BUSN9229 Week 1 Corporate Sustainability Acknowledgement: The powerpoint slides used in this topic have been adapted from materials developed by Dr Nick Mangos and Maz Demosthenous of the Flinders Business School, and their kind assistance in developing this topic is gratefully acknowledged.

Four Pillars of Corporate Sustainability Concept 4/27/2017 Four Pillars of Corporate Sustainability Concept According to Wilson (2003) Corporate Sustainability1 includes: Sustainable development Corporate Social Responsibility Stakeholder Theory Accountability 1. See reference List

Definition of Corporate Sustainability 4/27/2017 Definition of Corporate Sustainability Managers consider the traditional business model as one that fits with Growth and Profit Maximisation. However a new and evolving corporate management paradigm has emerged that which includes the economic (growth and profit maximisation ) together with the social and environmental issues. Thus the ideology is to sustain profit maximisation, together with sustaining environment for intergenerational purposes as well as sustaining socially responsible to the community at large.

Sustainability includes 4/27/2017 Sustainability includes Corporate Societal goals Environmental protection Social justice and equity Economic development

2. Sustainable Development 4/27/2017 2. Sustainable Development Sustainable development is a broad concept that combines: Economic Social Justice Environmental Science Environmental Management Business Management Politics and Law

Role of Sustainable Development 4/27/2017 Role of Sustainable Development Not to be left in the exclusive hands of government regulators and policy makers Industry has a significant role to play in achieving sustainable development. Industry needs to be more proactive role in balancing the economics with social equity and environmental protection.

Supporting Sustainable Development 4/27/2017 Supporting Sustainable Development Sustainable Development is as much an economic necessity as it is an environmental and social necessity

4/27/2017 Sustainable Development contributes to Corporate Sustainability in TWO ways Sets out areas that corporation should focus: Environmental Social Economic performance Provides common societal goals for: Corporations Governments Civil Society To work towards ecological, social & economic sustainability

4/27/2017 Corporate Social Responsibility and Sustainable Strategic Management (SSM) Whether Corporations care about SSM is determined by their levels of Corporate Social Responsibility (CSR) and stakeholder consideration and salience. CSR: deals with the role of business in society Premise of CSR: Corporate managers have an ethical obligation to consider and address needs of society not just to act in the interests of shareholders or their own self-interest

CSR is based on four philosophical theories 4/27/2017 CSR is based on four philosophical theories Social Contract theory Social Justice theory Rights Theory Deontological Theory (Wlison, 20031)

Stakeholder Issues in Business Strategies 4/27/2017 Stakeholder Issues in Business Strategies Consider stakeholder theory: Go beyond shareholder concerns which includes profit maximisation, economic reductionism objectives of the firm to include all stakeholders of the firm. Stakeholders have been defined (Freeman 1984, in Wilson, 20031) in past work and more recent times as. “any group or individual who can affect or is affected by the achievement of the organisation’s objectives”

Goal of Stakeholder Theory 4/27/2017 Goal of Stakeholder Theory To help corporation strengthen relationships with external groups in order to develop a competitive advantage Stakeholders include: shareholders Investors Employees Customers Suppliers The article Wilson (20031) in this weeks readings falls short in including what he sees as primary stakeholders.

5. Corporate Governance/Accountability and SSM 4/27/2017 5. Corporate Governance/Accountability and SSM Definition of Corporate Accountability: “Accountability is the legal or ethical responsibility to provide an account or reckoning of the actions for which one is held responsible…..referring to ones duty to explain, justify or report on his or her actions” (Wilson, 20031, p. 4). This definition is based on the principal and agent contract relationship where the shareholders are the principals and the corporate manager is the agent. Sometimes called Agency theory / agency law.

4/27/2017 Corporate Contracts Explicit and implicit contracts are entered into by the corporations with other stakeholder groups and these contracts for the basis of corporate accountability relationships. It is the nature of the relationship between corporate managers and society at large that defines corporate accountability theory.

Sustainability John Elkington (1997) 4/27/2017 Sustainability John Elkington (1997) Elkiington (1997, in Wilson,20031) UK consulting argues that: “..companies should report on their environmental, social, and economic performance not just financial performance” Elkington3 suggest that this is accounting on: Environmental Social Economic performance As a “Triple Bottom Line” reporting:

Sustainable Strategic Management: An Evolutionary Perspective 4/27/2017 Sustainable Strategic Management: An Evolutionary Perspective “..bringing the concept of ecological and social sustainability into the lexicon of management in general and strategic management..” (Stead and Stead, 20082). Second half of the 19th century and the 20th century through ideas of Smith, Taylor and Weber, ideas of Effectiveness and efficiency were the prime success factors in management focus for manufacturing activities. These were narrow and economic in nature.

4/27/2017 6. Sustainable Strategic Management: An Evolutionary Perspective (continued) Strategic management evolved in the beginning with internally focused concept of business policy 1960s. With an emphasis on efficient use of resources, functional activities of the firm to earn a profit. Strategic planning in the 1970’s was a process of defining a firms mission, vision, goals and formulating strategies to maximise stockholder and corporate returns (profits).

4/27/2017 6. Sustainable Strategic Management: An Evolutionary Perspective (continued) In the 1980’s environment become more turbulent with a myriad of stakeholders emerging, and a new management stakeholder paradigm emerged: “no firm can prosper without serving the needs of its stakeholders. It is the dynamic (not static) relationship between corporations and the environment and society in which it interacts that inevitably creates an evolutionary change to a sustainable focus. It is the relationship with the business and society and the changing needs of the planet, involving concerns for long-term health and welfare of mankind which drive organisations to SSM which has emerged in the 21st century

4/27/2017 6. Sustainable Strategic Management: An Evolutionary Perspective (continued) Emergence and Growth of SSM Neo classical economic assumption is that the economy is a closed one with respect to Social and Ecological systems. Refer to figure 1 page 67 in Stead & Stead2. It is what it ignores that is significant. Shift to SSM required a paradigm shift Sustaining economic activity is economic reductionism

Emergence and Growth of SSM continued 4/27/2017 Emergence and Growth of SSM continued Move towards a new sustainability paradigm in figure 2, p.68. Move towards sustainability strategies: “a firm with a vision to develop strategies designed to enhance long-run profitability” (Stead and Stead 20082). This is NOT simply a strategy designed to make a profit while doing as little ecological damage as possible. More so a firm need to develop instrumental value systems to serve sustainability needs of various stakeholders. Organisations should be strategically ecologically designed to reduce: resource depletion, materials use, energy consumption, emissions and effluents.

Emergence and Growth of SSM continued 4/27/2017 Emergence and Growth of SSM continued Sustainable competitive advantage: Market driven strategies allowing firms to ecologically differentiate their products from their competitors in the market place. Eg-minimise environmental hazards and life cycle costs -any other environmental friendly claim/ploy on product.

SSM Strategy Formulation 4/27/2017 SSM Strategy Formulation Strategic management formulation needs to be more inclusive of stakeholder needs and wants as well as the societal and ecological/biological sectors. It is an expansion of the neoclassical model to an open system as depicted in figure 3. (Stead and Stead, 20082, p. 74). Included here is stakeholder needs, society and Biological nutrients as well as the neoclassical economic activities.

An Enterprise Strategy Perspective on SSM 4/27/2017 An Enterprise Strategy Perspective on SSM Summary version of a model is provided in figure 4 (Stead & Stead, 20082, p. 78). Key sustainable centred stakeholders should be considered by managers in strategic decisions made about economic, social and ecological issue they face. It is suggested that firms that apply the model will by definition be consistent with the tenets of SSM as the corporate competitive and functional levels and “stand for sustainability”

Reference List Wilson (2003) “Corporate Sustainability: What is it and Where does it come from” Ivey Business Journal, pp 1-5, March/April 2003 Stead, J, G and Stead E., (2008) Sustainable Strategic Management: an evolutionary perspective”, International Journal Sustainable Strategic Management. Vol. 1, No. 1. pp. 62-81 Elkington, J. (2004). Enter the triple bottom line. The triple bottom line: Does it all add up, pp. 1-16. http://kmhassociates.ca/resources/1/Triple%20Bottom%20Line%20a%20history%201961-2001.pdf