Introduction
Sustainable value creation involves organizations creating long-term value through action on risks and opportunities accompanied by environmental, economic, and social developments. In other words, it is associated with operating practices and policies that help promote a firm’s competitiveness while simultaneously improving the ecological, social, and economic conditions in its operating society. Value entails the benefits relative to the costs of doing business. In addition, it encompasses the creation of economic value in a way that can also be advantageous to society by tackling its challenges and needs. The essay will analyze sustainable development, its associated opportunities, and challenges and present a case that portrays value creation.
Sustainable value creation can be easily created by fostering a collaborative system consisting of non-governmental organizations (NGOs), governments, corporations, and community members to generate some form of collective impact in society. This is in line with the stakeholder theory, where the company engages all the involved parties, including customers, employees, investors, suppliers, and communities.
It is highly comprised of corporate social responsibility (CSR), which is mainly used to drive value creation in operating societies. CSR helps nurture a positive image and goodwill among customers, which can help promote long-term shareholder value characterized by sustainable development. Therefore, sustainable value creation is directly linked with creating value that meets the current needs of society without in any way interfering with the capability of future generations to satisfy their needs (“session 4,” n.d). Thus, success in a business is associated with making a profit as well as sustainable value creation.
Involving all the stakeholders in an organization’s decision-making practices helps companies determine the societal and environmental issues that need to be fixed. This helps enhance the company’s legitimacy and reputation, which will enable corporations to preserve their operating licenses and promote business growth (“session 4,” n.d). Generating profits in organizations is not the issue of sustainable value creation but the methods these firms use to increase income revenue. Following this reasoning, when organizations externalize costs, break the rules, and ignore stakeholder concerns, they end up diminishing value (Chandler, 2021).
Some companies can benefit from doing their business this way, but it is challenging to sustain antagonistic behavior that is only advantageous to a narrow subgroup of constituents such as shareholders. Companies that follow this approach employ descriptive ethical theories to justify their actions that do not incorporate societal benefits (Mitra, n.d). Descriptive ethics tries to describe and explain moral decision-making and phenomena linked with why individuals act in a particular way.
Sustainable value creation helps enhance environmental efficacy concerning products and processes that reduce greenhouse gas emissions and waste. With this, companies are able to efficiently utilize inputs which help reduce the costs incurred in acquiring raw materials and waste disposal (“session 4,” n.d). Moreover, it helps foster the integration of stakeholder voices into business activities using extensive collaboration between customers, communities, suppliers, NGOs, and regulators. Additionally, companies will only be able to appropriately drive economic growth if they develop effective strategies that take care of the needs of society.
Sustainable value creation is largely associated with the view of capitalism which helps address human and environmental needs, creating job opportunities, improving efficiency, and building wealth. However, a narrow capitalist conception limits businesses from channeling their full potential to tackle the broader challenges in society (Porter & Kramer, 2011). Opportunities to create sustainable value in society have always been present but are mostly overlooked by most corporations. Following this, businesses have lost sight of efforts needed to help address issues faced in communities which brings forth the necessity of a new concept of capitalism in companies. This follows the fact societal needs continue to increase due to population growth (Porter & Kramer, 2011). Therefore, corporations need to redefine their activities to concentrate on creating sustainable shared value, which will help fuel productivity growth and innovation in the universal economy, thereby modeling capitalism’s stance and its connection to society.
Opportunities
Sustainable value creation helps companies retain the best employees or workforce. Sustainability is regarded as a vital instigator for employees to remain loyal to an organization. Employees are more drawn to companies that employ sustainable strategies that foster environmental and social responsibility. According to Chandler (2021), satisfied employees help boost productivity in the workplace, which enhances business growth. Additionally, sustainable value creation helps foster efficient use of resources such as energy and raw materials saving on costs. Moreover, sustainable value creation in corporations helps enhance customer retention, which fosters the sale of services and products and then helps increase revenue.
Sustainable value creation improves the public image of companies. Consumers are increasingly getting interested in using sustainable services and products. Therefore, sustainability in value creation helps communicate the company’s concern for protecting the environment and community, promoting its reputation, and fostering increased revenue. Furthermore, sustainable value creation develops opportunities for enhanced social responsibility. With CSR activities in society, such as education scholarships, communities are able to gain access to a platform that gives them opportunities to improve their quality of life.
Challenges
Lack of sustainable value creation in companies is associated with a decline in reputation and public image. Forsaking sustainable strategies communicates that the specified company is only interested in enhancing economic growth at the expense of environmental and societal needs. Following this, organizations end up fostering negative impressions among consumers, which can drive down sales and lead to decreased sales. Another vital challenge associated with sustainable value creation is the implementation costs. Integrating sustainable strategies into the operations of an organization can be a very expensive process that limits other companies from employing them to generate value creation in society. Moreover, ineffective sustainable value creation can promote employee turnover rates (Chandler, 2021). Employees tend to question if an organization is really concerned with changing its activities to be aimed at befitting the environment as well as society. Following this, the company ends up losing a talented workforce.
The Case of the Coca-Cola Company
Coca-Cola Company is committed to creating value for its stakeholders, which has helped it build value for its overall business operations over time. The company engages in developing, rewarding, and acknowledging its employees, which allows it to acquire and retain a motivated and skilled labor force. Furthermore, the company acknowledges the importance of employee safety & health by using the Zero is Possible vision to reduce injuries in the workplace, which shows employee value in the company enhancing retention. Moreover, the company has taken responsibility for protecting the environment and community. It believes that activities aimed at enriching the lives of societies help contribute to nurturing a positive public image while safeguarding the environment, which then boosts its market share and gains customers’ trust (The Coca-Cola Company, 2022).
To illustrate this, the Coca-Cola corporation has invested in various projects that have helped create value in society. The corporation took action toward developing a better-shared future using equity, inclusion, and diversity, which creates job opportunities for individuals providing a chance to improve quality of life and community growth.
Coca-Cola Company makes investments to foster economic empowerment and contribute through its foundation. Furthermore, the firm collaborated with the development of United Purpose in 2021 to help create 30 Women’s business centers which help over 30000 women obtain business training skills (The Coca-Cola Company, 2022). Moreover, the company, together with United Purpose, created a network comprising more than 70 training centers between 2015 and 2020 to support approximately 100000 women with technology and business skills, which then provides them with a stepping stone to economic self-reliance (The Coca-Cola Company, 2022).
The company is also committed to promoting environmental safety by enhancing the reduction of greenhouse gas emissions and curbing climate change. The company recycles and reuses its packaging bottles to prevent and manage waste management. The company has invested in plant-based bottles, which exclusively use renewable plant-based sources, eliminating the use of petroleum-based content, which helps minimize carbon footprint, thus promoting environmental health.
Conclusion
In conclusion, the paper has analyzed sustainable value creation together with the accompanies opportunities and challenges and a case study. Sustainable value creation is associated with involving the affected stakeholders. Involving stakeholders helps organizations establish environmental and societal issues faced in communities. Moreover, it aids in promoting environmental efficacy and reducing greenhouse emissions. The concept is highly related to capitalism, which helps address ecological and human needs. It helps enable companies to retain a competitive workforce, reduces operating costs, and maintains a customer base.
However, it is associated with high costs of implementation and can promote a destructive public image and increased turnover rates. The Coca-Cola Company is an excellent example of how corporations integrate sustainability to improve the efficacy of value creation. The company understands the value of employees through rewards and recognition. Additionally, it has invested in communities to enhance economic stability and growth in society. Furthermore, the Coca-Cola Company is committed to minimizing greenhouse emissions which then helps curb climate change.
References
Chandler, D. (2021). Sustainable value creation. Routledge.
Mitra, P. (n.d). Session 5: Responsible leadership (part II)-individual decision-making and ethical leadership.
Porter, M., & Kramer, M. (2011). The big idea: Creating shared value. How to reinvent capitalism and unleash a wave of innovation and growth. Web.
Session 4: The sustainable value framework (n.d). IÉSEG School of Management.
The Coca-Cola Company. (2022). 2021 Business & ESG Report. Web.