Strategic Management in a Sustainable Society

This article focuses on the concept of strategic management in a sustainable society as applicable to United States-based business organizations (companies). Strategic management refers to a company's detailed plan to capture and maintain competitive advantage in the marketplace. A sustainable society is one that meets current environmental, economic, and community needs without compromising those needs in the future. In order to contribute to a sustainable society, a company's strategic management plan will incorporate decisions and actions that positively address the three main facets of a sustainable society: environmental issues, economic issues, and community issues.

Keywords Business Ethics; Corporate Social Responsibility; Eco-Efficiency; Social Footprint; Socially-Responsible Investing; Stakeholder; Strategic Management; Sustainable Society

Management > Strategic Management in a Sustainable Society

Overview

Strategic management involves devising a complete roadmap for capturing and maintaining competitive advantage by determining the broader concepts of mission, goals, and long and short-term objectives; and by defining and managing the more specific details of analysis, decision-making, actions, roles, responsibilities, and timelines needed to do so.

A sustainable society is one that meets current environmental, economic, and community needs without compromising those needs in the future. There are three main categories of issues that affect a "sustainable society":

1. Environmental issues
2. Economic issues
3. Community issues

Today, companies are expected to practice good business ethics by fostering a sustainable society.

Merely avoiding a negative impact on society is not enough. Through television and Internet, the American public is presented with the details of corporate breeches and scandals as they unfold; natural disasters, such as Hurricane Katrina; and worldwide poverty and homelessness. Geographically, these issues affect society on a local, national, and global level. Companies are obliged to practice Corporate Social Responsibility, that is, to contribute to society now and in the future by maximizing the positive aspects of its decisions and actions and by minimizing any negative impact.

Therefore, the prudent approach is for companies to incorporate sustainable society issues into their management strategies now.

Further Insights

Three Facets of a Sustainable Society

There are three main facets that are central to a sustainable society: environmental issues, economic issues, and community issues. In many instances, issues may overlap into more than one category.

Environmental Issues in a Sustainable Society

Environmental issues may be caused by nature or humans.

Environmental issues include the following:

• Changes in the climate, such as global warming
• Natural disasters, such as hurricanes
• The alteration of terrain or bodies of water due to natural disasters or development
• Deterioration of air quality, both outside (such as fumes from motor vehicles and airplanes) and inside (such as toxins released from paint and varnish)
• The release of hazardous materials from activities such as oil spills and the dumping of hazardous waste
• The depletion or deterioration of natural resources, such as farmland, water, trees, and minerals
• The displacement of wildlife or depletion of their food sources

A company can influence those environmental issues caused by nature through its response and management of the after-effects. For example, a company's financial or emergency response to a hurricane illustrates a company's contribution to an environmental issue in a sustainable society. This is also a good example of an environmental issue that crosses over into a "community issue."

Economic Issues in a Sustainable Society

Economic issues in a sustainable society are a bit broader and include the following:

• The efficient production of necessary goods and services, including the streamlining of the supply chain process
• The use of responsible labor, environmental, and investment practices in the production of the goods and services

Community Issues in a Sustainable Society

Community issues affect the general well-being of people — their right to good health, safety, shelter, education — and the preservation and development of institutions that promote these rights.

Community institutions in a sustainable society include the following:

• Hospitals, clinics, access to medical supplies
• Food banks, agricultural and food production facilities
• Protective services, such as fire and police, and legal and social service organizations
• Affordable housing
• Educational facilities
• Religious institutions

Applications

What then, are the implications for a company? How can a company incorporate the environmental, economic, and community issues that are central to a sustainable society into its strategic management roadmap? A company that intends to incorporate sustainable society strategies into its strategic management needs to formally write them into its planning. To be truly effective, all stakeholders — from top management to employees — need to be committed to the planning and execution of actions and decisions that contribute to a sustainable society.

Options for Incorporating Sustainable Society Issues into Strategic Management

There are two options for incorporating sustainable society issues into strategic management policies: active options and passive options; a company may incorporate either option or both options, depending upon the particular issue.

1) Active option: Engaging in practices that will result in a positive impact on a sustainable society.

2) Passive option: Avoiding practices that will result in a negative impact on a sustainable society.

Here are examples of active and passive practices that companies might employ to meet environmental, economic, and community issues.

Environmental Issues in a Sustainable Society: Active Practices

Create a formal, written environmental management plan that details goals, actions, responsibilities, and timelines.

Use renewable resources, such as bamboo and treated pine timber whenever possible.

Plant trees on company property and in the community.

Reduce the number of motor vehicles and airplanes to lower emissions and noise pollution.

Use recycled and biodegradable materials in product development.

Operate facilities during non-peak utility and travel hours.

Design products that are recyclable or biodegradable.

Use alternative fuel vehicles whenever possible.

Develop alternative energies, fuels, and products.

Offer financial incentives to employees who travel to work by bicycle, public transportation, and hybrid or electric motor vehicles.

Offer employees the opportunity to work from home part of the time.

Purchase products from companies that employ sustainable packaging.

Environmental Issues in a Sustainable Society: Passive Practices

Limit building and development that will alter the course of nature, such as rerouting rivers, encroaching upon wetlands, or displacing wildlife habitats.

Economic Issues in a Sustainable Society: Active Practices

Streamline costs and processes in order to offer goods and services at a fair price.

Increase the value of products and services while reducing the impact on the environment.

Pay employees fair wages.

Promote and enforce equal opportunity for employees.

Engage in socially-responsible investing. This is an investment strategy that has also been gaining ground with individual investors who seek out funds specifically promoted as "socially-responsible." Lydenberg, (2007) describes social investors and universal investors as more considerate of socially sustainable issues than rational investors, who are most concerned with total return or stock price appreciation plus dividends.

Economic Issues in a Sustainable Society: Passive Practices

Refuse to do business with companies that engage in child labor or other human rights violations.

Refuse to invest in companies or countries that engage in child labor or other human rights violations.

Community Issues in a Sustainable Society

It is crucial for companies that plan to enter a new geographic environment to consider the historical and institutional dynamics of the local community; to maintain open communications with the local constituencies; and to safeguard and improve the social and economic assets of the community (Bird & Smucker, 2007).

Community Issues in a Sustainable Society: Active Practices

Designate a company spokesperson and establish a communications plan so that community leaders, citizens, and local media persons have easy access to accurate information and a process to address concerns and questions.

When building or developing, make the buildings aesthetically fit with the neighborhood.

Instead of building anew, renovate existing buildings.

When building or developing, provide additional community benefits such as burying utilities, improving existing roads, or bringing in high-speed Internet access.

Contribute funds for fire, police, and social service organizations.

Contribute funds and manpower to projects that provide free or low-cost medical care, food, and housing to low-income persons.

Volunteer funds and manpower for community service projects, such as beautification programs, arts programs, community gardens, playgrounds, and after-school programs.

Pharmaceutical companies can provide free medical supplies and prescriptions to persons who can't otherwise afford them due to a lack of insurance or an inability to make insurance co-payments.

Set aside a percentage of new housing for affordable housing. If building or developing on land that will displace low-income persons, fund suitable alternative living arrangements for them.

Community Issues in a Sustainable Society: Passive Practices

Limit building and development to those areas that will not displace people.

Environmental Issues & Economic Issues in a Sustainable Society: Overlapping Category

Eco-Efficiency

Eco-efficiency is a good example of a practice that tackles both environmental and economic issues in a sustainable society. Eco-efficiency refers to a company's efforts to increase the value of its products and services while simultaneously reducing the impact on the environment through pollution and the release of hazardous wastes. Aaron Brody discusses the concept, practice, and benefits of sustainable packaging as an eco-efficient strategy. He describes the "cradle-to-cradle lifecycle" of sustainable packaging as meeting current and future needs by using renewable and recyclable materials and encouraging waste reduction and resource conservation (Brody, 2007).

Examples of Companies that Embrace Sustainable Society Issues

Two global companies — Scandinavian Airlines and Gap Inc. — have embraced sustainable society issues and incorporated them into their management strategies. Here are descriptions of how they have made sustainable society actions an integral part of strategic management; the techniques they used; and the benefits of their programs.

Example 1: Scandinavian Airlines — Committed to Eco-efficiency

Airlines are major contributors to environmental issues through air emissions, noise emissions, air traffic congestions, and hazardous waste disposal. Scandinavian Airlines (SAS) however, is considered a leader in environmental management. The leadership of SAS incorporated environmental management into strategic management. In 1995, SAS published the first of its annual, award-winning environmental performance reports. Because of its commitment to environmental management and willingness to discuss it, Lynes & Dredge studied SAS to identify its tools and determine its motivations.

They found that SAS utilizes four main tools or mechanisms to manage its environmental program:

1. Publication of a public environmental report annually
2. Utilization of an eco-efficiency index to measure the economic efficiencies derived from implementing environmental measures
3. Utilization of an emissions calculator to determine destination-specific calculations of carbon dioxide generated
4. Institution of a corporate management policy that requires all managers to complete environmental reports for their divisions and also to purchase from suppliers who practice environmental management.

Lynes & Dredge identified five factors that are motivating factors in SAS' environmental management program:

1. Financial cost-benefit: SAS saves money by employing energy and water-saving techniques.
2. The regulatory setting: SAS accepts regulations and anticipates future legislation.
3. The desire to be a good corporate citizen: SAS presents a positive image of airlines within the transport industry and embodies the "Scandinavian spirit."
4. SAS desires a positive image as an airline within the marketplace, with suppliers, and with regulatory agencies.
5. SAS fosters positive relationships with stakeholders within the aviation community: corporate customers, the government, and unions.

Interestingly, SAS interviewees indicated that its environmental management program was not influenced by pressure from passengers as that did not seem to affect passengers' choice of airlines. Nor, was SAS inspired to promote environmental management as a marketing technique; the interviewees indicated that such marketing would be dishonest because airlines consume so much fossil fuel that none can really call themselves "green" yet. Lynes & Dredge concluded that a major element for the success of SAS to incorporate environmental management into its management strategy is the active and continuing role and commitment of top management to the program and its promotion as part of SAS corporate culture to employee at all levels within the organization (Lynes & Dredge, 2006).

Example 2: Gap Inc. — Committed to the Community & the Environment:

In 2004, Gap Inc., parent company of Gap, Banana Republic, Old Navy, and Forth & Towne, was the first retailer to publish a social responsibility report. Gap Inc. has incorporated social responsibility into four areas of its strategic management by:

1. Instilling sustainable solutions in its supply chain by improving working conditions, monitoring factories, enforcing labor standards, and collaborating for industry-wide change.
2. Ensuring a positive work environment for employees.
3. Contributing to the community through charitable contributions and volunteer work.
4. Assuming responsibility for environmental management practices in the operation of stores, distribution centers, and offices worldwide, by monitoring energy and supply consumption, safety rates, and the environmental management policies of external vendors.

According to Eva Sage-Gavin, Executive Vice President, Human Resources and Communications for Gap Inc., the company's social responsibility commitment dates back to its beginnings in 1977, when the founders established the Gap Foundation. Additional motivating factors include Gap Inc.'s efforts to meet global compliance standards for labor and the desire to improve even further upon the practices presented in Gap Inc.'s first formal social responsibility report in 2004. Sage-Gavin describes three major benefits resulting from Gap Inc.'s social responsibility program:

• Gap Inc. is better able to attract and retain employees.
• The supply chain has improved due to better working conditions for employees.
• The impact on the environment is more positive — reduced energy use equals reduced cost (Wright, 2007).

Discourse

Sustainability is a Global Issue

Here are two examples of global initiatives designed to influence companies to incorporate sustainable society factors into their management strategies:

• In 2006, the United Nations introduced Principles for Responsible Investment to promote socially-responsible investing on a global basis. The Principles are voluntary guidelines that provide institutional investors and asset managers with a framework that helps them to avoid investing in companies with poor records on issues such as human rights, pollution, and corporate governance. So far, the United Nations has garnered 170 signatories to the Principles from around the world (Green, 2007).
• Ford Motor Company and Conservation International established The Center for Environmental Leadership in Business (CELB) to help companies avoid harming the environment and instead integrate ecological practices into their business strategies in order to create solutions to global environmental problems (Business & the Environment with ISO 14000 Updates, 2007).

Benefits of Incorporating Sustainable Society Factors into Strategic Management

It's hard to dispute that there are definite benefits to the environment and local, national, and global communities from incorporating sustainable society factors into corporate management strategies. In fact, measurement tools do exist for calculating the benefits of a company's actions on society; the Center for Sustainable Innovation (http://www.sustainableinnovation.org) created a non-financial, mathematical tool called the Social Footprint, which is both a corporate sustainability measurement and a reporting method (Business Credit, 2006).

But what about the benefits to the company?

Benefits to the company — beyond political correctness — of positively contributing to a sustainable society include: the fostering of a positive public image; the attraction of investors and customers to a "socially responsible" company; and corporate satisfaction.

Conclusion

A company that aims to contribute to a sustainable society must of course, balance its actions and decisions against safety and cost. For example, a company that uses recycled materials to make a product must not compromise the safety of the product to the user or environment, and must be able to price the product so that the cost is not prohibitive in the marketplace. In another example, a company that decides to invest in socially-responsible funds will expect to reap financial, as well as social value from the investment.

Multiple strategies exist for a company to incorporate strategies into its strategic management that positively contribute to a sustainable society. But does the contribution to a sustainable society equal more monetary profit for the company? As companies weigh the effects of their strategic management actions and decisions on a sustainable society and on their profits, they must seek out innovative strategies to increase the value to all stakeholders now and in the future.

Terms & Concepts

Business Ethics: The analysis of human decisions and actions in order to determine whether they are right or wrong in the context of morality, legality, and fairness to stakeholders.

Corporate Social Responsibility: A company's obligation to contribute to society now and in the future by maximizing the positive impact of its decisions and actions and by minimizing any negative impact.

Cradle-to-Cradle Lifecycle: The concept that after usage, a product's package will either be recycled or reused, or composted into materials for new packaging.

Eco-Efficiency: Increasing the value of products or services while reducing the impact on the environment.

Global Warming: A warming of the Earth's temperature.

Hazardous Waste: Commercial by-products or discarded material that is potentially harmful to humans or the environment.

Principles for Responsible Investment: A set of voluntary guidelines, introduced by the United Nations in 2006, for the purpose of promoting socially-responsible, corporate investment worldwide.

Rational Investors: The Rational Investor is particularly concerned with total return consisting, in the case of equity investing, of stock price appreciation plus dividends (Lydenberg, 2007).

Social Footprint: A measurement and reporting method, created by the Center for Sustainable Innovation, which calculates an organization's impact on society.

Social Investors: Socially responsible investors who explicitly consider the social and environmental implications of their investments in corporations, or other asset classes, as a useful tool to help create a society that is just and sustainable, healthy and wealthy, while still achieving market rate returns (Lydenberg, 2007). This concept is also known as "socially-responsible investing."

Socially-Responsible Investing: See "Social Investors."

Stakeholders: Any persons who have an interest in the decisions or actions of a company.

Strategic Management: A company roadmap for capturing and maintaining competitive advantage by determining the broader concepts of mission, goals, and long and short-term objectives; and by defining and managing the more specific details of analysis, decision-making, actions, roles, responsibilities, and timelines.

Supply Chain: The movement of a product from the supplier to the manufacturer, to the retailer, to the customer.

Sustainable Society: A society which meets current environmental, economic, and community needs without compromising those needs in the future.

Universal Investors: Investors of such size that their investments are diversified across all asset classes and across investment opportunities within those asset classes, and therefore can be said to be invested in the economy as a whole (Lydenberg, 2007).

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Suggested Reading

Campbell, A. & Alexander, M. (1997). What's wrong with strategy? Harvard Business Review, 75, 42-51. Retrieved May 21, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9711071075&site=ehost-live

Center for Sustainable Innovation. (n.d.). Can there be context in sustainability reporting? Retrieved May 21, 2007, from (http://www.sustainableinnovation.org)

DesJardins, J.R. & Diedrich, E. (2003). Learning what it really costs: Teaching business ethics with life-cycle case studies. Journal of Business Ethics, 48, 33-42. Retrieved May 21, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=11992337&site=ehost-live

Gupta, R. & Coombes, P. (2003). Accentuating the positives. Global Agenda, , 112-115. Retrieved May 22, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=10296843&site=ehost-live

International Institute for Sustainable Development (http://www.iisd.org)

Schofer, E. & Granados, F.J. (2006). Environmentalism, globalization and national economies, 1980-2000. Social Forces, 85, 965-991. Retrieved May 23, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=23608218&site=ehost-live

Shaw, G., Brown, R. & Bromily, P. (1998). Strategic stories: How 3M is rewriting business planning. Harvard Business Review, 76, 41-50. Retrieved May 21, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=547095&site=ehost-live

The Center for Environmental Leadership in Business (http://www.celb.org/xp/CELB)

United Nations Division for Sustainable Development (http://www.un.org/esa/sustdev/about%5fus/aboutus.htm)