So is there an optimal level of sustainability? The answer, our research suggests, is “yes”. But that level is increasing due to three interrelated reasons: (1) new government regulations, (2) changing social expectations, and (3) innovation.
The increasing economic power and social impact, both good and bad, of the world’s largest corporations means that governments will inevitably set new “rules of the game” for what is accepted behaviour by companies. These government regulations will be driven in part by changing social expectations about what companies should and should not do, in many cases changing corporate behaviour even before new regulations are implemented.
Innovation by companies will be necessary in order to adopt more sustainable business practices that create economic value for shareholders. Some of this innovation will be in response to changing social expectations and new regulations, but some of it will be initiated by companies themselves who will see competitive advantages in doing so. Yes, there is an optimal degree of sustainability and its precise definition will vary across countries, industries, and company strategy.
Changing social expectations and regulations suggest that this optimal degree of sustainability will be increasing in the next few decades. The key success factor for corporations, therefore, would be in identifying which practices and in what ways will generate the largest returns in any given context.