Question

What are the benefits and downsides of companies like unilever embracing a sustainable business strategy as opposed to a traditional finance strategy of maximization of shareholder wealth

Answer 1

Companies like Unilever and many other companies are adopting and putting in place a sustainable business strategy and tangibly moving away from the strategy of maximizing shareholder wealth. In a sustainable strategy the focus is on 3Ps i.e. people, planet and profits.

There are several advantages of having and following a sustainable business strategy. First of all it ensures that interest of all stakeholders of a company are satisfied and thus on an overall basis the level of utility created by the company is maximized. Secondly it helps in improving the brand image of the company and gives it a competitive advantage over other companies that do not have a sustainable strategy in place. Thirdly it helps the company to attract desirable set of employees and investors towards it. Lastly it helps the company to function in a more efficient manner as waste is minimized.

In terms of disadvantages adopting a sustainable business strategy will lead to a spike in costs in the short term. This is because the company will have to put in place new practices and policies and this will lead to incurring of additional costs in the near future. This may lead to increase in production costs and if not managed well by the company it will lead to increase in product costs. If costing is not managed properly then it may lead to customer backlash. Secondly business and operational model will get complex and new vendors will have to be found that meets the sustainability requirements.