Managing Sustainable Business

Shell has been using scenario planning for 40 years to help deepen its strategic thinking. Developing and applying scenarios is part of an ongoing process in Shell that encourages decision-makers to explore the features, uncertainties, and boundaries of the future landscape, and engage with alternative points of view.The scenarios go beyond conventional energy outlooks and consider long-term trends in economics, energy supply and demand, geopolitical shifts and social change. They are based on plausible assumptions and quantification, and include the impact of different patterns of individual and collective choices.Shell’s latest scenario publication, the New Lens Scenarios, published in 2013, provides an in-depth analysis of how economic, social and political forces might play out over the twenty-first century, as well as their consequences for the global energy system and environment. Its ‘Mountains’ and ‘Oceans’ scenarios set out two distinct paths the world might take in the decades ahead. They reinforce the urgency and complexity of addressing the world’s resource and environmental stresses, and highlight the need for business and government to find new ways to collaborate, fostering policies that promote the development and use of cleaner energy, and improve energy efficiency.

This case explores a company’s responsibility for its social, environmental and economic impacts; and in particular, the risks associated with failing to manage negative social, environmental and economic impacts. These can be especially complex in joint ventures with multiple, external contractors; and industries operating at the forefront of proven technologies. The case examines the Deepwater Horizon disaster in the Gulf of Mexico and the consequences for BP. The case can also be used to examine crisis-management strategies and techniques.

On 16 July 2009, Wal-Mart CEO Mike Duke announced an ambitious plan to develop a “Sustainable Product Index” that would enable customers to access reliable, standardised information on where its products came from, what resources they required for manufacture and delivery, and how they should be disposed of and/or re-cycled. He went on to explain –

In January 2009, Hudson Lee, President of Tetra Pak China, was looking over a cliff. The company had invested €65 million to expand its packaging plant on Hohhot, the capital city of Inner Mongolia, China, on top of its initial 2004 investment of €50 m. The expansion plan was based on the inexorable rise in milk consumption in China – growing from 16 to 23 million tons between 2005 and 2012. This was a market with huge opportunities for growth, and powerful domestic brands to reach out to China’s 1.4 billion consumers. The plant initially designed to produce 20 billion cartons a year now had the capacity to process 60 billion cartons.

A Greenpeace campaign to boycott PVC products because of environmental concerns boded disaster for Hydro Polymers. Rather than adopt a defensive strategy, Hydro Polymers embraced the challenge and embarked on a sustainability journey using The Natural Step framework. This journey continued when Hydro was acquired by INEOS, ultimately leading to significant changes within the entire European PVC industry. The INEOS case examines whether positioning sustainability as a business opportunity, rather than a threat, can potentially yield substantial business results while also addressing environmental impacts.

For 20 years or more the world has recognized that the way we do business has serious impacts on the world around us. Now it is increasingly clear that the state of the world around us affects the way we do business.

The death of 1129 workers resulting from the collapse of the Rana Plaza garment factory in Bangladesh on 24th April 2013 may well mark the end of an era of corporate responsibility, and perhaps the onset of a next generation of activities involving different and improved instruments and activities.

On April 22nd 2014, after a difficult year in which GlaxoSmithKline (GSK) had been accused of bribery in China and fined $3 billion by American regulators for marketing malpractice in the US, the pharmaceutical company announced a complex three-part restructuring deal with Swiss giant Novartis. The deal, one of a slew of multibillion-dollar deals in the global pharmaceutical industry, would allow GSK to focus on four key business areas – HIV, vaccines, respiratory conditions and consumer healthcare. It was seen as a win-win deal, offering both companies economies of scale that were increasingly vital for ‘big pharma’. Analysts believed it would ‘unlock significant shareholder value’, not least because it would allow GSK to return £4 billion to investors through a B share scheme.

This case describes Shell’s evolution within the context of sensitive human rights issues related to oil exploration and exploitation in Nigeria. Given that much of the revenue from Nigerian oil resources can be siphoned off by corrupt state governors, this case focuses on issues relevant to government transparency and corruption. It describes Shell’s involvement in the Extractive Industries Transparency Initiative (EITI) and its collaboration with the Nigerian Government to instigate a more transparent reporting on oil revenues. However, a decade ago, two senior Shell executives – one Nigerian, and one European – involved in EITI and negotiations with the government retired from the company, and had the prospect of briefing their successors on the complexity of the Nigerian situation. This brought a number of questions that still remained to be answered to the table. The questions concerned the invasive nature of corruption and its effect on human rights, but more specifically the role of a multinational versus the role of the government when trying to deal with such issues. They also concerned the complexity of sustainability issues for corporations – particularly concerning human rights issues – and issues around the scope and limits of corporate responsibility as well as the difficulties that all players face in tough market conditions and on a “non-level playing field”. In a learning context, the case develops new insights on ways of operating responsibly, creating valuable partnerships and interacting in a complex global, socially responsible, context. In an Epilogue, we ask how, in the decade since the retirement of the two executives in question, Shell has evolved in its thinking and acting concerning the Niger Delta and discover that there are still unanswered questions.

After a monthly staff meeting, a young employee approached Sweta Mangal, CEO of Ziqitza Health Care Limited (ZHL). Sanjay Rafati had been hired as a financial officer the previous month, in November 2011. In view of the company’s strict ethical code, he was nervous about expressing his point of view, which was why he wanted to see Ms. Mangal in private:

The situation in one of the states where ZHL operates is getting critical. Unless the government pays what it owes us immediately, we will not be able to make payroll. We won’t be able to service our new ambulances, which will open us up to more accusations of negligence. Lives may be lost. This will devastate our morale and ruin our reputation. That bureaucrat will never stop.

Back when protesters were targeting the company, the Gap realized that it needed to overhaul the way it interacted with its critics. So the company launched a strategy of stakeholder engagement.

This case is about a gold mining company that sought to practice “responsible mining” by addressing environmental and stakeholder concerns, but which nevertheless attracted protests. Barrick Gold Corporation invested $4.8 billion developing the Pascua Lama gold mine in a glacial region of South America, but opposition has blocked the project.

This case is about Walmart’s launch of Love, Earth—a one billion dollar line of sustainable jewellery—told from the perspective of an NGO activist. Perhaps uniquely among sustainability cases to date, it offers the opportunity to explore strategic CSR and sustainability by a large MNC from the perspective of the firm and the NGO activists.

After years of broken promises, environmental mishaps and conflict in the Niger Delta region, Shell’s host communities had little trust in the company—the largest oil and gas producing company in Nigeria. By the late 1990s–early 2000s, the company had suffered reputational damage due to its environmental record in the Delta and in wake of the 1995 execution of Ogoni activist Ken Saro-Wiwa by the Nigerian government. By the early 2000s, Shell’s historically paternalistic community engagement model, which required bilateral agreements and multiple interfaces with nearly 1000 host communities, was becoming unsustainable. The company needed to figure out a more effective way of meeting the needs of local communities without compromising its long term position in the region. In 2005, Gloria Udoh, a community development officer at SPDC, Shell’s premier subsidiary in Nigeria, led a team that was charged with proposing a new community engagement model to Shell senior management.With senior management approval, they prepared to implement a pilot programme with communities in the Gbaran-Ubie project, one of Shell’s largest gas projects. How would she and her team gain the trust of communities that had often been at the short end of broken promises for decades? How would she convince community leaders that the new model would benefit them more in the long run than paternalistic handouts? What are the challenges in implementing a new engagement model in the context of a military insurgency in the Niger Delta?“Please leave. We are not willing to discuss with you if you are not going to address the outstanding electricity project.”The reaction of a Chief of the Nembe community as recalled by Shell community development officer Gloria Udoh to Shell’s plans for a new community engagement model in the Niger Delta.

Economy of mutuality provides a higher-order frame of reference for understanding what business is for and the values it presupposes and creates. This chapter equips executives and managers with a broadened perspective on business, encompassing not just market economy, but social enterprise and social economy. A spectrum of archetypes of business enterprise are considered in light of higher ends of economic life. The highest end-state of business encompassing all such archetypes, it is argued, is that of reciprocity and integral human development. The chapter concludes that, compared to market economy per se, economy of mutuality provides business executives and managers a more comprehensive conceptual framework for undertaking challenges of financial and social sustainability.

THE CAPITALIST SYSTEM is under siege. In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community.

Michael Porter has crystallized his approach to sustainability and social issues in management with the “Creating Shared Value” (CSV) framework he recently set forth in the Harvard Business Review with his collaborator, Mark Kramer. Seeking a framework that promises to enhance a firm’s prospects for competitive advantage through imaginative social engagement, Porter and Kramer prescribe CSV as the remedy for the present day crisis of legitimacy in global capitalism. This chapter begins with a demonstration of the promise of CSV, showing how CSV can deliver society the benefit of business engagement with its pressing problems, even while advancing the company’s profitability. Porter and Kramer recognize, however, that “NOT ALL societal problems can be solved through shared value solutions.” We show that, unfortunately, this includes problems that result directly from business activity. Because business is implicated in problems it cannot address through CSV, we contend that managers have to supplement CSV with additional normative frameworks. That is the only way, we argue, that companies can deliver on the promise Porter and Kramer announce to restore the legitimacy of capitalism with shared value solutions. The chapter concludes with a brief discussion of normative managerial frameworks—rooted in theories of business ethics, corporate citizenship and legitimacy—that may provide the needed supplement.

The crisis that hit the coffee market after the International Coffee Organization (ICO) agreement collapsed in 1989 led Italian company illycaffè to look beyond the typical business model that had characterized the coffee industry to date. illycaffè decided to embrace a new strategic challenge and focus on a direct-purchasing model. They would bypass the intermediaries and reward their chosen growers by paying them a premium over the market price.

Shakespeare would have been thrilled by all the intrigues in this relatively new and emerging financial theatre. All the elements are there to write yet another masterpiece – this time on the rise of King Microfinance, his conquering the world and the subsequent gradual decay of his empire. This case study will describe the struggle of one of the king’s knights – ACTIAM Impact Investing – in enlarging the empire in a way that simultaneously serves the interest of the people and the king’s financiers. So what happened?

Ecomagination is GE’s commitment to address challenges such as the need for cleaner, more efficient sources of energy, reduced emissions, and abundant sources of clean water. And we plan to make money doing it. Increasingly for business, “green” is green (Jeffrey Immelt, Chairman and CEO of General Electric, in 2005).

Ecomagination is a milestone for a number of reasons, including that it’s a long-term commitment with specific targets made at the company’s highest level. GE has taken this process seriously and done its homework to make sure its claims and goals are credible (Joel Makower, sustainability consultant, in 2005).

Sustainability, as it relates to both social and environmental issues, is treated very differently among companies that incorporate the subject into their business strategies. In this case, we explore sustainability at Unilever whose management addresses it not as a risk to be managed or cost to be avoided, but as an opportunity for competitive advantage and growth. With emerging markets as the backdrop, we learn about Unilever’s Sustainable Living Plan, and what the company has done to integrate sustainability principles into its business model and build on its core competencies, such as innovative product development and marketing expertise, to realise the potential of the fast-growing emerging markets (57% of its 2014 revenues came from emerging markets compared to less than 17% of most multinationals). Issues considered are the role of corporate culture and competencies, the importance of committed and courageous leadership, the willingness to set ambitious goals, and the challenge of creating internal and external alignment around strategic goals.

Business models—the underlying structures of how companies create, deliver and capture value—form the engine of our economy. They determine the speed at which economies grow, and the intensity at which our resources are consumed. They determine the number and type of jobs in our cities, the provenance of the products we buy, and the price of the food we eat. They contribute to the quality of our communities and our lives.

The UN Global Compact-Accenture CEO Study offers a unique perspective on the development of corporate sustainability. Drawing on interviews and survey contributions from more than 2000 chief executives worldwide across nearly a decade of research, this article tracks the development of corporate sustainability, from its roots in philanthropy and corporate social responsibility to its place in the mainstream. Through reflections on the CEO Studies conducted in 2007, 2010 and 2013, the authors trace the changing shape of corporate sustainability strategies from a responsive, issue-based engagement with individual environmental and social issues, through a period of focus on resource efficiency and cost reduction as sustainability became more closely aligned to core business. Observing a recent sense of frustrated ambition expressed by business leaders, Peter Lacy, Rob Hayward and Pranshu Gupta ask whether sustainability is stuck on a plateau of good intentions, or whether in the achievements of COP21 and the adoption of the Sustainable Development Goals we can see the beginnings of a new era in which leading companies collaborate with governments, policymakers and civil society to harness sustainability as a transformative force on the pathway to a sustainable economy.

There are many competing understandings of the implications of sustainable development for companies. Some companies talk about the ‘sustainability’ in terms of the company itself while others have seen sustainability in terms of the company’s responsibility to contribute to the sustainability of the economic and social systems within which the company and its products or services are part. When the managers of a company takes on board the second perspective and its ambition this often involves a fundamental review of what the company is doing to create value and that may in turn lead to a transition to a new approach to business.This chapter presents the case of Umicore – a Belgium company – that undertook such a transition. The case charts the change process that took place in the company focusing particularly on the role of human agents, pinpointing their roles and beliefs of the key actors who brought about change.Umicore was chosen for study because its transformation has been recognized by other organizations as contributing to sustainable development while achieving successful financial results. However, the transformation process that was undertaken at Umicore has not been studied. The chapter describes and analyses the main elements of the change process that ran from 1989 to 2008, as Union Minière – the predecessor of Umicore – transitioned to become the new Umicore, with an integrated approach to business and its contribution to sustainable development.The chapter addresses three main questions: What were the internal and external factors that drove the process of organizational change at Umicore? How did the company undertake change? What roles did internal agents play in the process?The transformation process is described by dividing the 19 year process into discrete phases while pinpointing the roles and beliefs held by key decisions makers during each of those phases.Conclusions are drawn about the process and the leadership provided by individual actors and groups of actors working together.

The IBM story has been one of rise, fall and subsequent recovery through self re-invention. It is a case of evolutionary learning in a constantly shifting business environment. It has embarked on, and succeeded in, major strategic transformations. Today it’s looking to provide other organisations with the capabilities to do the same, equipping them with smarter technology and systems to create change for the firm and its customers. The Smarter Planet initiative is specifically designed to help customers like local authorities, energy companies, utilities, health care and other companies manage their operations in a more sustainable way by reducing negative environmental impacts and increasing positive impacts on efficiency and throughput. “Creating a Smarter Planet” is itself a smart and successful business model which contributes to the sustainable profitable development of IBM and its customers and clients. As such it is exemplary business model transformation with all the risks and huge change management challenges that go with such a transformation.Once undisputed king of the computing world – building and selling what had become low-margin PCs, computer chips and other hardware – by the late 1990s IBM found itself unable to compete with companies from emerging countries and made the major strategic decision to move up the value chain and focus on providing IT expertise and computing services to businesses. The company’s executives recognised that not only was the world becoming smaller, due to improvements in technology and explosion of bandwidth, it was also becoming increasingly more complex, with the proliferation of inter-related systems and business partnerships. Organisations would have to become smarter if they wanted to take full advantage of this greater connectedness. In fact the world itself would be a better place with the smart use of technology by contributing to the smarter use of resources and by eliminating waste and inefficiencies.

In 1995 Iftekhar Enayetullah and Abu Hasnat Md. Maqsood Sinha founded Waste Concern to research and develop solutions to the problem of waste in Dhaka, the capital of Bangladesh. Over the years they established a number of companies and grew nationally and internationally. They also pioneered two Clean Development Mechanism projects under the United Nations program. In this case we describe the financial problems faced by the entrepreneurs as the carbon market plummeted affecting their Clean Development Mechanism projects. We also report other unforeseen issues such as the electricity crisis and the problem with accessing the site needed for implementing the projects. The case illustrates how Enayetullah and Sinha deal with these problems. Their approach can be summarized by their own words “when there is a problem, there is also an opportunity”. The case also illustrates the number of challenges and questions that ensued.

This case explores the changes wrought on society via the “sharing economy” by examining the innovations and controversies surrounding Uber. It provides a unique overview of the challenges posed by new business models, like Uber’s, which use the internet to link individual providers of goods and services to customers. Raising significant economic, social and environmental sustainability issues, it asks: what are the responsibilities of “sharing economy” companies like Uber? Are they merely “technological platforms” facilitating transactions for private, individual business people, or are they real-world companies, with the same responsibilities as transportation companies, hotels and employment agencies?

Future business leaders will require a different general outlook and understanding of the role and purpose of business in society than is prevalent today. They will need to employ a range of leadership approaches to deal with a new range of issues. This, in turn, will entail the development of new leadership capabilities. One significant avenue of development in making leaders and the orgnisations they lead more ‘agile’ is to build scenarios around what this paper articulates as the global ‘gigatrends’ that are shaping economic, political, and socio-cultural landscapes. These gigatrends are discussed first individual, then in terms of some critical interactions. Implications for future leadership capabilities and executive education are then addressed.

Unilever introduced the Unilever Sustainable Living Plan in 2010, with an extremely ambitious strategic goal of doubling growth while greatly reducing environmental externalities and increasing the company’s positive social impacts by 2020. Unilever’s CEO, Paul Polman felt strongly that there was no alternative to making sustainability central to the corporate strategy. As the world faces huge challenges, his view was that companies have responsibilities to act, particularly if, like Unilever, they are also doing business in some of the poorest countries in the world. So Unilever set off on a journey that made the company not only look at lifecycle impacts, but also at changing consumer behaviors. But what of the internal organizational behaviors? Companies may have a unique strategy, but if the culture does not provide fertile ground to match that uniqueness, then the strategy will not get traction. Unilever has been challenging the Human Resources Department on what its role is in trying to embed the Unilever Sustainable Living Plan within the organization. This case focuses on that challenge.

This study raises the question of how managers can adopt appropriate management control systems to communicate to employees and other stakeholders what behavior is desired, and how they can work to ensure that their corporate sustainability claims are implemented at the operational level. That is, how can organizations demonstrate that their sustainability declarations are not just “good looks”. Specifically, the study unfolds Novo Nordisk’s long-term commitment to sustainable practices and the company’s validation of these practices by focusing on how issues of sustainability have been integrated and cascaded throughout the entire organisation via the company’s “Way of Management”.

It may have been happening quietly in the background without attracting much attention, but look around and you’ll notice that there’s been a fundamental development in the scope of the role business leaders are required to play for their businesses to survive and thrive in today’s turbulent, uncertain and volatile times.