firms regarding the impact of their marketing and business activities on the environment and society largely due to consumer education, the role of activists and aftermath of some disasters. The firms have started to look at these issues in a more holistic manner which is evident from the sustainability practices undertaken by them. In spite of such efforts, their outcomes regarding sustainability efforts are not in line with the expectations, raising the bigger question whether the firms are displaying and enacting right set of behavior towards sustainability," the paper states offering a rationale for such a study.

In view of the background, the paper explores the multifaceted behavioral dimension along with its drivers that contribute towards sustainability in a firm. It also endeavours to develop a measure of sustainability for the firms by including behaviour at the firm level as an additional dimension apart from the economy, social and environmental dimension from triple bottom line perspective.

"The paper explores behavioural elements towards sustainability by firms. This is because such behavioural elements too play an important role on their bottom line. Through the study, we found out that while firms express desire towards sustainable behaviour, they don't necessarily execute the same. The paper also proposes the relationship between sustainability of the firms and performance metrics including marketing metrics," said Bipul Kumar, co-author of the working paper.

According to Sinha, companies so far earned profits for shareholders and pursued corporate social responsibility (CSR) for their other stakeholders.

"However, they now need to take the next third step towards environment sustainability. They should think of sustainability during manufacturing process as well as in final products. For instance, they should exhibit sustainable behaviour even in sourcing material that are environment friendly. This is what we call 'triple bottom perspective' being adopted by firms," says Sinha, while elaborating on the study.

The paper also looks at some of the gaps on the behavioral aspect of sustainability and the relevant problems identified in the sustainability marketing literature.

"These problems in the sustainability marketing have been developed in the form of propositions that elucidate the relationship between the sustainability of the firms and the different performance metrics," it states.

Meanwhile, Sinha adds that the paper suggest integration of behaviour towards environment sustainability instead of just stating intentions.