The sustainability agenda’s place in academic debate, framing public policy and spiritual corporate leadership
Pushing the frontier
May 2013’s Harvard Business Review provides further proof of sustainability’s place in mainstream academic debate. This issue of the prestigious US management journal devotes its “Big Idea” section to the theme, homing in on the area of strategy innovation. The clever folk at HBR claim have come up with an econometric analysis of more than 3,000 companies to show the correlation between environmental, social and governance (ESG) issues and financial returns. They have dreamt up a name for it too: the “performance frontier”. Too many companies miss out, apparently. That is, they invest in ESG at the cost of economic performance.
To ensure you’re pushing the frontier and not stumbling around behind the lines, corporate strategists should focus on the “most material” issues to their business. No real surprises there. If a car manufacturer focuses on saving the whale rather than cutting exhaust emissions, its long-term shareholder value is in for a shaky ride. If you’re unsure about defining what’s material and what’s not, then the authors point you to a new framework being developed by the Sustainability Accounting Standards Board, a US non-profit group.
Establishing a materiality matrix is one half of the battle. Companies then need to innovate. Their products, processes and business models – the whole shebang – need “major organisation-wide innovation”. One-off, isolated change won’t cut it, the authors warn. “Developing a single product or process innovation to address a specific issue may be part of the solution but in and of itself won't shift the performance frontier for the company as a whole.”
Eccles, R and Serafeim, G (May 2013), “The Performance Frontier: Innovating for a Sustainable Strategy”, Harvard Business Review, Vol 91 (5): 50-60.
Public policy affects all of us. It frames the ecosystem in which we live, work and generally go about our business. Bad policy places barriers to change and, when it’s really bad, can create incentives for unsustainable behaviour. On the flip side, good policy can rid us of the structural problems that create unsustainable scenarios and likewise encourage progressive practices (think cap-and-trade rules, or fiscal stimuli for clean energy). But policy making is a messy business, so how can companies advocating for pro-sustainability rule changes (either directly or indirectly through advocacy groups) judge if they’re making headway?
This paper describes a new framework for assessing “advocacy investments” undertaken by the Western Energy Project (WEP) in the US. The methodology is structured around nine conditions, ranging from developing an open policy window and a “dynamic master plan” through to achieving a clear implementation path. The approach can be used as a simple checklist (to help consider the influential factors in creating a successful campaign) or as a rubric (to avoid the pitfalls). At its most detailed level, the system can also serve as a “quantitative estimator” to judge the likelihood of success. It’s only an estimator, so should be seen as just another data point to consider alongside others.
WEP’s framework builds on the seminal work of John Kingdom of the University of Michigan and Kristi Kimball (of the Kimball Capitol Impact Framework fame) at the Hewlett Foundation. It’s not perfect, but it’s the most recent and most important chapter in an unfolding story.
Barkhorn, I et al (Spring 2013), “Assessing Advocacy”, Stanford Social Innovation Review, 11 (2): 58-64.
The 120 employees at Bereket (meaning “blessing” or “abundance” in Turkish) join together to pray, eat, chat and laugh after sunset during Ramadan. The textile firm also offers complimentary breakfasts, free tickets for cultural events, and much else besides. It’s one of a growing number of small and medium-sized Turkish businesses (known as Anatolian Tigers) that practise “benevolent leadership”. The goal of benevolent leadership is akin to that of corporate sustainability: namely, to create “a virtuous cycle of encouraging and initiating positive change in organisations”.
Where the model diverges from standard, rationalist textbooks is in its emphasis on a spiritual dimension to corporate leadership. This dimension focuses on understanding the spiritual needs of employees (or their “inner landscapes”, as the authors prefer). Such insights enable leaders to circumvent commonplace feelings among employees of psychological isolation at work or lack of meaning in their work lives. Spirituality is also closely linked with compassion, which, when adopted en masse, can enable companies (ie as an organisational collective of individuals) to “notice, feel, and respond to” the suffering of their members.
The paper examines three other “nurturing virtues” in-depth: morality, positivity, and community. It makes the case for a leadership model that intersects and combines these four virtues. A fascinating, alternative leadership paradigm.
Karakas, F and Sarigollu, E (April 2013), “The Role of Leadership in Creating Virtuous and Compassionate Organizations”, Journal of Business Ethics, 113 (4): 663-678.
The business schools of Nottingham, Aston and Winchester are among the 32 signatories of the new UK and Ireland chapter of the Principles for Responsible Management Education, a UN Global Compact initiative to promote responsible management education, research and thought leadership.
Exeter Business School is running a two-day business case competition in June. Students will compete to create water stewardship solutions for Coca-Cola Enterprises and SABMiller.Academic news Business School Bulletin Oliver Balch