Small Actions, Big Difference

Leveraging Corporate Sustainability to Drive Business and Societal Value

CB Bhattacharya

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781000507263
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

Despite dire warnings about global warming, carbon emissions by the world's largest companies are increasing and only a few companies have strategies for managing carbon emissions and water resources.

So what separates the best from the rest? In one word, the answer is ownership: companies that are winning at sustainability have created the conditions for their stakeholders to own sustainability and reap the benefits that come with deeper experience with and ownership of social and environmental issues: a happier, more productive workforce, increased customer loyalty, higher stock valuations, and greater long-term profits.

Based on interviews with 25 global multinational corporations as well as employees, middle managers, and senior leaders across multiple sectors, this is the first book to connect sustainability to the theory and principles of psychological ownership and to propose a succinct, easy-to-digest model for managerial use.

Watch the author talking about the themes in the book at the TedX: https://www.youtube.com/watch?v=7XpmsD2b76U

Part I

From bystanders to owners

In Part I, I present evidence that companies have failed to engage properly in sustainability despite boasts to the contrary. Based on my research, I argue that most corporate sustainability endeavors fail because companies are either (a) unwilling to take action because they view sustainability as a costly add-on and a hindrance to short-term performance, or (b) unable to engage employees and integrate sustainability into their operations and stakeholders’ lives. I then explain what ownership is and why it is a useful concept for companies seeking not just to talk the talk, but truly to walk the walk of sustainability.

1 The unsustainability of “sustainability”

1.1 Lots of talk and no action

“Fishbanks” is a business simulation exercise I like to run with executives who attend my continuing education programs. I think of it as “Monopoly” for sustainability, with one crucial difference. Dividing the executives into small teams, I ask them to compete against one another to become the most profitable commercial fishing company. I create a display that shows the teams’ running profits and set them loose to borrow money, build their fishing fleets, and outperform the competition. These executives, who hail from corporate stalwarts such as Accenture, Allianz, L’Oréal, Rio Tinto, or Siemens, are highly educated and enlightened. They know they’re taking part in a session about sustainability, and yet, without fail, as they compete against one another, they build up their fleets by a factor of six or more to extract more fish from the sea than their competitors. But guess what happens – the ocean runs out of fish.

As the game progresses, the players do become aware of the dangers of overfishing. Yet they continue to buy more ships and send them out to sea to fish. “We’re okay now,” some executives always say about the fish stocks. “We’ll start cutting back soon.” But of course, they don’t. And other executives don’t even see fish stocks as a problem. They make excuses for dwindling stocks, attributing the dip to cyclical factors like bad weather. As the fish run out, executives desperately try to sell boats nobody wants anymore. “Damn nature,” one player will say. “I can’t believe how greedy I was,” says another. These executives don’t even play for real money, but everybody loses every time. That’s the one crucial difference to “Monopoly,” because in that game someone always has to win.

This fishing simulation is not an idle game. It is a stark demonstration of a phenomenon called the “tragedy of the commons,” an idea popularized by the American ecologist Garrett Hardin in a 1968 Science article about common pasture ruined by overgrazing. “Fishbanks” illustrates that the overriding business mindset hasn’t changed in the half century since Hardin’s groundbreaking article. Many existing business practices are unaffected by 50 years of public debate and corporate pledges about “sustainability.” Most managers blissfully continue to maximize the private gains of their companies without regard for the collective losses borne by society. They continue to externalize the costs of pollution and the healthcare of their workers.

Yes, a few small companies – outdoor-clothing maker Patagonia, for example, or organic yoghurt producer Stonyfield – have made substantial progress on environmental and social issues. But the vast majority of companies, including the world’s biggest, have done little or nothing to avoid the disasters that follow resource degradation and depletion. They have not adopted sustainable business models. They still have not prepared their businesses – and with that an important part of society – for a future free of the tragedy of the commons and its follow-on disasters.

Sustainability means saving the planet and its people from irreparable harm. It is a task for politicians and business people, but, sadly, politics has so far failed to do its part – there are even signs its efforts have slackened in recent years. Toward the end of 2018, the United Nations Intergovernmental Panel on Climate Change (IPCC) warned that “rapid, far-reaching and unprecedented changes in all aspects of society” would still be needed if the world wanted to cap global warming at 1.5 degrees above preindustrial levels. With global mean surface temperatures already roughly one degree higher than in the period from 1850 to 1900, the IPCC said that by 2030 man-made CO₂ emissions would have to fall by around 45 percent from 2010 levels and to “net zero” emissions by 2050 to reach that goal. Only weeks later, the International Energy Agency said that CO₂-emissions in advanced economies had risen in 2018, the first annual rise in five years. Politicians seem to have their heads in the sand.

I think we should heed the warnings of large groups of learned scientists, not their evidence-free rejection by political populists. If we consider the natural ability of our planet to continually replenish key resources such as air and water, humanity today is consuming resources worth 1.5 planets. By 2050, assuming business as usual, we’ll be consuming three planets’ worth of resources. As Sowell said of Say: supply has increased beyond the limits of sustainability. We are chopping more trees down than can be replaced in time by new ones growing. Sustainability as it’s currently being practiced isn’t sustainable. Fixing it is an urgent human imperative. Politicians and business people should tackle this problem together. But there has been much talk and little action. And if politicians continue with their refusal to engage wholeheartedly, the imperative for businesses to act becomes even greater – not least because stakeholder pressure and environmental emergencies will soon hit untenable levels.

But companies are also failing to prepare and protect society at large because, on a fundamental level, they have not allowed the concept of planning for the future to take root in practice. Top executives often wax eloquent about sustainability. They tell us about their policies and programs, their key performance indicators used to keep track of corporate virtue. They describe their sustainability departments, compliance programs, and risk management procedures. A few more broad-minded executives even tout their sustainability initiatives as an exciting business opportunity. But the further you move away from the C-suite and its ideals into the many lower levels of a company, the more sustainability becomes mired in the day-to-day of mixed messages and confusion, demoralization and inertia.

Sustainability is “someone else’s job” – this attitude is still prevalent among too many employees and managers. They don’t understand the business relevance of sustainability, so they don’t put it into practice. As one executive told me, too many people “are talking about the problem, and reiterating and reiterating the problem, but not actually doing anything.”

Recounting his dealings with middle managers, a sustainability director at a large retailer said, “The conversation in the business is always positive about the need to change. But there’s always a question about pace. ‘Can we just wait another six or twelve months before we start [the sustainability] part of the journey? I’ve got other things I’ve got to deliver in the short term.’” He related what a hard time stores had had accepting greater autonomy to engage with their local communities. There was a “whole load of work that [needed] to change internally” before it happened, he said.

In most large organizations, attitudes and internal work processes haven’t evolved to allow individuals at every level of the business to practice sustainability, for example, by participating in sustainability initiatives however large or small. As a result, little of any importance gets done to avoid the tragedy of the commons, to end the unsustainability of sustainability.

Procrastination rules. As I argue in this chapter, companies have failed to integrate sustainability into their operations for four reasons. Firstly, many executives still operate in a business world in which the short-term extraction of profit is deemed more important than the long-term creation of value. Even those who know better still defer to the demands of owners or investors steeped in the lore of shareholder value.

Secondly, corporate leaders often still view sustainability as the next phase of “corporate responsibility,” something optional that companies can do out of the goodness of their hearts. They don’t recognize it as a strategic imperative, something they must do in order to prepare for the future. Both these failures lead to failure three – too many corporate executives still view sustainability as a cost and not as an investment, a drag on, rather than a catalyst for profit.

Lastly, and perhaps most importantly, even well-intentioned and enlightened executives fail to practice sustainability within their organizations because they don’t understand how to implement it so that the whole company buys in. They believe sustainability can be embedded via “change management,” which is fallacious because sustainability touches upon profound questions about business purpose and business philosophy in a way change management doesn’t.

In particular, these executives don’t understand how to engage and motivate employees and other stakeholders by lowering the costs of acting sustainability and increasing the benefits for all involved. This leads to a misalignment of values – as members of society, people see the need for acting sustainably, as corporate employees, they feel they can or must forego such thinking. It is no less than companies forcing their employees to be idealists and cynics both at the same time. But such split personalities are unsustainable over the long term.

Instead, companies need to imbue their employees and other stakeholders with a new sense of purpose around sustainability. That will encourage stakeholders to identify with sustainability, so that they come to recognize a personal stake in preparing their organization for the future. That, in turn, will give them ownership of sustainability, which is nothing less than a sense of personal responsibility for the well-being of the people and the planet.

The chapters that follow provide a framework for mobilizing an organization around sustainability. Stakeholders at all levels become engaged, both rationally and emotionally, and move from being bystanders to owners of that process. In the pages that follow, I will discuss why companies remain unwilling or unable to implement sustainable business models. But I also look beyond the gloom and detail positive sustainability-related changes taking place on the edges of the corporate world. There are many reasons to despair, but also many that offer hope. I am a believer in the corporate stakeholders of the world.

1.2 Companies are unwilling or unable to engage

Too many companies continue to place profit before people and planet – very possibly the company you work for, too. You might find that hard to accept, as you and your colleagues are probably aware of the need to factor environmental and social costs into the overall cost of doing business. But, as I said in the introduction, the steps from insight to effective implementation are hard, and often difficult to judge in their effectiveness. Thinking and talking about doing business sustainably is one thing. But actually putting concepts into practice is an entirely different proposition – the leap is too large for many companies.

Recall my students’ behavior in the “Fishbanks” exercise. These are usually relatively young people, well educated, and aware of their responsibility toward the planet. But when they play the fishing simulation at the start of their course, the same thing always happens. Some do come to see disaster looming, but disaster always unfolds, regardless.

I have watched young executives play this game for many years and I’m still startled by its uncanny, unwavering ability to lead astray people who quite obviously know better. After all, my seminars are about sustainability, so it should be obvious where the exercise is headed. But, sadly, “Fishbanks” is a gloomy demonstration of the problems companies face when trying to implement policies to save the planet. It shows how easy it is to focus on profit – and make people and planet someone else’s problem. Half a century after Hardin’s observation about the tragedy of the commons, nothing has changed. Without fail, these young managers hone in on their team’s profit – and the profits other teams are making – and quite naturally fall into a way of thinking and acting that lends business a rapacious and self-serving quality.

When the sizes of their catches start to plummet, most players begin to notice that their revenue problems are structural, not cyclical. Much of their wisdom about environment and society starts flooding back. Teams reach out to each other, self-appointed spokesmen or spokeswomen try to get their classmates to agree on moratoria or quotas. In the end, all teams understand what they’ve done, and they do finally react. But they always discover that all solutions are fraught in different ways – and being presented too late.

What happens, year in, year out, in my seminars is still happening ten thousand-fold in companies across the globe. Executiv...