Sustainable Entrepreneurship

When reading the daily newspaper and pursuing public debates, one may easily be inclined to declare the word ‘sustainable’ the negative buzzword of an entire generation. What isn’t sustainable these days? From the forestry, agriculture and fishing sectors to the industry sector including the financial sector, tourism, airlines – just about everything must be sustainable or at least become sustainable. In the meantime, it is possible to make a sustainable impression with sustainability and sustainability has a sustainable effect on our thinking, sometimes also our actions.

Sustainability is today an overarching orientation line of world politics. However, debate and implementation differ heavily. The aim of this paper is to show that sustainable development is strongly coupled to implement a sustainable economy on a global scale. This challenge eventually means implementing the 35-year-old concept of a global eco-social market economy. A vital element in this concept is the market which creates competition under a given regulation and economic constraint system in order to provide goods and services. In addition, a second constraint system must meanwhile assure sustainability in its ecological and social dimension.

Why is it that some corporations thrive for decades, only to diminish into financial struggles, demoralizing layoffs, and often, bankruptcy? Perhaps there exists an invisible force or phenomenon that has eluded the leaders of yesterday and today, not unlike microscopic organisms, that were made visible by the advent of the microscope in 1590. If we could turn a “creative lens” on these invisible forces and phenomena, we may discover an opportunity to revitalize the organization and restore it to a time of achievement and success.

The increasing social and environmental issues and challenges have become an imperative for businesses, governments and international community to be addressed, and failure to address these issues and challenges jeopardizes their ability to create prosperity and to be sustainable in the long-term for businesses and society as a whole. Sustainability has long been on the agenda at many companies, but for decades their social, environmental, and governance activities have been disconnected from core strategy. Most of companies still take a fragmented, reactive approach – launching ad hoc initiatives to enhance their “green” credentials, to comply with regulations, or to deal with emergencies – rather than treating sustainability as an issue with a direct impact on business results. The result of McKinsey’s survey on sustainability shows that only 36 % of executives say their companies have a strategic approach to it, with a defined set of initiatives (McKinsey 2011). The global stakeholders and constituents such as government, NGOs, and international community have become a major force in promoting social responsibility and environmental sustainability. They can provide integrated solutions across interconnected issues area such as economic, social, environmental, and security action. They can facilitate universal dialogue to arrive at joint solutions and mobilize new constituencies to join businesses, governments and international organizations to address global emerging issues and challenges, and they also can legitimize new norms, structures and processes for international cooperation on sustainable development. Now a global movement that aims to encourage businesses to pay closer attention to their social and environmental impact has gained momentum in recent years.

Sustainable Entrepreneurship and Social Innovation are not necessarily new concepts; they have existed for several years but seem to become increasingly relevant to companies, NGO’s and governments throughout the world every year. Many companies take these developments very seriously, as they understand that they are part of a new way of doing business in the future and thus create their own capacity to endure. One of the key challenges is, however, a partially unclear understanding of the concepts, how they can be implemented and how an impact can be created. In addition, concepts like Social Entrepreneurship or Sustainable Innovation exist and add to the complexity. As with most new concepts, this unclear understanding could ultimately hinder the development of a concept that, if applied seriously, might have a significant contribution on improving the way we collaborate, innovate and ultimately have a positive impact on the world.

All of the great American Entrepreneurs from Henry Ford, Thomas Edison, David Packard and Steve Jobs, had a driving theme to their entrepreneurship: a burning desire to contribute something great to society. It defined their entrepreneurism and fueled their passion and relentless pursuit of their dreams (Isaacson 2011). Today’s business model focuses primarily on shareholder returns, which characterizes much of the prevailing model of capitalism around the globe. This would be the least interesting driver for these visionaries, and in most cases they had to fight hard to keep their vision from the clutches and narrow interests of their investors. For the true entrepreneur there is little distance between the business model and the role of business in society. In fact the ultimate measure of a business is its contribute to society. This vision seems a far cry from the trajectory of the reigning business model. Even more telling is the relentless pursuit of a bottom line measured primarily by profit and loss statements.

Today businesses are increasingly judged by the extent to which they consider the main interests of society. Thus, the concept of corporate social responsibility has been transformed dramatically over the last couple of years. From a pure philanthropic perspective (sponsoring and donations), instead of being merely a legal compliance approach, it has developed into an explicit responsible management issue.

Now a third stage of CSR, discussed as Sustainable Entrepreneurship, has arrived. It comprises the general question about the overall contribution of enterprises to urgent social challenges. This new strategic positioning of businesses in society aims at increasing social and business added value at the same time (shared value). Businesses as responsible corporate citizens no longer want to be viewed as a problem, but are aiming to provide solutions for the pressing challenges of our time. This realignment of strategy among leading enterprises increases their competitiveness and provides urgently needed solutions for society – so called social innovations.

The theme of CSR (Corporate Social Responsibility) is widely diffused in the literature and the debate among scholars of different disciplines has produced a rich set of contributions. In the last decade, studies of CSR have intersected and merged with those on sustainability, broadening the concept, as recently reviewed by the European Commission itself. Starting from these premises this work focuses on the concept of business’ “holistic development,” paying particular attention to the importance of “territorial” firms and highlighting the links between holistic development of the firm and its territory.

Historically, activities dealing with these topics – often “bundled” under the term Corporate Responsibility (CR) – had a strong focus on philanthropy that can create social impact if conceptualized with a strategic view but have genuine problems in terms of scalability and replicability. Based on these limitations the genuine entrepreneurial activity understood as a mechanism to create new, sustainable business models through the transformation of societal challenges into innovative and sustainable services needs to be emphasized and specifically addressed in a strategic approach to CR. Therefore, as this is increasingly understood, the trendlines are pointing in the direction of focusing more strongly on activities that are aligning social and commercial ambition and can result in large-scale responsibility engagement, without ignoring philanthropy or zero profit initiatives if such kind of interventions contribute to solving societal challenges. Strategic CR should therefore aim to operate with a portfolio of tailored activities, comprising philanthropic initiatives, zero profit, social business or lower margin business models that are all closely linked to a company’s strategy and core competencies and are operated through a strong ethical governance.

Since the late 1980s, a major focus of executives responsible for sustainability strategy rollout in companies has been on “finding the business case” for sustainability and on convincing mainstream managers to exploit that case as much as possible internally and externally. Research has proven that the stronger the business case, and the more value drivers it builds upon, the stronger the internal and external appeal of associated projects, and the more robust the internal alignment within corporate organizations (Steger 2004). However, research has also shown that the “right” values, and corporate mind- and skill sets go a long way to supporting this process through the recruitment and creation of sustainability entrepreneurs that change behavioral patterns within firms.

Over the past years many corporate business leaders have started to shift their strategy from a pure profit seeking one towards a balance in simultaneously striving to achieve economic, environmental and social goals (Elkington 1998; Preuss 2007; Roth 2009). As a result, challenges on the sustainability agenda have emerged as a new source of opportunities for innovation and competitive advantage (Fichter 2006; Hockerts 2008; Hansen et al. 2009). Research has shown that entrepreneurs are the main drivers of innovation, economic growth and social change (Audretsch 2002); hence, organizations try to adopt entrepreneurial approaches in order to spur their own innovativeness (Hamel 1999; Ireland et al. 2009). However, as recent publications have discussed, the promotion of entrepreneurship is a difficult and multifaceted issue requiring the consideration of dynamic processes describing the interplay of multiple external factors, local conditions and the individual innovators (Isenberg 2010; Krueger 2012; Vogel 2013). These difficulties are particularly distinct when discussing sustainable innovation, as risk-related reluctance in instigating this kind of innovation can still be observed among corporate leaders (Hall 2002). If established companies plan to take part in creating tomorrow’s economy, it will be necessary for them to challenge prevailing assumptions about innovation processes (Hamel 1999). The purpose of this chapter is to investigate the main success factors of entrepreneurial ecosystems and discuss ways how to assimilate these in an organizational context.

Despite of proven immense impact on short-term profitability, short payback periods, serving as a multiplier for performance enhancements or by annual cost-savings and being recognized for its significance on the innovativeness and competiveness of a company, successful continuous improvement (CI) as defined in the paper is rare. An approach with prerequisites of a successful exception is the Fraunhofer Austria Corporate Capability Management (CCM) concept. CCM is defined as the systematic and holistic approach to ongoing improvements on organization’s capabilities in order to efficiently enhance a company’s sustainability, innovativeness and competitiveness. The concept comprehends discrepancies between research findings on critical success factors and contemporary industrial practices. The paper demonstrates that a gap between best practices and the actual implementation in companies is present. It concludes that the CCM concept addresses potentials for cost-savings, increased innovativeness and sustainability even left out by advanced CI practices.

The issue of climate change is quite obviously an environmental concern. However, far too often, we ignore the myriad other burdens associated with global warming. The grave problems caused by climate change are not solely environmental in nature; rather, they are predicaments of public health, national security, public safety, and economic development, to name only a few. Climate change and global warming touch upon practically every aspect of our society. Those who continue to ignore, deny, or downplay the critical developing issues caused by climate change place our nations and our world at risk. Those who embrace these charges understand that battling global warming will lead not only to an enhancement in our environment and quality of life, but to economic benefits and a growth as well. To put it simply, embracing the climate challenge allows us to avoid the worst effects of climate change and to green the bottom line.

Sustainability reporting (SR) is increasingly becoming a standard, especially among large companies, and the publication of a respective report can be considered a common business practice nowadays among multinational corporations. In a recent study, KPMG (2011) found that 95 % of the world’s largest 250 corporations issued such a report. 10 years earlier, only 45 % had done so (KPMG 2002). Moreover, SR has not only become a standard, it has also gradually been standardized with regard to the content disclosed. In 2011, already 80 % of the world’s largest 250 corporations applied the guidelines provided by the Global Reporting Initiative (GRI) for determining the contents of their reports.

We children see a fundamental problem: we will not be able to hold adults liable for the problems they have caused and not resolved, because they will be dead by the time we have to deal with them. If that weren’t so, part of the adult population would behave differently. Imagine if children could sue adults for unsustainable behaviour and businesses would have to set up provisions in their annual financial statements for these litigation risks! Studies carried out by Bertelsmann (see Berliner Morgenpost 2012) and Shell (2012) show that three fourth of all children and teenagers in Germany view the climate crisis and global poverty as the two principal challenges of humanity.

Thanks to their role as loan providers and savings managers, banks are in a position to contribute towards a sustainable and viable development. The independent Raiffeisen banks and their offices throughout Austria still adhere to the values and principles of their founding father Friedrich Wilhelm Raiffeisen. Without the consistent application of ethical values in their day-to-day business, the development of the Raiffeisen organisations would not have taken the form it did.

The European economy – as well at the global economy, as a whole – faces stark challenges. The questions we are trying to answer since the beginning of the economic crisis are difficult ones. But along with the hardships states, companies and citizens suffer in bad times there come new opportunities.

Being, becoming and remaining sustainable is one of the key challenges facing the small and medium-sized enterprises that my association represents. Sustainable Entrepreneurship is in reality more than just an opportunity – it is a pre-requisite for a successful modern business.

Forward-looking companies no longer see social and environmental challenges as only obstacles but as opportunities for innovation and growth. In the fast-developing field of corporate social responsibility, the focus is shifting away from risk management towards a more visionary and entrepreneurial approach that seeks to create shared value and identify opportunities for innovation that can benefit business, society and the environment alike. However, for many companies, the challenge still remains as to how they can stimulate entrepreneurship and innovation both inside their own companies and beyond. This publication is intended to provide some guidance on this challenge by bringing together the latest best practice, political frameworks and theoretical approaches towards sustainable entrepreneurship.

I founded the World Future Council in Hamburg in May 2007 to give a voice to the interests of future generations. Environmental challenges such as enacting effective laws to support the accelerated use of renewable energies have remained a core concern in our work. We also focus on social justice issues: How do we share our resources, our planetary wealth and our responsibilities? The financial and economic crisis has caused slowly festering problems to escalate. We need financial markets that facilitate real wealth creation. The World Future Council has shown how to create new financial resources in the public interest without causing inflation.

The current economy is not sustainable as such. We are living beyond our means. If we continue to waste as many scarce resources as before, we would need three more reserve planets to exploit. This means we need to handle resources much more efficiently, as well as replace fossil fuel resources. In my view, sustainable entrepreneurship distinguishes companies, projects or persons that not only address the topic of sustainability and social responsibility, but also actively implement it and act as role models. We need many companies and people who are already working on the world of tomorrow today. Sustainability plays a central role in the energy sector because, in addition to modern infrastructures and power stations, we also need facilities for building and storing renewable energy and also materials for effective improvements in energy efficiency.

For me, Sustainable Entrepreneurship is responsible entrepreneurship that takes into account the environmental, social and economic consequences in core business along the entire value chain in entrepreneurial reflection and decision-making. Sustainable Entrepreneurship means accepting responsibility for one’s own actions.

Interview with Ernst Ulrich von Weizsäcker Co-President of the Club of Rome and honorary member of the World Future Council As an expert for biology, the environment and ecological efficiency, you have contributed significantly towards creating greater awareness of the issue of sustainability.

Societal challenges have grown continuously over the last few decades. Today we already count more than seven billion Earth-dwellers (Handelsblatt 2011), and in many parts of the world we are facing dynamic leaps in development. We are living in times of change. The still difficult economic environment in Europe is now showing to many what has already been known for a long time: we need new management approaches and economic innovations to stay fit for the future in this dynamic environment.