Reconciling the creation of value, sustainability, and corporate social responsibility - a strategic stakeholder approach David Wheeler Schulich School

Reconciling the creation of value, sustainability, and corporate social

responsibility

- a strategic stakeholder approach

David Wheeler

Schulich School of Business

& Sustainable Enterprise Academy

York University

NOTE: Copyright Protected. May only be used for academic purpose only.

Dimensions of organisational strategy - three key dimensions (de Wit & Meyer)

Context world trends

ContentProcess

organisational responses and a navigational tool


Key indicators 1950 - 1997 (Worldwatch Institute, 1999)

population - doubledmegacities - tenfold increasefood production - 40 per cent increasefisheries catch - fivefold increasewater use - trebledcarbon emissions - quadrupled


Consumption and production (UNEP, WBCSD & WRI)

The money spent on household consumption worldwide increased 68% between 1980 and 1998. NB In many developing countries, food purchases account for as much as 70 % of family income.

World energy production rose 42% between 1980 and 2000 and will grow 150-230% by 2050. NB Renewable resources like solar and wind account for only 11.5% of current consumption.

Over the past century, world water withdrawals increased almost as fast as population growth. NB Currently, 70% of freshwater withdrawals is for agriculture.


75 per cent of global materials flow is waste

NaturalResources

Goods andServices

Pollution, Waste and Environmental

Disturbances


Data Source: C.D. Keeling and T.P. Whorf, Atmospheric CO2 Concentrations (ppmv) derived from in situ air samples collected at Mauna Loa Observatory, Hawaii, Scripps Institute of Oceanography, August 1998. A. Neftel et al, Historical CO2 Record from the Siple Station Ice Core, Physics Institute, University of Bern, Switzerland, September 1994. See http://cdiac.esd.ornl.gov/trends/co2/contents.htm

Atmospheric carbon dioxide concentrations (1750 to present)

270

280

290

300

310

320

330

340

350

360

370

1750 1800 1850 1900 1950 2000

part

s pe

r m

illio

n vo

lum

e

Mauna Loa (1958-present)

Siple Station (1750-)


outlines show watersheds that are both in and approaching scarcity; about 2.3 billion people are living in conditions of water stress or water scarcity.

Water scarcity in 2025 - a threat to public health and security (WRI)


Demographic, democratic and technological shifts (UNEP, WBCSD & WRI)

The current addition of 60 million urban citizens a year is the equivalent of adding another Paris, Beijing, or Cairo every other month.

In developed countries, the working age population will shrink from 740 million to 690 million between 2000 and 2025. NB In developing countries, it will increase from 3 to 4 billion people.

There are 119 democratic states out of a total of 192 countries in 2000, as compared to 22 democratic states out of 154 countries in 1950. In 1948, only 41 non-governmental organizations had consultative status in the UN; now there are 2,091.

Today, over 400 million people use the Internet, compared with less than 20 million 5 years ago. By 2005, there will be about a billion users. NB More than half the world's peoples have never used a telephone.

0

2

4

6

8

10

1950 1970 1990 2010 2030 2050

DEVELOPING

DEVELOPED

bill

ion

s o

f p

eo

ple

World population growth


Basic social needsmore than 150 million children

malnourishedmore than 750 million people lack health

servicesmore than 1250 million people lack access

to safe drinking watermore than 850 million adults can not read or

writeNOTE: Copyright Protected. May only be used for academic purpose only.

Social equity?

seven fold increase in developing country debt since 1970

in 70 countries around the world average incomes today are less than they were in real terms in 1980

there are between 200 and 300 million children working world wide; one million children work in the sex industry


On the future...We must recognise that we are living with a time bomb, and unless we take action now it could explode in our children’s faces. If we do not act, in thirty years the inequities will be greater. With population growing at 80 million a year, instead of 3 billion living on under $2 a day, it could be as high as 5 billion. In thirty years the quality of our environment will be worse. Instead of 4 per cent of tropical forests lost since Rio, it could be 24 per cent.

James Wolfensohn, President, World Bank


In summary……economic, social and environmental drivers of change

environmental and biophysical limits social inclusion and equity population growth consumption and production shifts demographic, democratic and technological shift values shifts: assurance: stakeholders’ - including

investors’ - need for assurance and companies’ need for trust and loyalty

governance shifts: the retreat of the state, the rise of civil society


Strategy process

AnalysisFormulation (choice)Implementation

Linear or systems based?

Stakeholder inclusive or exclusive?

Mental models matter!


Mental models - linear or systems thinking?

A world in which poverty and inequity are endemic will always be prone to ecological and other crises.

World Commission on Environment and Development, 1987


Sources of wealth creation and competitive advantage - stakeholder exclusive or stakeholder inclusive?

20th Centuryproduction inputsaccess to capitalmarket dominationproprietary

information

21st Centuryknowledge innovationcompetencies intellectual property

and social capital brands reputation relationships


.

Competitive, ethical

and sustainable

Competitive, ethical

and sustainable

Economic value

Social value

Environmental value

Sustainability - a potential new strategic framework for business


Financial capital

Natural capitalSocial capital

A new ‘capitalism’: three capitals in dynamic synergy

Consultation - Engagement - Climate Change PanelDiversitySocial InvestmentSD PrinciplesEmployeesUnited Way/ Days of CaringCommunity Development and EducationIndustry Guidelines and Standards

Green House Gases STEP - VCR - ABCWasteEmissionsToxicsBiodiversity - TNCCEcosystemsISO 14001 - HSSD - MSHSSD AssessmentsResearch

Business planningProduct StewardshipBrandingGreen Products / ImageStock priceReputationSupply Chain ManagementShell Environmental Fund Resource managementEnergy efficiency projects

The Shell Canada approach to SD

Courtesy of Murray Jones


Novartis approach to SD performance

Environmental Objectives Ecosystem integrity Climate integrity Carrying capacity Biodiversity

Economic Objectives Growth Shareholder value Efficiency

SustainableGrowth

Social Objectives Empowerment & Equity Social mobility Social cohesion Cultural identity Institutional development

Courtesy of Novartis


70

90

110

130

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170

Mar-98

Jun-98

Sep-98

Dec-98

Mar-99

Jun-99

Sep-99

Dec-99

Mar-00

Jun-00

Sep-00

Dec-00

Mar-01

Jun-01

JHIC Equity Pooled Fund (net of cash)

Total Return = 44.8%

Jones Heward Investment CounselSustainable Development Equity Fund

Total Return = 43.5%

TSE 300Total Return = 2.8%

Sustainability and stock performance - the Jones Heward IndexSustainability and stock performance - the Jones Heward Index


Innovest Index

EcoValue ‘21Top and Bottom Rated Companies1998 Total Return

10 AAA vs. 10 CCC

companies in:

•aerospace defense

•specialty chemical

•chemicals•communication equipment

•electric companies

•electronics (semiconductors)

•health care•iron and steel•paper, forest products, etc.

•petroleum

12/2

71/

101/

24 2/7

2/21 3/

73/

21 4/4

4/18 5/

25/

165/

306/

136/

277/

117/

25 8/8

8/22 9/

59/

1910

/3

10/1

7

10/3

1

11/1

4

11/2

8

12/1

2

12/2

6

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

17.0% Out-Performance Margin as of

1/2/99


How are leading edge companies responding at the organisational level?

Systems thinking and future focusedSensitivity to stakeholder relationships

(creation of communities of interest)Capability-basedInnovation-based

…….all of these are strategic responses


Tier 1

Tier 2

Tier 3

InterdependenceInterdependence

Balance Balance

Do minimum harm

Do maximum good

ControlControl

Reconciling the creation of value, sustainability, and corporate social responsibility - a strategic stakeholder approach: 1 - Mindsets


Tier 1

Tier 2

Tier 3

EngagedEngaged

Responsive Responsive

Do minimum harm

Do maximum good

CompliantCompliant

Reconciling the creation of value, sustainability, and corporate social responsibility - a strategic stakeholder approach: 2 - Behaviours


Stakeholder capitalism

Stakeholder capitalism sets a high standard, recognizes the common-sense practical world of global business today, and asks managers to get on with the task of creating value for all stakeholders.

Freeman, 2000


Documents

Reconciling the creation of value, sustainability, and corporate social responsibility - a strategic stakeholder approach David Wheeler Schulich School