Definitions - Sustainability Factors

1. Governance & Management.
2. Stakeholder Engagement.
3. Environmental Process Improvement.
4. Environmental Products/Services.
5. Local Economic Growth.
6. Community Development.
7. Human Resource Management.

Definitions - Business Success Factors

1. Revenue Growth & Market Access.
2. Cost Savings & Productivity.
3. Access to Capital.
4. Risk Management & License to Operate.
5. Human Capital.
6. Brand Value & Reputation.

Definitions - Sustainability Factors

Governance and Engagement

Governance & Management

This factor addresses the importance of sound business principles, transparency, values and ethics in governing a company. For example, the company may:

• Set in place basic governance structures e.g.

  • For family owned companies: constituting board of directors, succession planning, human resources and family-member employment; non-family-member shareholding, annual shareholder meetings, etc.

  • For listed companies: board of directors with non-executive and minority representation, shareholder meetings.

• Accounting and auditing performed in accordance with highest national standards and audit performed by recognized international firm.

• Set a mission statement, business principles, values and ethics, code of conduct around sustainable development performance including policies or codes of conduct on bribery and corruption, human rights, etc.

• Build specific structure and responsibilities for SD issues at the highest levels within the company (i.e. top-level responsibility as sign of commitment) and align incentives and pay systems with SD commitment and policies.

• Employ environmental, social or economic management systems, including national or international standards and certification (e.g. ISO 14000, SA 8000).

• Ensure alignment between company's lobbying or other government-related activities and its sustainability principles.

• Favor openness and transparency about activities except where commercial confidentiality is absolutely necessary.

Stakeholder Engagement

This factor addresses the company's engagement with stakeholders¹, regarding its sustainable development issues. For example, the company may:

• Provide public information on its sustainable development - environmental, social and economic - performance, principles and polices through meetings and communication with stakeholders.
• Regularly produce a public report.
• Business partner engagement (with employees, suppliers, joint-venture partners, contractors, shareholders and customers):
  • Select suppliers and business partners that meet sustainable development criteria.
  • Discuss and consult with workers on occupational, health, social and environmental issues.
  • Provide assistance to help suppliers and business partners meet these criteria.
  • Provide leadership in influencing employees, business partners, suppliers and customers to share best practice in pursuing sustainable development.
• Non-business partner engagement (e.g. governments, non-governmental organizations, industry associations, consumer groups and media):
  • Consult with external stakeholders over key environmental and social issues, to increase mutual understanding and co-operation in a way that affects decision-making.
  • Have a clear communication mechanism (e.g. a community liaison officer, formal complaints process, means of communication of relevant project information).
  • Have an external and independent sustainable development advisory board.
  • Show leadership with external stakeholders (government or industry associations, etc.) in promoting sustainable development.

¹Stakeholders are defined as those who affect, or are affected by, a company's operations. They can include employees, customers, shareholders, joint venture partners, governments, local communities, NGOs etc.

Environmental Focus

Environmental Process Improvement

This factor addresses the company's use of natural resources in the production of its goods or services. For example, the company may:

• Change/develop processes protecting the environment, including:
  • use less materials (including raw material and water use).
  • use less energy overall (and greater proportion from renewable energy).
  • reduce use and dispersion of toxic substances.
  • reduce waste and emissions to air, water and land, including greenhouse gases.
  • reduce their impact on the local environment - natural habitat and bio-diversity.
  • minimise use of transportation in production.
  • enhance the recyclability of by-products.
• Incorporate environmental considerations in selecting new sites and in closing existing sites.
• Ensure adequate resources are in place to meet any required site remediation or restoration.
• Work with suppliers to ensure common standards of environmental performance.

Environmental Products/Services

This factor addresses the importance of the company embedding environmental principles in its product or service development. For example, the company may:

• Develop new products or services specifically to improve its environmental, social or economic impact Integrate environmental, social or economic factors into product/service design and delivery; considering materials and inputs used, recyclability of product, maximising product life, etc.
• Assess products and services at different stages of production, use and disposal based on social and environmental considerations.
• Integrate external environmental costs into product/service decisions.
• Involve key suppliers in the review and design of products/services.
• Involve key customers in product servicing, maintenance and disposal which takes into account sustainable development issues.
• Adopt advertising and labelling practices reflecting economic, social and environmental concerns.

Socio-Economic Development

Local Economic Growth

This factor addresses the company's commitment to the capture of economic benefits within the community where the company is operating, as well as contributing to the economy. For example, the company may:

• Support community development and capacity to generate wealth by:
  • Giving preference to local businesses, both backwards, through the supply chain, and forward, through the distribution and retail network (particularly relevant for multinational companies).
  • Outsourcing activities and service requirements to local producers and suppliers.
  • Hiring staff from the local community (including at senior levels), paying fair wages and providing basic benefits (e.g. staff health and pension plan).
  • Providing fair wages and benefits to contract labour.
• Measure how it generates wealth and employment and how it is distributed (ex. taxes, wages, share ownership).
• Invest in infrastructure to support economic development, e.g. water supplies, roads, power, telecommunications.
• Contribute to training and sharing of technology, management techniques and standards with local suppliers, especially SMEs and marginalized (especially those displaced by setting up of the factory etc) or under-represented groups, as well as other actors such as government and NGOs.

Community Development

This factor addresses the company's commitment to the social development of the community (beyond economic development). For example, the company may:

• In deciding on siting, processes, products, etc., assess operations, products and services on the basis of social, political and local economic impacts.
• Extend employee health programs (particularly in areas such as HIV/AIDS) into the broader community.
• Recognise basic human rights in dealing with the community, e.g. indigenous property rights, use of security forces.
• Provide leadership in business ethics through avoiding bribes, corruption, conflicts of interest, etc.
• Undertake educational efforts ensuring capacity building, as well as institutional development projects.
•  Supporting heritage, art and culture.
• Invest in basic need projects around health, education, water, sanitation, etc. through donations in cash, kind or man-hours, particularly investment which :
  • Involves affected groups - civil society, government, communities - in ownership and responsibility for projects.
  • Involves participatory project planning, monitoring and evaluation.
  • Is part of a strategic program based on development needs and impacts.
  • Prioritises vulnerable or marginalized groups (indigenous people, single family heads, women).
  • Will become self-sustaining beyond the company's involvement.

Human Resource Management

This factor addresses the company's commitment to providing a safe, high-quality work environment for its employees – including management and staff – and contract labour. For example, the company may:

• Respect regulation working hours and payment for overtime.
• Pay fair wages compared to the national average, and provide basic benefits (e.g. staff health and pension plan).
• Provide health (including HIV/AIDS) and safety protection, enhancement and training for workforce, including subcontracted labour.
• Provide training and skill development of labor force to help them perform better, get promoted or find alternative employment in cases of redundancies.
• Develop labor practices around human rights (including child and forced labor), firing/redundancy and disciplinary measures in compliance with international standards and suitable for local conditions.
• Respect employees' right of association and collective negotiation if they so choose.
• Provide equal opportunities and maintain labor force diversity with respect to gender, religion, ethnicity, age, etc.
• Ensure work/life balance and provide flexible/part time working opportunities.

Definitions - Business Success Factors

This section defines the key factors that affect business/financial success for a company. The factors have been broken down into performance indicators - revenue and cost - which are the most tangible financial benefits, and business drivers. The business drivers are the factors that have an important influence on business performance and have been found to have an important influence on the other financial measures, e.g. increased motivation and morale under 'human and intellectual capital' could potentially decrease costs by increasing productivity.

Revenue Growth & Market Access

This factor reflects any increase in a company's income, including through increased market share, or access to new markets. It may include:

• Increased revenues due to the improvement of an existing product or the introduction of a new product resulting from sustainable development-based initiatives (e.g. sales of waste or by-products, emission trading, eco-tourism).
• Improved and/or more secure access to international and domestic markets/customers from sustainably harvested or produced goods.
• Given preference as a supplier due to environmental or social criteria.
• Access to new markets by innovatively filling a social, economic or environmental need which was previously overlooked.
• Increased revenues created through supporting the development of the local market.
• The ability to charge premium prices for more sustainable products, e.g. fairtrade or organic products.

Cost Savings & Productivity

This factor reflects any reduction in a company's operating costs or an improvement in its overall productivity and efficiency. It may include:

• Operational costs, for example:
  • Lower production costs.
  • Lower disposal fees.
  • Lower material and transport costs (e.g. through use of locally sourced materials and services).
• Maximising Productivity: producing more for each unit of currency spent on employees, contract labour, capital and other expenses through, for example:
  • Reduction in material use and waste generation.
  • Reduction in employee turnover and absenteeism.
  • Increased staff satisfaction and employee motivation.
• Minimising fines and penalties due to legal liabilities.

Access to Capital

This factor reflects the company's ability to attract capital, as well as the cost of capital to the company. It may include:

• Lower cost of capital due to improved risk profile and stability of cash flows.
• Improved access to long-term debt due to meeting certain environmental and social requirements.
• Increased ability to attract capital due to superior environmental or social performance.
• Increased shareholder value - likely to result in increased ability to raise capital through debt and equity.

Risk Management & License to Operate

This factor reflects the reduction in the likelihood that a company will suffer some loss, damage or disruption. It may include: 

• Risk profile:
  • Elimination or reduction of business disruption by proactive consideration of environmental and social issues (e.g. in site location).
  • Elimination or reduction of potential future costs and production delays.
  • Improved supply chain reliability.
  • Reduced vulnerability to changing regulations by being 'beyond compliance' - including positioning on issues such as the Montreal protocol (phase out of CFCs and replacement with alternative refrigerants).
  • Reduced political risk.
• Elimination or reduction of risk that the company's licence to operate will be revoked, including:
  • The 'legal' licence to operate - granted by government regulators.
  • The 'local' licence to operate - in the form of local community acceptance of (or lack of opposition to) the company.
  • The 'global' licence to operate - in the form of acceptance of the company's activities by international civil society (or lack of opposition). This is largely determined by the company's overall reputation and can be jeopardized due to perceived poor environmental and social performance.

Human Capital

This factor reflects the knowledge, skills and talent of the company's employees and contract labour, which are important in determining its ability to innovate and compete. This factor may include:

• Ability to attract and retain employees.
• Increased staff satisfaction and employee motivation.
• Increased employee empowerment and ability to innovate.
• Consultation and engagement activities that proactively address problems, leading to new innovations.

Brand Value & Reputation

This factor reflects the public perception of a company, its products and brands. This would include the reputation of the company, the personal reputation of the company manager/owner as well as the brand value of the company. It has an impact on the other financial factors, affecting for example:

• Assessment of the company by lending institutions and financial markets, and thus access to capital.
• Ability to attract business partners as well as quality employees.
• Licence to operate - legal, community and global licence.
• Reputation that can be quantified by:
  • Customer satisfaction surveys.
  • Ranking in lists (e.g. most admired companies).
  • Perception in public opinion polls.
  • Formal valuation of the company's overall brand.