Sustainable business combats global irresponsibility

Global warming creates societal and environmental problems that impact the financial and political climate and the quality of life around the world. How can businesses thrive in this type of environment?

In a turbulent world, businesses that embrace sustainability are often the ones that prosper. Sustainable enterprises take financial, ecological and social impacts into account in their own operation and in their supply networks. Also consumers and stakeholders are showing increasing concern for our planet's condition and demand companies to act responsibly.

"The issue is important because responsible business is a powerful solution to global problems. From another perspective, sustainability is the only feasible approach to business these days," outlines Paavo Ritala, Professor of Strategy and Innovations at the LUT School of Business and Innovations.

Sustainable businesses aim to withdraw from the conventional race to the bottom thinking where environmental or labour regulations are alleviated to remove obstacles to successful business. The LUT School of Business and Management believes that Europe cannot present business enterprises the best tax advantages, lowest wage requirements or most efficient infrastructure at the cost of environmental values.

"The prosperity and well-being of a nation must be founded on the promotion of sustainable and responsible businesses. This also includes financial responsibility; for instance, where the company pays its taxes," Ritala says.

Finland in the vanguard of corporate social responsibility

Sustainable business in Finland can be viewed as a global benchmark for the promotion of social sustainability. Social sustainability aims to eliminate inequality between people and promote the implementation of basic rights. Finland's working culture is based broadly on the principle of fairness, and institutions are built on trust.

According to Post-doctoral Researcher Anne Quarshie, global challenges require that businesses demand sustainability also from their stakeholders – that is, beyond the company walls.

"In terms of social issues, Finnish legislation guarantees good working conditions, but a company's entire supply chain may not be able to do the same," Quarshie points out.

Quarshie has observed that corporate social responsibility in Finnish businesses has become more systematic and ambitious in the 2000s. Companies also bear increasing responsibility for environmental issues, as corporate responsibility professionals have gradually awoken to the deterioration of global biodiversity.

Quarshie explored these issues with her colleague Laura Olkkonen in the book Corporate social responsibility in Finland: Origins, characteristics, and trends. Responsibility thinking is now embedded into organisational cultures instead of being an afterthought, as it previously was.

"If a company wants to stand out and achieve a competitive edge, it must take action and create positive impacts – not merely attempt to avoid negative ones. A responsible company goes above and beyond the letter of the law," Laura Olkkonen summarises.

Finnish companies also communicate more boldly about their responsibility and welcome related criticism. In the best case, the criticism may open a dialogue and lead to necessary changes. According to Laura Olkkonen, pioneering companies introduce new ways of acting responsibly, such as Finlayson's woman's euro equality campaign, inspiring other businesses to communicate more openly. External and internal communication is imperative in the promotion of corporate social responsibility.

"Fear of an uproar no longer prevents businesses from pursuing societal impact. The time for silence or lukewarm communication on responsibility is over."

Platform economy reforms business models, value chains and ecosystems

Business becomes more sustainable through renewal: as startups are founded, large enterprises undergo reforms, and businesses grow and internationalise.

The current global reform trend relates to platform economies. The mutual exchange of services and goods between businesses, customers and private citizens on digital platforms is based on sharing, combining, analysing and interpreting data. Data may provide information on, for instance, a surplus of resources that the company may sell or rent to a third party. The circular economy adds ecological value to the mix.

Paavo Ritala anticipates that data available on global industrial platforms will be increasingly used to develop ecologically and economically sustainable business.

"Our Scandinavian culture of trust may be an advantage in these platform and application programming interface (API) solutions, where success is based on communication between digital interfaces between business actors and on the innovative combinations of services, content, and other inputs."

New business models can be created even in the far north around ethically sustainable values.

"In digital business, people have woken up to the developments that threaten entire societies through, for example, election tampering and fake news. Our expertise in privacy protection and personal data processing may turn out to be a competitive edge in sustainable digital business," Ritala envisions.

Profitable business with a social mission

The LUT School of Business and Management is interested in contemporary economic phenomena, such as the platform economy, from the perspective of sustainability. LUT aims to understand the actions and strategies that enable businesses to create value sustainably and still succeed in the future. LUT's researchers know that the creation of a new business strategy needs to focus on intangible value creation.

"In addition to financial value, business always generates social and cultural value. When value creation is intangible, we can focus on aspects that create meaning and experiences to the world," Ritala says.

Sustainably renewing businesses not only recognise their influence over societally and globally important developments but also communicate actively about them. In fact, to consumers and investors, ethical considerations have risen in importance alongside monetary ones.

"Our values affect our purchase behaviour. We're prepared to pay more if we know that the product is, say, environmentally friendly," Ritala sums up.

The importance of social enterprises will grow

In an ideal situation, a company could communicate about its business model that creates value to the consumer, stakeholders and environment. Social enterprises are close to this ideal: instead of maximising profits, they may aim to utilise industrial by-product flows or provide jobs for the long-term unemployed. The result of social enterprises can be seen in the changes they create in people's lives or the environment.

A study conducted at LUT shows that the importance of social enterprises will grow by 2025. Social enterprises will mostly be founded to employ the younger generation.

According to Researcher Saila Tykkyläinen, the growth strategies of social enterprises are challenged by how well the business does on the market while fulfilling its social mission.

"In the best scenarios, a positive cycle is created in both missions. For example, restaurants that rescue surplus food are success stories in this field," Tykkyläinen says.

Finns are good at innovation but bad at commercialisation

The LUT School of Business and Management examines how new, economically, socially and ecologically sustainable value and innovations are created in business ecosystems. Finland's strength resides in the creation of networks and ecosystems that include a variety of competitors and partners.

"Trade associations and industrial forums keep popping up in Finland. Universities, the society and businesses operate in dynamic ecosystems around sustainability themes," Paavo Ritala reveals.

For example, LUT University is a member of the Package-Heroes consortium that creates plastic waste-minimising innovations in collaboration with VTT, the Natural Resources Institute Finland, and Åbo Akademi University. By developing power-to-x technologies, LUT enables different sectors to distance themselves from fossil fuels. Nevertheless, the transition from development to international business is not a simple one.

"It entails the classic dilemma that Finns excel at engineering but fail at marketing. Swedes have been much better at branding and commercialising their know-how."

Luckily, there are also some success stories. The LUT spinoff Visedo (now part of the Danfoss Group) electrifies mobile machines and is taking over Asia.

"If our solutions represent more sustainable business than what the rest of the world is offering, we need to package and market it in a way that brings Finland a genuine competitive edge. In fact, different scientific and political mechanisms could be employed to support the internationalisation of sustainable solutions," Ritala demands.

Businesses and experts will change the global economic system

The global economic system will become more sustainable as businesses modify their operations to respond to the changing business environment. The time is apt for a sustainability transformation in business, as internationalising family-owned companies, renewing SMEs, and social enterprises recognise climate change as a serious threat to humanity. This threat cannot be curbed by the continuous exploitation of natural resources and labour or through other less sustainable ways to do business.

"Enterprises influence how we see the world by demonstrating that they can achieve results sustainably despite the highly competitive business environment. Values and attitudes change through examples and political decisions," Paavo Ritala emphasises.

LUT fosters change by educating researchers, future influencers, and leaders who think sustainably. The research carried out by the LUT School of Business and Management can be used to develop Finnish services and production as well as the competitiveness of European industries.

"Pursuing growth in the global gross domestic product at any cost relates to an outdated model. That's not what we want to do – we want to promote the global dissemination of sustainable business models and green technology," Ritala concludes.

Sustainable development and business renewal

  • Watch a video on how the climate crisis is solved systemically.
  • According to Agenda 2030, social and economic development depends on the sustainable management of global natural resources. Agenda 2030 includes the UN's 17 sustainable development targets and 169 subtargets.
  • Sustainable economic development means balanced economic growth without debts or overconsumption of capital stock, and taking the capacity of the environment and future generations into account. A sustainable and stable economy lays a foundation for other sustainable development.
  • The starting point for sustainable ecological development is adapting human activity to the Earth's capacity and natural resources. It is important to secure biodiversity and functional ecosystems.
  •  Sustainable social development aims to ensure human well-being. The goal is to remove inequality and ensure a sufficient livelihood, health care, and basic rights for all. UN's sustainable development themes.

The LUT School of Business and Management supports the sustainable renewal of business

  • The LUT School of Business and Management observes the UN's Principles for Responsible Management Education.
  • All business students complete studies on sustainable development and corporate social responsibility.
  • Research themes: sustainable value creation, sustainable business models, sustainable customer value propositions, sustainable and responsible supply networks, responsibility practices, international entrepreneurship, impact of digitalisation on business practices, corporate renewal ability, utilisation of data in business, business analytics, and bioeconomy.
  • Read more about LUT's sustainable business and entrepreneurship publications and projects.

More information:

Paavo Ritala
Professor
LUT School of Business and Management
firstname.lastname@lut.fi
Twitter: @PaavoRitala