Harvard Business Review

Green has finally caught the attention of both the Political and financial ears in the US. We are now designing recyclables in our material selections, EOl's are ear marked with reusable in mind and we are realizing that less energy in means better margins out.

The need for greater application is at hand, America for the first time in decades is in the competitive export posture (based the Euro and Europe's loss of direct export to the US for products other that wine,cheese and olive oil)

The technology vault is open, renewables, Carbon fiber, waste recycling systems, again the US is postured for a blue ocean flood, the hold back is the first round investor pools, add that to the mixed and growth curve will again head in the up direction.

For more information, simply ask.

Terry O'Malley, CEO
PMI

When in 1997 Shell invited major shareholders to a meeting to discuss “nonfinancial issues” covering industrial safety, human rights, the environment, and climate (yes, climate in 1997), one shareholder said to me, “That was really interesting – I wondered what we were going to talk about for three hours”. Now in a similar annual meeting to discuss Anglo American’s “Report to Society”, around 40 major shareholders ask searching questions and make constructive suggestions. Why the change? As a mining company, Anglo American, unlike Shell, does not have millions of direct consumers making daily purchasing choices around the world. But our major shareholders – insurance companies and pension funds – do have millions of consumers. And as an NGO activist once said to me “Insurance companies watch trends in consumer attitudes, and twenty individual letters or e-mails to them is a trend”.

So HSBC, which certainly listens to consumers around the world, not only subscribes to the Equator Principles, but has lending guidelines for sensitive areas such as forestry, energy, mining, chemicals, and water infrastructure, which were developed in consultation with outside not for profit groups. HSBC reports on transactions covered by the Equator Principles and has a sample externally appraised.

Aspirations and verbal commitments to principles are not enough. Measurement of results and transparent, verified reporting against, for example, the Global Reporting Initiative guidelines – developed by businesses, non-governmental organisations, labour organisations and agencies such as the UN Environmental Programme working together – is essential.

Any human organisation will at some point make a mistake somewhere in the world. This will be picked up on the internet as it happens. At that point you need well-established global environmental and social reporting to put the failure in context, and you need independent organisations with whom you have worked to develop policies and who know and respect your values to help you address the issue.

Judith Samuelson is surely right that contemporary corporations would be wise to consider green initiatives and to engage stakeholders----including but hardly limited to environmentalists/NGOs---when doing so.

To deepen that thought, however, it is important to distinguish three kinds of substantive decisions.

The first kind of decision is whether a green initiative makes sense from a traditional business point of view: does an investment produce appropriate returns and margins? Part of GE’s Ecomagination effort was to introduce technologies into the marketplace which offered both operational and environmental advances. If costs could be competitive, these “green” technologies---eg. better aircraft engines, hybrid locomotives, coal gasification---would be in great demand from customers (airlines, railroads, utilities) because of end-user and societal demand. GE explicitly said Eco was a business initiative, summarized by the phrase: “green is green.” The appeal was primarily to investors, but with strong support from environmentalists.

A second substantive decision is how to adhere to the spirit and the letter the myriad environmental health and safety laws and regulations across the globe. This involves significant choices about resources, inside expertise and systems and processes embedded in business operations.. Such adherence is a foundational corporate responsibility and is far from easy because corporate efforts vary markedly in their depth and intensity. Decisions here involve regulators, workers and communities, not only environmentalists.

A third substantive decision is what voluntary global standards and actions corporations should adopt----beyond formal business metrics and formal rules. These decisions involve a cost-benefit analysis about what is in the long-term enlightened self-interest of the corporation. They often require judgment because benefits like cost-avoidance or enhanced reputation or employee pride involve common-sense, not just financial analyses, and because the time period for the benefit to occur is often longer than the next quarter. Such choices, which involve some cost, must balance or optimize concerns of all stakeholders.

For example, GE chose to build new plants to world standards, not local standards, whether in Mexico or China for a number of reasons: more efficient, better health and safety for employees, avoidance of future remedial costs, better for environment. Similarly, in Ecomagination, GE committed to absolute reductions in greenhouse gases and an increase in energy efficiency in its own operations----as a proof statement to customers that green efforts could work, to be credible in its broader Eco initiative and to achieve important environmental goals.

Moreover, corporations may conclude that the cost of such voluntary actions is too great because competitors won’t take them and won’t incur that cost. But corporations may also conclude that new public policy mandates, not voluntary action, is needed to attain necessary “social goods” and to ensure fair cost-spreading. National and international policies to restrain carbon---through a variety of alternative mechanisms---are a good example of the need. But, once again, many stakeholders and elements of society will be instrumental in forging the political consensus so necessary for effective governmental action on this multi-faceted issue which affects so many elements of society.

Ben W. Heineman, Jr.
Former general counsel of General Electric and author of forthcoming book
“High Performance with High Integrity” (Harvard Business Press, June 2008).

The work we do at the Carbon Disclosure Project (CDP) shows just how important climate change issues have become to the corporate world. We work with over 385 institutional investors, holding $57 trillion in assets under management, including Merrill Lynch, Axa, AIG Investments, Fortis, Morgan Stanley, HSBC and Barclays. On behalf of these investors CDP writes to over 3,000 companies globally to request greenhouse gas emissions and climate change relevant data. The data helps investors pick out the winners and avoid the losers as we move towards a carbon constrained world. The level of engagement from the investor community shows the growth in understanding of risks and opportunities associated with climate change and the importance of information and data to inform on these issues.

Equally, many of the companies who respond to CDP recognise how important climate change is in business strategy and planning. 80% of the Global 500 companies which respond to CDP recognise climate change as both an opportunity and a risk and many companies are implementing emissions reductions programmes – Cadbury Schweppes, for example, aims to achieve a 50% cut in carbon emissions by 2020 and other companies are taking on equally ambitious reduction targets. There are also many large companies which have spotted the huge raft of opportunities associated with producing low carbon products – the Toyota Prius, Cisco’s TelePresence systems, GE's low energy lightbulbs, double glazing for improved insulation, components for renewables … the list goes on. And investors too are spotting the opportunities – Merrill Lynch, HSBC and Schroders have all recently launched funds and products in this space – Nymex recently launched the Green Exchange, and NYSE-Euronext launched Bluenext, to trade carbon credits and other climate change related products.

To find out more about how companies are developing strategies on climate change – visit our website at www.cdproject.net to read thousands of corporate responses on climate change strategy and emissions data.

Paul Dickinson, chief executive officer, Carbon Disclosure Project

Judith Samuelson's piece today about companies and activists collaborating instead of bickering on sustainability challenges is 99% on the mark.

The only point I disagree with is her contention that TXU backed away from building 11 new coal-fired power plants in Texas because its environmental reputation was at stake. The pullback was driven not by reputation but by the realization that building new coal-fired power plants is a huge financial risk. National carbon limits are inevitable and high-emitting coal plants will be hugely expensive when plant owners have to pay for their carbon emissions. According to our estimates, if TXU had built all 11 plants, the company's costs to pay for the additional CO2 emissions would have been in the range of $900 million to $2 billion a year. No wonder TXU dropped the project.

Still, Samuelson's overall thesis is dead on.

For years, Ceres has used stakeholder teams, comprised of investors, environmentalists and other outside experts, to engage with companies on environmental and social challenges they face. Through regular conference calls and face-to-face meetings, these teams advise companies on sustainability reporting, emerging issues and specific performance improvements. The relationships between these teams and the companies are steady and long lasting. They are not one-night stands focused on one problem and one project only. That's an important distinction. Constructive long-term stakeholder engagement is the best way to drill sustainability deeply and broadly throughout a company.

An example of what I am talking about is our relationship with apparel company Timberland. Ceres has a long track record of working with apparel companies on workplace conditions at their overseas factories. Timberland is among the companies that have been responsive to our concerns on this issue. In just the past few years, the New Hampshire company has disclosed the names and locations of its 300 contract facilities and boosted its assessments at those sites, which has led to improvements in workplace conditions. But, with help from our stakeholder team, Timberland is now taking sustainability in exciting new directions. The company recently launched first-of-its-kind packaging with "nutritional labels," detailing how and where each Timberland product was made and its impact on the environment. The company is also participating in our new Facility Reporting Project, a valuable way for companies to evaluate and address how individual facilities are impacting their local communities.

Still, stakeholder engagement is hard, hard work with numerous challenges. The three keys to success are goal setting, continual performance improvement and accountability.

In the case of climate change, our stakeholder teams will never be satisfied with companies making simple pledges toward carbon neutrality. It's relatively easy to buy carbon credits and renewable energy certificates (RECs) and then claim you're 100% powered by wind energy. But, as we all know, there's a vast gap between credits and RECs that are purchased and new wind farms that are actually built.

Businesses that are really serious about reducing their carbon footprint -- and the world's carbon footprint -- need to go much further. Energy efficiency and other measures that directly reduce greenhouse gas emissions in their operations and supply chains should come first. If carbon offsets are being utilized, the companies should also support tough accountability standards to ensure that offsets -- whether for a forest project in the Amazon or a clean energy project in Russia -- are real and legitimate. And, lastly, companies should support state and federal policies that will enable more wind farms and other renewable energy projects to be built.

Otherwise, those renewable energy certificates companies are bragging about to the public and their stakeholder teams may be little more than pieces of paper.

Mindy Lubber, president of Ceres

I agree with Judith Samuelson's article on corporations collaborating with NGOs/activists rather than fighting with them, but it is not that easy. Many companies are trying to adhere to becoming a "sustainable company" but many of them don't really know what it means, as it is not clearly defined. That is the reason there are claims of companies being sustainble, but surveys show that a small percentage are actually achieving their goals.

On the other hand, some companies, like McDonald's, are doing more in being socially responsible than they are disclosing publicly. If McDonald's publicizes some of its environmental initiatives, it runs the risk of being criticize for what it is not doing, and the latter seems to get more print space.

I also agree with companies making a concerted effort to reduce their carbon emissions as a means of being more socially and environmentally responsible. The usual way of accomplishing this is to become more energy efficient, but isn't that something that all companies should be doing as a matter of operations management? In the book "Cradle to Cradle", the authors make a clear distinction between "eco-efficient" (reducing the impact on the environment) and "eco-effective" (restore the environment), but the former should just be labeled "efficient". Whether you are benefiting the environment or not, a company should strive to be more efficent.

George P. Nassos, Director
Center for Sustainable Enterprise at
IIT - Stuart School of Business

Judith Samuelson has hit on a core element of the new world of realities facing companies and other institutions in society today: the need for collaborative relationships across sectors. Underlying Samuelson’s argument is a key issue, the growing consensus that not only are climate change and all of its consequences real, but that they are in fact human induced. The issue of climate change alone has made it increasingly important to understand the risks that civilization as we know it is facing, and to find new ways to engage with and listen to each other—so that together we can find solutions to the many problems facing the world.

Today’s reality is that some 300 signatories, financial institutions of all stripes, with assets totaling over $10 trillion (yes, that’s trillion) have now signed the UN’s Principles for Responsible Investment, and that there are now nearly 5000 signatories to the UN Global Compact, of which about 3700 are companies. Who could have imagined this type of “activism” on behalf of the planet on the part of companies even ten years ago, yet today progressive companies from all industries are recognizing the need for change, and are acting on that recognition.

In the new world of connectivity and sometimes unwitting transparency that Samuelson identifies, previously adversarial relationships are becoming not only less effective, but even distinctly unhelpful in pointing businesses, NGOs, and other social institutions, including governments, toward the types of solutions that are really needed. We need to find ways to open up the common ground that we all share—a better world for our children’s children, a world in which there is equity and sustainability, perhaps, a world where there are natural spots all can visit, a world where there is health and well being. Ultimately, we are all on the same team if we can find the strength and courage to make the kinds of changes that are called for today to build a better world tomorrow.

Sandra Waddock
Professor of Management, Boston College

There’s absolutely no question the TXU deal had huge implications far beyond the acquisition itself. Yes, the environmental terms of the deal – eight proposed coal plants off the table, major efficiency investments, and support for national climate legislation – were a real accomplishment in themselves. But the bigger story was the signal that it sent to both Washington and Wall Street that global warming had officially arrived as a core competitive business consideration, one where there are opportunities to make money by building better mousetraps.

No more are we talking just about economic doom-and-gloom. There’s good business to be had selling cleaner, safer, more energy efficient goods and services. In fact, it has the potential to be the next industrial revolution in this country.

That’s the main reason I’ve been spending so much more of my time over the past year or so working with CEOs and other business leaders. They want to get this right, and they are looking for an active and open dialogue to help them do it. That is a huge change from how things worked when I first started out in this field.

That doesn’t mean that we’re going to cozy up with any old corporation that comes along. Whether it’s a mom-n-pop or Walmart, the criteria for companies that want to engage with NRDC on their greening efforts have to clear the same three filters: First, are they serious about it? Second, are they going to dedicate the resources and commitment to make it work? And third, is the result going to have benefits beyond just that company – are we really transforming the broader marketplace. If the answer is yes to all three questions, then we can start a real conversation.

Many factors are driving these changes--and they aren’t going away. Policy is one. Rising resource prices is another and not just oil. The price of coal has doubled in the last year, and some analysts think it may double again in the next 12 months. Consumers also have higher expectations today, and they are better informed than ever about corporate responsibility. The biggest reason may be simple competitive pressure: If you don’t deliver, the guy across the street will.

That’s why this is such an incredibly exciting time to be tackling these challenges.

Frances Beinecke
President, NRDC

Judy's essay, as just about everyone else says, makes great points. I'd extend them even further. Environmental pressures will, in the future, exacerbate existing social tensions. As authors such as Thomas Homer-Dixon have shown, environmental degradation tends to fall on the oppressed around the world and as Michael Klare has shown, competition for oil, water, and other resources may not (or may) cause war themselves, but they will certainly add a volatile dimension to already existing ethnic, religious, political, and other tensions. Companies and government leaders will have to listen to these voices or risk adding violence to the mix of environmental issues...and war isn't exactly beneficial to the environment either.

So, engaging with activist groups has merit in its own right. The comments to date make nice arguments for that position. It's also a good idea to engage to head off some of the underlying issues that may lurk underneath the activists' concerns and we might as well develop this skill of engagement. We need to get good at it.

Tim Fort
Executive Director, Institute for Corporate Responsibility
George Washington University School of Business

As Mindy Lubber noted, the prospect of having to pay for carbon dioxide emissions concentrates the mind of senior management wonderfully.

But what sort of carbon price should we expect?

The central estimate from the Stern report of the damage caused by a tonne of carbon dioxide emitted today is $85. So this could be a sensible starting point for a carbon price. But much of the controversy about Stern’s figures stems from his use of a 0.1% per year pure rate of time preference to discount impacts in the future back to the present day. Despite Stern’s persuasive arguments, this rate is lower than many are willing to accept. But what would a higher discount rate do to the figures?

Fortunately, we can calculate this, using the same model as Stern, PAGE2002, which was developed at Judge Business School. Using a pure rate of time preference that ranges all the way from 0% to 2% per year brings the central $85 damage valuation down to about $40 per tonne of carbon dioxide. That the starting point for a carbon price should be somewhere within the range of $40 to $85 per tonne of carbon dioxide would seem to be a fairly robust conclusion.

Whatever the starting point for the carbon price, it would need to rise over time, because the impacts of our emissions will be greater as we get closer to the time that really catastrophic changes might occur. The model results show that the price should rise at about 3% per year in real terms.

If a carbon tax or fully auctioned permits are used, the revenue raised would be substantial. A small amount should be set aside to deal with any hardship caused to those on low incomes. The bulk of the revenue would allow welcome cuts to other taxes, such as income and sales taxes. A blueprint for saving the planet and boosting the economy at the same time.

Chris Hope
Reader in Policy Modelling
Judge Business School
University of Cambridge

Well what telling comments there are here. George Nassos says: "Many companies are trying to adhere to becoming a "sustainable company" but many of them don't really know what it means, as it is not clearly defined. That is the reason there are claims of companies being sustainable, but surveys show that a small percentage are actually achieving their goals."

Maybe here is the key point. What does sustainable develompment mean?? For one thing sustainable development is not a business project but a social project. Not surprising then that companies don't deliver! And the fact that business and managers do not seem to recognise this distinction is a basic problem.

So to develop the argument. Business is not a suitable unit of analysis for sustainable development because business is mainly concerned with the production side of the patterns of production and consumption in society that are currently unsustainable.

Seen in this way business can only contribute to sustainable development by working with others in society. In Europe we would argue that business contributes through practices that we would call corporate responsibility. But a word of warning - that is a different notion of corporate responsibility than has dominated management scholarship and business practice in the US. And that European form of corporate responsibility is much more open to the notion of business working with others in a process of organisational and social learning, innovation and change toward sustainable develompment than the US version.

No! American citizens do not worry! This is not a recipe for socialism. This is merely acceptance of the fact that in a rapidly changing world shaped by international business, a more globalised society and significant resource scarcity the companies that succeed will be the ones best able to keep apace with change. The ones that survive will be able on the one hand to protect the value of some of their current assets, and, on the other, develop and have accepted new assets based on innovation.

Given that the first principle in generating ideas for innovation is to talk and listen to others not like yourself, and, that the first principle of innovation is that this occurs when others come to adopt those new ideas. It seems obvious for companies to engage with external actors - as a source of ideas and as partners in change - the cornerstones of innovation.

The question then is not whether to engage with stakeholders but who to engage with and how? Indeed the act of engagement, the choice of external actors, the facilitation of the exchange of views and insights, the generation of ideas, the accomplishment of complex integrated evaluations of those ideas, and, then, the rapid deployment of the resulting innovations might well define the process of sustainable development!! Sorry, George Nasso, sustainable development is a process not a goal!

This becomes even more imperative in a world characterised by ever more rapid change and ever more tight connections. A world where 'open innovation' becomes critical and where innovation is not any longer about technology or products and services, but, also about business models, management, organisations and institutions. In the light of these comments it would seem that what is currently advocated as 'open innovation' is in fact better seen as 'slightly less than usually closed innovation'. We have a very long way to go in opening up innovation!

Indeed a pre-requisit of sustainable development is the ability of companies to gain from society the licence to operate together with the licence to innovate. That itself can only be done through innovative forms of governance - to set what we might call the framework conditions for enterprise determined by companies in concert with other actors in society.

In this sense we should not even think about business and its stakeholders but about business as a (powerful) actor among many other actors.

What gets in the way of this process - well partly the power of business as an actor? But many other things. Let us start with managers. I could suggest an over-reliance on control, fear of change, inability to work with others who are different, an absence of creative and courageous leadership, arrogance and, of course, a distance from other caused by their professional language and self-assumed status. Finally, the pursuit of knowledge accumulation rather than a commitment to learning! These do not readily contribute to sustainable development as a project for humanity, within which great economic opportunities are there to be found.

To point a little to my own institutions this is of course fueled by a failure in business schools to furnish the skills and competencies on which managers can draw to participate effectively in the type of social and organisational learning, innovation and change for the future that I seek to describe above.

Nigel Roome
Daniel Janssen Chair of Corporate Responsibility, Solvay Business School, Bruxelles, Belgium
and
Professor of Corporate Global Responsibility and Governance, TiasNimbas Business School, Tilburg, The Netherlands

Judith Samuelson is spot on, especially her headline. What is so surprising is the continuing denial of so many managers to the huge business benefits that campaigners deliver free of charge.

Investigative environmentalists should be celebrated. They probably know more about your supply chain than that you do. And they winkle out your commercial risks for free. Productive allies indeed!

Peter T. Knight
President
Context America Inc

It was good to see Peter's comments here, as I was beginning to think I was operating in Wonderland. My day job, in a nutshell, consists of corralling executives to take time out of their pressure cooker jobs to think about two things: one, how do the decisions I make affect wider society? and how do I align the metrics and incentive systems in my company (bank, consulting firm) to long term value that more naturally incorporates the non-market and community impacts? Do I think this conversation is getting easier--you bet. Is the evidence strong enough to influence the market? Only on the margins. Yes, the biggest brands in industries that touch people are vulnerable and are making strides. And we have seen some remarkable changes in the last couple years--among them success in moving up the food chain to the service and capital providers like investment banks, however we are not out of the woods yet.

Our mantra at the Business and Society Program at Aspen is borrowed from the work of Adam Kahane, who used to say something like this: "The system is perfectly designed for the results we have now." to which we add, so let's get cracking and redesign the system. The gamesmanship involved in quarter-to-quarter management, including the ridiculous system of forecasting down to a penny per share the entire results of a multinational operation of extraordinary complexity--and then working to beat that forecast--is the real mantra in public companies. Sure there are exceptions, but there is also plenty of evidence that this mentality dominates. The CEO of one of the largest banks in the world once told me that he has a 90-day calendar on his wall. The big issues: climate, poverty, even domestic issues like investing in keeping the U.S. workforce equipped, don't get addressed--cannot get addressed--in a world that manages by the quarter.

Judy Samuelson

Judith Samuelson's article underscores the importance of what my colleague Andrew C. Wicks and I have called stakeholder responsibility. While much attention has been directed to the responsibilities of corporations for addressing an array of social and environmental concerns, there has been less of a focus on the responsibilities of stakeholders (e.g., investors, employees, customers, suppliers, government, NGO's) who play critical roles. The examples Ms. Samuelson writes about in this inspiring article highlight the promise of corporations and their stakeholders recognizing their mutual responsibilities and working together to address social and environmental issues.

"The old days of black-and-white positions, of big business versus tree huggers, are long gone" - is it really so? Ms. Samuelson herself gives a few examples (Walmart, bottled water manufacturers) where this is not true. There are NGOs everywhere...if you are good with one NGO, there is a possibility that you invite the wrath of another. In these days you still get called an "environmental terrorist" or your programme a "greenwash"..these depend on the agenda of the NGO, need not necessarily based on the corporation's environmental performance. I am doubtful if an organization can foresee such an unpredictable chaos.

The focus, therefore, has to be on improving environmental performance of the organization's activities, products and services, irrespective of whether the organization is on the watchlist of NGOs or not. If an organization has to be "told" by an NGO of its environmental impact, there is something wrong and the organization deserves to be condemned. Thinking ahead and avoiding adverse reactions is a better strategy than to forge a strategic alliance with an NGO. One has control over the former; no control over the latter. Which one would you choose ?

L. Ramakrishnan

Companies realizing the potential of engaging stakeholders, particularly NGOs? Absolutely! In my experience working in both the corporate and non-profit sectors, this holds particular promise in new product/service development, as well as in the continuous improvement of existing products and services.

A successful engagement process includes, in part, the leveraging of tools such as Voice of The Customer and similar research methods that get company representatives out of their offices and into the end-use environment. By observing and interpreting the work of stakeholders (in this case NGOs) first-hand, it can expose the company to a rich and laregly untapped resource for innovation (not to mention risk mitigation). It's an excellent potential source for discovering lead users and early adopters, as NGOs make it their business to discover issues and identify solutions much earlier than does the general marketplace.

David Bennell
Executive Director- FSC Global Fund

Formerly L.L. Bean Manager of Product Research, Testing and Environmental Affairs

Nice discussion. As Samuelson and otehrs have made clear, dealing with environmental issues and advocacy NGOs is, by now, a no-brainer. It has become something of a hygiene factor. And writing up CSR reports and signing up for various voluntary initiatives like the GRI or the Global Compact do not provide much in the way of differentiation or competitive position anymore.

In my research I am in relatively constant contact with advocacy NGOs. Over the last couple of years I have begun to see a substantive shift that will become increasingly apparent in the years to come.

Fifteen years ago it was mostly about conflict and confrontation. In the last ten to fifteen years there has been a shift to more collaboration with individual firms and, to some extent, with industry groups in setting voluntary standards.

From the big brand NGOs in particular I am hearing a high level of frustration concerning the bang-for-buck returns of working with what are already relatively clean firms and in sruggling to reach agreement on voluntary standards that lack enforcement mechanism and which are ingored by the dirtiest players.

More and more they are turning toward regulation as the most effective way of making substantive change. And today, the most forward-thinking firms are beginning to work with these NGOs in shaping the regulatory environment, to the benefit of themselves--through various forms of competitive advantage--as well as for society as a whole.

Want to know more? Watch HBR for a possible article! :)

Michael Yaziji
Professor
IMD
michael.yaziji "at" imd.ch

The comments on Judith Samuelson's article already speak to the main issues. However, there are two points that should be made more explicit. Nigel Roome correctly points out that stakeholder engagement is a process. And as Ben Heineman suggests, corporations will need to work with other stakeholders such as governments. These two comments allude to an important point that stakeholder engagement is not a dyadic process. Quite the contrary, finding truly successful solutions to complex social problems will require engaging a range of stakeholders, not just developing partnerships with one or two NGOs.

A second point to remember is that stakeholder engagement is more than stakeholder management. Meaningful stakeholder engagement means following the principles of distributive, procedural, and interactional justice. If corporations fail to follow these principles they unlikely to achieve their desired goals, and may actually make the situation worse.

See Cropanzano, R., D. E. Bowen, et al. (2007). "The Management of Organizational Justice." Academy of Management Perspectives 21(4): 34-48 for a good summary of the principles of organizational justice.

NGOs are doing an effective job. NGOs also require legitimacy to gain respect in the market. There are responsbible NGOs and radical NGOs which can co-opt a businesses goals.

Fish farms, whether you endorse them or not, are licensed to operate in Canada and elsewhere. If an investor puts their money into such an endeavour, applies for and receives a conditional license to operate, it is difficult to reconcile the actions of NGOs aimed at destroying such a practice. If there should not be a salmon-farm for example, then the government agency needs to determine that it is not going to allow such practices and cease these operations. The government's feet should be held to the fire. Salmon farms have been operating for decades in many parts of the world, albeit with mixed resutls.

In British Columbia in 2007, a judge ruled that a member of a local NGO was guilty of making malicious comments against a specific BC-based fish farm. Further the NGO was found motivated by malice to misrepresent the opeartions of this fish farm by using deceitiful practices and issuing dishonest press releases which misinformed the public. Before the individual from the NGO could be held accountable he fled to the UK to take up the case there. Fish farms may simply be the "cattle farm" in the ocean. If the practices are found to be wanting, then shared reponsibility requires governmental intervention, ownership, and input from NGOs, shareholders, and other stakeholders.

Working with NGOs to resolve issues and to ensure sustainable practices is the goal. But the means of doing so can be as important as the end. NGOs aimed at destroying businesses through illegal activities cause other business owners or CEOs to rightfully be nervous when they hear that an NGO wants to have a meeting with them.

NGOs are also "businesses". They too should be issuing triple bottom line reports and provide evidence of their credibility to affect change in a responsible manner.

Larry Berglund

Many contributors to this discussion have rightly expressed concern about whether corporate efforts on green issues are for show or for real.

How do corporations embed in their business operations decision-making and evaluation processes on environmental, health and safety initiatives relating to: a. traditional for-profit activities; b. the level of effort in adhering to the spirit and letter of formal rules across the world; and c. voluntary adoption of global actions or standards beyond traditional business metrics and formal rules?

This is an important, if complex, subject. Here are three important processes which corporate leaders should make part of regular business rhythms.

First, they should have a systematic process for identifying, prioritizing, deciding and implementing global actions and standards in the present. As many here have noted, defining which sustainability issues are important in the context of the corporation’s business operations and which ones deserve commitment of time, effort and resources is not automatic. It requires careful analysis and hard choices. A CEO must make this process high level---with top business and staff leaders involved in the discussion so that decisions become business priorities.

Second, early warning systems are a complementary process. Such systems look out into the future by evaluating stakeholder concerns, legislative proposals, media coverage, commentary from experts in NGOs, think tanks and academia. The issues generated by this process are also assessed on a regular basis by top business leaders----with initial decisions about which issues are so important that investments should be made today---in developing technology or public policy or voluntary corporate commitments --- for a solid position in the future that positions the company ahead of the curve.. Again, choices on what to prioritize for the future are not easy.

Third, corporations must report on their initiatives with the same kind of detail and accuracy as they seek in the management’s discussion and analysis (MD&A) in their annual reports. We have seen a surge in Citizenship or CSR reports. But these must be much more than glossy pictures of children playing by fields of flowers. As others have noted, the Global Reporting Initiative provides a good framework for such corporate efforts, and meaningful detail, with an explanation of how it was derived and verified, is essential.

Wise corporations will seek stakeholder advice and counsel in all three processes. For example, GE issued its first annual Citizenship Report in 2005, and has sought comments and critiques from a stakeholder advisory group and in global stakeholder meetings ever since.

Ben W. Heineman, Jr.
Former general counsel of General Electric and author of forthcoming book,
“High Performance with High Integrity” (Harvard Business Press, June 2008)

Wow, talk about a series of topics near and dear to my heart, these are it. Also, from my perspective, the very public ethical lapses of Enron, WorldCom and Tyco, are closely aligned with these issues along with the realization of climate change and globalization as business drivers. Each of the public ethical lapses has helped to usher in a new form of stakeholder engagement (not just green stakeholders), which is now a real part of doing business.

Increased consumer demands and shareholder activism are now demanding attention from today's businesses, but globalization and climate change are the real drivers that are catalyzing innovation and are facilitating energy conservation and waste reduction. And while some of the leaders are using this to show a new form of responsibility, it would be naïve to discount the cost savings benefit, and chalk all these innovations up to getting the green religion. Just look the recent WSJ ECO-nomics event in California.

Regardless, when combined, each of these issues have contributed to a significantly changed dynamic for all the players including environmental NGOs, other stakeholders, industry sectors as well as government. And this has created a lot of trade-offs and challenges in forging partnerships. However, embedded within these tradeoffs and challenges are significant opportunities.

In working for government, I choose the focus on fully maximizing the opportunities. As part of my work, I'm responsible for elevating the work of my agency and engaging people, through their actions to mitigate environmental harm. Because the sad reality is that virtually everything we do in our society creates environmental impact. Climate change has created a necessary catalyst; however, I've combined it with the other aforementioned changes our society and business community to facilitate a much different way of doing business in the government. Essentially, I've leveraged these changes to facilitate collaborative relationships between specific industry sectors, government and various stakeholders to help consumers (or as I see them, citizens) to live more sustainably.

While more companies are embracing their values and are more overtly incorporating them into how they do business, others still struggle. And this is where the opportunities lie. My agency is the lead federal agency for conserving fish and wildlife. We share this responsibility with the States. While we have used the North American wildlife management model to produce some amazing results (bringing back deer and turkey from near extinction in the ‘30s), we need to evolve with all the changes that are occurring and this is where my work comes into to play. Because of its’ role, government has had a traditionally adversarial relationship with the private sector. However, because of the changes that are and continue to occur, this is where I’ve found some leverage. I’ve spearheaded three national behavioral change campaigns in conjunction with multiple partners to address some very complex environmental issues, invasive species and pharmaceuticals in the environment. Below is some background information about each of these campaigns.

America is one of the leaders of our global consumer society. And while this position has provided our citizenry with a very high quality of life, it has also created many complex environmental impacts. Unfortunately, for a variety of reasons, our citizenry is far removed from this reality. My agency has focused on addressing specific issues and elevating them by creating innovative, public-private partnerships with the relevant sectors to target specific behaviors of specific audiences related to these issues. Below is a description of our campaigns:

• Stop Aquatic Hitchhikers! TM
Environmental Issue: Invasive species, a major threat to biological diversity.
Audience: Aquatic recreational users
Problem Behavior: Unknowingly transporting invasive species with recreational equipment.
Desired Behavior: Cleaning equipment to prevent invasive species introduction/spread.
Private Sector Partner: Recreational equipment industry
Campaign website: www.protectyourwaters.net

• HabitattitudeTM
o Environmental Issue: Invasive species, a major threat to biological diversity.
o Audience: Pet owners
o Problem Behavior: Naively releasing potentially harmful nonnative species into the environment.
o Desired Behavior: Choosing environmentally friendly alternatives to surrender pets.
o Private Sector Partner: Pet and aquarium industry
Campaign website: www.habitattitude.net

• SMARXT DisposalTM
Environmental Issue: Pharmaceuticals in the environment, an emerging contaminant.
Audience: Medication consumers
Problem Behavior: Flushing expired and unused medications to dispose of them.
Desired Behavior: Embracing responsible disposal methods for unwanted medications.
Private Sector Partners: Pharmacists and pharmaceutical manufacturers
Campaign website: www.smarxtdisposal.net

So, my long-winded response to the hard trade-offs question is that the mindset of government needs to change away from being exclusively regulatory and more holistic in order to keep pace with the times. And the challenges come in the form of leadership (who, what and when will they be willing to demonstrate it, not just talk about it), just everything else.

While I agree that the current trends point to richer corporate-stakeholder engagement, we risk focusing on the wrong trends if we do not consider a given company’s definition of “stakeholder”. One can cast the net narrowly or widely by using criteria such as “level of expertise, ability to impact our business, orientation towards our proposed activities, etc.” But I would argue that, for the majority of companies, the popularity of stakeholder engagement as a process may lead to a myopia about the actual impacts to be addressed.

1. Incentives for Short-Term Selection Bias: As Judy Samuelson points out, if a CEO is still penalized or rewarded based upon his/her performance over 90 days, and it is his in-house team that prioritizes when and which stakeholders to consult, the organizational incentives likely support a heavy “sample selection bias” towards those stakeholders who can impact a company’s short-term goals. At BSR, we receive many requests for facilitating stakeholder engagements once the protesters are on the street or the threatening policy proposal is on the table.
2. No Proxy for Future Generations: The issue becomes more complex when one asks “Which stakeholders can suitably represent future generations?”. Given the popularity of the Brundtland definition of “sustainable development”, this becomes a critical question. Environmental and development advocacy groups may be the best proxy, but it is questionable to assume that they can predict the desired option sets for future generations (see Allen White's 2007 paper on the subject).
3. The Blind Spot of Policy Advocacy: The traditional view of stakeholder engagement entails a company inviting input from a select set of internal and external constituencies regarding a given decision or activity. Typically, the criteria for selecting those stakeholders include the directness of the impact under examination. This tends to inherently exclude one area of huge potential impact for corporate sustainability strategists: policy advocacy. Those affected by new public policies are generally not considered stakeholders of any one company. Also, the opacity of lobbying efforts makes it hard for any stakeholders, including a company’s Community Affairs or Sustainability departments, to highlight inconsistencies between lobbying stances and sustainability policies (see Robert Repetto's 2006 paper on the subject).

Together, these three limitations highlight why companies should not rely too heavily on stakeholder engagement as a cure-all or a crystal ball.

Emma Stewart, Ph.D.
Director of Environmental R&D
BSR

Devil's advocate here: A dominant theme in the posts so far is that everyone wins when businesses partner with NGOs on improving environmental impact. Businesses get good free advice (witness TXU's buyers, advised by Environmental Defense and others, scrapping all those coal plants and, therefore, heading off crushing penalties for future carbon emissions), they avert challenges about their environmental performance, and they become greener, which is good for everyone. But as Larry Berglund noted a few posts back, “There are responsible NGOs and radical NGOs which can co-opt businesses goals....NGOs are also ‘businesses’. They too should be issuing triple bottom line reports and provide evidence of their credibility to affect change in a responsible manner.”

Wouldn’t businesses be wiser in the long run to pay – maybe a lot -- for environmental advice from consultancies whose interests are contractually aligned with their clients’, and who can demonstrate a track-record of linking improved environmental performance with organizational performance?

On its web site, Environmental Defense states “We accept no payments from our corporate partners. The environment is our only client…” What company would in, say, reconfiguring its supply chains or overhauling its product strategy, bring in a free consultancy that came right out and said “Don’t pay us a penny; our real client is someone other than you…”

Madam,

Once we agree that sustainable development is an imperative and no longer a matter of choice, the necessary conditions and courses of action become apparent.

1. At a very basic level, why should we limit the discussion to business and NGOs alone? Don't each one of us have a responsibility too? Is it not possible to make a beginning at the individual / family level through such means as rain water harvesting, recycling water for gardening and washing, switching off lights and appliances when not required, car pooling, conscious avoidance of non bio-degradable packaging - the list can go on. A conservative estimate has quantified the savings from these simple measures at 25%.

2. At the business level, in today's world, is it not necessary to consider the concerns of all stakeholders and not just shareholders? If this premise is accepted, we would probably not witness large corporations using fresh water for gardening in cities where hundreds of thousands of people do not have access to potable water; we would probably not witness retail chains making indiscriminate use of non-recycled plastics for packaging; we would probably be spared the horror of watching large quantities of food being wasted at conferences even as millions across the world wonder whether they would get the next meal at all; we would probably not have to work in or visit giant offices that, to use the words of a well-known architect, are virtual gas chambers.

3. As for NGOs, it may be worth remembering that our worst critics are probably our best friends. It may be tempting for CXOs to go along with group think and sycophancy, but someone has to point out their dark spots too.

4. At the end of the day, it is time we gave up the we vs they syndrome; government vs business; business vs NGOs; ordinary people vs big business. We all share the most precious resource we have - our planet. Either we work together or sink together. The choice is entirely ours.

Warm Regards

While I agree that the current trends point to richer corporate-stakeholder engagement, we risk focusing on the wrong trends if we do not consider a given company’s definition of “stakeholder”. One can cast the net narrowly or widely by using criteria such as “level of expertise, ability to impact our business, orientation towards our proposed activities, etc.” But I would argue that, for the majority of companies, the popularity of stakeholder engagement as a process may lead to a myopia about the actual impacts to be addressed.

1. Incentives for Short-Term Selection Bias: As Judy Samuelson points out, if a CEO is still penalized or rewarded based upon his/her performance over 90 days, and it is his in-house team that prioritizes when and which stakeholders to consult, the organizational incentives likely support a heavy “sample selection bias” towards those stakeholders who can impact a company’s short-term goals. At BSR, we receive many requests for facilitating stakeholder engagements once the protesters are on the street or the threatening policy proposal is on the table.
2. No Proxy for Future Generations: The issue becomes more complex when one asks “Which stakeholders can suitably represent future generations?”. Given the popularity of the Brundtland definition of “sustainable development” , this becomes a critical question. Environmental and development advocacy groups may be the best proxy, but it is questionable to assume that they can predict the desired option sets for future generations .
3. The Blind Spot of Policy Advocacy: The traditional view of stakeholder engagement entails a company inviting input from a select set of internal and external constituencies regarding a given decision or activity. Typically, the criteria for selecting those stakeholders include the directness of the impact under examination. This tends to inherently exclude one area of huge potential impact for corporate sustainability strategists: policy advocacy. Those affected by new public policies are generally not considered stakeholders of any one company. Also, the opacity of lobbying efforts makes it hard for any stakeholders, including a company’s Community Affairs or Sustainability departments, to highlight inconsistencies between lobbying stances and sustainability policies .

Together, these three limitations highlight why companies should not rely too heavily on stakeholder engagement as a cure-all or a crystal ball.

Emma Stewart, Ph.D.
Director of Environmental R&D
BSR

In a recent global survey conducted by BearingPoint regarding green/sustainable supply chains, 83% of respondents indicated that they have adopted environmental strategies in order to protect brand image and to address environmental regulations. To borrow terminology from the technology adoption life cycle, early adopters in green/sustainability are proactive, agile and seek first mover competitive advantage and embrace working with NGO's, industry consortiums and consumer peer groups to map out and identify stakeholders and their green requirements within the company operations. Laggards are reactive and tend to not know where to start with respect to how to identify a green strategy and define tactical operational/supply chain responses.

In the mean time, you will continue to see companies impacted by their ability to adopt and disclose green/sustainable performance from multiple stakeholders (both financial and insurance institutions, NGO’s and consumers groups). It will be critical to align green and operational performance through effective management dashboards in order to manage on-going green/sustainability performance and mitigate risks associated with the negative financial results of tarnished corporate image through poor environmental performance. With increasing costs of raw materials and energy, it will drive companies to examine green initiatives, not from a marketing standpoint, but as a business necessity. The initial steps companies can take to develop green operational strategies will require them to consider:
• Define a green strategy
• Determine if competitive differentiation can drive higher margins that are sustainable
o If not sustainable, work with industry peers to define industry standards relevant to suppliers who contribute components to your product
• Baseline where you are from a component environmental compliance perspective
o Determine where you want to be
o Define a plan to get there.
• Set up a management dashboard to continual monitor compliance
• Publish your results to your stakeholders
During this journey, involving key stake holders, consultancies and NGO’s is a necessity that will help frame what the cost/benefit equation is for your company. Sierra Club, World Wildlife Fund, Greenpeace and others are actively involved in this process. One element to consider is how companies consider they factor in the goodwill costs they will gain from marketing opportunities around their green initiatives.

Brent Proud, M.Sc.
Manager
BearingPoint

Greetings from high atop Aspen, Colorado, where the sun is shinning, the snow is piled high (most snowfall in an eon) and where 300 environmentalists, business and policy wonks are gathered for the first ever Aspen Enviornment Fest. I just had lunch with a charming, but depressing, forest specialist and researcher in eco-systems, who worries--among other things--about the rapid decline of the Aspen stands (trees, not tacos) in Colorado and elsewhere in the West. This lunch conversation, in addition to reviewing recent posts above, have me thinking about government. Where is the government?

As B V Krishnamurthy posts above, "At the end of the day, it is time we gave up the we vs they syndrome; government vs business; business vs NGOs; ordinary people vs big business. We all share the most precious resource we have - our planet. Either we work together or sink together. The choice is entirely ours."

We focus on the role of business, because industry is the source of many enviornmental problems, AND because it is business that seems today to have the talent, resources, and increasingly, the motivation to act, but business vs. NGO (or even business + NGO)without the moderating voice, and ear, of goverment may miss the most important strategies: the best mix of technology and conservation, the right balance between consumer demands vs. public needs, and the big picture strategy. Or is government as short-sighted as business, with investments today that fall off the radar after the next election?

One of the most provocative speakers here is the environment advocate for the Aspen Ski Company, who is quick to acknowledge that this ski company, known for its green-leaning policies, has still failed to reduce carbon usage overall. He claims their most important work falls in the realm of influencing policy--like the amicus brief they filed in the Massachussetts case (won) that will force the EPA to regulate carbon. Not many companies have weighed in on the big policy issues--like on the need for a carbon tax vs. cap and trade system, for example. (Although some of the most courageous like JP Morgan have made it clear that cap and trade alone is insuffcient.) Will business gain sufficient experience through their joint-ventures with NGOs to see that the next frontier has to be policy? To date most action in Washington is limited to industry and firm-specific protections. I think there is little doubt that the big environmental issues require policy directives--whether we are talking about soil, air, water, fish or bio-diversity. Who will step in to influence the playing field in a big way? What is business' role?

As recent posts have noted, fundamental energy-environmental initiatives will require changes in public policy---changes which go beyond decisions by single corporations, in consultation with stakeholders, to make green products, implement the spirit not just the letter of existing formal rules, or take voluntary ethical actions to protect the environment/reduce energy use.

If we are in a new era of constructive discussions about such single company actions between corporations and their many stakeholders, we are just at the dawn of constructive processes between business and advocacy groups on fundamental public policy. As I mentioned in an earlier comment, when important “social goods” are at issue, companies may be choose to focus on legislation or regulation because it may be too expensive/uncompetitive to go it alone (costs must be fairly spread across industries or society) and because sporadic, voluntary action may not, ultimately, address the fundamental issue.

One part of a new, constructive process will involve companies and advocacy groups finding ways to reach consensus on the basic science and the basic assumptions which underlie so much public policy in the energy/environment area. Second, each will have to “check their guns at the door” if they wish to find a consensus---to discuss their “real” substantive policy positions rather repeating the traditional practice of arguing about their political “going-in” positions so as to leave room to maneuver in the legislative or regulatory process.

One example worth examining for future lessons is the United States Climate Action Partnership, an alliance of manufacturers, utilities and environmental organizations (like the World Resources Institute and the Environmetnal Defense Fund) formed to seek mandatory reductions in GHG emissions from major sectors through a legislatively created cap and trade system.

Ben W. Heineman, Jr., former general counsel of General Electric and author of the forthcoming book, “High Performance with High Integrity” (Harvard Business Press, June 2008).

As recent posts have noted, fundamental energy-environmental initiatives will require changes in public policy---changes which go beyond decisions by single corporations, in consultation with stakeholders, to make green products, implement the spirit not just the letter of existing formal rules, or take voluntary ethical actions to protect the environment/reduce energy use.

If we are in a new era of constructive discussions about such single company actions between corporations and their many stakeholders, we are just at the dawn of constructive processes between business and advocacy groups on fundamental public policy. As I mentioned in an earlier comment, when important “social goods” are at issue, companies may be choose to focus on legislation or regulation because it may be too expensive/uncompetitive to go it alone (costs must be fairly spread across industries or society) and because sporadic, voluntary action may not, ultimately, address the fundamental issue.

One part of a new, constructive process will involve companies and advocacy groups finding ways to reach consensus on the basic science and the basic assumptions which underlie so much public policy in the energy/environment area. Second, each will have to “check their guns at the door” if they wish to find a consensus---to discuss their “real” substantive policy positions rather repeating the traditional practice of arguing about their political “going-in” positions so as to leave room to maneuver in the legislative or regulatory process.

One example worth examining for future lessons is the United States Climate Action Partnership, an alliance of manufacturers, utilities and environmental organizations (like the World Resources Institute and the Environmetnal Defense Fund) formed to seek mandatory reductions in GHG emissions from major sectors through a legislatively created cap and trade system.

Ben W. Heineman, Jr., former general counsel of General Electric and author of the forthcoming book, “High Performance with High Integrity” (Harvard Business Press, June 2008).

Reading through the posts to-date caused me to reflect back on the state of 'stakeholder-ship' today, how it has evolved over the years, and how stakeholder engagement has impacted business practice.

Sir Mark in his earlier post made reference to his time at Shell. In the 1980's and 1990's corporate relationships with activists were mainly antagonistic. But due to the combination of companies learning how to listen, relate, and respect external stakeholders views, and activists learning how to play by the rules of the corporate game, the scene looks very different today. Activists have become shareowners. Activists have become business partners. There are examples of these relationships and successes sprinkled throughout the posts above.

But is all of this harmony a good thing?

By comfortably playing by the rules of the game, activists and businesses alike may be overlooking the fact that the rules of the game themselves need to be re-written if we are to change the course of the social and environmental crises’ that face us today and in the future.

Several posts refer to the emergence of communicating and reporting – openly and honestly – about social and environmental issues. Most economists would say that markets work best when full information is available. Would businesses and their stakeholders make different decisions if full information could be had? Would this change the accepted roles and responsibilities of stakeholders and lead to the dawn of a new era of ‘stakeholder-ship’?

Alyson Slater
Strategic Director
Global Reporting Initiative

The emerging leaders in corporate America are part of the slacker generation. As such, they tend to devote more time to family and personal needs, and are less likely to work the 70+ hours per week that today's leaders put in.

On the plus side, these future leaders are both green- and technology-savvy, ready to embrace and fully exploit the "greenology" being generated today. They're comfortable using technology and have had environmental concerns drilled into their heads as far back as they can remember.

On the negative side, if we assume they'll only put in 40 hours during most weeks, these future leaders will not likely put in the effort necessary for driving a company to a new level. They'll continue making progress by figuring out ways to do things better, faster and cheaper. To move to a whole new plane requires leadership and dedication.

Will innovation die? Not likely. I've been talking about the US market only. Move out of the US and it's a whole new ballgame. Will we be able to compete with countries like India and China? No, in fact, we will likely swap positions and roles with them. They'll be the ones inventing, and we'll be using the good old American know-how to make the inventions better, faster and cheaper.

How did we get to the point where we're actually trading places with these countries? We committed one of the biggest bungles of corporate America. Namely, we blurred the line between management and leadership.

Today, many companies engage in management activities, but proclaim these to be examples of "leadership". They hold the false assumption that everyone in the organization can, and should be, a leader. The definitions of leader and manager are used interchangeably, posing enormous confusion for those coming up the ranks.

The bottom line is that people are rewarded for the better, faster cheaper improvements. These efforts are typically based on some calculated risks, which are very low. To move the organization to a new level requires much more risk, and there's no guarantee the payoff will be worth it. Managers are stuck, much like horses with blinders on, running around the company track. Ask them to pause to consider another way to do something or try a new approach is something akin to asking the horse to stop running on the track, and most definitely get trampled by the rest.

What can emerging leaders do? They first need to understand the terms manager and leader, and be able to very clearly distinguish each from the other. They then need to build a model that will enable the organization to have a leadership / management ratio that maximizes opportunity while minimizing risk. Finally, they need build an organization that has a leadership component and to reward it accordingly.

No one in corporate America ever says, "well, you took a risk and failed, and we're willing to let you take more." Beyond that, and this is the scary part, they will likely point out areas where people didn't succeed as well as expected, and will point to all those missed opportunities that got them where they are. Damned if you do, and damned if you don't.

So we continue running on the track, beating ourselves for not doing anything to move the company up a level, and wasting time and resources on minimal achievements of the better, faster cheaper type, while ignoring those leadership opportunities that are screaming in our face.

How do we fix it? Why not treat it the same way we treat the country's debt? Let's keep running, avoid risk, and leave it to the next generation to get the country out of this mess.

Sustainable Development: An Integrated Force in the Business Environment

A. The Equation
Sustainable Development is in the horizon for corporations, governments and international organizations of countries around the world and it will be facing the challenge of the effects of this external force in its daily business operations and its existence among nations and within its societies. The variables that makes up sustainable development consists of Economic Prosperity , which is the maintenance of high and stable levels of economic growth and employment, Social Equity ,which is the social progress which recognizes the needs of everyone and Environmental Sustainability which is the prudent use of natural resources and effective protection of the environment.

B. Countries & Sustainable Development

1. Integrating the goals of Economic & Social Development Growth

a. Role of Government & Social Development
A country’s economic system consists of external and internal forces that contribute to the undulation of activity of the organization, consumers and monetary and fiscal policies. A country’s economic resource consists of land, labour, capital and human resource-which when developed and put through education and skill training, becomes human capital. Economic Prosperity is the maintenance of high and stable levels of economic growth and employment. The external economic forces are the life cycles, business cycle changes, inflation, interest rats, international economics, consumer sentiments, and technology, government [changes in law, regulation, taxation, and political environment]. The internal forces of countries economic system consists of the industries, the companies and labor force. The level of a country’s productivity impacts on its long term growth. Social Equity is the social progress and the recognition of the basic needs of everyone. Sustainable

Development can increase countries productivity so that the population living in poverty and who are not able to acquire jobs to become financially independent can be removed from the sleeping labor supply.

The visible hand of government intervention is necessary to provide social safety net and welfare to catalyze the population living in poverty into the labor force; the overall wealth of the cities within the countries can materialized through higher level of productivity by a sustainable development microstructure. The role of government in providing public assistance, welfare programs, education and training, childcare, provision for the physically and mentally challenged and provisions for the elderly to the poorest segment of its population will contribute to the micromanagement of poverty from a country’s municipal/local-city level and improved efforts for long term poverty alleviation on a macrolevel, as a form of sustainable development.

b. Role of Small Businesses, Corporations & Government

Corporations are the generator of wealth, conduit for innovation, knowledge and technology transfer. The role of corporation and its participation in its community in which it conducts its business is a form of sustainable development. Besides, brand equity, goodwill, corporate citizenship, corporations are facing a new external force in the horizon and this is sustainable development, which is the integration of economic, social and environmental forces. The question may arise as to how can these forces, once perceived as independent and specific in its own category and function, contribute to sustainable development? The answer lays in the rapid interdependencies and osmosis effect that technology and communications has impacted on these three separate but increasingly interdependent forces. The technological force causes a synergistic effect of economic, social and environmental fabrication that has become sustainable development as the new integrated force in the business environment. The business environment in which the corporations exist does not only face the economic, social and environmental challenges, it now faced the synergistic impact of sustainable development and a need to integrated the equation into its internal and external business environment. Hybrid forces are developing in the business environment due to the impact of technology and communication. The osmosistic effect that sustainable development has on Corporations, calls for a shift in its paradigm for strategic management in sustainable development and more active participation in social development issues.

Conclusively, through bisectoral integration approach, the role go government and the role of corporations, international organizations and institutions for knowledge and dissemination of public information, will achieve sustainable development for its civil society, country by country, state by state and city by city, village by village. Finally, Corporations can offset poverty by offering jobs, provide health benefits, and education and training programs to the poorest segment of civil society in an effort for poverty alleviation and achieving sustainable development.

2. Integrating the goals of Environmental Protection

Like a boat filled with people, floating on the sea continuously and no land in sight, hence the sense of destitute and the strong sense of uncertainty. As an international community, it is high priority to take care of the environment in which we live in, country by country, nation by nation, city by city and village by village. The Environment provides commodities and contributes to well being, growth and our daily livelihood. When planning for any economic, social and political activity and implementation of any type of deliverables, it is pertinent to integrate the compatible variable of environmental sustainability. Consideration must be given to integration of the Sustainable Development Equation. The equation is the culmination of management, systems and policies of Economic Prosperity, which is the maintenance of high and stable levels of economic growth and employment, Social Equity, which is the social progress which recognizes the needs of everyone and Environmental Sustainability which is the prudent use of natural resources and effective protection of the environment .The context in which the economic and social systems are enclosed allows for our societies to function and strive. No longer can one system be independent of the other. No longer can one system be more important than the other. It is important to protect the environment to achieve Sustainable Development Equity (SDE). Thus, through the integrations of the sustainable development equation and creating the value of sustainable development equity, countries can achieve a sustainable development biosphere.

C. Countries Challenges & Future Outlook
[Creating Sustainable Development Biosphere]
Systems & Mechanism of Action & Virtuous Cycle of Reintegration

A. Systems & Mechanism of Action

The ecological systems of sustainable development consists five subsystems. Firstly, the country’s immediate environment ,which is the corporations,government,international organizations and institution of innovations and knowledge [i.e. academia], competitors within the designated industries, other nations and organic growth and development environment, which is known as the Sustainable Development Microsystems (SDM). Secondly, there will be a systems of interconnectivity between the immediate environments, where the country’s corporations, government, international organizations and institution in its domestic environment for of innovations, knowledge research & development, which is known as the Sustainable Development Mesosystem (SDMe). Thirdly, the country’s external environment setting, such as the domestic economic system will indirectly affect development, which is known as Sustainable Development Exosystem (SDE). Fourthly, the countries larger cultural context in its strategic geographical position of national economy, political culture and its subculture, which is known as Sustainable Development Macrosystem (SDMa).

B. Virtuous Cycle of Reintegration
A country’s corporations, government, international organizations and institution of innovations and knowledge [i.e. academia], competitors within the designated industries, other nations and organic growth and development environment in the patterning of environmental events and its transition over the event’s lifecycle, which is known as Sustainable Development Chronosystem (SDC). The system of SDM, SDMe, SDE, SDMa, SDC contains specific roles, norms and rules that can potently influence and mold sustainable development, all together. Thus, through the virtuous cycle of reintegration with the establishment of the sustainable development systems and mechanism of action and the system of value creation of sustainable development equity, countries can achieve the sustainable development biosphere.

Reference

Bronfenbrenner, U. (1979). The Ecology of Human Development: Experiments by Nature and Design. Cambridge, MA: Harvard University Press.

Rita Cooma Rahi,
President & CEO, ICCouncil
Phone: 212.920.6009
Fax: 732.983.0533.
Email. ticc@iccouncil.com

Alyson Slater asks a series of highly relevant questions about the changing stakeholder environment and shifting power play. No one would disagree with her comment about the need for markets to have full disclosure. Her organisation, the Global Reporting Initiative (GRI), has done valuable work in encouraging such transparency.

We at Context have been working with companies (including Shell) for over a decade, helping them in the reporting that Alyson promotes. The success of Shell’s early reporting was largely driven by the reputational crisis that afflicted Shell in the 90s.

While most of the largest companies in Europe now accept the principle of Alyson’s message, those in the USA (with some notable exceptions) do not see the need for GRI-type disclosure.

Two things might change this. First, a sense of business crisis brought on by climate change, which makes disclosure a competitive issue and a must-do. Second, a greater sense of reality from Alyson and her colleagues that business needs to be led gently into what it sees as the terrifying, tangled weeds of social and environmental disclosure.

No matter what Al Gore says, the first seems unlikely. The second will demand a much greater understanding by the good people at the GRI about just how averse business is to voluntary disclosure, and to tailor their dictats accordingly.

Hi all, Great dialogs.
I have been interested in this topic for quite a while - likely initiated by the book Natural Capitalism (over 10 years ago) as it forecast the greening of America as a major economic boon. Who knew it would take this long. Funny, 5 years ago I had HP (my former employer) ready to consider funding a rather unique idea (not mine).
The idea was to use a tall ship (think Masters & Commanders) as the icon for a traveling telecommunications center that sailed port to port and open discussion were initiated on topics that affect our planet. The first was global warming. HP was interested in being the sole sponsor to the tune of $29 million. I pulled the plug on it as there were some issues that seems to be unresolvable at that time. Shame, the guy who thought of it was ahead of his time. As a marketing consultant, I naturally follow trends and have translated several into reshaping global markets. This trend towards increased green stewardship is approaching a mainstream cusp (grass roots and high level support)- it still needs help. I read an article 2 years ago - "the ten new laws of branding" - that I strongly agree with. It speaks to Milennial's and Boomer's driving a shift from homogenized statements that offend no one to companies everywhere standing for something of substance. Kind of like the approach Newman's Own took many years ago. I kind of see a spin off of Consumer Report's whereas companies that do step up are promoted as "worthy". It should also offer help and options on how as I think many companies struggle with that.
I think when people surrender power to economic minded pursuits (look at uranium mining as one example) we fail to realize our own power. I am heavily vested into creating empowered online communities and see that as one key enabling factor. Look at the progress Move On has made as just an example respecting they too have an agenda some agree with and some do not. So I realize these are some seemingly random thoughts that I see as all connected. A good friend of mine Dr. Alex Pattakos (author of Prisoners of our thoughts) talks of a major trend whereas most people are searching for meaning. I can relate to that on a personal level and professionally as so many companies have controlled dialogs, have gone unaccountable and thus created a lack of trust between themselves and consumers (heralding the death of intrusion marketing at long last). As a society we come dangerously close to being superficial (if not already entrenched). I think that backlash is creating a counter-culture that I am proud to feel a part of. Groups like this (you folks) are on the leading edge of positive change. Keep the faith.

Bill Van Eron
Chief Innovation Officer
Headwaters Marketing
www.hw2o.com

It is a difficult question. Green stakeholders and Ngos in general have been growing their importance generally speaking. However when it comes to business decisions and investments causing an increase in carbon emissions you can see that the old approach of ignoring the green agenda is still followed by large corporations.
It is true that companies are paying more and more attention to these issues. But it also true that in developing countries the approach is still very slow, whereas in developed ones the approach seems not to have an impact of strategic business decisions.

There is however something important: consumers are interacting among themselves via the internet and blogs, spotting the “green sins” of the companies.
Few people and corporations pay attention to this issue which will be vital for the success of the lauch of a product or a brand in the future.

In other words in the global world everybody has a say in the green issue and if he/she is able to prove what he says, then he could really change the minds of millions of consumers. And then the company which does not pay attention to that can really have serious problems for the launch of its products or even for its survival.

And the green issue IS the issue for consumers nowadays.
Therefore companies will be better off paying attention what the civil society (not only the Ngos) say if they want to survive.

RE:
"...the litany of unlikely bedfellows grows..."
"..And if you can't figure out who your stakeholders are..."

RE:
"...No! American citizens do not worry! This is not a recipe for socialism. This is merely acceptance of the fact that in a rapidly changing world ..."

Don't worry....?????

"Socialism corrects the basic flaw of capitalism. It sets human society on a new path. The means of production, factories, mines and mills become the property of the people. They operate and produce only to fulfill human needs. They are not motivated by profit. THis is the foundation for the new set of priorities for new values... What is inovated is a 'conflict of values.'"
- Ecology-1972-Socialism and the Environment-
Gus Hall

"..We must change all our values ... What we are talking about is creating new forms of life on the basis of new values..."
-Mikhail Gorbachev-

You bet i'm worrid...!!!

It is terrific to see such a robust discussion of stakeholder engagement. It's been my world for a quarter-century, so I frankly relate to almost all the comments.

But as a contrarian, let me challenge a bit.

Is industry the SOURCE of many environmental problems, as Judith states?

This is a common misconception, in my view, and one that blocks resolution of issues. I know that Judith did not mean it quite as it came out. But here are a few points I'd like to make.

1. When you say "industry is the source of the problem," you pit industry against "the rest of us," who are implicitly innocent. In fact, there is no one institution or individual to fundamentally blame - to say, "they started it - they are the primary cause." The economy is a system - all agents interact to create the demand and supply of problems.

2. That's more than a truism - it's a key insight. And it DOESN'T mean "we all have to do our part" - that's not the point. The point is that we, collectively, need to rise above our INDIVIDUAL situations, and examine the SYSTEM of which we are all a part. What are its incentives and disincentives? How do these affect our behavior? HOW COULD WE TWEAK THESE, SO THAT OUR INTERESTS ARE BETTER ALIGNED?

3. By looking at the SYSTEM - not to find blame, but to learn its trigger points - a world of potential common ground opens up between industry, government, and consumers - ie, between all the aspects of each of us.

4. Example: We deplete oil because we don't charge its cost of creation, but only its cost of extraction. That's like valuing your life savings based on the cost of driving to the ATM to withdraw them. OF COURSE, in this context, we're going to waste petroleum. It would be insane, at the individual level, NOT to. That's why even the most radical environmentalists fly to conferences to espouse their views. It would be counterproductive not to. BUT, it's also insane, at the societal level, to do this. The trick is: bringing these interests into alignment.

5. So: why are environmentalists AND corporates abandoning the idea of shifting taxes from jobs and income to carbon - an economic trigger that could begin to shift the whole ecoomy away from petroleum addiction? I overstate this - of course, many are advocating carbon taxes. But many are too "politically sophisticated" to do so. They "know" its a political impossibility, so they advance other good but insufficient substitutes such as cap-and-trade. That's necessary, but not sufficient. Even if the political support is not there, we need to be VERY EXPLICIT about what is needed - and persistent, if gentle, in repeating it until it is a commonly understood mantra. That is how, eventually, the necessary becomes the possible.

6. The stakeholder engagement process is all the rage now - and I know from experience, its impacts can be extraordinary. But there is great fear and misunderstanding of it, and that leads many to:

- Avoid it, because even though it generally reduces conflict, the blame for not engaging is not as easy to assign as the blame for engaging. "Safe" executives often leave their companies exposed, to avoid being the one blamed if they drive an engagement process that is later seen to backfire.

- Over-engineer it, by creating formal bodies well before we understand what we are trying to achieve, who is going to help us do so. That ties us into multi-year commitments to the wrong approaches and partners. Informal processes are generally the most effective way to start.

- Overstate the case - as either sweetness-and-light or a capitulation. Engagement is not magic - it's simply a signal that people want to understand one another, and the system that links them, so that they can find any unseen opportunities to advance everyone's goals at once.

See the case study at
http://www.future500.org/documents/StanfordCaseStudyFuture5002006.pdf

Bill Shireman
Future 500
bshireman@future500.org
www.future500.org

Corporate Social Responsibility (CSR)-Literature Review

Social Responsibility’s company is not a new concept in society but progressively expand along with other concepts. Social responsibility’s company which is referred as Corporate Social Responsibility theoretically still generated the contradiction.
Corporate Social Responsibility started to become the big issue and studied by a lot of party since early year 1960 in United States and in the early 1970 in Europe. In this time, Corporate Social Responsibility is become the important issue in business world and society and its discussion coverage even also immeasurable progressively along with progressively its excitement growth and business world. Progressively is wide coverage of discussion of this Corporate Social Responsibility, definition which is made by expert more immeasurable. Beside that, terms which emerge along with growth of Corporate Social Responsibility even also increasing and varying.

Definition about corporate social responsibility still is difficult found in literature accountancy. The definition need a lot of consideration and consensus about any kind of competent included into company responsibility. However, if we discuss about a company choice in disclosure social responsibility reporting, we will agree that a company take charge that must be expressed related to accountability, not only in finance performance but also its social performance.

According To World Business Council for Sustainable Development in its publicizing entitling Making Good Business Sense (2002) citing statement of Lord Holme and Richard Watts (2000) defining social responsibility company is:
“Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.” (www.mallenbaker.net)

For a while according to Elkington (1997), company responsibility help the attainment focussed three company efficacy consisted of the “social efficacy, environmental, and financial". This concept is known as Triple Bottom Line Success of a Company. For more clear depicted is in following schema:

Picture 1. Triple Bottom Line Success of a Company.
The Existing Of Triple Bottom line Success of a Company triggered by Corporate Financial Responsibility (CFR). After that company effort to minimize negative affect from environmental problem (CER), and strive the company for behave to matching with social environmental expectation (CSR). There are interconnected sliver and overall of the responsibility viewed as contribution of company and business world in general in realizing sustainable development (Suwaldiman, 2005).

Another definition mention:
“Corporate Social Responsibility is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life”. (World Business Council for Sustainable Development, 2002)

Definition of Corporate Social Responsibility varied between definitions in one state with other state because what conceived of social responsibility form on the basis of awareness or initiative in one state just earn represent obligation in other state. For example, association of Corporate Social Responsibility in Ghana mentions:
"CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government (mallenbaker.net).

While association of Corporate Social Responsibility in Filipina have a notion that “CSR is about business giving back to society"(mallenbaker.net).

Organization Corporate Social Responsibility in Europe is CSR Europe (www.csreurope.com) have a notion that company have two responsibility type that is first commercial responsibility which run the business successfully and secondly is social responsibility that is company role in society, where in form of various activity done by company besides activity of attainment maximize profit. This activity for example environmental continuity, paying attention to employees prosperity, running business pursuant to existing ethics, and active participate in society environment in place where the company operate.

Griffin in Essential Business mention the social responsibility company with the term of Social Responsibility define:
“The attempt of business to balance it commitments to group and individuals in its environment, including customers, other business, employees and investors”. According to him, social responsibility represent effort to balance various commitment for responsible to all investor that is maximize the profit company. Beside that, company also take charge to its consumer which is market the good quality product - a commitment that possible trigger increase production cost and make the company have to settle for the lower profit. This matter then result a lot of irresponsible company to its consumer because enthusiastic to gratify the investor.

From various definitions above, writer can conclude that social responsibility company is company continuation effort to balance the aspect of social-economy company in order to fulfilling obligation demand to all stakeholders fairly and proportional

Edwin Mirfazli
Accounting Department
University of Lampung
Indonesia
E-mail : Mirfazli@yahoo.com

The Nature of Sustainable Development Management

Sustainable Development Management will continue to be a dominant business activity perhaps as long as human consumption and environmental issues remain in the business environment. Sustainable Development Management is not only grounded in the natural environment, it is the collaboration and efficient extraction of resource into the business environment and in the needs of the firm to which an ecological system must entrust its natural resources, both environmentally and economically to achieve social equity. Sustainable Development Management also expresses basic beliefs of our global society, though the “firm may behave nationalistically, where convergence occurs (Reich, 2005)”. It expresses the belief in the possibility of human consumption and the livelihood through systematic organization of resources framed in the economic environment and refined in the business environment. Changes from the natural environment, economic environment and business environment can be made into a powerful engine for achieving social equity and human development, in both the short run and long run.
Resource extracted from the natural environment and refined in the business environment to become more consumable can and should be used to advance the human materialism. In the natural environment, the firms’ natural environmental supply chain begins with and regulation of natural resources, of which raw material are extracted through various production links, such as construction of component, assembly and merging. Finally, it is refined in the business and reach the consumer through a distribution channel. It is important to note that resources are means to man's activities and an ecological system provide an opportunity to extract and refine the raw materials from nature for sustainability and creating wealth. Furthermore, change management is necessary to achieve sustainable development investment; needless to say that the role of government is to provide safety net in this ecological system.

The environmental challenges from the natural environment, such as global warming, flooding, hurricane, melting ice caps and rising sea level are beyond the control of the economic environment and business environment. The current financial shield from natural disaster is insurance and/or replacement coverage. Also, through preventive measures, such as creating awareness through education, can the firms [supply] and the consumers [demand] reach a point of efficiency. The economic environment and business environment are deeply nested in the natural environment. Firms now have to deal with challenges not only internally, but external from its business environment, economic environment, and the natural environment.

In 2007 to 2008, the year began with the snow storm and earthquake in China, and cyclone in Myanmar. In September, 2008, hurricane Ike, damaged thousands of homes in Texas. The impact of the natural disaster was a sad loss of human lives and costly to businesses and the overall economy of these countries. Firstly, the natural environment consists of geological activity, ocean activity, atmosphere [climate/weather], life, ecosystems, biomes, and wilderness. At each category of the natural environment, the firms, with various industries/sectors, and specialized products and services refine the raw materials in the business environment and brings it to the market for human consumption. Through this long chain of demand and supply, the driving force is the desire to accumulate and exploit resources to satisfy and perhaps enhance human materialism. Secondly, the economic environment is made up of both external and internal economic forces. External economic forces, which are the life cycles, business cycle changes, inflation, interest rates, international economics, consumer sentiments, and technology, government [changes in law, regulation, taxation, and political environment]. The internal forces of countries economic system consists of the industries, the companies and labor force. Thirdly, the business environment is made up of external and internal forces to which it must manage and adapt to maintain the development and life of the firm. There are limited control over the external forces that surrounds the firm, such as market competition, distribution for goods and services, economic, socioeconomic, financial, legal, natural environment, political, cultural, human capital and technological innovation. The internal business environment, however, is manageable, such as factors of production (capital, raw material and people) business activities for generating value of the organization (operating activities, investing activities and financing activities). Contextual consideration must be factor into the business activities for domestic environment, foreign environment and the international environment with respect to culture, language, religion and tradition.
Sustainable Development & The Business Environment

The firm is dealing with multi-types of environment and systems when developing strategies to implement a symbiotic relationship with the environment and dealing with global warming and other environmental challenges. Careful consideration must be given to the ecological system of sustainable development and the economic systems in which it functions. The ecological systems of sustainable development consist of five subsystems. Firstly, the business environment consists of the firm, government, international organizations and institution of innovations and knowledge [i.e. academia], competitors within the designated industries, other nations and development environment, makes up the Sustainable Development Microsystems (SDM). Secondly, there will be a systems of interconnectivity between the immediate environments, where the country’s firms, government, international organizations and institution in its domestic environment for innovations, knowledge research & development, which is known as the Sustainable Development Mesosystem (SDMe). Thirdly, the country’s external environment setting, such as the domestic economic system will affect development, which is known as Sustainable Development Exosystem (SDE). Fourthly, the countries larger cultural context in its strategic geographical position of national economy, political culture and its subculture, which is known as Sustainable Development Macrosystem (SDMa). These ecological systems are nucleated in the economic environment, which is external to the business environment which the firm thrives. The economic system consists of external and internal forces that contribute to the undulation of activity of the organization, consumers and monetary and fiscal policies. A country’s economic resource consists of land, labour, capital and population/human resource-which when developed and processed through education and skill training, becomes human capital.

Economic Prosperity is the maintenance of high and stable levels of economic growth and employment. The external economic forces are the life cycles, business cycle changes, inflation, interest rates, international economics, consumer sentiments, and technology, government [changes in law, regulation, taxation, and political environment]. The internal forces of countries economic system consists of the industries, the companies and labor force. The level of a country’s productivity impacts on its long term growth. Social Equity is the social progress and the recognition of the basic needs of everyone. Environmental Sustainability which is the prudent use of natural resources and effective protection of the environment.

The Firm & Achieving The Virtuous Cycle of Reintegration

Firms, government, international organizations and institution of innovations and knowledge [i.e. academia], industry competitors and the development environment in the patterning of environmental events and its transition over the event’s lifecycle, which is known as Sustainable Development Chronosystem (SDC). The system of SDM, SDMe, SDE, SDMa, and SDC contains specific roles, norms and rules that can potently influence and mold sustainable development, all together. Thus, through the virtuous cycle of reintegration with the establishment of the sustainable development systems and mechanism of action and the system of value creation of sustainable development equity, firms can achieve the sustainable development biosphere, which is deeply nested within the economic environment and the natural environment. The evolution of the paradigm shifts to a Sustainable Development Investment Project Management Portfolio (SDIPMP) via Sustainable Development Investment Project Management Office (SDIPMO) in the firm and the role of managers will be an ongoing effort to balance change with continuity, is at the core of sustainable development ecological systems that must become one of the firm’s major business activity, among the operating activity, investing activity and financing activities, as a value generator. The Sustainable Development Investment Project Management Portfolio (SDIPMP) within the business organ of Sustainable Development Investment Project Management Office (SDIPMO) allows for value creation and preservation for the firm and its portfolio performance is accounted for as a fixed asset, tangible long term investment. Such a structure within the financial balance sheet creates an internal mechanism of actions (MOA) for long term capital preservation with change management and other finance dynamics and momentum to sustain shocks and downturns, internally and externally of the business environment. This structure creates an internal balance of spin cycle dynamics, which is the specific element of change in finance for stability and is reflected on the financial balance sheet and managed via SDIPMO and SDIPMP. The virtuous cycle of reintegration is achieved by two venues; firstly, when shareholders reinvest in the SMIPMP, after payouts from surplus capital (long term investment) and, secondly, when SDIPMP is trading value in the capital market (short term investment via AAA-rated asset-backed securities), where the investors can claim value also.

Rita I. Cooma ,
President & CEO, ICCouncil
Email. ticc@iccouncil.com
www.iccouncil.com