To reach the global sustainability goals, businesses play a significant role. Through the use of market power and daily operations, they are in the position to either accelerate or inhibit sustainability changes.
Many entrepreneurs form corporations because this business structure has, for a long time, been one of the most popular options for American businesses. But what exactly is a corporation, and why is it such a popular type of entity? This entity type gives entrepreneurs a formal business structure that can easily grow with their company as they expand their operations.
What is a corporation?
A corporation is an organization—usually a group of people or a business—that has been authorized by the state to act as a single entity and is legally recognized as such for certain purposes. Charters were used to establish early incorporated entities. For a detailed definition of a corporation, read on the Incorporation Rocket website.
What is the purpose of a corporation?
The ability to raise funds through the issuance of stock is the primary advantage of a corporation over other entity types. However, it’s critical to understand that by allowing stockholders to vote on how the company is run, you’re essentially delegating some of your decision-making authority to someone else. If you want complete control, an LLC or another entity type may be a better choice. Having others share the burden of responsibility may alleviate some of your burden.
Maryville University states that aside from the many advantages of forming a corporation, they have a certain responsibility to operate in a sustainable manner.
What is the definition of Corporate Sustainability?
Depending on the business context, corporate sustainability can have a variety of meanings. Fundamentally, the concept of sustainability can be defined as “meeting the needs of the present without jeopardizing future generations’ ability to meet their own.” However, three major pillars are frequently associated with the topic of corporate sustainability: social, environmental, and economic (often known as people, planet, and profits). These core components, when combined, assist corporations in embracing sustainability in a way that benefits efficiency, long-term growth, and shareholder value.
There are 3 pillars to sustainability:
1. Economic
Contrary to its name, the economic pillar is concerned with corporate risk management rather than profit maximization. The importance of the balance between profit and ethics cannot be overstated. Although a change in the supply chain may result in short-term financial gains, it should be viewed with extreme skepticism if there is any risk of potential reputational damage to the corporation. On the other hand, the economic pillar serves as a counterweight to extreme sustainability measures that corporations are sometimes compelled to implement, such as the complete abolition of fossil fuels.
2. Social
The social pillar is all about getting the help of employees, stakeholders, and the community. Fair treatment of employees and a respectful supply chain process result in increased productivity and creativity, as well as high retention and engagement. Overall, implementing long-term social strategies results in a workforce that is more skilled and motivated. Creating a strong, community-oriented culture encourages employees to be innovative – to improve on existing products, processes, and business models.
3. Environmental
The environmental pillar is arguably the most crucial of the three. Because they are constantly reviewing existing processes to find better, greener alternatives, sustainable corporations are often the most innovative. Corporations can improve their public reputation and financial returns by reducing their carbon footprint and packaging waste. Implementing transportation management systems, reducing carbon emissions, and improving packaging are some common goals that help corporations save money while also reducing their environmental impact. As consumer awareness of environmental issues grows, it is critical to have a mission of green sustainability in order to establish a reputation as eco-friendly.
What Is the Importance of Corporate Sustainability?
The three pillars of corporate sustainability – economic, social, and environmental – work in tandem to assist organizations in their efforts to adopt more sustainable practices. Businesses must shift away from an outdated mindset of maximizing profits at the expense of the environment and toward a more mutual interdependence and eco-innovation.
Final Thought
Which entity type to form is one of the most important decisions you’ll make for your business, but selecting the right one can be difficult. Knowing the benefits and drawbacks can help you make a more informed decision. Overall, corporations are a popular entity type for a reason: they provide entrepreneurs with a formal business structure that is ready to grow alongside your company. Adopting sustainable practices not only benefits the environment; corporations have demonstrated that sustainability initiatives lead to an improved brand image, lower costs, happier shareholders, increased productivity, and a plethora of other benefits. The concept of sustainability is here to stay.
