The business world has grown increasingly competitive over the years, thus putting companies under immense pressure not only to succeed in their operations but also to sustain in the future. Corporate sustainability is viewed as a means of creating long-term value for business owners by managing risks and embracing opportunities. Historically, corporate sustainability through activities such as corporate social responsibility (CSR) was viewed predominately as a cost that eats into a company’s profits. However, over the past few decades, business leaders have started to view sustainability as an opportunity rather than an obligation. In the wake of an increased level of awareness among stakeholders as well as a rising number of regulations, the concept of corporate sustainability has become even more relevant. Furthermore, investors’ interest in non-financial performance has also increased significantly. Companies are therefore shifting their focus on the short-term, narrow financial focus as initially was the norm, to focus on long-term areas of corporate sustainability.
Forms of Sustainability in Relation to Financial Management
Sustainability takes four key forms; human, social, environmental, and economic. These forms are often referred to as pillars of sustainability, all of which play a critical role in a firm’s financial well-being. Human sustainability focuses on maintaining and improving the human capital in society. For instance, investing in knowledge and skills, nutrition improvement, health, and education programs, and systems are some of the programs under human sustainability (Aggarwal 61). Firms that are keen on human sustainability understand that humans play a key role, either directly or indirectly, in the production of goods and provision of services. With an empowered human resource pool, businesses are able to get the best skills and talent, thus enabling them to manufacture cost-effective products, superior services, and undertake operations in an efficient manner. The bottom line of these programs would be improved efficiency and increased profits.
Economic sustainability focuses on maintaining the capital and other factors of production intact. Companies that are keen on economic sustainability strive to use assets efficiently as a way of maintaining profitability over time (Galant and Cadez, 677). On the other hand, social sustainability seeks to preserve social capital through the creation of services that improve the overall social well-being of society. Typically, businesses must understand that what they do impacts other people in society. As such, socially sustainable businesses integrate honesty, and cohesion in their activities as well as focusing on relationships amongst people.
Environmental sustainability seeks to improve the welfare of human beings through the protection of the natural environment. Natural capital such as land, water, minerals, and the air is a crucial aspect in any production setting (Aggarwal 63). Environmental sustainability is largely dependent on businesses’ ability to achieve economic outcomes without harming the environment, both in the short and long term. By companies being able to protect the environment, they are guaranteed continued production, thus able to sustain their profitability in the long run.
UAE Firm That Engages In Sustainability-Related Activities
Companies in the UAE are recognizing the need to raise standards so as to meet the internationally accepted levels of excellence in terms of accountability, financial transparency, environmental impact, and social responsibility. Apparel Group LLC is one of such firms that have greatly involved themselves in sustainability-related activities. Apparel Group LLC is a global lifestyle and fashion conglomerate situated in Dubai, UAE. With more than 75 brands sold in more than 1,750, the company caters to the desires of eager shoppers across four continents (Apparel Group n.p). The company employs approximately 17,000 multicultural staff, all of which have been key in assisting the company to achieve its objectives. Apparel Group has established a strong presence in UAE, Bahrain, Oman, Saudi Arabia, Kuwait, South Africa, Jordan, Indonesia, South Africa, Poland, Indonesia, Malaysia, and Thailand. Further, the company has also developed strategies aimed at entering new markets such as Egypt, Pakistan, the Philippines, and Hungary. The company also operates other brands originating from Europe, Australia, Asia, Canada, and the USA.
Apparel Group is committed to sustainability; a fact which is evident from its various sustainability-related activities. For instance, the company has a vibrant CSR mission that addresses its commitment to sustainable actions while at the same time contributing meaningfully to the social, economic, and environmental performance. The company engages in activities that touch on all the four forms of sustainability (Apparel Group n.p). Some of these human sustainability activities undertaken by the company include the organization of health and wellness camps and engaging in Dubai’s fitness challenge. In terms of human capital development, Apparel Group organizes various training programs, both for their staff and the community. Additionally, the company also offers internships and part-time work opportunities to different groups of people both in the UAE and across borders. In 2017, a total of 643 students were trained and 349 received certification in apparel training (Apparel Group n.p). Apparel Group LLC also engages in environmental sustainability through the adoption of proper waste management systems, the use of sensor-triggered lights, timed AC usage, and LEDs that conserve energy.
Analysis of How These Sustainability Activities Are Expected to Affect the Firm’s Corporate Performance
The ever-growing desire to position UAE as a global epitome of financial, real estate, and tourism activity has forced businesses to keenly take note of the global corporate agenda. Similarly, many companies are embracing the concept of ‘Green Finance’ as a way of building and promoting ‘Green Emirates’. Apparel Group LLC emphasizes the ‘triple bottom line’ denoting the three key aspects of sustainability; people (social), planet (environmental), and profits (economic) (Apparel Group n.p). Given the dynamism, complexity, and competitiveness of today’s business world, it is very likely that Apparel’s corporate sustainability which is derived from its social responsibility will largely influence its financial performance. Typically, companies engage in CSR activities for a number of reasons. For instance, some companies may engage in sustainability activities for pure philanthropy, without expecting any direct paybacks (Aggarwal 63). On the other hand, some other companies engage in CSR activities with the aim of conforming to external pressures while others do so in expectation of the benefits such as stronger reputation and financial gains.
Generally, companies such as Apparel Group LLC are able to benefit from being socially responsible in a number of ways. For instance, it becomes easier to market their products to potential customers when society feels that they are interacting with a company that cares about their welfare, both social and economic. Further, engaging in social activities such as fitness challenges helps companies market themselves to potential customers who may end up purchasing company products (Galant and Cadez, 680). Additionally, activities such as apparel training activities send a powerful message to potential customers. Engaging in social activities is a powerful platform, through which Apparel Group LLC can advertise its brand. The long-term effect of such activities would be increased market share and higher revenue.
Apparel Group can also benefit from a large pool of qualified and talented staff through their CSR activities. For instance, engaging in sustainability activities such as offering training, certifications, and internship programs help in imparting necessary skills to potential workers. With qualified staff, the company is able to manufacture high-quality clothes that improve its competitive edge. The company’s sustainability activities can therefore act as a great source of competitive advantage (Galant and Cadez, 680). In a world marred with extreme competition, developing an edge over key competitors is at the core of any strategic management strategy. Similarly, such activities can positively impact on the company’s reputation and image. Customers will most likely want to associate themselves with a company that engages in CSR activities such as blood donations, training, promoting fitness, just as Apparel Group does.
Apparel Group also expects to benefit from a positive impact on employee motivation and improved retention levels as a result of its sustainability goals. For instance, the company provides accommodation to their warehouse staff, thus encouraging them to concentrate more on their work, hence increasing profitability (Lassala, Apetrei, Sapena 2). Improved quality of cloths manufactured due to skills imparted, lower employee turnover and hence, reduced employee cost, reduced paper wastage, and recycling as a way of environmental sustainability all lead to reduced operational cost, which has a direct impact on profitability. Additionally, sustainability activities ensure that the company conforms to existing compliance laws, thus avoiding hefty penalties and fines. Ultimately, increased market share and higher sales result in better financial performance.
Sustainability has been described as the ability to meet the needs of the present generation without compromising future generations’ ability to meet their own needs. Companies that focus on sustainability focus on the ‘triple bottom line’ denoting focus on people, profits, and the environment. Similarly, firms that embrace the four forms of sustainability, that is, human, social, economic, and environmental suitability stand the best chance of sustaining their corporate financial performance. In the UAE, various companies have started to acknowledge the benefits of engaging in sustainability activities, thus embracing ‘Green Emirates. One of such companies that have been vibrant on CSR is Apparel Group LLC. The company has a vibrant CSR mission that addresses its commitment to sustainable actions while at the same time contributing meaningfully to the social, economic, and environmental performance. Apparel Group expects to reap greatly from its sustainability activities due to benefits emanating from increased market share and revenues, access to qualified staff, and better company image and reputation.
Aggarwal, Priyanka. “Impact of the sustainability performance of the company on its financial performance: A study of listed Indian companies.” Global Journal of Management and Business Research (C: Finance) Volume 13 (2013). https://globaljournals.org/GJMBR_Volume13/6-Impact-of-Sustainability-Performan.pdf
Apparel Group. “Company – Apparel Group”. Appareluae.Com, 2020, https://www.appareluae.com/company/.
Galant, Adriana, and Simon Cadez. “Corporate social responsibility and financial performance relationship: a review of measurement approaches.” Economic research-Ekonomska istraživanja 30.1 (2017): 676-693. https://www.tandfonline.com/doi/full/10.1080/1331677X.2017.1313122
Lassala, Carlos, Andreea Apetrei, and Juan Sapena. “Sustainability matter and financial performance of companies.” Sustainability 9.9 (2017): 1498. https://www.researchgate.net/publication/319257544_Sustainability_Matter_and_Financial_Performance_of_Companies