Criteria For Sustainability – Are Decisions Responsible – Environmentally? Economically? Socially?

As the economy migrates from the industrial age to the information age, the value of knowledge becomes more significant. As more information becomes available about the impact of industrial activity on the ecosystem, it is important to acquire knowledge about sustainable development, and promote it responsibly. The sustainable enterprise has to make decisions that include environmental, economic, and social criteria for itself, its constituencies, and the community-at-large.

The sustainable enterprise gains a beneficial position over time either by enhancing or maintaining its current position, or by changing it. It must make decisions in the present that affect both the present and the future in such a way that future generations are not impacted negatively.

The sustainable enterprise employs three criteria in all decision making – are the mindset and intended actions responsible:

  • Environmentally?
  • Economically?
  • Socially?

These three criteria should be embraced within values statements so as to set expectations for attitudes and behaviors within the enterprise, with its constituencies, and with the community-at-large.

Environmentally responsible…

Being environmentally responsible is a discipline that applies to people, and the characteristics of processes and products and/or services (including packaging materials) that they create. It means protecting the ecological biosphere by conserving natural resources, avoiding contaminants and pollutants, and protecting the air, sources of water, and soil, minerals and oils, and plants and animals. It also means being energy efficient and adopting recycling programs.

The benefits of being environmentally responsible include:

  • Accident avoidance – less employee sick time and lower insurance costs
  • Anti-pollution – less clean-up costs
  • Conservation – less waste
  • Employee welfare – reduced turnover and hiring costs
  • Recycling – reduced disposal costs
  • Safe products and/or services – less liability suits

Decisions should be made with environmental responsibility in mind for the enterprise, its constituencies, and the community-at-large.


Economically responsible…

Being economically responsible is a discipline for building the value of the enterprise while considering the needs of constituencies and the community-at-large. Enterprise value is the equity value plus the fair value of the long-term debt plus minority interests in affiliates less minority interests of affiliates and cash and cash equivalents.

Under the notion of stewardship – the responsibility for the performance of the enterprise and the delivery of value, being economically responsible means instilling a value management discipline. This discipline embraces shared values (common beliefs), a vision of what the community and the enterprise can become within its mission, and building value – worth and usefulness. If the value proposition is compelling, constituencies will follow because everybody likes to be associated with success.

The value management discipline includes having effective systems of control, and employing both financial and non-financial performance measures to monitor contributions to enterprise value. Financial measures include revenue, costs and expenses, profits, cash flows, and returns on investment. Non-financial measures include market share and penetration, product usage, satisfaction, quality, time-to-market, cycle time, productivity, asset capacity and utilization.

Measures for economic sustainability include:

  • Asset life cycle renewal period – ability to replace capital assets according to a prudent retirement schedule
  • Average collection period – effectiveness of converting receivables into cash
  • Current ratio – ability to cover current obligations as they become due
  • Debt service coverage – ability to cover debt obligations as they become due
  • Efficiency – ability of operating revenue to cover costs and expenses
  • Financial leverage – strength of the equity base and the dependency on debt
  • Solvency – ability to cover all obligations as they become due

Economic considerations for constituencies include:

  • Employees – fair compensation, career development opportunity, and a safe workplace in exchange for loyalty and productivity
  • Customers – quality and value in exchange for loyalty and timely payments
  • Suppliers – loyalty and timely payments in exchange for quality and value
  • Investors – returns above the cost of capital in exchange for commitment
  • Regulators – compliance in exchange for freedom to do business within laws and regulations, and a level playing field
  • Competitors – challenges in exchange for fairness

Decisions should be made with economic responsibility in mind.


Socially responsible…

Being socially responsible is a discipline that applies to all individuals and enterprises with respect to the community-at-large and society. The minimum standards for social responsibility for enterprises are:

  • Providing safe and environmentally friendly facilities and equipment, processes and functions, and products and/or services
  • Not engaging in deceptive or fraudulent practices
  • The requirements for being socially responsible include:
  • Giving back to the local community
  • Providing equal opportunity and embracing diversity
  • Offering opportunities to the disabled and handicapped

Decisions should be made with social responsibility in mind.


The sustainable enterprise builds aspirational, competitive, collaborative, and cooperative advantage in order enhance, and maintain its beneficial position.

Aspirational advantage consists of loyal relationships between employee, customer, supplier, and investor constituencies because stated values and enacted values are consistent. Competitive advantage results from the position and posture that offers consistencies better value than competitors. Collaborative advantage is obtained from relationships between suppliers, or customers, or peers as a partnership with a common mission, and operating dependently for mutual value. Cooperative advantage is obtained from relationships between suppliers, or customers, or peers as an association with a similar mission, but operating independently for mutual value.

Building collaborative and cooperative advantage strengthens relationships with constituencies in communities, and contributes to the development of economic clusters – a key to community sustainability.

Enacting change is routine for a sustainable enterprise to continue as an ongoing concern.

Making sustainable decisions is an enterpriship (entrepreneurship, leadership, and management) competency.

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