Peter A. Soyka
On this page, I provide some of my personal perspectives on the issue of organizational sustainability, which in my view is the only sensible and viable framework in which to address significant environmental, health and safety, social, governance, or financial issues in medium-sized to large organizations. With that said, there are a great many small organizations, both for-profit and otherwise, that can make good use of the concept of sustainability. The perspectives that follow are largely excerpted from my two recent books on organizational sustainability. The first is oriented toward leaders of nonprofit organizations, and is entitled, Govern Green: Driving your Organization's Commitment to Sustainability (2011)1. The second is directed primarily to a corporate audience, though other consultants, policy makers, academics and students, and other interested parties may also find it useful and thought-provoking. It is entitled, Creating a Sustainable Organization: Approaches for Enhancing Corporate Value through Sustainability (2012). This book was published by FT Press, a division of Pearson Education, Inc., and is available for purchase from the publisher here and booksellers worldwide.
As most informed observers would agree, sustainability reflects three inter-related dimensions: environmental quality, social equity, and economic prosperity.
In my view, however, sustainability is a value set, philosophy, and approach rooted in the belief that organizations (corporate and otherwise) can and must materially contribute to the betterment of society. Also, successful organizations must balance their needs, aspirations, and limitations against the larger interests of the societies in which they operate. Only organizations that provide goods and/or services that are of value to people and/or society more generally, and are dedicated to excellence, interested in the full development of human potential, and committed to fairness, are likely to be durable (sustainable) over the long term. Fundamentally, sustainable organizations are purpose-driven, with the purpose being an overarching objective larger and less tangible than self-gratification or profit maximization. Accordingly, in my formulation of the concept, sustainable organizations are
This view places the conventional emphasis on the "three legs of the stool" noted above2 within a larger, more integrative context. It also recognizes that each is a key dimension of any coherent concept of sustainable organizations, past or present. The importance of each of the three major elements of sustainability depends on the organization's nature and purpose. Public sector and nonprofit organizations have been formed and structured specifically to provide some combination of products and services that benefit society, whether that involves forecasting the weather, teaching children, or defending the country from military threats. With the exception of agencies and non-governmental organizations (NGOs) specifically focused on some aspect of sustainability (such as the U.S. Environmental Protection Agency [EPA] or the Sierra Club), most such organizations have a primary mission to fulfill that is not directly related to either environmental protection or social equity. Nonetheless, by adopting sustainability as a guiding principle, such organizations commit themselves at the very least to ensuring that they limit any adverse impacts of their operations on the environment and treat all stakeholders fairly. Many public sector organizations, including the U.S. federal government and its many parts, have been moving decisively in recent years to institute more sustainable behavior.
Corporations are in quite a different place. They are not explicitly supported by and accountable to the American taxpayer and have not (generally) been formed to pursue a mission eligible for tax-exempt status as a nonprofit3. Some observers believe that in contrast to the work done by the government and nonprofit sectors, the legitimate role of business is to make money for its owners (shareholders), and the more the better. In this view of the world, time and money invested in improving environmental performance, providing safer working conditions, supporting local communities through philanthropic activity, and other such corporate social responsibility (CSR) behaviors are an unwarranted and unproductive use of the firm's assets.
This view, which has been held and promoted with great conviction by many in the business community and academia, is increasingly being challenged. As I show in several places and ways throughout my most recent book, corporate leaders should accept and, ideally, embrace the concept of sustainability, for two fundamental reasons. One is that U.S. corporations, as distinct entities holding enumerated legal rights and receiving numerous public benefits, have an obligation not only to comply with all applicable laws and regulations but also to ensure that their conduct does not harm the broader societies of which they are a part and on which they depend for survival. The other is that increasingly, recognizing important sustainability issues and acting on them in an enlightened and sophisticated way has been shown to increase revenue growth and earnings and to strengthen the firm's position in terms of the factors that drive long-term financial success. In other words, the argument for embracing corporate sustainability has two elements: it is the right thing to do, and it is the smart thing to do.
It is important to highlight and clarify what I mean by sustainability and to distinguish it from several other concepts now in widespread use:
Each of these other, more limited concepts has considerable merit. However, none is new or sufficient to both address the needs and interests of the broad set of stakeholders to which most organizations (at least large ones) are accountable and to position the firm to avail itself of all related opportunities. Sustainability is often framed in the media as a campaign to "green" the world or "save the planet." I take the position that, when viewed from an appropriately broad perspective, sustainability extends beyond the currently fashionable focus on "greening." Greening is simply the latest manifestation of public interest in the environment, which has come back into vogue during the past three or four years following a multiyear hiatus. As an interested party who has watched several incarnations of a growing public/ business interest in improving the environmental performance of organizations (and individuals), it is both heartening and, in some ways, disturbing to observe the eagerness with which many are now embracing everything "green." Greening sounds and feels admirable, but public interest in this topic tends to wax and wane over time. My fear is that it will again fall out of fashion, unless the renewed focus on environmental performance improvement is coupled with considerations of social equity and both are underlain by rigorous economic analysis. Sustainability, defined in this way, provides the only theoretical and practical environmental improvement framework that can be fully justified and maintained during both good and challenging economic times. Therefore, it is robust and "sustainable" enough for the long haul.
My concerns with the terms CSR and social responsibility are somewhat different. Although in most formulations they include the three "legs of the stool," they really are about delineating and acting on the obligations of the modern corporation to society at large. In contrast, and as highlighted a moment ago, I believe that it is most useful to think of sustainability as an imperative that applies to all organizations and political entities (countries, states, municipalities). Each of these is challenged to understand and address the broad conditions under which it operates and its relationships with other entities and the natural world. They also must chart a course on which they can thrive without undermining their asset base or unfairly precluding or limiting the sustainable success of others. In that context, CSR can be thought of as one element of a corporate strategy to address the sustainability imperative. Such an element can, for example, identify the concerns of external stakeholders and define and execute processes to ensure that these external interests are respected as the firm pursues its broader business goals. In other words, CSR and its analogs can be an important part of (but in any case are a subset of) an organization's approach to sustainability. In particular, CSR can, and often does, comprise an organization's efforts to respond to the imperative to promote sustainable development. Similarly, CSR can be used to appropriately target a company's philanthropic activities. Or the firm may separately deploy a strategic philanthropy campaign. But by its nature any such activity is far more narrow in scope and effect than organizational sustainability. The two should not be confused or, in my view, ever be used interchangeably.
Sustainable Development, as discussed further below, was the original concept giving rise to the term "sustainability." It is important to realize, however, that sustainable development is fundamentally about helping the world's poor, and their host societies, lift themselves out of poverty in a way that ensures that the benefits of doing so are not overly concentrated within existing (or new) societal elites, and that economic development does not come at the cost of severe environmental degradation, as it often has in the past. Sustainable development remains a worthy and important goal, but should be distinguished from the environmental, social, and economic challenges and opportunities directly facing most U.S. businesses and other organizations.
These distinctions are not trivial. Indeed, understanding and resolving them has proven difficult for many organizations and practitioners. Regardless of what words you choose to employ, the key point is that pursuing sustainability at the organizational level is more complex, more important, and more difficult than simply greening the organization to some arbitrary but comfortable level, or becoming more attentive to particular stakeholders and their views. However, substantial rewards can accompany this greater level of difficulty.
In my work, I prefer to use the concept of sustainability rather than greening or sustainable development as the key objective to be pursued at the organizational level by my clients. As mentioned above, sustainability has emerged directly from the environmental movement and is often focused on key environmental issues and challenges. However, there also are important opportunities for corporate leaders to examine social equity and economic issues in parallel with the environmental aspects of their organizations. The concept of sustainability provides an integrative framework to facilitate this thought process. Moreover, in practice, and as illustrated in many places in my book, synergies and scale economies often make it possible to address issues having both environmental and social aspects more effectively and economically than would be possible by pursuing separate, unrelated approaches.
Capitalism—in particular, the entrepreneurial American brand of capitalism—emerged from the 20th century as the dominant global economic philosophy. This happened as the inevitable demise of the Soviet Union unfolded and sweeping economic liberalization took hold in formerly closed or tightly controlled economies from Eastern Europe to South Asia. The resulting growth in international trade has made the world economy ever more interconnected. We now confront the failure of multilateral efforts to further reduce international trade barriers, rising economic inequality within and across societies around the world, and the hazards posed by global environmental challenges such as climate change and access to water. Most recently, we have faced the failure of unregulated financial markets and the ensuing economic meltdown. Many people are questioning whether corporations are behaving appropriately, contributing more to solutions than problems, and, in some cases, are larger and more powerful than is appropriate for the good of society.
Concerns about the appropriate role of corporations and their behavior are hardly a new phenomenon. Yet the tenor of the debate is changing. Many more people are now openly questioning the classical position of free-market advocates that, in essence, corporations' primary or even sole responsibility is to make money for their shareholders. It is now increasingly accepted that how corporations make money also is vitally important, for several reasons. One is the backlash against free trade that has occurred globally (even here in the U.S.). It has become clear that although some countries, companies, and individuals have reaped enormous financial benefits from globalization, many others have been left behind or put at a severe disadvantage. Another reason is the perception of outsized and inappropriate influence exerted by major multinational corporations on national and even international public policy. Many major companies have financial resources that exceed those of national governments in developing countries. Skeptics of corporate beneficence also are not comforted by the fact that corporate leaders are not elected by the people of the countries in which they operate. The speed and severity with which the recent economic contagion spread across virtually all international markets also illustrates the pervasive influence of corporate voices in promoting the idea that less regulation stimulates or unleashes innovation, reduces overall risk, and creates and helps distribute new wealth in ways that are equitable. It can fairly be said that the events of the past several years have called each of these assertions into question.
Finally, rightly or wrongly, corporations are blamed for many of the environmental problems that increasingly are receiving public attention. Ironically, many major corporations have been leaders in developing and deploying more environmentally friendly technology over the past three decades. Often they are far more eco-efficient than smaller organizations operating in similar businesses. In many cases, companies have invested considerable time and resources in attempting to reduce their EHS footprint, and even to develop new eco-friendly products and services. Some such efforts have been successful (both in execution and in generating a positive public perception), but in other cases they have been denounced by environmental advocacy groups as "greenwashing."
Accordingly, the business climate today is challenging in ways that require new perspectives. The public in the U.S. and many other countries expects that companies will operate in compliance with the law and in ways that are environmentally sound, treat their own people and those in surrounding communities fairly, and engage with their stakeholders on issues of common interest. At the same time, the expectations of the capital markets have not changed. Publicly traded companies must grow revenues and earnings, consistently generate cash, and effectively manage risk. Balancing these sometimes conflicting imperatives requires a framework that, when applied to a specific organization, is flexible and yields an internally consistent set of values, normative behaviors, business goals, methods, and performance metrics.
Moreover, as suggested previously, the "envelope" of expectations brought to bear by a wide array of interested parties is now wider than ever. Corporations face expectations and pressures from many sides. These include customers, suppliers, competitors, regulators, their own employees, and shareholders, to name a few. Companies that succeed in the long term will need to find ways to understand and satisfy the expectations of all of these and other important stakeholders. When and where possible, firms should seek to find and exploit opportunities to achieve financial success while creating value for one or more of these important constituencies. Given the apparent complexity of such a challenge, it is reasonable to assume that not all firms will have the vision, leadership, and skill to succeed. This suggests that solving (or at least making significant ongoing progress on) the sustainability challenge will produce durable competitive advantage.
There is evidence all around us that the need for corporate sustainability is growing significantly and at an increasing rate. Public perceptions of environmental behavior (and perceived misbehavior) already were at high levels before the Deepwater Horizon exploded and released a giant oil spill in the Gulf of Mexico in April 2010. Expectations for improved practices and acceptable behavior more generally are quite significant. These expectations will not diminish in the coming years as the magnitude and urgency of global environmental issues become more clear. Increasingly, corporations will be asked what they are doing to both protect their own operations and limit business risks and contribute to larger-scale resolution of these issues.
Two sustainability issues in particular should be in the minds of corporate senior executives in virtually any U.S. company of significant size: climate change and water availability and quality. Constraints imposed by climate change and, in the longer term, availability of water in needed quantities with adequate quality will influence myriad business decisions in the 21st century. Taking the broad-spectrum, integrative approach I suggest will help maximize the chances of any business making the best decisions when they need to be made.
Another factor that cannot be ignored is the growth in economic power and expectations among developing countries and the people within them. It is widely understood within the business community that expansion internationally offers many U.S. industries and companies their greatest growth prospects. Countries in the developing world often offer vital sources of raw materials. Companies will find that increasingly, the people in these countries will expect that firms that do business within their borders will show respect for their laws, customs, cultures, and the rights of indigenous people. And they will expect this whether or not in all cases the governments that (at least in theory) represent them uphold the same standards at all times. Many large U.S. companies and their senior managers are highly experienced and skilled at working under these conditions. But many others have not displayed the necessary cultural sensitivity or skill to avoid igniting controversy, resistance, and other problems. In some cases, U.S. multinationals have had to abandon major international investments and have generated extensive negative press coverage as well. I conclude that to prosper in the future, U.S. and other Western companies will need to compete on the basis of strength. Adopting the framework of sustainability to guide their plans and actions will help ensure that they are looking at investments and operations around the world through all the appropriate lenses.
If you work in the EHS field within a large, advanced company, you might be wondering how much real upside potential embracing sustainability offers when your firm already has advanced EHS management practices in place. The following points (which are discussed in my book) offer a few thoughts in this regard.
For these benefits to be realized, the organization and those managing it must be attentive to a number of structural, organizational, and cultural considerations. These also are identified and discussed in depth in the book.
Sustainability, and its close counterpart, sustainable development, are terms of art that have been in the public domain since their original formulation in the mid-1980s. "Sustainable development" was the original concept, but in recent time increasingly has been supplanted by "sustainability." These concepts emerged from the environmental movement, and reflect the recognition that major environmental issues are inter-related to economic and social justice issues. It is generally recognized that the term "sustainable development" first appeared in the 1987 report of the Brundtland Commission, entitled Our Common Future. This document presents the following, widely cited and used definition:
"Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs."
The breadth of this definition has spawned many distinct interpretations of how society can (or must) adapt its behaviors and practices to enable continued growth and prosperity. There is, however, general agreement that sustainable development or sustainability reflects three inter-related dimensions: environmental quality, social equity, and economic prosperity. While the impetus behind the sustainability movement has largely been provided by environmental (and to some degree, population growth) concerns, there is a clear recognition within all sides of the movement that a reasonable balance among the three dimensions is a prerequisite to an organization, community, economy, or nation that is viable in the long term.
The term "sustainability" is in more common use within corporate organizations, probably because it is simpler, and is not directly connected to either material consumption or development, which are major concerns to some stakeholders. Sustainability also seems more directly germane to the scale of a single organization, and therefore is more useful as an organizing principle for internal business improvement initiatives.
More generally, however, the distinction between sustainable development and sustainability is not a matter of semantics, for the following reason: Sustainable development is about helping the world's poor. The Brundtland Commission recognized the dire circumstances in which a sizeable fraction of humanity lived (and still does), as well as the legitimacy of their aspirations for a better life and higher standard of living. They also recognized, however, that if the billions living in poverty around the world were to achieve their goal with (then) current technology, infrastructure, and relative consumption patterns, their collective actions would unleash a global environmental catastrophe. In response, the sustainable development concept postulates that the developing world and its people must receive assistance so that they can build their economies in a way that does not undermine their own natural resource base, threaten the health of their people (or that of their neighbors), or unjustly enrich a small percentage of the population at the expense of everyone else.
As suggested above, sustainable development remains a worthy and important goal, but it should be distinguished from the environmental, social, and economic challenges and opportunities directly facing most U.S. organizations, particularly those in the corporate sector.
1 Available from BoardSource, Inc.
2 Some people and organizations are now using the phrase "people, planet, profits" as convenient shorthand for this concept.
3 Most U.S. nonprofits are organized under Section 501(c)(3) of the Internal Revenue Code, which enables them to receive monetary and other donations that are tax-deductible for the donor. Tax-exempt organizations eligible for Section 501(c)(3) status are limited to organizations formed and operated exclusively for charitable, religious, educational, scientific, literary, or other defined purposes.