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Among the most important issues facing business today is sustainability. Sustainability is concerned with meeting the needs of the present without compromising the ability of future generations to meet their own needs. A sustainable enterprise is one that considers its impacts on the environment and on society in general, while maintaining financial profitability. Sustainable enterprises measure success in terms of a triple bottom line ([11] Savitz and Weber, 2006) comprised of:
the environmental bottom line;
the societal bottom line; and
the financial bottom line.
Sustainable enterprises search for a "sweet spot" where harmful social and environmental impacts are minimized, and an adequate rate of return is realized. This philosophy is illustrated in Figure 1 [Figure omitted. See Article Image.].
We first review the literature on environmental sustainability and on corporate social responsibility, and then report the results of a study that examines whether environmentally and socially sustainable businesses outperform key competitors that do not share the same practices. While a cover story in Business Week ([1] Engardio et al. , 2007) concluded that the results from dozens of studies examining the relationships between a company's social and environmental practices and its financial performance were mixed, we find that, on average, environmentally and socially sustainable businesses are more profitable, have higher growth rates, and create more shareholder value than their less committed competitors. Since this is not true of all environmentally and socially committed businesses, we see that hitting the sweet spot is not easy. We conclude by offering a set of guidelines for how businesses can hit the sweet spot.
The environmental bottom-line
For decades, the concern about our natural resources being depleted by human activities and economic expansion has grown deeper and deeper. More and more environmental problems have been recognized, including air and water pollution, ozone depletion, global warming, toxic wastes in groundwater and worldwide destruction of ocean fisheries (e.g. [16] World Resources Institute, 2004). With the growing awareness of the depletion and/or degradation of natural resources, the environmental sustainability movement has awakened nations, businesses, and individuals to the necessity of protecting the environment for the benefit of generations to come.
Some consumer and technology-oriented businesses have been proactive in this area because they have financial reasons to commit to environmental sustainability. A...