Corporate Sustainability Management

The Art and Science of Managing Non-Financial Performance

Mark W. McElroy, J.M.L. van Engelen

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136329616
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Formación empresarial

Businesses around the world are increasingly turning to an exciting new branch of management known as corporate sustainability management (CSM) to help them better understand and manage their non-financial performance.

Indeed, what we are witnessing is nothing less than the birth of a new management function. The main pillar of CSM is the Triple Bottom Line (TBL), which has been successful as an organizing principle but a disappointment in practice. This is largely due to the absence of 'sustainability context' in related measurement, management and reporting efforts, when for example the monitoring of a company's use of freshwater resources fails to take into account the size of related supplies.

This book is the first to introduce a systematic means of including context in sustainability management and doing effective CSM. After making the case for why context matters, the book explains how to do context-based CSM by providing a stepwise, cyclical blueprint for how to practice it in any organization. This includes a template for context-based metrics compatible with the Global Reporting Initiative (GRI), as well as specific examples of metrics for each of the triple bottom lines.

Practical examples of best practices are presented throughout, while simultaneously addressing key issues, such as how organizations can measure performance against context-based standards when consensus for such standards does not yet exist. Appendices include tools for developing and applying context-based metrics, as well as case studies taken from the practice of context-based CSM at two companies in the United States.

This guide is the essential tool for business and organizational leaders in all sectors committed to improving their sustainability performance, with a particular emphasis on measurement, management and reporting.

1

CONTEXT-BASED SUSTAINABILITY

A brief history of context

The central claim of this book is that sustainability measurement, management and reporting must be context-based in order to be meaningful. All aspects of corporate sustainability management (CSM), that is, must be performed with explicit reference to, and in light of, actual social and/or environmental conditions in the world in order to be effective. The sustainability of water use, for example, cannot be determined without reference to the size and sufficiency of available water supplies; nor can the sustainability of an organization’s social impacts be determined without reference to the general well-being of its stakeholders.

In this chapter we will unpack and explore this idea further, culminating in a summary of exactly what we mean by context-based sustainability, or CBS. But first we want to make it clear just how long the idea of including context in sustainability management has been around by highlighting its appearance in the literature over the past three hundred years. As we will show, context in sustainability is not a new idea, just a currently neglected one.

Hans Carl von Carlowitz

The concept of sustainability arguably first appeared in 1713 in the writings of one Hans Carl von Carlowitz (Von Carlowitz, 1713), a Saxon tax accountant and mining administrator who more or less invented the practice of sustainable forestry. In the early eighteenth century, the mining industry in Europe was in a state of crisis, not because of any shortages in ore or in mines per se, but because of the scarcity of lumber required for smelting. Whole forests were disappearing through clear cutting, leading to soaring prices, bankruptcies and the collapse of the mining sector in certain areas. In response, Von Carlowitz argued that the forestry industry should alter its practices such that the rate of logging does not exceed the rate at which trees grow; in so doing, he singlehandedly ushered in the principle of sustainability to management, the relevance and importance of which have been growing ever since.

Indeed, Von Carlowitz’s writings arguably constituted the first formulation of what would later become known as the triple bottom line (Elkington, 1997). Edinger and Kaul (2003, p. 5) put it this way:

One year before he died, [Von] Carlowitz published his book Sylvicultura Oeconomica (The Economics of Forestry). He outlined the triad principles of sustainability (ecology, economy and social aspects) and, like the modern ecological economists … subordinated human economic activity to natural restraints. Von Carlowitz believed that trade and commerce had to serve the society and treat nature in a careful and considerate way. Also, he saw economic activity as responsible for future generations.

Throughout the entirety of his 1713 text, Von Carlowitz used the word sustainability only once – or sustainable or sustained, in fact, since he used the term in its descriptive form as an adjective (nachhaltende), not as a noun. He did so while advocating for the adoption of sustainable forestry practices as follows:¹

Therefore the highest level of art, science, industry and institutions in this country will have to make every effort to achieve conservation and cultivation of wood for continuous and sustained utilization, because it is an indispensable matter, without which a country cannot continue in its esse.

(Von Carlowitz, 1713, pp. 105–06)

In making his argument, Von Carlowitz relied on context – sustainability context – to give his proposals meaning. The particular type of context he relied on was the stock of forests and the rate at which trees grow, an environmental condition or fact that should determine, he argued, the maximum rate at which humans should harvest trees. Context in sustainability management, then, is always reflective of one or more social and/or environmental conditions in the world, which in turn give rise to thresholds or standards of performance that tell us what our impacts should or should not be in order for our behaviors to be sustainable (i.e., so as to preserve stocks of vital resources important to human well-being). In Von Carlowitz’s case, the context of interest was an environmental kind – the finite supply of trees and their actual rate of growth – and his management proposals were expressed in precisely those terms: the rate of tree logging should not exceed the rate at which trees actually grow or reproduce. It would not have been enough simply to say that humans should be logging less; rather, the question was by how much less. The actual rate of tree growth supplied the answer.

Thomas R. Malthus

In 1798, eighty-five years after Von Carlowitz’s seminal work on sustainability, another auspicious moment in the history of sustainability context took place, this time in the writings of Thomas R. Malthus and his infamous An Essay on the Principle of Population (Malthus, 1998[1798]). The essence of Malthus’s Essay was his claim that the rate of human population growth would eventually exceed the rate of food production, since the former grows geometrically and the latter arithmetically. Thus, he argued, population will sooner or later outstrip the food supply on Earth, with widespread famine and misery to follow. Here, in his own words, is how Malthus put it (Malthus, 1998[1798], p. 14):

Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will shew [sic] the immensity of the first power in comparison of the second.

By that law of our nature which makes food necessary to the life of man, the effects of these two unequal powers must be kept equal.

This implies a strong and constantly operating check on population from the difficulty of subsistence. This difficulty must fall some where; and must necessarily be severely felt by a large portion of mankind.

Whereas for Von Carlowitz the relevant context that should govern or constrain human behavior was the rate at which trees grow, for Malthus it was the rate at which food is produced. Thus, in both cases, we have a pair of rates being compared with one another. In the case of Von Carlowitz, it was the rate of logging compared with the rate of tree growth; for Malthus, it was the rate of human reproduction compared with the rate of food growth. Stated in more general terms, both cases involved comparisons between some type of human behavior (mining and reproduction) and the capacity of an environmental resource (trees and food, respectively) to support it (the behavior) on a continuing if not indefinite basis.

Generally speaking, if human activity puts the quality and/or sufficiency of a supporting (if not vital) resource at risk relative to levels required for human well-being, the behavior can be said to be unsustainable, thanks entirely to what its impact on the supporting resource is. Here it should be clear that both Von Carlowitz and Malthus were ultimately appealing to the principle of human well-being – and the need or desire to ensure it – as the basis of their thinking. Placing resources required for human well-being at risk, they seemed to be saying, is unsustainable precisely because it puts human well-being at risk.

The main goal of sustainability management must therefore be to ensure that the quality and/or sufficiency of vital resources in the world are always maintained at levels required to ensure human well-being. Thus, explicit knowledge of such levels – or at least well-reasoned claims about them – is essential for sustainability measurement, management and reporting, and that is precisely the kind of context that must be embedded in everything we do as sustainability managers in business. Effective sustainability management simply cannot be done without it.

John Stuart Mill

Next in our journey through the intellectual history of sustainability (and context) comes John Stuart Mill. Exactly fifty years after Malthus published his Essay, Mill published a work entitled Principles of Political Economy with Some of Their Applications to Social Philosophy, in which he included his concept of the stationary state (Mill, 1923 [1848], Book 4, Chapter 6). Mill contrasted the stationary state with the prevailing progressive state, the latter being a reference to the growth-oriented, resource-based economy, and the former comprising a fundamentally different, if not utopian, alternative. In contemplating his vision of a stationary state, Mill asked (p. 746):

Towards what ultimate point is society tending by its industrial progress? When the progress ceases, in what condition are we to expect that it will leave mankind?

Mill answered his own question by envisioning a world in which all finite resources are harnessed, controlled or consumed by the (conventional, growth-oriented) progressive state, a prospect entirely possible in a world with limited resources – that is, our world. He was clearly troubled by this (pp. 750–51):

Nor is there much satisfaction in contemplating the world with nothing left to the spontaneous activity of nature; with every rood of land brought into cultivation, which is capable of growing food for human beings; every flowery waste or natural pasture ploughed up, all quadrupeds or birds which are not domesticated for man’s use exterminated as his rivals for food, every hedgerow or superfluous tree rooted out, and scarcely a place left where a wild shrub or flower could grow without being eradicated as a weed in the name of agriculture. If the earth must lose that great portion of its pleasantness which it owes to things that the unlimited increase of wealth and population would extirpate from it, for the mere purpose of enabling it to support a larger, but not a better or a happier population, I sincerely hope, for the sake of posterity, that they will be content to be stationary, long before necessity compels them to it.

Here, as in the case of Von Carlowitz and Malthus, we see Mill raising the specter of human suffering and misery as the consequence of a failure to take context – what he calls ‘necessity’ – explicitly into account, this time with respect to the general conduct of human economic affairs in all of its dimensions. The alternative vision he offers is that of the stationary state, an economic system in which the level of human demands placed on vital resources in the world more or less conforms to their continuous availability, and vice versa. In so many words, he seems to be saying: manage our numbers and activities in the world, or else the world will manage them for us!

Meadows et al.

From Mill in 1848 we jump to the twentieth century in 1972, when Donella Meadows, Dennis Meadows, Jorgen Randers and William Behrens III published their highly acclaimed book The Limits to Growth (Meadows et al., 1972). Their purpose in publishing Limits, in their words, was as follows (pp. x–xi):

The intent of the project is to examine the complex of problems troubling men of all nations: poverty in the midst of plenty; degradation of the environment; loss of faith in institutions; uncontrolled urban spread; insecurity of employment; alienation of youth; rejection of traditional values; and inflation and other monetary and economic disruptions. These seemingly divergent parts of the world ‘problematique,’ as The Club of Rome calls it, have three characteristics in common: they occur to some degree in all societies; they contain technical, social, economic, and political elements; and, most important of all, they interact.

The particular methodology used by Meadows et al. in their work involved the deployment of system dynamics tools (Forrester, 1961, 1969, 1971) and the development of a model of human activity called the World model, in which sustainability context was firmly ensconced. This context took the form of many premises and assumptions about ecological constraints in the world, prevailing social conditions, consumption patterns, population growth, etc. that the authors relied on for their analysis. The model, in turn, was used to determine whether or not various possible futures of human activity on Earth would be viable given certain predicted and hypothetical social and ecological constraints. In effect, what they did was to measure and report, albeit on a prospective and exploratory basis, the sustainability performance of humanity, with sustainability context (i.e., then-current and future conditions in the world) taken fully into account. Indeed, the very ‘limits’ referred to in the title of their book were – and are – instances of context, confronting humanity in terms of the finite environment on Earth, and by the equally finite scope and dimensions of social services and institutions in the world available to address human needs. Five specific types of context were of particular concern to them (p. xi):

The team examined the five basic factors that determine, and therefore ultimately limit, growth on this planet – population, agricultural production, natural resources, industrial production, and pollution.

Here we see how context came explicitly into play for the Limits team. In order to assess the sustainability performance of humanity on a global basis, existing and future conditions in the world were factored into the analysis. The long-term viability of human behaviors on the planet (given trends in evidence at the time) would have to be assessed relative to agricultural production – a tip of the hat to Malthus – natural resource constraints and so forth. Background population conditions, too, would have to be considered, since existing levels at the time already placed certain demands on society and the environment, thereby constraining the capacity of social and environmental systems to accommodate future (and growing) human needs.

The conclusions reached by Meadows et al. were as follows (p. 29):

Our conclusions are:

1. If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next one hundred years. The most probable result will be a sudden and uncontrollable decline in both population and industrial capacity.

2. It is possible to alter these growth trends and to establish a condition of ecological and economic stability that is sustainable far into the future. The state of global equilibrium [note the similarity here to Mill’s notion of the ‘stationary state’] could be designed so that the basic material needs of each person on Earth are satisfied and each person has an equal opportunity to realize his individual human potential [notice here, as well, the elliptical reference to human well-being as a criterion for sustainability].

3. If the world’s people decide to strive for this second outcome rather than the first, the sooner they begin working to attain it, the greater will be their chances of success.

Regardless of how one may feel about the Limits team’s analysis and conclusions, it should be clear that their assessment of the sustainability of human activity in the world could not have been rendered without explicit consideration of human, social, economic, environmental and material conditions in the world, no matter how hypothetical. Indeed, it is quite literally impossible to draw any meaningful conclusions about the sustainability of human activities – at any level of analysis, global or otherwise – without taking such conditions systematically into account. As we will see, this is true for businesses and other kinds of organizations as well.²

World Council of Churches

Only two years after The Limits to Growth was published, there appeared what may be the earliest expression of sustainability principles in modern terms from a very surprising, if not unlikely, source: the concept of a ‘sustainable society’ as put forward at an ecumenical study conference on ‘Science and Technology for Human Development’, held by the World Council of Churches in 1974. There the concept was defined as follows (World Council of Churches, 1974, as quoted in Dresner [2002, p. 29]):

First, social sustainability cannot be obtained without an equitable distribution of what is in scarce supply or without common opportunity to participate in social decisions. Second, a robust global society will not be sustainable unless the need for food is at any time well bel...