Making Sustainaility Work

By Glen Armstrong,2014-11-12 03:15
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Making Sustainaility Work




    Tamara Bekefi

    Principal, Daedalus Strategic Advising

     All Rights Reserved. Copyright ? 2008 Tamara Bekefi

    Chapter 1: A New Framework for Implementing Corporate Sustainability

Key points:

    ; 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

    financial performance.

    ; 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.

    III. Accountability

    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

    financial performance.


    ; 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 Leadership

    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. Leadership

    2. Strategy

    3. Structure

    4. Systems


    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

Key points:

    ; 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

    and competitors.

    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

    corporate culture.

    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

    labor/supply-chain issues.

    ; When determining a corporate sustainability strategy, companies must take

    into account

    o Internal factors:

    ; Corporate culture

    ; Competitive positioning


    ; Sustainability performance

    o External factors:

    ; Regulations

    ; 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,

    and anticorruption.

    ; 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.


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