The Durable Corporation

Strategies for Sustainable Development

Güler Aras, David Crowther

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9780566088193
• eBook ISBN: 9781317035190
• Topic: Business
• Subtopic: Business General
• Index: Business

Sustainability is normally considered to be about choices for the future being limited by decisions made in the present, and is frequently portrayed as concerning environmental issues alone. The Durable Corporation rejects both of these notions to argue that sustainability is a more complex concept that involves balancing many factors. It explores the nature, value and role of sustainability in business and maintains that resource utilization must be based upon the twin pillars of equity and efficiency rather than attempting to ensure that our choices in the future are not reduced. The authors of The Durable Corporation propose a new model of sustainability and a fresh approach to managing resources. They extend this to the development of difference strategies for achieving sustainability and an alternative approach to managing for the future. These features make it essential reading for all those with responsibility for the sustainability or durability of the enterprises in which they are engaged or in the study of the issues at stake.

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Introduction: Why Sustainability Matters

Introduction

Most corporations in the world are currently trying to distance themselves from the excesses and misbehaviours which have been manifest in recent years by those corporations which have been symbolised as rogue corporations.¹ Many would consider that these corporations have, however, behaved no differently to most others and have merely been found out in their misdeeds. Nevertheless, the distancing of the rogues from the rest has led to a tremendous resurgence of interest in behaviour which has been classified as corporate social responsibility (CSR). So, corporations have been busy repackaging their behaviour as CSR and redesignating their spinmasters as Directors of CSR, for many people would say that there is much evidence that little has changed in corporate behaviour except for this repackaging – the power of the semiotic being far more potent in the modern world that the power of actual action, and also obviating the need for such action. In this book we do not take this position, holding a view that all corporations are a mixture of good and bad practice just as much as all people are – so cataloguing the bad might be easy and entertaining but hardly constructive.

Crowther and Rayman-Bacchus (2004a) have argued that the corporate excesses, which are starting to become disclosed and which are affecting large numbers of people, have raised an awareness of the social behaviours of corporations. This is one reason why the issue of CSR has become a much more prominent feature of the corporate landscape. There are other factors which have helped raise this issue to prominence and Topal and Crowther (2004) maintain that a concern with the effects of bioengineering and genetic modifications of nature is also an issue which is arousing general concern. At a different level of analysis, Crowther (2000a, 2002a, 2002b) has argued that the availability of the World Wide Web has facilitated the dissemination of information and has enabled more pressure to be brought upon corporations by their various stakeholders. But, Wheeler and Elkington (2001: 1) talk about the end of the corporate environmental report due to the fact that historically this report has not engaged stakeholders and it appears to be:

‘the development of truly interactive (cybernetic) corporate sustainability and communications delivered via the internet and other channels.’

Another point of view, about the diffusion of information and its impact,² was presented by Unerman and Bennette (2004), who explain the difficulties in identifying all stakeholders that are affected by a corporation’s activity. All these perspectives, therefore, raise the question as to what exactly is CSR and how can it manifest and to what exactly can be considered to be CSR. According to the EU (2001: 8):

‘... CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.’

From these various writings about CSR we can infer that the idea of the corporation as a social enterprise is not new and has resonance with earlier ideas such as those of Dahl (1972: 18), who stated:

‘... every large corporation should be thought of as a social enterprise; that is an entity whose existence and decisions can be justified insofar as they serve public or social purposes.’

Shaw (2004: 196) explains that the principal characteristics of a social enterprise are:

(i) the orientation, ‘... directly involved in producing goods and providing services to the market, making an operating surplus ...’

(ii) the aim, ‘... explicit social aims (job creation, training or provision of local services), strong social values and mission (commitment to local capacity building), accountable to their members and wider community for their social, environmental and economic impact.³ The profits are to their stakeholders or for benefit the community.’

(iii) and the ownership, ‘... autonomous organizations with loose governance and participation of stakeholders in the ownership structure.’

All definitions – and there are many – seem to have a commonality in that they are based upon a concern with more than just profitability and returns to shareholders. Indeed, involving other stakeholders and considering them in decision-making is a central platform of CSR. The broadest definition of CSR is concerned with what is – or should be – the relationship between the global corporation, governments of countries and individual citizens. For example, the Organization for Economic Cooperation and Development (OECD) has studied investment in weak governance zones.⁴ More locally, the concept of CSR is concerned with the relationship between a corporation and the local community in which it resides or operates. One such case was Timberland, which recorded 44,000 community service hours during a three-year period and received US recognition⁵ for its commitment to social responsibility (Austin et al. 2004). Another concept of CSR is concerned with the relationship between a corporation and its stakeholders. In this situation, activity could be focused on employees (see Parker 1977). The corporation develops its codes of conduct that could make some progress in improving labour rules and process, but the scope are limited and it is unclear if they can make a significant impact without the help of governments with law enforcement. These efforts are likely to benefit only a small segment of the target workforce.⁶

For the authors all of these definitions are pertinent and represent dimensions of the issues. At the same time a parallel debate is taking place in the arena of ethics as to whether corporations should be controlled through increased regulation or whether the ethical base of citizenship has been lost and needs replacing before socially responsible behaviour will ensue. For example, Fülöp et al. (2000) state that people in Hungary often comment that ethics in the Hungarian economic life is a delusion rather than a reality.⁷ However this debate is represented it seems that it is concerned with some sort of social contract between corporations and society.

For corporations however, within the broad concept of CSR there are three real issues which focus their attention at the moment: sustainability, corporate governance and the harmonisation of accounting standards. All are issues which are global in their impact and must be considered in the context of globalisation. Probably the most important – and certainly what we will be focusing on in this book – is the issue of sustainability. This is something which is addressed by every corporation, and most governments and NGOs, all over the world. It is also the topic of this book and so we need to start by considering why it has become such an important issue.

Global Warming

The changes to the weather systems around the world is apparent to most people and is being manifest in such extreme weather as excessive rain or snow, droughts, heatwaves and hurricanes which have been affecting many parts of the world. Indeed most of us remember, for example, Hurricane Katrina which devastated New Orleans. Global warming and climate change, its most noticeable effect, is a subject of discussion all over the world and it is generally, although by no means universally, accepted that global warming is taking place and therefore that climate change will continue to happen. Opinion is divided, however, as to whether the climate change which has taken place can be reversed or not. Some think that it cannot be reversed. Thus, according to Lovelock (2006) climate change is inevitable with its consequences upon the environment and therefore upon human life and economic activity. He remains, however, positive that it is possible to adapt and is thereby more positive than some other commentators.⁸ In this book we take the position that it is an established fact that climate change is taking place and consider what can be done about it in terms of corporate activity. Whether or not it is reversible is not the issue for us as we feel obliged to attempt to – at least – mitigate its effects through changes in corporate behaviour.

Although there are many factors which are contributing to the global warming which is taking place, it is clear that commercial and economic activity plays a significant part in this global warming. Indeed many people talk about ‘greenhouse gases’, with carbon dioxide being the main one, as a direct consequence of economic activity. Consequently many people see the reduction in the emission of such gases as being fundamental to any attempt to combat climate change. This of course requires a change in behaviour – of people and of organisations. Such a perceived need for change is one of the factors which has caused the current concern with sustainability.

Footprinting

Another factor which is occupying the minds of people in general is that of their ecological footprint – the amount of physical area of the earth needed to provide for each person. Ecological footprint analysis compares human demand on nature with the biosphere’s ability to regenerate resources and provide services. It does this by assessing the biologically productive land and marine area required to produce the resources a population consumes and absorb the corresponding waste, using prevailing technology. This approach can also be applied to an activity such as the manufacturing of a product or driving of a car. A possibly more fashionable term at the moment however is that of carbon footprinting.

A carbon footprint can be considered to be the total amount of carbon dioxide (CO₂) and other greenhouse gases emitted over the full life cycle of a product or service. Normally a carbon footprint is usually expressed as a CO₂ equivalent (usually in kilogrammes or tonnes), which accounts for the same global warming effects of different greenhouse gases (UK Parliamentary Office of Science and Technology POST 2006). There are a number of ways of calculating this footprint and a number of online resources to assist, at least as far as individuals are concerned. For a corporation it is more problematic as it involves both life cycle analysis⁹ and a detailed understanding of all stages in the supply chain.

For an individual the definition of carbon footprint is the total amount of carbon dioxide attributable to the actions of that individual (mainly through their energy use) over a period of one year. This definition underlies the personal carbon calculators that are widely used. The term owes its origins to the idea that a footprint is what has been left behind as a result of the individual’s activities. Carbon footprints can either consider only direct emissions (typically from energy used in the home and in transport, including travel by cars, aeroplanes, rail and other transport), or can also include indirect emissions (including carbon dioxide emissions as a result of goods and services consumed). Bottom-up calculations sum attributable such emissions from individual actions; top-down calculations take total emissions from a country (or other high-level entity) and divide these emissions among the residents (or other participants in that entity). A number of studies have calculated the carbon footprint of organisations and nations. One such UK (2007) study examined age-related carbon emissions based on expenditure and consumption. The study found that on average people aged 50–65 years have a higher carbon footprint than any other age group. Individuals aged 50–65 years old have a carbon footprint of approximately 13.5 tonnes/capita per year compared to the UK average of 12 tonnes.

It is claimed that the carbon footprint so calculated can be effectively reduced by some of the following steps:

• Life Cycle Assessment (LCA) to accurately determine the current carbon footprint.

• Identification of hot-spots in terms of energy consumption and associated carbon dioxide emissions.

• Optimisation of energy efficiency and, thus, reduction of CO₂ emissions and reduction of other GHG emissions contributed from production processes.

• Identification of solutions to neutralise the CO₂ emissions that cannot be eliminated by energy saving measures. This includes such things as carbon offsetting and investment in projects that aim at reducing carbon dioxide emissions, such as tree planting.

It is commonly understood that the carbon dioxide emissions (and the emissions of other greenhouse gases) are almost exclusively associated with the conversion of energy carriers such as wood burning, natural gas, coal and oil. The carbon content released during the energy conversion process reaches the atmosphere and is deemed to be responsible for global warming, and therefore climate change.¹⁰ Nevertheless, general concern has been expressed worldwide and this has led to the Kyoto Protocol.¹¹ The Kyoto Protocol defines legally binding targets and timetables for cutting the greenhouse-gas emissions of industrialised countries that ratified the Protocol.¹² Accordingly, from an economic or market perspective, one has to distinguish between a mandatory market and a voluntary market. Typical for both markets is the trade in emission certificates.

In contrast to the strict rules set out for the mandatory market, the voluntary market provides companies with different options to acquire emissions reductions. A solution, comparable with those developed for the mandatory market, has been developed for the voluntary market, the verified emission reductions (VER). This measure has the great advantage that the projects/activities are managed according to the quality standards set out for CDM/JI projects but the certificates provided are not registered by the governments of the host countries or the Executive Board of the UNO. As such, high quality VERs can be acquired at lower costs for the same project quality. However, at present VERs can not be used in the mandatory market.

The voluntary market in North America is divided between members of the Chicago Climate Exchange and the over the counter (OTC) market. The Chicago Climate Exchange is a voluntary yet legally binding cap-and-trade emission scheme whereby members commit to the capped emission reductions and must purchase allowances from other members or offset excess emissions. The OTC market does not involve a legally binding scheme and a wide array of buyers from the public and private spheres, as well as special events that want to go carbon neutral. There are project developers, wholesalers, brokers and retailers, as well as carbon funds, in the voluntary market. Some businesses and nonprofits in the voluntary market encompass more than just one of the activities listed above. A report by Ecosystem Marketplace shows that carbon offset prices increase as it moves along the supply chain – from project developer to retailer.

While some mandatory emission reduction schemes exclude forest projects, these projects flourish in the voluntary markets. A major criticism concerns the imprecise nature of greenhouse gas sequestration quantification methodologies for forestry projects. However, others note the community co-benefits tha...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• Foreword
• 1 Introduction: Why Sustainability Matters
• 2 Defining Sustainability
• 3 Managing Risk
• 4 Governance and Sustainable Performance
• 5 Implications of the Size and Sector of a Firm
• 6 Satisfying Stakeholders: Distributing Effects
• 7 External Verification: Audit and Rating Systems
• 8 International Standards and Regulations
• 9 Globalisation, Competition and Financial Crisis
• 10 Corporate Social Obligations for Sustainability
• 11 Implementing Sustainable Practice
• 12 Conclusion: Creating and Sharing Common Value
• References
• Index