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Introduction
‘The concept of corporate sustainability is being viewed as an emerging mega-trend by various think-tanks all over the world’ (Muff 2014:10). It incorporates the organisation’s entire decision making that keeps a balance between the organisation’s financial, social, and environmental concerns, opportunities and commitments. The concept of corporate sustainability should be viewed as a continuous journey and not as a destination. It is such a dynamic concept that its implications are apparent on the whole society and not just the organisations (Bertels & Fraser, 2010 cited in Muff 2014:13).




Brief History of Sustainability
In 1983 the United Nations formed the ‘World Commission on Environment and Development’ (WCED 1987). It proposed recommendations through the development of sustainability, for all countries to act upon a long-term strategy to improve social, environmental and economic issues relating to poverty, population, food security, biodiversity, resource management, industry, energy; and in context, all would have to be treated holistically and not separately.

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The Bruntland Commission
The Brundtland Commission 1987, ‘Our Common Future’, would define sustainable development as, economic ‘development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs’ (WCED 1987 cited in Doppelt 2010:59). The term sustainable development would identify a notion of a sustained and continual development of current social and economic levels, while confronting broader arguments arising from the present environmental state.

The Brundtland Commission through its identification of sustainable development would argue a broad set of 'remedies' and 'recommendations' that would provide a starting point for both private and government institutions for policy development (WCED 1987:16 cited in Doppelt 2010:59). The commission would identify and describe objectives that would need to be met in order to sustain life as we currently know it (Doppelt 2010:59). However in-depth the dispute about social ineptitudes, resources misuse or economic injustice brought by inefficient governance and business practice, the report would be unable to identify clear models and/or strategies which both private and government institutions could follow in order to develop a sustainable strategy.




Origins of Corporate Sustainability
home_head_banner1.jpgMarcel van Marrewijk in The Journal of Business Ethics (2003) proposes that, corporate sustainability may be routed from a philanthropic approach derived from the concept of sustainable development. Van Marrewijk goes on to suggest that corporate sustainability is a ‘new and distinct phenomenon’ (2003:97). Utting and Clapp (2008) agree with this statement and position their arguments towards a theoretical approach that would suggest that, corporate sustainability has indeed become a modern occurrence to which firms may orientate themselves in order to explore a sustainable approach to business procedures. Van Marrewijk clarifies that ‘companies are responsible to society as a whole’ and argues that, ‘consultants and corporate executives must maintain a more humane, ethical and more transparent way of doing business’ (2003:97). The new corporate challenge ‘requires organisations to fundamentally rethink their position and act in terms’ of their corporate social responsibility, which appears to be, as van Marrewijk suggests, a ‘strategic response to challenging circumstances within a complex societal context (2003:97).

The Institute of Business Ethics (IBE 2001) defines corporate social responsibility as ‘the responsibility of a company for the totality of its impact, with the need to embed society’s values into the core operations as well as into its treatment of its social and physical environment’ (Campbell and Kitson 2008:125). The complexity of the definition of corporate social responsibility is directed towards a more social aspect of sustainability, relating to: ‘transparency, stakeholder dialogue and sustainability reporting’ (van Marrewijk 2003:102). The interpretation that corporate sustainability may have been routed from a philanthropic/societal approach like that of corporate social responsibility was debated at the Corporate Sustainable Conference (2002) held at the Erasmus University, Rotterdam. Although the traditional prejudice of corporate sustainability was directed more towards, ‘value creation, environmental management, environmental friendly production systems and human capital management’, for which this is still true, the conference 'clearly showed sufficient interest in integrating social and societal aspects into corporate sustainability' (van Marrewijk 2003:101). Unlike corporate social responsibility, however, corporate sustainability would adopt a more environmental stance and evoke a relationship between business, ecosystems and society.

The Erasmus University places corporate sustainability 'as the ultimate goal, with corporate social responsibility as an intermediate stage’ (van Marrewijk 2003:101) (figure 1). Doppelt suggests that sustainability defines ‘the ultimate goal’, that being: ‘meeting the needs of the present generation without compromising the ability of future generations to meet their own needs’ (WCED 1987 cited in Doppelt 2010:20). Firms, as Utting and Clapp argue may adopt corporate social responsibility initiatives initially ‘because they improve efficiency… and/or improve their reputation and competitive advantage’ (2008:4). However, to achieve the ‘ultimate goal’ corporate sustainability would be arguably the behaviour that firms would adopt.

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Figure 1: Relationship between Corporate Sustainability, Corporate Social Responsibility and The Triple-Bottom-Line.Source: Erasmus University, Wempe and Keptein



Definitions of Corporate Sustainability
Utting and Clapp would describe the gesture of corporate sustainability firstly as ‘the capacity of the firm to create value through the product and service it produces and to continue operating over the years’ (2008:41). Secondly, ‘corporate sustainability can be considered as the attempt to adapt the concept of sustainable development to corporate settings, matching the goal of value creation with environmental and social considerations’ (2008:41). What Utting and Clapp (2008) are trying to establish is that corporate sustainability is an attempt to ‘assimilate the environmental and social dimensions into business operations: processes, products, and procedures’ (2008:41).



Competitive Advantage and Value Creation
Corporate sustainability in the context of value creation can ‘entail the creation of a sustainable competitive advantage’ (Utting and Clapp, 2008:41). Delivering an effective sustainability strategy can enhance and improve the survival rate of an organisation in terms of its branding by ‘strengthening their competitive, strategic and financial positions’ within the market (McDonagh, and Prothero 1997:368), adding to their value creation.

Organisations ‘can gain a competitive advantage by using resources more efficiently and being socially responsible’ (Epstein 2003:65). ‘Substantial competitive advantages can be achieved through improved social and environmental performances. They often are reflected in improved product quality, improved product yields, and improved profitability – the result of redesigned processes and products’ (Epstein 2003:65).




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During the rescission of 2001-2003, Interface inc, a global carpet giant ‘faced a 36% world-wide slump in corporate sales’ (Scott 2013:13). However, due to their low-cost sustainable operations and improved product quality through sustainable innovations, Interface was able during this period to gain a high proportion of the market share and access new markets. Interface made radical innovative improvements within their production and acquisition process that addresses waste management, eco-efficiency, and any other action implemented to reduce the company’s environmental footprint. This enabled them to become a global leader with sales in 2009 reaching over $130 million.
By clicking on the picture,the website(TIMreview) will further illustrate Interface'ssustainability innovation strategy



The Business Case for Sustainability is explained by Ray Anderson, Founder and Chairmen of InterfaceFLOR. Interface is a long-time partner of The Natural Step and is a proven leader when it comes to sustainability. Interface's bold vision "mission zero" is the company's promise to eliminate any negative impact it may have on the environment, by the year 2020.



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BHP Billiton, world’s largest mining company based in Australia have implemented critical sustainability performances initiatives with benefits that have included enchantments in biodiversity, improved standards of living and reduced business risks, whilst achieving an improved value creation and competitive advantage. Figure 2 below illustrates BHP Billiton value creation in the form of a spider diagram.

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Figure 2: BHP Billiton value creation through sustainable incentives which they call, 'beyond the business case'.
Source: BHP Billiton (2006) Full Sustainability Report

The business dictionary on-line describes value creation as, ‘The performance of actions that increase the worth of goods, services or even a business’. (unknown : http://www.businessdictionary.com/definition/value-creation.html#ixzz3S0YeMPx3)

Hart and Milstein (1999) defines a sustainable enterprise as, ‘one that contributes to sustainable development by delivering simultaneously economic, social and environmental benefits, the so called triple bottom line’ (John Elkington- NTinM3 an expert on sustainability created the concept of ‘the triple bottom line) (Hart, and Milstien 1999:56 cited Utting, and Clapp, 2008:42).




Pros and Cons
‘Corporate social responsibility is too broad in its scope’, Banerjee argues ‘to be relevant to organisations’ (Banerjee 2001:42). Henderson continues the debate and argues that, 'there is no solid and well developed consensus which provides a basis for action' (Henderson 2001:21-22). Van Marrewijk (2003) goes on to assume that corporate social responsibility is too vague to be useful in a corporate setting, and so as a result, organisations adopt a sustainable approach at a corporate level, which would mean to developed a corporate sustainability strategy and develop managers to implement sustainability into corporate decision-making, rendering the debate in favour of applying corporate sustainability tactics together within organisations procedures and decision making. So the challenge now ‘has moved from “whether” to “how” to integrate corporate social, environmental, and economic impacts – corporate sustainability – into day-to-day management decisions when managers at all levels have significant incentive pressures to increase short-term earnings’ (Epstein 2008:19).



  • The argument that Donna Ladkin, Professor of Leadership and Ethics at Cranfield School of Management puts forth, is that leading for sustainability is an important trait, and moving towards the idea of whether to how to implementing corporate sustainability will define new challenges like uncertainty and performance measures, that will need strong leadership intervention. ‘There is often difficulty obtaining an alignment of strategy, structure, systems, performance measures, and rewards to facilitate effective implementation’ of corporate sustainability (Epstein 2008:19). But having the right leadership skills Donna Ladkin argues, will secure managers and business leaders in adopting effective sustainable practises.


Although the biased approach suggests that applying corporate sustainability within corporate decision-making can have significant efficiency benefits, there are still some who doubt its capability in leading the way to financial gain. According to the shareholder’s approach, the sole purpose of a socially responsible business is to maximise profits, and that ‘the focal point of the company and socially responsible activities don't belong to the domain of organisations but are a major task of governments’ (van Marrewijk 2003:96). It has been argued however, that although it may be ‘unlikely that all companies have fully integrated or achieved sustainability… numerous companies have taken important steps towards improving the sustainability performance and reducing their negative social and environmental impacts’ (Epstein 2008:20), with great financial rewards. Foley states that, the contribution of sustainability aims to create ‘long-term value for the owners of the business’ (Foley 2000 cited in van Marrewijk 2003:96), and also results in higher quality and a reduction in production and operational associated costs.



Shareholder Value Creation


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Epstein indicates that ‘increasing shareholder value is a key objective of most companies’ (2008:140). Most companies measure their ‘shareholder value creation’ in economic values and, as Epstein argues, ‘shareholder value is created by sustainability initiatives that generate’ these profits (2008:140). ‘In other words, it is about the perpetual ability of the corporation to deliver returns to its shareholders and do so in a way that is superior within its industry. (The Guardian 2013; Ioannou 2013). ‘It is only through the identification, measurement, and management of sustainability impact that social, environmental and financial performances can be improved and value created’ (Epstein 2008:21).


Shareholder Model
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Figure 3: Dell Shareholder ModelSource: Dell (2006) Sustainability Report

According to Dow Jones sustainability index, ‘corporate sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental, and social developments’ (Utting and Clapp, 2008:42). Identifying and understanding your shareholder value can help ‘communicate the potential value of sustainability initiatives to managers who must justify the allocation of scarce resources’ (Epstein 2008:142).


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Walmart, a super giant in the supermarket industry reduced solid waste by 25% eliminated energy in its stores by 30%, and increase significantly its efficiency of its logistics system. Incorporating sustainability practices has contributed to increased annual profits, in turn, these are passed down to their shareholders.

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Georgia-Pacific a large forest products company has identifies its shareholders value and have increased it to $800,000 by reducing landfill at their generating plant, and by reducing energy usage they have added an extra $200,000 to their overall shareholder value.




Managing Corporate Sustainability
In today’s society organisations are pressured from all angles to become more socially, environmentally and economically aware. With external pressures, such as government policies and legislation at an all-time high, motivation for a sustainable strategy pressures the organisation from within form shareholders whose main emphasis is on delivering value and increasing economic profits. Epstein argues that ‘we have come to a point now with this agenda of sustainability and corporate responsibility’ (Epstein 2008:21) that it ‘is not only central to business strategy but will increasingly become a critical driver of business growth’ (Epstein 2008:21).

Managers, Epstein (2008) argues, ‘must make significant changes to more efficiently manage their social, economic, and environmental impacts’ (2008:23). Epstein goes on to suggest that, management must ‘recognise that sustainability can create financial value for the corporation through enhanced revenues and lower costs’ (2008:20). ‘Corporate sustainability performances are no longer primarily focused on companies like Ben & Jerry’s or the Body Shop’, as they were years ago (Epstein 2008:23). Rather as he argues, ‘it is now also some of the world’s largest corporations such as General Electric and Walmart (along with many others) that are leading the way with significant financial and organisational commitments to social and environmental issues’ (Epstein 2008:23).


  • MacDonald’s have developed particular systems to deal with social and environmental problems, by creating ‘shared value’. They have transferred technologies from part of the company to use in implementing sustainability. They have set up systems for improved costing, capital budgeting, performance revolutions, and product design and have developed an integrated programme that includes sustainability in day-to-day decision-making.


Managing corporate sustainability strategies is unlike that of managing any other managerial/leadership operational strategies in the sense that, taking operational strategies for example, the operational motivation goal is directly linked to profits. Taking innovation, for example, again the ultimate goal is increasing profits through innovative products and design. Epstein argues that, ‘for sustainability, the goal is to simultaneously achieve excellent in both social and environmental and financial performance’ (2008:23).


Innovation for Sustainability: Dose Sustainability Change Innovation Process?



This clip by Keith Goffin, professor of innovation and new product development at Cranfield School of Management, highlights the difficulties that managers may face when they commit to innovation sustainability. ‘To simultaneously achieve excellent in both social and environmental aspects, and to achieve financial performance’ while increasing product quality and design (Epstein 2008:23), Goffin argues that managers will need to adopt a proactive attitude to innovation sustainability in able to implement it within product development.

It is managing corporate sustainability strategies that creates challenges for managers to implement into the overall business culture. The difficulties come for managers to understand where the proper systems for evaluating sustainability performances can be made, and as Epstein propose that ‘it is unclear how trade-offs between financial and environmental social performances should be made’ (2008:23). However, this survey below (figure 4) clearly illustrates that managers believe the main advantage of sustainability is improved company or brand image, identifying that customer perception of sustainable strategies can impact performance. This suggests that increasing a business’ focus on sustainable strategies will result in greater customer loyalty and differentiation within its market (MIT Sloan: 2009).


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Figure 4: Management perception of the effectiveness of a sustainability strategySource: Business strategy and the environment (On-line)



The Corporate Sustainability Model


The impetus for implementing a corporate sustainability model, other than to improve an organisation’s environmental and social impact, is geared towards both a long-term and short-term financial gain. Epstein (2008) agrees and suggests that the outputs of such a model must convey a monetary value in order to retain shareholder interests. But ultimately, the model should effectively establish a mechanism by which to link environmental and ethical concerns to a corporate sustainability strategy. Through such a model, ‘managers have significant ability through leadership and the formulation and implementation of various processes including sustainability strategy, structure, action, and systems to detect corporate sustainability performances’ (Epstein 2008:26). These performances will as Ioannou suggests ‘generate financial as well as environmental and social value’ (The Guardian 2013; Ioannou 2013). ‘The model (figure 5) describes the drivers of corporate sustainability performances, the actions that managers can take to affect the performance, and the consequences of these actions on corporate environmental, social, and financial performance’ (Epstein 2008:47).

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Figure 5: Corporate Sustainability ModelSource Epstein M. J. (2008:46)

‘The corporate sustainability model describes the inputs, processes, outputs, and outcomes necessary to implement a successful sustainability strategy’ (Epstein 2008:25).

  • ‘Evaluating the inputs and their likely effects on sustainability and financial performance factors, leaders and organisations can develop the appropriate processes to improve sustainability. (Epstein 2008:47).

  • ‘The sustainability strategy, structure, system, programs and actions have three major ultimate set of impacts: corporate financial cost and benefit of actions, social and environmental impacts, and long-term financial impact through sustainability performances’ (Epstein 2008:47).

  • Sustainability performances, ‘effects of corporate activity on social, environmental, and economic fabric of society’ (Epstein 2008:47), are the outputs.

  • ‘The leadership feedback loop is designed to evaluate and improve corporate strategies' (Epstein 2008:47).

Through leadership and managing the formulation of corporate sustainability performances, the impacts for corporate financial performance as an outcome is high, as well as integrating corporate sustainability into day-to-day operational decisions.




The Future Leaders for Corporate Sustainability


In conclusion to this wiki, it is vital to address the concern that Professor Frank Horwitz, director of the Cranfield School of Management has for future leaders in context to corporate sustainability. The question Horwitz proposes is “what are the critical needs for future leaders of organisations?” He argues that the successful leaders 10-15 years from now may not be the same type of leaders that have been required in the pass. He illustrates this by identifying three key critical aspects.

  • Firstly, the successful future leader will be sophisticated in the so called soft issues. Managers/leaders will have to
    deal with complexity and a rapidly changing environment. Corporate responsibility, core moral values etc. are those soft issues in question. Epstein also agrees and suggests that it is the ‘soft leadership element’ that will propose a sustainable strategy and ‘integrated economic, social, environmental impacts into their organisations’ (Epstein 2008:24).

  • Secondly, business schools will develop business acumen, which are the traditional areas of interdisciplinary which business managers will need in order to do business effectively.

  • Thirdly, understanding the context in which one is doing business. That being, the changing nature of sensitivity to cross cultural issues, political knowledge and power shifting. As the world becomes more globalised and accessible shifting cultural sensitivity will be a major fundamental operational change in most organisations (2010:35).

Horwitz suggested that the “new world of today” (illustrating an ever changing business environment), requires managers to understand the idea that there are a multiplicity of stakeholders. One must manage employee engagement, customers and implement a sustainable supply chain regarding issues around environment and ethical value. More importantly, Horwitz argues, for future business to success and thrive they must accurately understand how business interact with other business and government institutions in helping to address food shortages, poverty, climate change, economic sustainability, resource management and how to achieve sustainability throughout their business processes.




Conclusion


The belief that sustainability simply involves better controls, incremental improvements and increased efficiencies to their existing, inherently harmful linear production systems, is false. Implementing corporate sustainability often entails whole new business models, few organisations initiate meaningful cultural change efforts (Doppelt 2010:35). But implementing a corporate sustainability strategy accurately can justify short-term and long-term financial benefits, competitive advantage and stakeholder value creation.




Reference


Banerjee, S, B. (2009) Corporate Social Responsibility: The Good, the Bad and the Ugly. Cheltenham: Edward Elgar Publishing.
Business Dictionary (unknown): Value Creation [Online] Available from: http://www.businessdictionary.com/definition/value-creation.html#ixzz3S0YeMPx3 [Accessed 15 February 2015].
Campbell, R. and Kitson, A (2008) The Ethical Organisation. 2nd Ed. Basingstoke, New York: Palgrave Macmillan.
Doppelt, B. (2010) Leading Change towards Sustainability: A Change-Management Guide for Businesses, Government and Civil Society. 2nd Ed. Sheffield: Greenleaf Publishing.
Epstein, M. J. (2008) Making Sustainability Work. Best Practices in Managing and Measuring Corporate Social, Environmental, and Economic Impacts. Sheffield: Greenleaf publishing Ltd.
Ioannou, I. (2013) Corporate Strategy In The Age Of Sustainability [Online] Available from: http://www.theguardian.com/sustainable-business/blog/corporate-strategy-sustainability-trend [Accessed 15 February 2015].
McDonagh, P. and Prothero, A. ed (1997) Green Management: A Reader. London: The Dryden Press
Henderson, D. (2001) Misguided Virtue: False Notions Of Corporate Social Responsibility. Hobart: London Publishing Partners: New Zealand Business Roundtable Wellington
Henderson, D. (2001) Misguided Virtue: False Notions Of Corporate Social Responsibility. Hobart: London Publishing Partners. [Online] available from: http://www.iea.org.uk/sites/default/files/publications/files/upldbook126pdf.pdf [Accessed 15 February 2015].
Hoffman, W. M. (1991). ‘Business and Environmental Ethics’. Business Ethics Quarterly. Vol. 1, No. 2. pp. 169-184
MIT Sloan (2009). ‘The Business of Sustainability’. MIT Sloan Management Review. pp. 1-12
Muff, K. ed (2014). ‘Building Sustainable Legacies: The New Frontier of Societal Value Code Creation’. Journal in Business Sustainability. Issue 2. UK: Greenleaf Publishing. [Online] Available from: http://www.academia.edu/5911972/RETHINKING_CORPORATE_SUSTAINABILITY_WITHIN_THE_WELL-BEING_CONTEXT_The_COGWHEEL_Sustainability_Framework [Accessed 15 February 2015].
Savitz, A. ed (2013) The Triple Bottom Line: How Today’s Best-Run Companies Are Achieving Economic, Social And Environmental Success – And How You Can Too. John Wiley & Sons: US.
Scott, J. (2013) The Sustainable Business: A Practitioner’s Guide to Achieve Long-Term Profitability and Competitiveness. 2nd Ed. Sheffield: Greenleaf publishing Ltd.
The Guardian (2013) Corporate Strategy In The Age Of Sustainability [Online] Available from: http://www.theguardian.com/sustainable-business/blog/corporate-strategy-sustainability-trend [Accessed 15 February 2015].
Utting, P. and Clapp, J. ed (2008) Corporate Accountability And Sustainable Development, Ecological Economics And Human Well-Being. India: Oxford University Press.
Van Marrewijk, M. (2003) ‘Concepts and Definitions of CSR and Corporate Sustainability’: Between Agency and Communion. Journal of Business Ethics. Vol. 44, issue 2/3; ABI/INFORM Global, 95-10s. [Online]Available from:http://www.academia.edu/1111541/Concepts_and_definitions_of_CSR_and_corporate_sustainability_between_agency_and_communion [Accessed 15 February 2015].
World Commission on Environment and Development (1987). ‘Towards Sustainable Development’. Our Common Future: Brutland Report 1987. Oxford University Press. pp.36-51

Additions


Does sustainability change innovation process?

Many organisations feel that if they become more environmentally friendly this will lead to a negative effect on their competitiveness due to the added cost without the immediate financial benefits. Research that has been carried out resulted with the fact that if an organisation becomes environmentally friendly it will in fact lead to lower costs due to the fact that they reduce the inputs that they use. What appeared from the results of the research was also that ‘companies are begging to treat sustainability as innovation’s new frontier’ (Your Story, 2015).

An article written by Subir Ghosh posted in 2015 stated that 71% of respondents to a survey carried out said that they felt that their CEO understood the value of sustainability. It is inevitable that the business will face different challenges that they will need to overcome when becoming more sustainable however ‘the competitive advantage will stand them in good stead, because sustainability will always be an integral part of the development.’ With the Ethical Corporation published a ‘Sate of Sustainability’ reports published in 2015 this is a great for companies to use as a comparison. Dave Stangis who is Vice President, Public Affairs and Corporate responsibility at Campbell Soup Company said that the report ‘provides a great snapshot of where the profession is today and a yardstick to assess your own company’s progress on the journey’ (Blue & Green Tomorrow, 2015).

References


Ghosh, S. (2015) ‘Are Business ready for sustainability? CEOs certainly think so’, Your Story – Inspire, Innovate, Ignite, [Online] Available from: http://yourstory.com/2015/04/ceo-businesses-sustainability/ [Accessed 24/04/2015]


Malone, C. (2015) ‘Seven in ten CEOs convinced of the value of sustainability’, Blue & Green Tomorrow, [Online] Available from: http://blueandgreentomorrow.com/2015/04/20/seven-in-ten-ceos-convinced-of-the-value-of-sustainability/ [Accessed 24/04/2015]