Sustainability of Organizations

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Yannis A. Phillis is a guest  contributor. He is Professor of Engineering at UCLA and the Technology University of Crete.

The following is adopted from:
“Fuzzy Measurement of Sustainability,”  by
Y. A. Phillis and V. S. Kouikoglou, Nova Publishers, NY, 2009, by permission.

An organization is an entity or purposeful structure with boundaries that separate it from its environment. According to Webster’s dictionary it is an administrative and functional structure (as a business or a political party). An organization pursues certain goals such as education (this is a university) or production of goods and services if it is a corporation. Organizations interact with their environment, physical, biological and social, they affect it and become affected by it. It is quite natural then that organizations play an important role in the sustainability of a region or country.

A company might use production technologies that are environmentally friendly and continuously strive toward improving them or it might disregard such technologies to enhance short term profits. A company might resort to friendly or hostile employment practices. To be sustainable an organization should employ practices that improve the welfare of society and have a minimal environmental impact. One has then to assess societal and environmental impact of organizations quantitatively. Such assessment presupposes that organizations accept the principles of accountability and transparency. Equivalently, organizations must understand their public role and impact and voluntarily provide reliable data about their economic, social, and environmental performance.

Sustainability of organizations should not be confused with self-sufficiency. Factories ordinarily need a number of external inputs to function, such as energy, matter, and labor, for example, and they transform matter into finished products while at the same time they generate pollution which is released into the environment. Sustainability of organizations is associated with their activities, emissions, impact of products, installations, policies, etc. It is desirable to improve all activities, that is, reduce emissions, improve products, build environmentally friendly installations, contribute to the economic welfare of the society, and so on.

The boundaries of an organization are defined by its physical ones but they are not necessarily limited by them. A car company for example, generates pollution locally but its supply chain and products have global environmental impacts and national or international economic effects. Time scales also depend on the type of organization and its products or services. Each organization has its own space and time demands when sustainability is assessed.

There are several reasons why organizations assess or should assess their sustainability:

  1. It is good marketing to provide society with sustainability data. People often prefer products of environmentally and socially friendly companies.
  2. Sustainability is becoming the goal of local and national governments and organizations cannot ignore this trend.
  3. Improving environmental performance often improves financial and economic performance of an organization by making the various stages of production more efficient.
  4. A sustainability report exposes progress towards improvement and provides guidance towards new strategic decisions.
  5. A sustainability report shows compliance with existing environmental and labor laws and regulations.

Models that assess sustainability of organizations should be customized to the realities of each particular organization. However, general guidelines should exist to provide directions. A few corporations follow the guidelines of such organizations as the Coalition for Environmentally Responsible Economies (CERES) and the Global Reporting Initiative (GRI). In this article a different model is outlined that uses fuzzy logic to assess sustainability.

The Model

Overall sustainability (OSUS) is a function of what is called the human system (HUMS) and the ecosystem (ECOS). HUMS is a function of policies (POLIC), economics (WEALTH), health and insurance (HEALTH), and education (KNOW). ECOS in turn is a function of the corporation’s impact on AIR, LAND, WATER, and biodiversity (BIOD). The inputs to the eight secondary components are the so called basic indicators.

Basic Indicators

The choice of basic indicators depends on the type of organization under consideration. One should keep in mind when choosing basic indicators that they reflect the organization’s economic, environmental, and social performance and its contribution locally, regionally, or globally to sustainability. Norms and targets for these indicators are dictated by legal requirements and scientific or expert knowledge.

Boundaries

The boundaries of the organization extend from all possible inputs such as supply chains to all outputs such as products, clients, etc.

Assessment of Indicators

Values of indicators are provided by organizations or can be estimated using various techniques. For example, emissions due to the production, use, and disposal of goods can be evaluated using life cycle assessment (LCA).

An Example of Basic Indicators

The following is an indicative list of possible sustainability indicators.

AIR

Greenhouse gas emissions (all emissions concern production and product use/disposal)

NOx, SOx, CO emissions

VOC (volatile organic compounds) emissions

CFC (chlorofluorocarbons) emissions

Renewable energy use

Fossil fuel use

Percentage of environmentally friendly buildings, i.e., buildings with

  • passive solar design
  • economy fixtures
  • automatic switches
  • faucets that turn off when not used

LAND

Solid and liquid waste generation (all waste concerns production and product use/disposal)

Amount of solid and liquid waste treated/recycled

Nuclear waste

Reforested land

Restored land

Amount of material dumped/recycled

WATER

Water use for production

Water treatment/recycling

BOD (biological oxygen demand)

COD (chemical oxygen demand)

Hydrocarbon effluents

Wastewater effluents

BIOD

Number of species/habitats affected by production and product use/disposal

Protected habitats conserved or destroyed

POLICY

Compliance with international human rights and environmental agreements

Compliance with national environmental laws/regulations

Compliance with national labor laws/regulations

Benefits to employees

Percentage of employees covered by bargaining agreements

Nondiscrimination policies

Avoidance of child labor

Respect of rights of indigenous people expressed by numbers of violations of such rights

Financial and other contributions to communities

WEALTH

Revenue

Production/operating costs

Financial assistance received from government

New capital investments

HEALTH

Injury rates

Fatality rates

Lost days

Occupational health problems

Health insurance coverage of employees

KNOW

R&D expenditures

Percentage of employees receiving training in

  • new technologies and methods
  • ethics
  • anti-corruption policies

Interaction with institutions of higher learning.

Starting with the basic indicators one proceeds upwards towards composite indicators using fuzzy logic until a final value of OSUS is found ranging from 0 to 1, which expresses the sustainability status of the organization. For a detailed exposition into all technical aspects of this model one could refer to the book cited below the title of this article and its references therein.

This model allows the calculation of sensitivities of sustainability with respect to basic indicators so that one could easily pinpoint those inputs that affect sustainability the most and focus on their improvement.

It should be noted that the scale (0,1) is not absolute or technically defined as for example scales of temperature in physics. It simply provides a numerical value against which one can gauge the time evolution of an organization towards sustainability and it gives a common base for comparisons among organizations.

The model is already used in practice by several researchers in the field of corporate sustainability. In an era of economic crises, hard governmental decisions and lurking social instabilities organizations ought to use such tools to assess and improve their contributions to society. First and foremost it’s for their own good.

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Prof. Phillis is in the forefront of the application of fuzzy logic to the analysis and design of production lines, queuing control, and large-scale manufacturing networks. Dr. Phillis is an Editor of the Journal of Intelligent and Robotic Systems. He was the General Chair of the International Conference on Management of Technology Change for  2003 and 2005. He received his PhD in Engineering from UCLA.

2 thoughts on “Sustainability of Organizations”

    1. Thank you. For more updated information, please, check out the following reference: Phillis, Grigoroudis, and Kouikoglou, “Sustainability ranking and improvement of countries,” Ecological Economics, Vol. 70, No. 3, 542-553, 2011.

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