The sustainability-promoting firm

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Philip Sutton
Director, Policy and Strategy
Green Innovations Inc.
Tel & fax: +61 3 9486 4799
Philip.Sutton@green-innovations.asn.au

15th February 1999 - Version 1.b/w:i

Paper marked up in HTML format
by Greg Naylor.

Contents

A version of this paper has been published as:

Sutton, P. (1999). "The sustainability-promoting firm". Greener Management International 23, UK.

Abstract

If society is to be sustainable, growing corporate power must be matched by growing corporate responsibility for ensuring the public good. This suggests that there needs to be a proliferation of sustainability-promoting firms.

This paper recommends an appropriate role for the private sector where society is aiming to be sustainable. The meaning of sustainability is clarified. To be meaningful sustainability must refer to maintaining or restoring something specific . The paper provides what the author hopes is a more adequate basis for firms to promote environmental, social and economic sustainability.

Key characteristics and competencies for sustainability-promoting firms are proposed. A simple model for action by small firms is presented to demonstrate that action on sustainability issues is possible for firms of any size. The key drivers that could motivate firms to take up the sustainability-promoting stance are examined and the need for a campaign to push for corporate adoption of the sustainability-promoting stance is identified. The paper finishes with a model for guiding action to promote sustainability through the peaks and troughs of the business cycle.

Sustainability: what should the private sector's role be?

Many people hold the view that the role of private firms is to produce products and services, and make money, and it is government's job to safeguard the community's interests. According to this way of thinking, although firms are expected to comply with the law, they are not expected to be proactive in helping society solve its wider problems. So there is a division of labour between firms and the government.

This division of labour is justified by what might be called a doctrine of 'diminished responsibility', that is, a diminished responsibility by firms for ensuring the community or public good (Note 1)

This is not to suggest that governments, and all their multitudes of agencies, uniformly and routinely exhibit exemplary responsibility, while all businesses are totally devoid of moral concern. In reality concern for the community good can be found, somewhat patchily, in both the business and the government sectors. Instead what is being argued is that there is a widespread public expectation that the core business of government should be the advancement of the public good while the core business of business is the production of goods and services and the generation of profits. This can be put still more strongly. At this point in time virtually no-one thinks that the core purpose of business should be the general advancement of the public good.

The division of labour that allows firms to have diminished responsibility for the public good will work where governments are strong and firms are not powerful enough to make their private interests prevail over the public good. But with the globalisation of the economy and the absence of effective global governance, the private sector has gained a decisive advantage.

So it is now frequently the case that the more important an environmental issue is, the harder it is for the public good to prevail. This is because big environmental issues often require profound economic restructuring; and large private sector coalitions (Note 2) to campaign against such change can be and indeed are mobilised.

We can see this pattern when we compare the response to damage caused by chlorofluorocarbons (CFCs) on the one hand and greenhouse gases on the other. The CFC issue was reasonably clear cut scientifically, the threats to the public were clear and effective responses were possible without having to revolutionise the structure of industry - so governments were relatively more powerful than the firms that had a vested interest in the maintenance of the status quo. The global warming issue is rather different. Society can only solve the problem if the use of fossil fuels is phased out completely (Note 3). But change on this scale affects so much of the economy that there are currently whole branches of industry that would rather not change. So it should not be surprising that governments could only agree, at the Kyoto Conference in 1997, to a mere 5.2% global reduction in greenhouse gas emissions compared to the realistically (Note 4) needed 100% reduction.

So we seem to be locked into a pattern of inadequate response to major environmental issues. Is there no way through to a more effective response?

If, even when on balance public opinion and the influence of organised community groups favours government action, governments nevertheless do not feel powerful enough to take action, then the dynamics of the environmental protection process are not likely to improve until the behaviour of the private sector changes. So, paradoxically, the growth in corporate power over recent decades - that has made it easier for firms to avoid public responsibility - actually undermines the legitimacy of this avoidance because the doctrine of diminished responsibility can only work while governments are powerful enough to carry out their half of the bargain which is to safeguard the public good.

If society is to be sustainable when corporate power is dominant, then, with that power must come responsibility for the public good. And the responsibility needs to be exercised.

If the private sector is to take up responsibility for the public good this would require firms to not only reduce their negative impacts, but to go a very significant step further. They would need to pro-actively help society to achieve sustainability. In other words we now need to introduce a new ethic for firms based on a doctrine of their 'undiminished responsibility' for the promotion of the public good.

Firms that adopted an ethic of undiminished responsibility for the achievement of sustainability could be thought of as 'sustainability-promoting firms' (Note 5). And if they were to proliferate there would be profound effects on the power balance in society.

At present the vast majority of firms (both large and small) have a relatively low direct effect on the environment. These firms tend to have minimal engagement in the process of influencing public policy. As a result they are politically irrelevant even though they make up the majority of firms of their size-class. Those firms that do engage in the political process - to influence public environmental policy on any particular issue - are overwhelmingly the ones that are trying to defend the environmentally-damaging status quo or are trying to moderate the pace of environmental improvement. So, despite their relatively small numbers, in each size-class across the economy, it is currently the negatively proactive firms that are by far the most influential.

A countervailing proliferation of sustainability-promoting firms will come about if an increasing number of firms:

While some sustainability-promoting firms might come into existence as start-ups, it is more likely in the long run that they will emerge as a result of policy and cultural change within existing firms.

If sustainability-promoting firms proliferate, so that they outnumber firms in their size-class that defend the environmentally damaging status quo, then they will gain the corporate balance of power. This dynamic is summarised in Figure 1.

Figure 1 - From defensive action to creative engagement

The stance of firms Defending environmentally damaging status quo Neutral or only reducing own negative impacts Creating environmentally beneficial future for society
Number of firms / share of GDP Now

Preferred future

Action with respect to system-wide change Negative proactivity Minimal engagement Positive proactivity - via paradigm shifting products or influence
Strength of forces Now

Preferred future

This swing in corporate behaviour would not only have the benefit of creating a business 'mandate' for governments to act on sustainability issues (to complement the democratic mandate) but it would also:

What is sustainability?

Before plunging into the practicalities of what sustainability-promoting firms might look like and how a proliferation of such firms can be catalysed, it is desirable to spend a moment clarifying the mission of such firms.

If a firm is to promote 'sustainability' what should it be promoting?

It was concern for the environment that projected the terms 'sustainable development' and 'sustainability' into the language of economics and business management. Environmental policy makers of the late 1970s and the 1980s wanted to overcome the widespread notion that environmental and economic concerns were fundamentally hostile, where a gain for one must mean a loss for the other (Note 6). They argued that firms and societies needed protected environments and conserved natural resources in order to sustain the society and the economy (the 'wise use' argument). Others argued the flip side, that viable economies and societies were needed so that the environment could be sustained.

The term sustainable development was appealing because it implied the possibility of win-win solutions. It also integrated the notions of progress (development) and sustainability thus linking the interests of very large numbers of people.

However as the various groupings in society worked to claim the concept of sustainable development as their own, a number of widespread meanings have emerged that are problematical. Many people now use the term sustainable development (Note 7) to mean either:

In both cases, the notion that there is something specific to be maintained or restored has been lost. So it would be possible for organisations to pursue good works in the name of sustainable development while failing to contribute effectively to the maintenance of vital aspects of the environment, society or the economy - because the need for such maintenance has not been addressed consciously.

This is one reason why more and more people are now focussing on the concept of sustainability as such rather than the broader notion of sustainable development - because the need to retain the reference to 'maintenance' of something is more glaringly obvious for the term 'sustainability' than in it is for 'sustainable development'.

Figure 2 highlights the relationship between sustainability (maintaining or restoring a necessary or current standard) and progress (striving for a new standard). It also suggests that this distinction is relevant across the environmental, social and economic dimensions. Figure 2 also teases out a number of levels for sustainability ie. survival sustainability, sustainability of the current standard and sustainability of the capacity for progress.

Figure 2 suggests that a hierarchy of importance should apply to the sustainability levels. If we are to care for all people and species now - and into the long-term future - then we must ensure that we achieve survival sustainability. In communities that are already tolerably well off, there is not much point in striving for more 'icing on the cake', that is going for improvements in quality of life beyond the current standard if this prevents effective action to sustain the underpinnings of ecosystems, human communities and the economy. Unfortunately it is now common in many countries, both developed and developing, to find that efforts to improve the standard of living in the shorter term is diverting crucial resources and attention away from the longer term maintenance of basic survival capacity.

Figure 2 - Sustainability & progress

Objective

Priority:
from highest
to lowest

Environmental

Social

Economic

SUSTAINABILITY

At survival level

Protection of life support systems

Prevention of species extinction

Capacity to solve serious problems

Subsistence

At the current standard

Maintenance of current environmental quality

Maintenance of current social quality (eg. vibrant community life)

Maintenance of current standard of living

Of the capacity for progress

Maintenance of the capacity for environmental progress

Maintenance of the capacity for social progress

Maintenance of the capacity for economic progress

      PROGRESS

Actual improvement in environmental quality above the current standard

Actual improvement in social quality above the current standard

Actual improvement in the standard of living above the current standard

Especially at the survival level, sustainability in any one of the environmental, social or economic dimensions cannot be achieved if sustainability is not also achieved in the other two dimensions. For example if society is riven by active conflict and hatred or eroded by serious corruption, both the environment and the economy are likely to suffer. Similarly if the economy goes into free fall then the environment and society will suffer (Note 8).

Many people with a concern for the environment recognise that "sustainability goes beyond action in just the environmental sphere". Programs like Agenda 21 have promoted the idea that this extension should focus on efforts to improve equity and participatory inclusion. However there is far more to social and economic sustainability than equity and participatory inclusion.

For example, if society and indeed the environment and the economy are to be sustained, society must have the capability and resilience to solve its major problems. In turn, the capacity to solve major problems depends on society being:

Equity and participatory inclusion certainly feature in the list but so do a significant number of other key factors.

A new vision of sustainability?

It is clear that 'sustainability' has relevant meaning in each of the three dimensions examined above (ecological, social and economic). But what focus should a sustainability-promoting firm give to the term? Should it focus on environmental sustainability? Or should it try to tackle sustainability in all three dimensions?

Logically, sustainability issues are ones that involve a significant threat to the functioning of environmental, social or economic systems (see Figure 3). So it doesn't make much sense to try to limit the promotion of sustainability to one dimension when the viability of ecological, social and economic systems is so interdependent and the need for sustainability in each dimension is so compelling in its own right.

Figure 3 - Key characteristics of a sustainability problem

The functioning of a major SYSTEM is seriously THREATENED
(environmental, social or economic)

...so it is important to take action

There is a DEADLINE THAT MUST NOT BE MISSED

... so there is a need for assured progress and there may well be urgency

The PROBLEM IS DENIABLE or IGNORABLE

...so active steps need to be taken - in opposition to the pressure for denial - to engage society in achieving a solution to the issue.

The three characteristics of sustanability issues identified in the left hand column of Figure 3 can be illustrated well by the Y2K ('millennium bug') problem.

The functioning of a major system is seriously threatened: It is now increasingly accepted that if computers, software and embedded microprocessors (chips) are not fixed or replaced, almost every area of economic activity could conceivably be disrupted - electricity might not be generated and distributed, planes might not fly, banks might not operate and so on. So clearly this problem is capable of disrupting a major system - in this case the economy. And the ripple effects could, in the worst case, severely effect the sustainability of society (social cohesion could erode if the necessities of life are not supplied as usual) and the sustainability of the environment (there could be malfunctions for example in oil rigs, sewage plants, chemical factories, nuclear reactors and weapons systems).

There is a deadline that must not be missed: The deadline or at least the principle deadline in the case of the Y2K issue is painfully obvious ie. the first moment of the new year in the year 2000. The fact that the deadlines for other sustainability issues are often not anywhere near as clear or as immovable does not mean they do not exist. Any issues that involve irreversibility (extinction, long term loss) have implicit deadlines at least for the generations who live through the period of loss.

The problem is deniable or ignorable: Society can fail to comprehend sustainability problems or effective action can be put off for a variety of reasons including a lack of compelling short term benefits for some and the existence of strong disbenefits for others. This pattern is also clear in the case of the Y2K issue (Note 9):

The Y2K problem began in 1959 when Grace Murray Hopper, the inventor of Flow-matic - the first computer language written in plain English, and a number of other programmers including Robert Bemer of IBM developed a compromise computer programming language for business. This language was COBOL. To save valued space on data-entry punch cards and in computer memory, the language abbreviated years to two digits (e.g., 1959 was represented as 59). Some of Robert Bemer's IBM clients however needed to deal with dates outside the current century (eg. for genealogical records) so he invented the picture clause in COBOL that allowed a four-digit year to be programmed.

In 1960, only one year after the invention of COBOL the Y2K problem was identified. Robert Bemer and 47 other computer scientists anticipated problems that would occur forty years later and began lobbying for the four-digit year to be made the norm in programming. Unfortunately this lobbying failed a crucial early test in 1964 when IBM introduced the hugely successful System/ 360 mainframe and retained the two-digit year as the norm for its programming.

However in 1967 things looked up for the first generation Y2K lobbyists. The White House ordered the National Bureau of Standards to settle the date debate. But Bemer and his colleagues suffered a critical setback when, under pressure from the Pentagon, one of the largest user of mainframe computers, the Bureau stuck with the two-digit year.

In the 1970s the International Standards Organisation set a four digit date standard, but this failed to shake industry practice. Although the Pentagon promised to adopt year 2000 compliant date system around 1974 action failed to eventuate.

Bemer renewed his lobbying efforts in 1979 with the first widely published prediction of the Y2K crisis - in the journal Interface Age. However the response to the article was minimal and the issue died down again for another fourteen years.

Then in 1993 staff monitoring nuclear weapons at NORAD advanced their computer clocks to Jan. 1, 2000 - and the ICBM alert system crashed. That same year, Peter de Jager broke into print with his "Doomsday 2000" article in Computerworld. This launched him onto the lecture circuit to campaign on the Y2K issue.

This time the new generation of Y2K campaigners that de Jager's efforts spawned succeeded in getting the issue onto the mainstream agenda - and in keeping it there. In 1995 IBM finally acknowledged the Y2K bug and announced plans to help its customers make "timely year 2000 transitions". A year later in 1996, at the request of Senator Daniel Patrick Moynihan, the Congressional Research Service wrote its first report on Y2K. Moynihan warned Clinton of the "Year 2000 time bomb". Two years later, in 1998, the White House appointed John Koskinen as its Y2K czar and he found that most government agencies were unprepared for the Y2K transition. 1998 was also the year when most big businesses and many governments around the world finally committed themselves to strong action on the issue.

Within a year of the problem being created (the Y2K non-compliant COBOL programming language), key people knew there would be problems. But society denied the problem for 35 years before vigorous action was finally catalysed. Why was it Peter de Jager's activism, beginning in 1993, and not the lobbying of Robert Bemer in 1960 that finally engaged society with the issue? The realisation that time was running out may have had something to do with it, as well as the increasingly ominous tone of the warnings. Compare Bemer's dry 1979 prophecy: "Don't drop the first two digits. The program may well fail from ambiguity" with De Jager's call to arms twenty years later: "The economy worldwide would stop ... you would not have water. You would not have power ..."

Nevertheless the lead times required to check and correct billions of lines of computer code, billions of embedded chips and millions of computers mean that there is a very real prospect that many organisations will not be fully Y2K compliant when the new year 2000 rolls around. The deadline that must not be missed will be missed. And the disruptions that this will cause have been estimated by Ed Yardeni, Chief economist with Deutsche Bank Securities, to lead to a 70% probability of there being a world recession (Note 10)

Sustainability flashpoints

Most attempts to date to extend the sphere of concern of sustainability into the social and economic realms have been partial and ultimately inadequate. So if the sustainability-promoting firm is to tackle sustainability across the board, what issues or problems might it concern itself with? Figures 4 and 5 give an indication of the scope of sustainability issues.

Figure 4 - Drivers of unsustainability

Driver

Examples (issues & scope)

Comment

Accelerating / overwhelming corruption

Russia, Colombia, Papua New Guinea

 

Oppressive dictatorship

North Korea, Burma

 

Paralysed democracies

USA, European Union

Unable to reach consensus on key issues at all or within a practical timeframe (ie. the EU and inaction over Bosnia)

Intolerance / hatred based on ethnicity / religion

Northern Ireland, the former Yugoslavia, Middle East, South Asia

 

Population growth

Haiti, some African states, Bangladesh.

Especially where the population density and growth rate are both high.

Growing water shortage

China, India, Middle East, North Africa

May lead to aggression between countries

Global warming

Global

 

Declining commitment to maintaining/building a healthy society

Global

Driven by: economic individualism, primacy of corporations over society.

Discounting the value of investments so that benefits or costs beyond a few decades count for nothing

Global

So-called "short-termism".

Large-scale labour shedding

High labour cost countries, recessed economies

Can lead to insufficient purchasing power and savings thus undermining the economy, can lead to poverty and unstable social systems.

Technological fragility

Global / Y2K, loss of agricultural genetic diversity

 

Resource depletion

World oil production peak in 10+ years

In the case of oil, this is a key issue if efficiency plus renewable energy sources cannot be mobilised rapidly enough.

Super-pathogens

HIV-Aids / Africa, Asia

 

Emergence of antibiotic resistant microbes

Global

 

Destruction of natural habitat/life support systems

Global / bushland clearance, soil degradation

 

The triggers in Figure 5 can dramatically reveal the unsustainability caused by the drivers in Figure 4

Figure 5 - Triggers of unsustainability

Trigger

Examples (issues & scope)

Comment

Collapse of governance

Russia

Fragility in Indonesia / China.

Economic depression

Asia

Can lead to political instability, scapegoating, aggression and lack of resources to deal with other sustainability issues.

Y2K digital systems date problem

Global

Could trigger a global recession.

Wars / super terrorism

WW1, WW2 / Rwanda, former Yugoslavia, Cambodia

Risks in Middle East, Asia.

Extreme earthquakes, Tsunami

 

Rare but devastating if large enough.

Catastrophic cyclones

Central America

 

Catastrophic floods

China, Bangladesh

200 million at risk if the Yellow River breaks its levy banks.

Catastrophic bushfires

Indonesia, Brazil

 

Catastrophic droughts

Sub-Saharan Africa

 

Catastrophic crop failures

Russia, North Korea

Critical if combined with lack of income to buy from elsewhere.

Catastrophic collapse of ecosystems supporting economy

Newfoundland fishery (Canada)

 

Seen from this multi-dimensional perspective we can say that the world has already been challenged by a number of economically or socially-driven global sustainability crises, for example, World War 1, the 1930s Depression, World War 1 and the Y2K crisis.

A number of future global sustainability crises can be anticipated. For example the economic impact of the Y2K crisis, coupled with the ongoing impact of the Asian economic meltdown, could well trigger a very severe global recession.

And although the world has not yet faced an acute environmentally-driven global sustainability crisis, such crises are likely to be felt no later than the first two decades of the new century - propelled for example by global warming, the peaking of global oil production (Campbell & Laherrere, 1998, International Energy Agency, 1998), fresh water shortages and damage to soils and natural habitats.

Already over the last decade disturbed weather conditions, possibly caused by global warming, have had a draining effect on economies in many parts of the world through the impacts of severe cyclones, floods, fires, droughts, etc. The insurance industry, which has suffered from massive pay outs caused by these abnormal events, has become very aware of this pattern. It lobbied actively in the lead up to the 1997 Kyoto conference, urging governments to take a strong stand on global warming.

It can be expected that this trend towards severe environmentally-related stresses on all the major systems, social, economic and ecological, will intensify. If society waits however until such time as these issues are incontrovertibly recognised as a serious problem, it may not have the economic and human capital resources to deal with them.

The key characteristics of the sustainability-promoting firm

Having established the need for sustainability-promoting firms and indicated a desirable scope for their action on sustainability, it is now time to look at what sustainability-promoting firms need to do. If firms want to be classed as 'sustainability-promoting' there are five things they need to do as their minimum commitment:

These five core requirements make it clear that a firm that has its sights set exclusively on the firm's self interest in the short term cannot really be a sustainability-promoting firm. The core requirements, especially the last four, are of no practical value to the firm in this context.

There are six additional actions that it would be desirable for sustainability-promoting firms to take to magnify their effectiveness. They should:

Sustainability-promoting firms need to be distinguished from firms whose principal contribution to the achievement of sustainability is an exemplary product or production process. Sustainability is a system characteristic and so sustainability-promoting firms need to take undiminished responsibility for catalysing a paradigm shift to sustainability.

The key competencies of the sustainability-promoting firm

In order to identify the key competencies that sustainability-promoting firms need to have, we must first consider the common characteristics of sustainability issues across the three key areas: environmental, social and economic.

The characteristics of sustainability issues that demand special competencies

Sustainability issues arising in the environmental, social and economic dimensions are incredibly diverse. And yet there are some shared characteristics. A great many of the issues involve:

Standing in the way of an effective response to most sustainability issues are factors such as:

The key competencies

Since sustainability issues have common characteristics it makes sense to develop special competencies than can be applied across a wide variety of sustainability issues.

These key competencies include the ability to:

Management researchers, educators and communicators need to develop and propagate these key competencies (Note 16).

Given the breadth and complexity of sustainability issues there is a considerable benefit to be gained by using a conscious management system to handle them. Fortunately, the ISO 14001 environmental management methodology could be easily extended to handle sustainability issues across the environmental, social and economic dimensions - see Sutton (1997b).

Figure 6 - Strategic directions for achieving ecological sustainability

Policy Objectives
(9 system conditions)
Targets
(9 stretch goals)
Actions
(15 generic strategies)
Society should be ecologically sustainable. Ecological sustainability must not be undermined by systematic:
  1. increases in concentrations in nature of substances that come from the earth's crust
  2. increases in concentrations in nature of substances produced by society
  3. increases in the manipulation or harvesting of nature
  4. failure to restore the ecological basis for biodiversity and ecological productivity.

Society must make it easy to achieve system conditions 1-4 by ensuring that:

  1. society has the capability and resilience to solve its major problems
  2. material flows into and out of society do not increase systematically
  3. society's aggregate use of resources and land is ultra-frugal
  4. the human population does not increase systematically.
  5. the speed and scale of responses is adequate.
Society should aim for:
  1. 'zero' extinctions
  2. 'zero' climate damage(Note 17)
  3. 'zero' soil degradation
  4. 'zero' waste
  5. 'zero' pollution
  6. a 90% improvement in resource use efficiency (Factor 10)  (Note 18)
  7. 'zero' net greenhouse gas emissions.
  8. 'zero' encroachment on nature.
  9. 75% of land for nature.
Society should take action to:
  1. contain human activity (for nature) - don't encroach, boost land efficiency
  2. tread lightly (for nature)
  3. restore habitat (for nature)
  4. dematerialise
  5. create a closed-cycle economy
  6. use renewable resources
  7. design for no toxicity (including eco-toxicity)
  8. protect people from environmental threats
  9. strive for sustainable population
  10. green up business
  11. green up lifestyles
  12. green up culture
  13. encourage 'ecological take-off' in the economy/society
  14. boost social and economic capability
  15. achieve results at a desirable speed and scale.

Realistically, could a firm act on all this?

While the reader may have accepted the logic of each individual step of the argument so far, the end point of the argument, that firms should take responsibility for sustainability issues identified in Figures 4 and 5, might now seem impossibly far removed from anything that is relevant to the average firm. Can we seriously expect firms to feel any responsibility for or take any action on the enormous range of huge issues catalogued above?

Certainly the public affairs branches of the very biggest firms deal with at least some of the issues in Figures 4 and 5, for example, economic stability, governability, human rights, corruption and global warming. Perhaps the mega-firms could be convinced, over time, to place these issues in a more comprehensive sustainability framework and to take on a wider range of issues.

But of what relevance are these issues to the vast majority of firms that are dramatically smaller, that lack the resources to devote to the big picture issues and that lack the political clout of the mega-firms?

There is one strategy that might enable small firms to take on the full array of sustainability issues, despite these limitations, and that is outsourcing. How might a small firm promote sustainability using the outsourcing strategy?

Just before answering this question, it is worth noting that a sceptical reader might feel that answering this question is pointless if no convincing arguments are provided to show why small firms would take up a sustainability-promoting stance in the first place - given that it is notoriously hard to motivate small firms to tackle issues that go beyond short term survival or that appear to divert the owner or manager from their preferred course. The issue of motivation will not be ignored. It is the topic for the next section.

To test the limits of what small firms can do to tackle a large array of 'big picture' sustainability issues let's consider the example of the ten person company (Note 19). Given the huge data requirements and the complex skills required, the identification of sustainability issues and the development of strategy options is largely beyond the internal capacity of the small firm, so these tasks would have to be outsourced. A micro-organisation will most likely have a micro-budget to match, and so the outsourcing is likely to be most effective in the form of a subscription to a research organisation - involving an investment of perhaps no more than a few hundred dollars a year. While this amount of money will not of itself buy much research, the research organisation could fund a full program provided it had a sufficiently large subscriber base. The research organisation would need to have the capacity to produce condensed briefing materials so that busy people in micro firms can absorb the key messages despite the pressure of other work.

When doing strategic thinking the people in the ten person sustainability-promoting firm would need to consider modifying their production processes, their product range and their use of influence and they would need to think about sustainability in all three of its key dimensions: environmental, social and economic.

All small firms need to devote most of their labour to production, product development and marketing, otherwise they are likely to fail. The ten person sustainability-promoting firm would have to do likewise - easily devoting 95% of their effort to these hands-on areas. But to have a significant impact on big sustainability issues it is critical that firms, no matter how small, also exercise whatever influence that they can muster. Since the ten person sustainability-promoting firm would have so little time to give to exercising influence this function would have to be largely outsourced too - to a range of skilful lobbying organisations that share the values and basic strategies of the firm. Even the task of finding appropriate lobbyists would most likely need to be outsourced to a broker. Once again the firm might only be able to devote a few hundred dollars a year to this lobbying.

Expenditure on making an effective contribution to sustainability-promotion through modified production processes and products will need to be much more substantial than the expenditures for strategic briefings and influence-services. But if the firm's strategies are clever, these expenditures need not be additional costs but can be centrally relevant to getting 'product' out the door. This is why firms have moved, for example, from end-of-pipe pollution control to 'upstream' cleaner production techniques which often eliminate the add on cost by building pollution and waste prevention into the core production processes.

The number of sustainability issues to be dealt with in the production and products area is large and the expertise and support services and products needed to act on them would be large too. So the firm would most likely need to hire a broker to tap the necessary expertise and products.

Even learning how to effectively manage a sustainability-promoting firm would be something that could be facilitated by buying in management training or tapping into other externally produced educational resources.

Figure 7 - Outsourcing of sustainability-promoting functions by small firms

Areas of leverage

Types of service providers

Management approach that is orientated toward sustainability-promotion

Management training; publishing

Identification of sustainability issues and development of strategic options

Research; strategic advice generation; communications

Influence

Brokerage service to identify influence service providers; influence service providers (eg. lobbyists, educators/trainers, advertising agencies, media services, publishers)

Modification of production processes and products

Brokerage service to identify relevant production and product-related service providers; the production and product related service providers

It is possible that the service providers identified in Figure 7 will be urged into existence by the small sustainability-promoting firms. But more likely it will require the initiative of industry associations, government agencies, existing consultancy firms, environmental advocacy groups or professional 'greening of business' groups.

Why will firms want to be sustainability-promoting?

In the section on "The key characteristics of the sustainability-promoting firm" it was argued that firms focussed exclusively on their short-term self interest are most unlikely to see the point of being a sustainability-promoting firm. They would only adopt a sustainability-promoting stance if it was an externally imposed requirement demanded by government, customers or other organisation whose cooperation was essential for the firm (eg. Their industry association, financier, insurer etc.). But there is a paradox here. Governments, customers, industry associations, financial institutions, insurers etc. will only have the freedom to impose such a requirement if the concept of sustainability-promotion is already widely supported in the business community. So other motivators will be needed to prompt firms to be early adopters of the sustainability-promoting stance.

Competition might be a powerful driver. If highly competitive firms adopted the sustainability-promoting firm approach and it could be demonstrated that this stance contributed materially to their competitive success then many other firms would be tempted to adopt this approach as well.

But what will motivate the first cohort of firms to take up the idea, well before it is proven to be competitively potent or before it has become a requirement? Firms that are sensitive to public opinion might be motivated if the public demands that the firm be sustainability-promoting - especially where this view is held by the firms' customers. This might partly explain why businesses such as the Body Shop, Patagonia, the Cooperative Bank, Ben & Jerry's and MAC (Note 20) have a high profile commitment to ethical business practice. The first cohort of sustainability-promoting firms might also be motivated by other aspects of their long-term self interest, for example, the enhancement of staff morale and commitment, long-term relevance to a changing market and the long-term maintenance of a positive business climate (Note 21).

And there are motivations that go beyond the self interest of the firm. The personal feelings and beliefs of key decision makers play an important part too. While final decisions may well be justified on the basis of hard-nosed calculations of the benefit to the firm, the inspiration for a business initiative can sometimes spring from privately held ethical beliefs. For example, Interface, a global manufacturer of carpets took on a very proactive environmental program after the CEO, Ray Anderson decided it was time to take an ethical stand.

Even if strong external pressures were eventually to build up to make it pragmatically useful for firms to adopt the sustainability-promoting stance there is still a practical reason for the commitment to be driven by a moral or cultural imperative. This is because sustainability-promotion can only be truly effective if people are personally motivated to apply their full creative powers to the task. Legal requirements might generate compliance with identified minimum standards but they cannot force people to excel. The required commitment to excellence can only grow in the heart and mind of each person as a result of moral and/or intellectual engagement.

Ultimately, at the heart of the concept of the sustainability-promoting firm is the practical need for vision and ethical commitment. For many this will sound warning bells. Surely the pursuit of visions and ethics guarantees that the firm will lose the plot commercially? Not necessarily according to research by Collins & Porras (1994). They found that where firms, such as Hewlett Packard and Merck, combined a strong commitment to both short term survival and to timeless and inspirational non-commercial values, they created the possibility for not just average but superior commercial performance and for well above average corporate longevity.

So perhaps the potential motivators for sustainability-promoting firms of pursuing:

can be actualised most powerfully in combination.

Let's return now to the issue of the motivations of small firms. According to Simon Whalley of the UK Federation of Small Businesses many small firms are dominated by a struggle for day-to-day survival and by the entrepreneur's desire for control so that they can gain a sense of independence or actualise a vision (Sheldon, 1998). Also small firms tend to operate very informally. These factors combine to make it very difficult to get small firms to systematically address issues that are not already well known to the entrepreneur and that are not considered to have practical relevance.

Many small firms will never adopt the sustainability-promoting approach. Their leadership is simply unwilling or unable to take a proactive stance on sustainability. If the economy as a whole moves in the direction of sustainability they will just be swept along and become greener because of their need to remain relevant to the changing market place - otherwise they will not change.

But a significant number of small firms could potentially be motivated to take up the sustainability-promoting approach. These are the firms led by proprietors or managers who:

The key issue in relation to these people is not whether they could take up the sustainability-promoting firm stance in theory but whether they will ever find out enough about how to be sustainability-promoting to know what to do and whether they will ever experience the triggers that will switch them from aware to active. Most small business managers have little time for formal learning - they absorb ideas verbally and from experience. So the idea of being a sustainability-promoting firm will have to come to them through a drip-feed process from workmates, family, friends, and the media.

The importance of personal values and learning via informal workplace and community networks suggest that the adoption of a sustainability-promoting approach in firms requires cultural and moral change that can only be engendered (relatively) quickly through a community-based campaign.

The well-springs of the sustainability-promoting firm campaign

Where will this campaign for sustainability-promotion come from? How will it generate the credibility and resources needed to foster change powerful enough to create something on the scale of a second industrial revolution?

There are elements of every firm that are already involved in contributing to the achievement of sustainability. The elements include those involved in, for example: environmental management, occupational health and safety, equal opportunity employment, training and knowledge retention, physical asset maintenance, management for business continuity and Y2K preparedness.

And there are whole organisations devoted to sustainability-related activity (see Figure 8).

Figure 8 - programs /industry sectors promoting some form of sustainability

Environmental

Social

Economic

Global warming prevention / mitigation

Heath (physical and mental)- remedial / preventive

Promotion of competitiveness - in the firm and in the value chain

Fisheries and forestry conservation

Corruption and crime prevention

Macroeconomic stabilisation

Water conservation

Policing / private security

Asset maintenance

Soil conservation

Poverty relief

Y2K impact prevention / mitigation

Urban and land use planning

Promotion of racial and ethnic harmony

Occupational health and safety

Pollution prevention

Overseas aid

Quality management

Waste prevention

Emergency services / disaster prevention

Risk management

Nature conservation

Disaster relief

Insurance / insurance risk prevention

Environmental management

Human rights promotion

Savings promotion

Environmental education

Programs for fair treatment (of workers and the community)

Corruption and crime prevention

Environmental activism

Quality of work life

Vocational and management education

 

Protection of indigenous cultures

Urban and land use planning

 

Cultural conservation

Environmental management

 

Urban and land use planning

Change management

 

Military security / threat prevention

 
 

Broad-based education

 
 

Promotion of religious and non-religious ethics

 
 

Social activism

 

It will almost certainly be organisations and individuals involved in these programs across the whole economy and society that will be the base from which the campaign for sustainability-promotion will emerge. These programs already deploy a significant percentage of the GDP, although probably more is spent on sustainability-via-remediation than on sustainability-via-prevention.

The character of the sustainability-promoting firm campaign

Effort needs to be put into linking some of the outreach efforts of these programs into a mutually supporting campaign for sustainability-promotion.

Programs of outreach into firms already exist in all three dimensions of sustainability-promotion via:

In the first section of this paper it was argued that the achievement of sustainability often requires quite massive changes in the economy or society if it is to brought about relatively quickly. Fast change will only occur if large sections of the society can be mobilised in favour of the change and the forces opposed do not create a logjam that blocks progress. The 'large change' aspect means that the campaign for sustainability-promotion has to be very radical in the scale of its objectives and the speed of their implementation, but the need to avoid a social logjam means that the campaign must not be fundamentally oppositional in psychology (ie. a psychology of 'us' versus 'the enemy' is not appropriate) and it must strive as far as possible for win-win solutions.

The radicalism objective suggests that the campaign needs to be independent of forces substantially tied to the status quo so that it is not paralysed by a fear of 'frightening the horses'. It is this fear that drives most mainstream reform processes to compromise their objectives very substantially, so that patronage or apparent credibility can be retained. But for sustainability issues it is not appropriate to water down the objectives. These requirements mean that the campaign needs to be led by non-government organisations that are not tied to governments or firms.

On the other hand the 'oppositional' or 'anti' mentality that pervades most change movements that operate outside the control of status quo forces is not appropriate either.

So a new style of campaigning needs to be forged that is radical and friendly (Note 22).

The functions of the campaign for sustainability-promotion would be to:

Because the concept of sustainability is so wide ranging it is likely that most people will become engaged through mini-campaigns built around more specific issues. For example around stretch goals or generic strategies. Examples in the environmental dimension can be found in Figure 6. Some firms might however become involved through 'broad spectrum' business ethics campaigns.

Of course the process of creating a sustainable society is so huge a task and is so complex and difficult that it will not happen simply because there is a campaign for sustainability-promotion. Other triggers of change and other change agents will play important parts. This fuller process is discussed at more length in Sutton (1998b) (ie. the first "Sustainability-promoting firm" paper) and on the Green Innovations web site in general (see the URL at the end of the paper).

Tackling sustainability through the business cycle

There is a common perception that sustainability issues rise to near the top of the public and commercial agendas when the economy is booming and drop well down when the economy goes into recession. However such an on-off approach is not necessary or appropriate.

The time to implement dramatic new things is in the upswing of the business cycle. People are optimistic, there's money to invest and people are prepared to take risks (Note 24). However the time to prepare for dramatic new things is well before hand and as often as not that will be in the down swings of the business cycle. (See Figure 9.)

Figure 9 Managing for sustainability-promotion through the business cycle

[Graphic: Action
through the business cycle]

Promoting ecological sustainability through the business cycle
(This figure is not a prediction - it is for illustrative purposes only)

If we want businesses globally to embark on the transition to a sustainable economy as soon as possible and if we want to make a major leap in that direction then we need to be ready to capitalise fully on the next boom period from its very start. The boom times are windows of opportunity for dramatic change and they only come around every 7-11 years. They are opportunities that should not to be squandered.

Currently there is little awareness within firms of what needs to be done to create a sustainable (as opposed to a merely somewhat greener) economy. This awareness needs to be generated. There is, as yet, no consensus in business that there should be a transformation to a truly sustainable economy. That consensus needs to be built. Plans need to be prepared to clarify and guide the introduction of the all the necessary changes. Early-mover companies need to be engaged in the process at both a strategic and practical level. And the less visionary firms need to be involved through cost-saving, risk management and customer loyalty programs (see Arnold & Day, 1999). Economic downturns, far from being lost time, could be fruitful times to do the preparation and sow the seeds.

Conclusion

The key conclusions of this paper are that:

The author's organisation, Green Innovations Inc., will be pursuing this agenda and it welcomes collaboration from others. More information on these ideas is available on the Green Innovations web site:

http://www.green-innovations.asn.au/

Notes

  1. This proposed doctrine is not meant to be related to the legal notion of 'diminished responsibility' where guilt is admited but not culpability.

  2. Frequently with the support, it must be said, of economic or industry-related government agencies.

  3. Ice cores from the Antarctic show that over the last 160,000 years atmospheric CO2 levels have never exceeded 300 parts per million (ppmv) (Jouzel et al., 1987.). So if we are to apply the precautionary principle to the treatment of the environment we should probably try to keep CO2 levels under 300 ppmv. A report by the CSIRO, Australia's largest government research organisation, indicates that even to stabilise the atmosphere at the elevated level of 350 ppmv will require human-caused greenhouse gas emissions to be reduced to zero and major efforts will be needed to remove CO2 from the atmosphere (Enting et al., 1994).

  4. Ecologically realistic that is.

  5. The term 'sustainability-promoting firm' is used rather than the 'sustainable firm' because most of the aspects of sustainability that are of interest to the community at large are the characteristics of whole social, economic and ecological systems. Even for very well run companies we cannot possibly know if they are ecologically or socially sustainable until we know something about the society or environment that they and their products are embedded in.

  6. The World Conservation Strategy of 1980 first gave the term 'sustainable development' international currency (IUCN/UNEP/WWF, 1980). The Brundtland Report published as "Our common future" (World Commission on Environment and Development, 1987) popularised the term.

  7. Some people treat the terms 'sustainability' and 'sustainable development' as synonymous and therefore give it the same meaning.

  8. This is not an argument for maintaining an environmentally destructive economy. An environmentally sound economy can be successful (in terms of macroeconomic stability, full employment, and high real standard of living) without being ecologically unsustainable. See: http://www.green-innovations.asn.au/tmcp.htm

  9. This history is based on Taylor, 1999.

  10. For details of his prediction of the economic consequences of the Y2K problem see: http://www.yardeni.com/cyber.html

  11. 'Sustainability take-off' is as a condition where concern for the sustainability is embedded in the culture, where action to achieve sustainability is continuous over decades, where sustainability programs do not get significantly wound back during economic down-turns (or better still they are advanced in ways that are appropriate to that stage of the business cycle), where changes in government do not significantly set back sustainability-promotion, where public policy is driven by a vision of a preferred sustainable future and where the leading sections of the business community are sustainability-promoting. A discussion of the related concept of ecological take-off can be found at: http://www.green-innovations.asn.au/takeoff2.htm

  12. The author calls this the 5-in-1 Customer concept where the firms tries to simultaneously serve the needs of five 'customer' classes: the immediate user of the product, as well as the local community, people globally, future generations and nature.

  13. Pioneering involves developing new capacities or qualities from scratch. Leapfrogging involves significant advances that go beyond incremental change.

  14. These are rules for managing the overall dynamics of the system.

  15. Green Innovations has developed a set of system conditions that deal with sustainability at the survival level in the environmental, social and economic dimensions (Sutton, 1998).

  16. Core competencies are also discussed, in the context of ecological sustainability, in Sutton (1997a).

  17. Given the huge injection of greenhouse gases into the atmosphere over the last half century and the enormous lead times for correction, this stretch goal becomes a long-term recovery target rather than a preventive goal.

  18. See the International Factor 10 Club (1997).

  19. What can be done by a ten person firm can probably also be done by management units within larger organisations. In fact, even one-person firms could apply many of the same strategies.

  20. MAC is a cosmetics subsidiary of Estee Lauder.

  21. If the environment, society and economy are not sustained then business opportunities are likely to contract for most firms.

  22. 'Friendly' might be better understood as inclusive and cooperative. People need to begin with an assumption that collaboration is possible. In the period before the basis for cooperation is established between the campaign for sustainability-promoting and other elements of society, the campaign might have to be proactive in its pursuit of common ground, adopting what might be called 'unilateral cooperation'. And the campaign will need to be prepared to be forgiving if, after a period non-cooperation or open conflict, the opportunity for cooperation can be created.

  23. Or management units within larger organisations.

  24. Because initiatives taken at this time are less risky than they would be at other times.

References

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Campbell, C. J. & Laherrere J. H. (1998). "The end of cheap oil". Scientific American. March.

Collins, J. & Porras, J. (1994). Built to last: Successful habits of visionary companies. Century: London.

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de Geus, A. (1997). The living company: Growth, learning and longevity in business. Nicholas Brealey: London.

Ellyard, P. (1998). Ideas for the new millennium. Melbourne University Press: Carlton South, Melbourne.

Enting, I., Wigley, T. and Heimann, M. (1994). Technical Paper No. 31: Future emissions and concentrations of carbon dioxide: Key ocean / atmosphere / land analyses. CSIRO Division of Atmospheric Research: Melbourne.

Goldratt, E. (1994). It's not luck. Gower: Aldershot, Hampshire.

Green Innovations. (1998). http://www.green-innovations.asn.au/welcome.html

Grove, A. (1998). Only the paranoid survive: How to exploit the crisis points that challenge every company and career. HarperCollinBusiness: London.

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Jouzel, J. et al. (1987). "Vostok ice core: a continuous isotope temperature record over the last climatic cycle (160,000 years)" Nature 329, pp. 403-408.

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Sheldon, C. (1998). Croner's Environmental Policy and Procedures: Special Report No. 34, July 1998 available from the Editor, Katherine Hunter; email: <ksh@croner.co.uk>.

Strebel, P. (1992). Breakpoints: How managers exploit radical business change. Harvard Business School Press: Boston, Massachusetts.

Sutton. (1998a.) "Ecological sustainability" at http://www.green-innovations.asn.au/ecolsust.htm

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Sutton, P. (1997a). "Tapping the sustainability market". Greener Management International, 18, UK.; also at http://www.green-innovations.asn.au/tapsmrkt.htm

Sutton, P. (1997b). "Targeting sustainability: the positive application of ISO 14001" In Sheldon, C. (ed.) ISO 14001 and beyond: environmental management systems in the real world. Greenleaf Publishing: Sheffield, UK.

Taylor, C. (1999). "The history and the hype". Time, Jan 18, 1999

von Weizsäcker, E., Lovins, A. and Lovins, H. 1997. Factor four. Allen & Unwin: St. Leonards (Sydney), Australia.

World Commission on Environment and Development. (1987). Our common future. Oxford University Press: Oxford.


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Page first posted: 15th February 1999
Page last modified: 3 January 2001