Principal, Daedalus Strategic Advising
All Rights Reserved. Copyright ? 2008 Tamara Bekefi
Chapter 1: A New Framework for Implementing Corporate Sustainability
; Sustainability performance is the effect of corporate activity on the social,
environmental, and economic fabric of society.
; A balance between economic progress, social responsibility, and environmental
protection, sometimes referred to as the triple bottom line, can lead to competitive
; The evaluation of social, economic, and environmental impacts of organizational
actions is necessary to make effective operational and capital investment decisions
that positively impact organizational objectives and satisfy the objectives of multiple
; The financial payoff of a proactive sustainability strategy can be substantial. ; To become a leader in sustainability, one needs to articulate what sustainability is,
develop processes to promote sustainability throughout the corporation, measure
performance on sustainability, and ultimately link this measurement to corporate
; Corporate citizenship is an important driver for building trust, attracting and retaining
employees, and obtaining a “license to operate” within a community.
; Corporate citizenship is much more than charitable donations and public relations—
it’s the way the company integrates sustainability principles with everyday business
operations and policies and then translates all of this into bottom-line results. ; For sustainability to be long lasting and useful, it must be representative of and
integrated into day-to-day corporate activities and corporate performance. ; If sustainability is seen only as an attempt to provide effective public relations, it does
not create long-term value and can even be a value destroyer.
; The key to success is integrating sustainability into business decisions, identifying,
measuring, and reporting (both internally and externally) the present and future
impacts of products, services, processes, and activities.
I. Defining sustainability within the context of corporate responsibility
; The nine principles of sustainability share three attributes:
1. They make the definition of sustainability more precise.
2. They can be integrated into day-to-day management decision processes
and into operational and capital investment decisions.
3. They can be quantified and monetized.
; The nine principles of sustainability are as follows:
1. Ethics: The company establishes, promotes, monitors, and maintains
ethical standards and practices in dealings with all company stakeholders. 2. Governance: The company manages all of its resources conscientiously
and effectively, recognizing the fiduciary duty of corporate boards and
managers to focus on the interests of all company stakeholders. 3. Transparency: The company provides timely disclosure of information
about its products, services, and activities, thus permitting stakeholders to
make informed decisions.
4. Business relationships: The company engages in fair-trading practices
with suppliers, distributors, and partners.
5. Financial returns: The company compensates providers of capital with a
competitive return on investment and the protection of company assets. 6. Community involvement and economic development: The company fosters
a mutually beneficial relationship between the corporation and the
community in which it is sensitive to the culture, context, and needs of the
7. Value of products and services: The company respects the needs, desires,
and rights of its customers and strives to provide the highest levels of
product and service values.
8. Employment practices: The company engages in human-resource
management practices that promote personal and professional employee
development, diversity, and empowerment.
9. Protection of the environment: The company strives to protect and restore
the environment and promote sustainable development with products,
processes, services, and other activities.
II. Identifying stakeholders
; How an organization chooses to define its stakeholders is an important determinant of how stakeholder relations are considered in sustainability decision making and how stakeholder reactions are managed.
; Some definitions cover those individuals who can either be affected by or affect the organization, while others require that a stakeholder be in a position to both influence and be influenced by organizational activities.
; There are core stakeholders and fringe stakeholders:
o Core stakeholders are visible and are able to impact corporate decisions
due to their power or legitimacy.
o Fringe stakeholders are disconnected from the company because they are
remote, weak, or currently disinterested.
; Typical stakeholders include shareholders, customers, suppliers, employees, regulators, and the community.
; Stakeholder relationships go through a four-stage evolution:
1. Awareness: At this stage, stakeholders know that the company exists. The
company will want to communicate with these stakeholders by providing
them with more information about it so that they can begin to appreciate
the company’s mission and values.
2. Knowledge: Stakeholders have begun to understand what the company
does, its values, strategy, and mission. During this stage, the company will
want to provide stakeholders with information to make decisions.
Customers want to know how the organization’s products meet their needs,
employees need to understand organization structure and systems, and
suppliers want to understand what the company needs from them.
3. Admiration: Once stakeholders have gained knowledge about the
company, trust needs to be developed. This is the stage where stakeholders
will develop commitment toward the company.
4. Action: The company is now taking action to collaborate further with
stakeholders. Customers refer business, investors recommend the stock,
employees are willing to take on greater responsibility. and
; To move toward a more complete understanding of sustainability and a further
integration of social and environmental issues into core business strategy and
operational decisions, sustainability values and organizational stakeholders
must be identified and specified.
To better integrate a broader set of stakeholder concerns into management decisions, consideration of impacts and recognition of the importance of accountability is necessary. Four approaches to becoming an accountable organization are as follows:
1. Improve corporate governance.
2. Improve measures of operational and social performance.
3. Improve reporting.
4. Improve management systems.
IV. The Corporate Sustainability Model
; The Corporate Sustainability Model uses the social, environmental, and
financial dimensions of sustainability as its foundation.
; The model describes the drivers of corporate sustainability performance, the
actions that managers can take to affect that performance, and the
consequences of those actions on corporate environmental, social, and
; It describes the inputs, processes, outputs, and outcomes necessary to
implement a successful sustainability strategy.
; The inputs include
o The external context
o The internal context
o The business context
o Human and financial resources
; The processes include
o Sustainability strategy
o Sustainability structure
o Sustainability systems, programs, and actions
; The outputs include
o Sustainability performance (the effect of corporate activity on the social,
environmental, and economic fabric of society)
o Stakeholder reactions
; The outcomes include
o Long-term corporate financial performance
o Sustainability performance
V. Sustainability Actions
Four sustainability actions lead to financial and sustainability success:
1. Why is corporate citizenship important?
2. Is a public relations approach to sustainability beneficial? 3. What three attributes do the nine sustainability principles share?
4. What are the nine principles of sustainability? 5. Why is it important to define a company’s stakeholders?
6. What is the difference between core and fringe stakeholders? 7. Which six groups are typical stakeholders?
8. What are the four stages in the evolution of stakeholder relationships? 9. What are the four inputs in the Corporate Sustainability Model?
Chapter 2: Leadership and Strategy for Corporate Sustainability
; Sustainability performance begins with the commitment of senior company officers
and the development of a mission and strategy that will be implemented. ; Having the CEO and other senior corporate officers set the tone at the top is critical
but not sufficient on its own.
; A corporate sustainability mission statement should be adopted to convey the
corporate commitment throughout the organization.
; Corporate sustainability strategies are then developed to move the company toward a
full integration of sustainability.
; Such a move must be seen as a core corporate value, central to company operations,
rather than as a reaction to current or pending governmental regulations. ; Implementation must continue through
o Broad-based institutional support for the company strategy
o Development of an organizational structure to support sustainability
o Development of costing, capital investment, and risk management systems
o Performance evaluation and incentive systems
o Measurement and feedback systems
o Reporting and monitoring systems
; Sustainability can improve international competitiveness.
; A commitment to sustainability can prompt a closer examination of production
processes, resulting in improved product designs, product and service quality, and
production efficiency and yields, along with environmental improvements. These
improvements, in turn, often result in increased employee and customer satisfaction
and retention, increased social and environmental performance, and increased
I. The importance of leadership in communicating corporate commitment to
; The commitment of the board and management to the enforcement of
sustainability principles and development of organizational systems can
encourage all employees to comply with the company strategy.
; A high-performance board should achieve three core objectives:
1. Provide superior strategic guidance to ensure the company’s growth and
2. Ensure accountability of the company to its stakeholders, including
shareholders, employees, customers, suppliers, regulators, and the
3. Ensure that a highly qualified executive team is managing the company. ; Six core principles can help boards to formulate strategies in general and to
improve sustainability in particular:
1. Leadership: Provide a framework for checks and balances; identify and
build skills to address sustainability issues.
2. Engagement: Support engagement as a corporate value through dialog and
consultation with stakeholders.
3. Alignment: Establish operational practices and incentives that align with
sustainability policies and performance goals.
4. Diversity: Include a diversity of races, skills, experiences, genders, and
ages in executive and director positions.
5. Evaluation: Evaluate the performance of the board and the company in
progressing toward a higher level of accountability and sustainability
6. Responsibility: Ensure that the board responds to company stakeholders
and maintains their trust.
II. The critical role of leadership in developing and implementing sustainability ; Research has clearly shown that sustainability strategies are typically top-
down and that the most effective implementation occurs when top
management is clearly committed to the strategy.
; To deliver positive sustainability outputs and outcomes, corporate leaders
o Know their company’s current sustainability activities and impacts.
o Set the organization’s sustainability strategy and goals and gather
information on sustainability indexes through benchmarking with peers
o Understand and engage with stakeholders.
o Implement sustainability policies that support the overall business and
; A primary goal of leadership for sustainability is setting principles and
practices that will help institutionalize the concept of sustainability in the
; The CEO and board of directors are responsible for initiating, communicating,
and implementing sustainability values and strategy throughout the
organization. To do this, they should
o Integrate awareness of social and environmental issues into corporate
decisions at all levels, and ensure such concerns have representation on the
o Develop measures to identify, measure, report, and manage the social and
environmental impacts of corporate activities.
o Modify the corporate structure as needed to integrate sustainability
throughout the organization.
o Create incentives promoting socially and environmentally responsible
behavior and integrate them into the performance evaluation system and
III. Developing a corporate sustainability strategy
; A sustainability strategy requires the commitment of senior management and
the board, who provide leadership and guidance. They drive the sustainability
message through the organization and lend it credibility and weight. ; Developing a sustainability strategy involves identifying and prioritizing
social and environmental issues that the company can have the greatest impact
; Social and environmental issues facing companies fall into three categories:
1. General social issues
2. Value-chain social impacts
3. Social dimensions of competitive context
; Sustainability strategies pass through three stages:
1. Managing regulatory compliance
2. Achieving competitive advantage
3. Completing social, economic, and environmental integration
IV. The challenges multinational corporations face when operating globally ; Challenges include global climate change, nongovernmental organization
(NGO) pressure, worker rights, political upheaval, human rights, and
; When determining a corporate sustainability strategy, companies must take
o Internal factors:
; Corporate culture
; Competitive positioning
; Sustainability performance
o External factors:
; Market factors
; Geographic factors
V. Corporate mission statements
A useful mission statement has three important characteristics. It is 1. Short and simple
2. Widely available
3. Renewed regularly
VI. Important industry standards that should be considered
; ISO 1400 and EMAS: These standards help provide a structured approach to
environmental management systems.
; SA8000: This standard focuses on workplace values and is based on
International Labor Organization (ILO) conventions, the Universal
Declaration of Human Rights, and the UN Convention on the Rights of the
; United Nations Global Compact: This agreement encourages and promotes
good corporate practices in the areas of human rights, labor, the environment,
; Millennium Development Goals: These are UN-led global goals and a
timetable for combating poverty, hunger, disease, illiteracy, environmental
degradation, and discrimination against women.
; Voluntary codes of conduct: Many industries establish voluntary codes that
companies can subscribe to in order to address stakeholder concerns. These
are an alternative to government regulation.
VII. How government regulations can affect sustainability decisions ; A useful framework for thinking about the role of government in social and
environmental regulation is “government policy contributes to
competitiveness if it encourages innovation . . . and undermines
competitiveness if it retards innovation or undermines the intensity of
; Companies can innovate in anticipation of government regulation to avoid the
heavy costs of regulation.