Theoretical Analysis of Key Sustainability Concerns in a Circular Economy

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THEORETICAL ANALYSIS OF KEY SUSTAINABILITY CONCERNS IN A CIRCULAR ECONOMY

The Triple Bottom Line (TBL)

John Elkington designed the Triple Bottom Line (TBL) theory in 1994 to link sustainable business with the three “Ps” (i.e. people, planet and profit). In a volatile business world where inequality, poverty and climate change have taken the lead, Elkington made an attempt at encouraging frontline stakeholders in our current financial accounting-based business ecosystem to embrace a more comprehensive approach in analysing the environment, social and governance (ESG) impact of business (Acerbi & Taisch, 2020).

Figure 1: The Triple Bottom Line (TBL) Concept

Source: Liang et al (2018)

Global economies have thrived on profit-oriented services or a financial bottom line. But with Elkington’s theory, and its application by many companies, a large number of businesses have shown commitment to CSR, environmental sustainability and social well-being to achieve financial success and resilience. The theory is measured with three indexes: economic (e.g. job growth, employment distribution by sector and personal income); environmental (e.g. solid waste management, electricity/fossil fuel consumption, land use, hazardous waste management, and excessive nutrients); and social (violent crimes per capita, gender equality, unemployment rate, median household income etc) (Andrew, 2006).

Basically, TBL as a business concept encourages organizations to consistently measure their social and environmental impact—in addition to financial performance—instead of focusing on profits only. Although idealistic in nature, TBL places purpose over profit and large corporations have proved the practicability of Elkington’s theory by adhering to sustainable business practices while making profits. Therefore, it is possible for a brand in local and international markets to “do well by doing good.”

Business Ethics

The world’s sustainability issues present opportunities for businesses. For example, organizations can leverage the ESG challenge to make billions by providing safe, affordable and eco-friendly products for the existing and new market segments. But to achieve competitiveness and survive in volatile market environments, companies should not only embrace sustainable business strategies but adhere to ethical practices that make them attractive to investors and strengthen affiliation with governments, customers as well as host communities (Julian & Ralf, 2019).

Business ethics refer to a mix of moral principles that serve as guide to business activities. Therefore, an ethical business practice means distinguishing between what is “right” or “wrong”. Some examples of unethical practices are: tax evasion, child labour, unsafe work conditions, discrimination at the workplace, poor waste management policies, bribery and corruption etc. Similar to CSR, which involves investing in social welfare and community development, ethical business practices help to keep the workforce and environment safe, as well as improve organizational culture, business strategy, and trade interactions with customers and stakeholders. Integration of ethics in business also strengthens accountability, fairness and transparency, thereby resulting in delivery of better goods and services (Acerbi & Taisch, 2020).

Over 70% of ESG controversies across the world are due to business ethics. According to the utilitarian theory of business ethics propounded by propagated by many philosophers, including Jeremy Bentham, James Mill, and Mill’s son John Stuart Mill, organizations should focus on limiting the negative impact of its business to the lowest number of people. This increases business outcomes and the number of stakeholders benefitting from the business. The utilitarian approach is based on the moral value that everyone has a right to life and should be treated with respect and dignity. Companies analysed by Valtteri et al (2018) have low in ESG indicators in varying degrees. For example, Ekokem, UPM and Republic Services have low investment in waste management. Suzhou produces products that are difficult to waste, and Huawei lacks the accreditation required to improve recycling activities whereas Dell has a robust mechanism for recycling waste. But the American brand is widely criticized for exploiting its sustainability rating to hike prices, thereby scoring low on the economic indicator.

FINDINGS

Key Sustainability Concerns and Impact on Business

The implementation of sustainable business practices enables organizations to reduce various negative impacts on the environment, economy and society. Some of the critical sustainability issues are: biodiversity, deforestation, forced labour, water use, poverty, and Greenhouse Gas (GHG) emissions (Julian & Ralf, 2019). Based on these findings, the major sustainability concerns are how to:

  • Advance the Circular Economy—There are limited resources in the world. Thus, companies rely on collaboration to maintain steady supply of raw materials and achieve competitiveness as well as profitability. But waste disposal via land, water and air as seen in the activities of Huawei, Dell, Suzhou and other companies significantly depletes the scarce natural resources, thereby posing a huge risk to global supplies.
  • Increase governmental support—Notwithstanding the relevance of sustainable businesses and importance of globalization, governments are protective of their indigenous companies and this makes it difficult to implement policies that strengthen partnership between private- and public-sector companies. Thus, there’s no level playing ground for multinational corporations as country-level rules and regulations often impose strict, exploitative conditions that limit global expansion of sustainable businesses (Acerbi & Taisch, 2020).