Strategic considerations of organizations today require a systemic approach to the environmental, social and economic dimensions of sustainability. Sustainability is seen as a process of engaging stakeholders (shareholders, employees, customers, suppliers and communities, including governments) in the pursuit of goals which are future-oriented and are mutually beneficial.
Sustainability is the ability to survive. This is the single overarching goal for all organisations, because every strategy becomes insignificant when the organization ceases to exist. In the face of global social and environmental challenges, natural resources at the brink of depletion, rising world population and natural disasters in short succession, economic success will not be determined in competition for an existing, limited pool of resources but by finding innovative ways of creating new, additional value.
However, approaches to address sustainability are fragmented; going 'green' is considered a cost, not an opportunity by many organisations. That is not surprising, as social and environmental concerns are often not supported by legal requirements but are supposed to be integrated on ‘a voluntary basis’ (1). A global unified regulatory strategy which outlines clear social and environmental expectations and enforces compliance is missing. Some organisations progress voluntarily and reap the rewards as first-movers: they improve their product-range, energy-usage and their processes and branding by addressing sustainability as a strategic goal. Currently we are far away from seeing sustainability consistently globally embraced.
- Legal requirements
Sustainability standards must be created and implemented into legal frameworks. Unified standards would be beneficial for internationally operating organisations because it is much more efficient to apply only one standard to a variety of markets than having to design solutions for a variety of frameworks.
- Price of resources
The oil-crisis in the 1970s was a shock for economies but also initiated a significant rise in patents (2). Apparently the pressure of price and scarcity of oil stimulated creativity and innovation in a way that hadn’t happened before. This could be taken as a model to initiate novel ways of thinking about products and processes. If a managed shortage for non-renewable resources, e.g. oil, gold and other metals, was created well in advance before these resources in reality run out, a wave of innovative processes would be sparked. Innovative ideas are likely to be developed for overcoming the shortage through processes which make more efficient use of the existing resource, or design alternative, more advanced products and thus create a competitive advantage.
This could be achieved by increasing the price by a premium, which would incorporate a mitigation of the environmentally and socially detrimental effects of the resource exploitation. These effects are usually not reflected in resource prices today. A premium on price would help balance out social inequities which constitute a growing risk of social unrest in many countries. The mark-up could also be invested into alleviating waste and pollution problems and supporting innovative clean technology.
Shortening the supply of a resource prior to actual scarcity provides the opportunity of managing the extent of the impact and of moderating the effects. However, if a crisis hits markets unexpectedly, such as the recent financial crisis, the impact can be dramatic, because there is not time to react and create sustainable alternatives. In the current geopolitical situation a business environment can significantly change from one day to the next through political shifts, disasters or volatile financial markets. The opportunity to experiment with the impacts of a resource shortage could provide a range of new options, the time to test them, and an opportunity to market innovations profitably and thus gain the flexibility to survive changes and use them productively.
The first step for giving sustainability considerations more weight in organisational strategy is to replace a rational approach to sustainability by instigating a substantial behaviour change, through a ‘passion for sustainability’ (3). Engagement with sustainability has to start in management education through a broad and consistent incorporation of social and environmental topics into curricula. Currently, the way and extent sustainability is covered in management education curricula varies widely (4). Future as well as current leaders have to be equipped throughout their training with not only extensive knowledge about sustainability but also with the conviction that sustainable development has to be the underlying principle of organisational strategy.
(1) European Commission. (2002, last updated 2005). Corporate social responsibility: A business contribution to sustainable development. (347). Retrieved from http://europa.eu/legislation_summaries/employment_and_social_policy/employment_rights_and_work_organisation/n26034_en.htm.
(2) Alpanda, S., & Peralta-Alva, A. (2010). Oil crisis, energy-saving technological change and the stock market crash of 1973-74. Review of Economic Dynamics, 13(4), 824-842. doi: 10.1016/j.red.2010.04.003
(3) Shrivastava, P. (2010). Pedagogy of Passion for Sustainability. Academy of Management Learning & Education, 9(3), 443-455.
(4) Yen-Chun Jim, W. U., Shihping, H., Lopin, K. U. O., & Wen-Hsiung, W. U. (2010). Management Education for Sustainability: A Web-Based Content Analysis. Academy of Management Learning & Education, 9(3), 520-531.
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