Overcoming Barriers to Corporate Sustainability (CS)

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Overcoming Barriers to Corporate Sustainability (CS)
Jaap de Jonge, Editor, Netherlands

According to Robert G. Eccles and George Serafeim in their article "Innovating for a Sustainable Strategy" (HBR May 2013), most large companies have some kind of sustainability program underway, but many are not successful and investors are understandably critical towards sustainability projects if they do not generate economic value.

So companies need to address the interests of ALL stakeholders (including the shareholders) and create a sustainable strategy. Such a strategy goes beyond just cutting emissions, reducing waste etc. and requires a strategic focus on the Environmental, Social and Governance (ESG) issues that are most relevant to creating shareholder value.
In this way firms can increase both their ESG and financial performance at the same time. An idea similar to Porter's Shared Value Principle.

Eccles and Serafeim are offering a 4-stage sustainability strategy framework which can be helpful for corporations wanting to execute such a combined corporate sustainability/shareholder value strategy:
1. IDENTIFY the most critical ESG issues in your type of business.
2. QUANTIFY the financial impact of ESG improvements (one can use the SASB Materiality Maps for this, which distinguishes 43 potential impact issues in 5 main categories: Environment, Social Capital, Human Capital, Business Model and Innovation, Leadership and Governance).
3. Undertake MAJOR INNOVATION in products, processes and business models to achieve the improvements under 2 (Improving a single product or process innovation will be insufficient to affect the whole corporation).
4. COMMUNICATE with stakeholders about these innovations. For example by integrating ESG information in the annual report.

Companies should avoid the following sustainability barriers when implementing these steps:
A. Short-term-oriented incentive systems
B. Short-term investor pressure
C. Shortage of strategic ESG know-how
D. Failing to account in the proper way for environmental and social value in the capital budgeting process.

I believe that indeed these 4 are probably the most important obstacles to a more sustainable future for all of us. So we'd better take them seriously. Most of these barriers can probably only be countered per individual company. But perhaps there are also some generic solutions / advices up to a certain point. So...
► How can the barriers A-D to Corporate Sustainability be overcome? Please share your experiences...
► Did you notice any other obstacles beyond the 4 mentioned? Please share those too. Thanks...

Culture and Its Impact on Sustainability
Catherine M. Bing, CEO, United States
I am sure that cultural values also make it easier or more difficult to satisfy financial stakeholders... For example, certain cultures have a long-term or a short-term orientation.

Make Sustainability Reporting Mandatory
Natalie, Professor, India
If CS has to happen, sustainability reporting has to be made mandatory like Corporate Social Responsibility in India for those companies earning a net profit of more than Rs. 5 crore or more in a fiscal year.
Government has to come forward in aiding the companies to become sustainable and maintaining the ecological balance. In this regard, government has to come up with eco-subsidy and eco-tax which will enable the companies to go for renewable resources and becoming green. New entrepreneurial units have to be encouraged to operate as a green business from the start.

Sustainable Strategy Should be Part of the Business Strategy and Corporate Culture
SETIONO WINARDI, Business Consultant, Indonesia
The sustainable strategy has to be described in the master business strategy and drop down in 3 stages: short term, medium term and long term.
Its also important to involve the workforce and make it part of the corporate culture.

Overcoming Sustainability Barriers Requires Innovation and Change Management
srinivas, Test Manager, India
I think there is a need to have effective change management and innovation process to overcome the barriers in sustainability. Innovation to cater to improve upon the delivery effectiveness of service or product by constantly keeping an eye on changes in external evironment. I think this can be achieved by having quick feedback loops (agile auditing?) and an effective change management approach which works right from the value (or belief) system to begin with. Also the delivery organisation needs to reinvent itself after a certain period of time. It involves pain, yet its imperative for sustainability.

Sustainability Requires Effort
Andrew Blaine, Business Consultant, South Africa
As a species, humankind is lazy and almost always chooses the easiest route. If we could save all the time, money and effort spent on finding the easy way and then selling it, we would all be millionaires.
Identifying a sustainable eco-strategy will always involve addressing this situation and the fundamental prerequisite is to produce an elemental change in attitude, initially within the family and then, by extension into our communities. Thus, while the change needs to be universal, it will not be realised without an initial change in the attitude of leadership.
Is this possible? I am not certain!

Sustaintability Goals
Madan Gopal Agarwal, Business Consultant, India
The success of any program depends upon proper articulation of its long-term objective(s), meticulous planning to achieve the same, establishing a capable team and empowering them.
In sustainability efforts, all that is even more important, since the goals are rarely articulated in financial terms. But the goals need to be articulated in financial terms if the program has to succeed. Once this financial goal is known to all, seamless execution, swift reviews and timely corrective actions will ensure the economic value is realized as per the initial plan.

Overcoming Barriers to Corporate Sustainability
Alan Kennedy, Strategy Consultant, Canada
We think the way to overcome the barriers A-D to Corporate Sustainability is to properly allocate responsibility for implementation of the sustainability strategy.
Implementing generic frameworks, such as the Eccles & Serafeim 4 stage sustainability strategy framework seems to be a challenge because we don't know where to "put" the sustainability strategy.

We look at these issues through our 8 strategy framework: The Alpha Strategies.
There are 8 strategies common to every company, from for-profits to nonprofits, regardless of size (Business Definition/Mandate; Risk; Growth; Financial Management; R&D/Technology; Organization Management; Marketing&Sales/Communication; Service Delivery/Production/Manufacturing).
We think overall oversight of the sustainability strategy belongs in the Risk strategy because mismanagement of it carries risk.

Primary responsibility for implementation will depend on dominant strategy for the organization. The 8 strategies are organized into 3 categories:
- ALPHA - One, the Alpha, leads.
- INFLUENCERS - 3 are Influencers, constraining and guiding the implementation of the Alpha,
- ENABLERS - The remaining 4 strategies are Enablers.
Anyone of the 8 can be Alpha, but there are typical industry-specific Alphas. For example:
- For car companies, it is Manufacturing;
- For banks, it is Financial Management;
- For Utilities it is Service Delivery;
- For many hospitals, it is either Service Delivery or R&D/Technology.

The sustainability strategy starts with understanding the current strategy and its configuration within a specific organization. Obviously, our approach is top-down, with the sustainability strategy now being approved by the Board. Without the Board oversight and a good understanding of current strategy and its configuration, allocation of responsibility for developing and implementing sustainability is hit and miss.

Finally, there may well be application of sustainability to all 8 strategies but clearly the biggest priorities will be associated with the dominant (Alpha) strategy.
Perhaps with this approach, the barriers to its implementation can be overcome.

Nature of Sustainability and Evolutionary Barriers: Inertia
srinivas, Test Manager, India
I believe that besides the barriers A,B,C and D there is a need to be aware of
E. INERTIA barriers:
- Due to genesis of new change
- Due to existing position
- Due to the need to eliminate existing undue procedures
Overall I think here we are dealing with inertia (both static and dyanamic) when introducing the change related to sustainability or even to evolve from the present state.

Corporate Sustainability and Inertia
Ted Garrison, Management Consultant, United States
@srinivas: you are correct. You have identified why most companies struggle with change. The trick is to create a culture that tears down those barriers. McGrath and her book offers examples of companies that have done that and were very successful. Unfortunately, most companies don't.

Corporate Self-Interest
Uduakobong Sunday, Management Consultant, Nigeria
One additional barrier to Corporate Sustainability is what I call
F. CORPORATE SELF-INTEREST. Where the vision of the organisation does not take cognizance of the other stakeholders like - the communities within which it operates, the welfare of the employees, as well as the investors who are not part of the day-to day running of the business, the growth and survival of the business may be deterred.

Key Factors in Corporate Sustainability
Afari, Consultant, Iran
Corporate Sustainability will be materialized, provided that corporate leaders can balance and meet the expectations of all corporate stakeholders (customers, shareholders, employees, suppliers, partners, society). Without any doubt, this is a very tough job.
To achieve this goal, the vision, values, capability and devotion of the leaders are the most important factors. They can play significant roles in compromising long term versus short term goals and conflicting demands of corporate different stakeholders.

Changing the Corporate Culture to Become More Sustainable
Mandy Pretorius, Student (MBA), South Africa
It is essential for companies to identify long-term sustainability challenges through involving the entire company in taking ownership in ensuring the company's overall well-being. Sustainability incentives and reward systems must be put in place to encourage all employees to be more savings-orientated, thus creating more environmentally responsible citizens.

Why CS is Such a Challenge
Ted Garrison, Management Consultant, United States
Peter Drucker wrote the purpose of a business is to find a customer's need and fill it. If you do that well your company will thrive - but too many companies are focused on themselves first and they then tend not to be responsive to the customer's needs.
The second problem is the the customer's needs are constantly changing so companies must adapt. Kodak went out of business despite being the best at what it did, because the world shifted from paper to digital pictures. In contrast, Fuji adapted to digital and prospered.
As the world changes faster and faster - sustainability must change also. It use to mean developing a product or service that gave you a long-term competitive advantage.
Today it means being able to adapt and innovate to the changing demands of one's customers.

The FIVE Factors to Overcome to Become Sustainable
Arif ur Rehman, Professor, Pakistan
Becoming sustainable fundamentally demands overcoming the following:
- One, the senior staff / decision makers must be on board on the same frequency;
- Two, employee engagement in the process must extrude a sense of positivism and motivation;
- Three, costs count, but if the ‘costs’ alone matter prepare for the company’s closure;
- Four, consumers often aren’t bothered about sustainability where the management needs to go out of the way educating them; and
- Five, metrics demand projected outcomes to be measured upfront.

The Most Important Obstacle to Sustainability is Lack of a Business Case
Love Lonnroth, Management Consultant, Sweden
I am a management consultant with 20 years experience in corporate sustainability. The main problem in elevating sustainability to a top management priority is that managers do not perceive a clear business case. The ones that do embrace sustainability are motivated by their own interests and concerns. I think there are two solutions to this:
1. Translate the sustainability related risks, especially Black Swan type of risks, to the context of reputational and financial impact.
2. Find new revenue streams by sustainability innovation.
Albeit all talk of managing for the long term, most companies are still short term focused.


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