An Investigation into Sustainability Strategies in Value Chain Networks
The corporate agenda is changing. Social transformation is taking place on many levels, from population growth and shifting demographics, to heightened awareness of global issues, driven by unprecedented scientific knowledge and connectivity. These transformations are forcing businesses around the world to rethink their strategies and broaden their perspective. In Epstein’s view:
“The issue of whether companies should consider their social responsibility or the impact of their activities on their stakeholders is no longer up for discussion. These issues, and many, many more like them, have become a central part of the creation of shareholder value and the management of both global and local enterprises.” (Epstein, 2008)
Evidence indicates that ‘sustainability’ strategies are surviving the current economic downturn (Berns et al., 2009), and that companies are increasing their ambitions to act in a more socially or environmentally responsible manner. This suggests that sustainability can be linked to bottom line business value, and as such should be considered from a strategic perspective.
The primary objective of this research project therefore, is to learn more about strategies explicitly aimed at reducing environmental burden and enhancing social impact, whilst delivering growth and meeting revenue targets. These elements, grouped together, form the three pillars of sustainable development, which in business terminology has been labelled the triple bottom line (Elkington, 1997).
Sustainability and the concept of sustainable development came to prominence in 1987, with the publication of the oft quoted United Nations World Commission on Environment and Development Report, ‘Our Common Future’. Sustainable development, as outlined in the report, was proposed as a means of enabling continued economic growth whilst addressing environmental and social concerns, defined as:
“…development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987)
An alternative perspective on sustainability is offered by The Natural Step, a non-profit education organisation. They promote a framework based on four system conditions, which describe a sustainable society. Starting from these conditions a business can use back-casting, a form of scenario planning, to identify the strategies they need to implement in order to become sustainable. The system conditions describe a sustainable society as:
“…one where nature is not subject to systematically increasing concentrations of substances extracted from the Earth’s crust, concentrations of substances produced by society, degradation by physical means and, in that society people are not subject to conditions that systematically undermine their capacity to meet their needs.” (Ny et al., 2006)
Translating these ideas into the context of this report, a business striving to become sustainable can be defined as one:
“…where an organisation explicitly and comprehensively incorporates social, environmental, and economic goals in developing strategic vision and long-term strategic objectives.” (Carter & Rogers, 2008)
The idea of a business incorporating social and environmental objectives into their operations is not a new concept. Evidence points to the birth of modern corporate responsibility in a paper written in the 1950s (Husted & Allen, 2006). However the idea of strategic sustainability, built on best practices from the business management field, is still a nascent practice pursued by a minority of leading businesses.
Leaving aside the more traditional concept of Corporate Social Responsibility, (CSR), which hinges on the voluntary consideration of social and environmental concerns by a business, I have chosen to adopt Visser’s definition. Suitable because it captures the strategic potential of corporate responsibility, which, it could be argued, is no longer quite so discretionary. Visser interprets CSR as Corporate Sustainability and Responsibility, defined as:
“…the way in which business consistently creates shared value in society through economic development, good governance, stakeholder responsiveness and environmental improvement.” (Visser, 2011)
Drivers of CSR
The drivers of action on sustainability are diverse, context dependent and change over time. Fundamentally, the ideas are grounded in science, and as scientific knowledge increases, our understanding of the impact of modern systems evolves. As King explains:
“…companies do not operate in a vacuum. They operate in the milieu in which they carry on business. Our forefathers in the industrial revolution believed that mechanisation was the answer to everything. This resulted in business being conducted, for 150 years, on two false assumptions. Firstly, that there were limitless resources of natural capital and secondly, that planet earth had an infinite capacity to absorb waste.” (UNCTAD, 2010)
CSR can be considered as a firm’s obligation to respond to the externalities created by market action, where externalities are the external costs (positive or negative) of an organisation’s activity on society and the environment (Husted & Allen, 2006).
It is clear that some businesses recognise the connection between global problems and modern business practices, and through a process akin to action research, they are seeking to merge business practice with CSR. Training an academic lens on these activities is critical, both to provide external, evidence-based analysis that can help sharpen efforts and also as a means of assessing the broader impacts of these initiatives on society.
The starting point for this research is a review of the academic literature on strategy, and the link with value chain networks. The literature review will then explore the theoretical perspectives linking these fields to sustainability, and seek to identify a suitable research question, related to a specific academic gap.