Sustainable Business Management E-Book
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- Herausgeber: UVK
- Kategorie: Fachliteratur
- Sprache: Deutsch
With the book the authors want to make a contribution towards discovering and developing the subject of sustainable business management. To do so, they initially put sustainable business management in its scientific context and then illuminate the areas of direct relevance for management. This includes the positioning within strategic management, the demands of sustainability on personnel management, innovation management, international management as well as operative environmental management. With a focus on corporate leadership, sustainability is discussed in the context of financial management and controlling, including the already existing instruments for implementing sustainability used by practitioners as well as legal requirements. Next, the reader learns how the value chain and marketing activities can be structured in a sustainable fashion. Finally an outlook on the possible future development of sustainable management is provided.
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Preface
For us, sustainable business management focuses on the economic activities of companies that reconcile economic success with the responsibility for people, society and the environment. To feel responsibility for ones actions is above all a normative decision. We, 14 professors of Nuertingen-Geislingen University (Germany), have made this decision. With this fundamental volume on sustainable business management, we want to convey to students of business management and those business managers with operative responsibility that the economic, social and ecological consistency of their decisions makes good business sense and at the same time addresses fundamental economic challenges.
Those involved with sustainable development often feel the need to justify their choice. The term sustainability is used everywhere and is even abused on occasion. Distance from the subject may be required simply to avoid the accusation of acting opportunistically and benefitting from the current sustainability boom. But there are also supporters of sustainability who think that business is the source of all evil and purposefully seek the confrontation with the field of business management. Others think that sustainable development is not so much the responsibility of business management, but rather of the legislator. If society and politicians want tighter environmental standards, laws have to be passed and the companies will obey them. In this case, sustainability amounts to little more than adherence to additional legal requirements. Finally the supporters of sustainable behavior are frequently seen as naïve do-gooders, who do not merit a serious debate. Against this backdrop it certainly seems appropriate to ask why we want to deal with sustainability in the context of business management.
Should we refuse to discuss sustainability simply because the term is fashionable these days? Instead we address the topic because we are convinced that business sustainability is an important aspect of business management and sustainable economic behavior should be seen as a competitive advantage. The current fashion may have certain helpful aspects (for example political acceptance, support of sustainability initiatives, and so forth), but can constitute a true hindrance when terms are overused and the repetitive admonishments only reduce our interest instead of increasing it. We do not deal with sustainability simply because it is currently fashionable, but for the same reason, we also do not ignore it. Fashion should not be a relevant scientific criterion.
We also do not think that there is a conflict between business sustainability and classical business management and its teachings. Instead sustainability can move business management forward. The realization that we need to react in the best possible way to changing framework conditions always leads to a forward move.
Thus criticism is not a hindrance, but supportive instead. Especially as advocates of business management we see the discussion about sustainability as an enormous opportunity. After all, we always thought of our USP as providing the best possible results given scarce resources. We are specialists in dealing with scarce resources. Now we are not only confronted with scarce financial means, but also scarce raw materials, a limited environment, scarce labor, scarce attention and so forth. We need to continue our learning process in order to understand how to deal with these types of scarcity as well.
We do not think that the responsibility for sustainable development lies only with legislators. They merely define the framework conditions for sustainable economic behavior. Successful sustainable economic behavior will always be the task of companies and is an absolute prerequisite in a highly competitive global environment. Put differently: sustainable management is an elementary skill and needed for survival. The final, somewhat condescending accusation of being a do-gooder can certainly be interpreted as a compliment. Innovative actions always target improvement and not maintenance of existing conventions. Especially sustainability in connection with innovation is the basis for mastering existing economic, societal and ecological challenges. Should the world indeed become a better place as a result of dealing with sustainability, integrating sustainability in the training of business managers to enable them to accept comprehensive responsibility, a major goal would have been accomplished. This continues to motivate us.
This book is the result of a joint project by 14 professors at Nuertingen-Geislingen University. Most of them are active in the field of business management, but lawyers and environmental engineers are also involved. The subject of sustainable business management is wide open and first contours are only beginning to show. With the book we want to make a contribution towards discovering and developing the subject. To do so, we initially put sustainable business management in its scientific context and then illuminate the areas of direct relevance for management. This includes the positioning within strategic management, the demands of sustainability on personnel management, innovation management, international management as well as operative environmental management. With a focus on corporate leadership, sustainability is discussed in the context of financial management and controlling, including the already existing instruments for implementing sustainability used by practitioners as well as legal requirements. Next, the reader learns how the value chain and marketing activities can be structured in a sustainable fashion. Finally an outlook on the possible future development of sustainable management is provided.
We are grateful for the outstanding cooperation with our publisher UVK Verlag, and especially want to thank Dr. Schechler. The editors look forward to any type of feedback from the readers.
Prof. Dr. Dr. Dietmar Ernst ([email protected])
Prof. Dr. Ulrich Sailer ([email protected])
Overview
Preface
Figures
Tables
Prof. Dr. Ulrich Sailer
1Sustainable Development – an Introduction
Prof. Dr. Dr. Dietmar Ernst
2Sustainable Business Management
Prof. Dr. Erskin Blunck
3Strategic Sustainability Management
Prof. Dr. Horst Blumenstock
4Sustainable Human Resource Management
Prof. Dr. Carsten Herbes
5International Management and Business Sustainability
Prof. Dr. Frank Andreas Schittenhelm
6Innovation Management and Sustainability
Prof. Dr. Hans-Jürgen Gnam und Prof. Dr. Lisa Schwalbe
7Operational Environmental Management
Prof. Dr. Frank Andreas Schittenhelm
8Financial Management and Sustainability
Prof. Dr. Ulrich Sailer
9Controlling
Prof. Dr. Thomas Barth und Prof. Dr. Steffen Scheurer
10Instruments for Implementing Business Sustainability
Prof. Dr. Katja Gabius
11Legal Implications of Business Sustainability
Prof. Dr. Monika Reintjes
12Shaping the Value Chain
Prof. Dr. Iris Ramme
13Marketing
Prof. Dr. Thomas Ginter
14Integral Management – New Perspectives for Sustainable Development
About the Authors
Glossary
Table of Content
Preface
Figures
Tables
1Sustainable Development – an Introduction
2Sustainable Business Management
2.1 Introduction
2.2 Scientific Programs in Business Management and their Links to Business Sustainability
2.2.1 Gutenberg’s Factor Theory
2.2.2 Heinen’s Decision-oriented Business Management
2.2.3 The Systems-oriented Approach
2.2.4 The Behavioral Approach
2.2.5 The Environmental Approach
2.2.6 The Approach of Institutional Economics
2.3 What Lies Ahead for Business Research?
2.4 Sustainable Business Management
2.5 Principles of Sustainable Business Management
3Strategic Sustainability Management
3.1 Introduction
3.2 Classification of Strategic Sustainability Management
3.3 Dimensions of Strategic Sustainability Management
3.4 Organizational Purpose and Sustainability
3.5 Strategy Process
3.5.1 Strategic Thinking
3.5.2 Strategy Formation
3.5.3 Strategy Implementation / Strategic Change
3.6 Strategy Content
3.6.1 Business Level Strategy
3.6.2 Corporate Level Strategy
3.6.3 Network Level Strategy
3.7 Strategic Context
3.7.1 Organizational Context
3.7.2 Industry Context
3.7.3 International Context
3.7.4 Ecological Context
4Sustainable Human Resource Management
4.1 Challenges Facing Human Resource Management
4.2 Development towards Sustainable Human Resource Management
4.2.1 Scope and Orientation
4.2.2 Fundamental aims
4.2.3 Culture of Trust as the Foundation for Sustainable Human Resource Management
4.3 Central Tasks for Sustainable Human Resource Management
4.3.1 Leadership
4.3.2 Human Resource Management planning
4.3.3 Human Resource Management development
4.3.4 Shaping the Corporate Culture
4.4 Organizational Structure of Sustainable Human Resource Management
4.4.1 Positioning and Classification of SusHRM
4.4.2 Involvement in SusHRM
5International Management and Business Sustainability
5.1 Introduction
5.1.1 International Corporate Activities – an Overview
5.1.2 The International Dimension of Sustainability
5.1.3 Effects of International Transactions on Sustainability
5.2 International Particularities of Sustainability Aspects
5.2.1 Expanded Scope
5.2.2 Supranational Regulations of Sustainability Aspects
5.2.3 Other Supranational Business Sustainability Drivers
5.3 Approaching and Understanding Sustainability in Different Countries
5.4 Problems and Approaches for Sustainable International Activities of Corporations
5.4.1 Strategy
5.4.2 Procurement
5.4.3 Marketing & Distribution
6 Innovation Management and Sustainability
6.1 Introductory Considerations
6.2 Prerequisites for Success at the Company Level
6.2.1 Innovation Processes
6.2.2 Culture of Innovation
6.2.3 Innovation Manager
6.3 Specific Sustainability Aspects
6.3.1 Sustainable Innovation Process
6.3.2 Sustainable Culture of Innovation
6.3.3 Sustainable Innovation Managers
7Operational Environmental Management
7.1 Development of Environmental Management
7.2 Uses of an Environmental Management System
7.3 Environmental Management based on DIN EN ISO 14001
7.3.1 Requirements of DIN EN ISO 14001
7.3.2 Introduction of an Environmental Management System based on ISO 14001
7.4 Environmental management following EMAS
7.4.1 Demands of EMAS
7.4.2 Vorgehensweise für die Einführung von EMAS
7.5 Simplified Systems Approaches
7.6 Further Developments of Environmental Management Systems
8Financial Management and Sustainability
8.1 Introduction
8.2 Investment Analysis
8.2.1 Cash Flow Analysis
8.2.2 Modern Portfolio Theory
8.2.3 Utility Analysis
8.3 Financing
8.4 Implications for Company Management and Controlling
8.5 Sustainable Financial Management
8.6 Risk Management
9Controlling
9.1 What is Meant by the Term Controlling?
9.2 Controlling Tasks
9.3 From Traditional to Sustainable Controlling
9.4 Holistic Solutions
9.5 The Limits of Accounting in Sustainable Controlling
9.6 Controlling Based on Key Figures versus Sustainable Controlling
9.7 Applied Sustainability Controlling
10Instruments for Implementing Business Sustainability
10.1 Introduction
10.2 Implementing Sustainable Management at the Company Level
10.3 The Situational Approach to Sustainable Management
10.4 Implementation in the Context of Integrated Management
10.5 Controlling Tasks in the Context of Successfully Implemented Sustainable Management
10.6 Assessment of the General Implementation of Sustainable Management
10.6.1 Features of a Sustainability Assessment
10.6.2 Overview of the Assessment Process
10.7 Examples of Concrete Instruments for Sustainable Management
10.7.1 The Sustainable Balanced Scorecard as an Instrument for Sustainable Management at the Strategic Level
10.7.2 Carbon Controlling as an Instrument for Sustainable Management at the Operative Level
10.8 External Reporting on Sustainable Management
10.8.1 Approaches to Measure Sustainability
10.8.2 Reporting on Business sustainability based on the Global Reporting Initiative (GRI)
10.9 Summary
11Legal Implications of Business Sustainability
11.1 Principles of Business Sustainability
11.2 Corporate Social Responsibility
11.2.1 Terminology
11.2.2 Historical Roots
11.2.3 Legal Implications of CSR
11.2.4 Differentiation
11.3 Corporate Governance
11.3.1 Terminology
11.3.2 Historical Roots
11.3.3 Legal Foundations of Corporate Governance
11.4 The German Corporate Governance Code
11.4.1 Term and Essence
11.4.2 Formal Structure of the German Corporate Governance Code
11.4.3 Material Context: The Normative Structure of the German Corporate Governance Code
11.4.4 Current Developments Concerning the German Corporate Governance Code
11.5 Green Book of the European Commission of April 5, 2011: European Corporate Governance Framework (2011)
11.6 Action Plan Corporate Governance of the EU
11.7 Corporate Compliance
11.7.1 Terminology
11.7.2 Legal Implications
11.7.3 Principles of a Corporate Compliance Organization at the Company
12Shaping the Value Chain
12.1 Fundamentals
12.1.1 Value Creation
12.1.2 Pressure to Adapt
12.1.3 Ecological Sustainability and Value Creation
12.2 Procurement and Procurement Logistics
12.2.1 Reassessment of Known Concepts
12.2.2 Extending Existing Processes
12.3 Production und Production Logistics
12.3.1 Reassessment of Known Concepts
12.3.2 Extending Existing Processes
12.3.3 Use of Innovative Technologies
12.4 Distribution and Distribution Logistics
12.4.1 Reassessment of Known Concepts
12.4.2 Extending Existing Processes
12.4.3 Use of Innovative Technologies
13Marketing
13.1 Marketing and Sustainability
13.1.1 Marketing
13.1.2 Sustainability
13.1.3 Definition of Sustainable Marketing
13.1.4 Development of Sustainable Marketing
13.2 Sustainability in the Marketing Process
13.2.1 The Marketing Process
13.2.2 Marketing Research
13.2.3 Strategic Marketing
13.2.4 Marketing Implementation and Marketing Controlling
13.3 Sustainable Marketing Measures
13.3.1 Product Policy
13.3.2 Pricing Policy
13.3.3 Distribution Policy
13.3.4 Communication Policy
14Integral Management – New Perspectives for Sustainable Development
14.1 Defining the Problem: Complexity and its Consequences
14.2 The Integral Approach
14.3 Fields of Tension in Integral Management
About the Authors
Glossary
Figures
Fig. 1-1 Three-Pillar-Model of Sustainability
Fig. 2-1 Scientific programs in business management
Fig. 3-1 Overview of the Strategic Dimensions
Fig. 3-2 Spectrum of hybrid organizational targets following Kim Alter
Fig. 3-3 Four types of sustainability marketers following Belz and Peattie.
Fig. 3-4 Overview of the strategic dimensions as well as central aspects of sustainability
Fig. 4-1 Target system of SusHRM
Fig. 4-2 Aspects of personnel planning in the context of SusHRM
Fig. 4-3 Systematic overview of personnel development measures
Fig. 4-4 Considering different dimensions of fairness
Fig. 5-1 Culture and various sustainability activities
Fig. 6-1 The innovation triangle – Interrelations between innovation manager, innovation process and culture of innovation as components of innovation management
Fig. 6-2 An overview of the stage-gate model
Fig. 6-3 Prerequisites for successful innovation management
Fig. 6-4 Tasks of the innovation manager
Fig. 6-5 Skills necessary for successful innovation management
Fig. 6-6 Required competencies of the innovation manager
Fig. 7-1 Possible process for updating legal demands
Fig. 7-2 Meaning of symbols
Fig. 7-3 Steps in introducing EMAS
Fig. 7-4 EMAS logo
Fig. 7-5 Main criteria of EFQM
Fig. 8-1 Cash flows in the company
Fig. 9-1 Components of controlling
Fig. 9-2 Controlling as product of manager and controller
Fig. 9-3 Controlling tasks in practice
Fig. 9-4 Types of systems and competencies
Fig. 9-5 6 steps of holistic problem solving
Fig. 9-6 Controlling based on key figures versus sustainable controlling
Fig. 9-7 5 steps towards sustainable success
Fig. 10-1 Explanatory model for the implementation of business sustainability.
Fig. 10-2 Key questions and criteria concerning the importance of sustainability.
Fig. 10-3 Matrix of opportunities and threats of business sustainability
Fig. 10-4 Integrated management concept following Bleicher
Fig. 10-5 Steps in the assessment process
Fig. 10-6 Providing weights to the ecological dimension
Fig. 10-7 Assessing the degree of implementation
Fig. 10-8 Activity portfolio
Fig. 10-9 Possible options for converting a BSC into a SBSC
Fig. 10-10 Integrative Sustainability Balanced Scorecard
Fig. 10-11 Options for reporting
Fig. 12-1 Fields of action for the sustainable value creation
Fig. 12-2 Lot size planning
Fig. 13-1 Marketing process
Fig. 14-1 The Four-Quadrant Model – Different perspectives on reality
Fig. 14-2 Holarchy of development
Fig. 14-3 The four quadrants related to humans
Fig. 14-4 States as instruments for the determination of the status quo
Fig. 14-5 Development stages of a company
Fig. 14-6 Possible development lines for a company
Fig. 14-7 Company typologies
Fig. 14-8 Fields of tension in integral management
Tables
Tab. 1-1 Societal and business dimensions of sustainability
Tab. 4-1 Examples from the target system of SusHRM
Tab. 4-2 Examples of design tasks of SusHRM in the context of human resource management
Tab. 7-1 Development stages of environmental management
Tab. 7-2 Example of a legal register
Tab. 7-3 Examples of environmental aspects and environmental effects ..
Tab. 7-4 Examples for direct and indirect environmental aspects
Tab. 7-5 Environmental management approaches
Tab. 9-1 Controlling tasks
Tab. 12-1 Building blocks for resource efficient technologies to run logistics centers
Tab. 13-1 Philosophies of market development
Tab. 13-2 Development of sustainable marketing
Tab. 13-3 Potential for a sustainable product policy
Tab. 13-4 Potential for a sustainable pricing policy
Tab. 13-5 Potential for a sustainable distribution policy
Tab. 13-6 Potential for a sustainable communication policy
1 Sustainable Development – an Introduction
by Ulrich Sailer
Learning Objectives
The readers
are familiar with the term sustainable development and its origins,know how the term sustainable development evolved from the Brundtland Report to the Three-Pillar-Model,recognize the inherent tensions between traditional models of business management and sustainable business.List of Key Terms
Greenwashing Brundtland Report Three-Pillar-Model Corporate Social Responsibility (CSR) Corporate Citizenship Compliance
Should we even bother with the term sustainability these days? It is used in an inflationary fashion and for many different purposes. It is mocked as a buzzword and often abused rather than used. We frequently do not know what an author means concretely when he uses the term. One author may use sustainability simply as a synonym for something that has a long-term or lasting effect. Another one may imply the full weight of the → Brundtland Report, the → Three-Pillar-Model and the recommendations of the study commissions from various parliaments. And a third author talks about sustainability because today products and services are absolutely expected to have that feature. Who would want to buy anything else?
Especially this frequent and undifferentiated use, the misuse of the term and also the abusive → greenwashing result in the fact a number of observers think of sustainability as a worn out and trendy term which should consciously be avoided. Those who continue to work on business sustainability issues in academia are frequently forced to justify, in a slightly apologetic manner, why they still use the term. And this is exactly what the authors of “Sustainable Business Management” discussed. Now that business management has been “turned sustainable,” many a cynic might consider such a volume to be unavoidable. As we can already choose sustainable vacation travel, biological and sustainable wine and sustainable electrical power, it is inevitable that somebody also wants to sell the idea of sustainable business management. But isn’t good business management already sustainable? Hasn’t the goal of our management science always been to develop healthy companies which can grow sustainably? In that case, there is no reason for the discipline of business management to listen to the lectures of the supporters of sustainability who stress its narrow-mindedness. Not far away is an ideological debate about social romantics and do-gooders, who want to seize the opportunity offered by the spirit of the times to take revenge on business management. Given these challenges, it is unsurprising that a number of people try to distance themselves from the term of sustainability. There is a real danger that the message is misunderstood or that the author is associated with the wrong crowd.
It is clear that the term sustainability cannot be used lightly. But we feel it is our responsibility to seize the opportunities for advancing the field of business management which arise from a critical discussion of sustainability. Sustainable business management is neither a complete concept nor an ideology. And it is absolutely not the case that traditional business management is abandoned completely or discredited as hopelessly one-sided and incomplete. Instead we are looking at an evolutionary development, which confirms many insights from classical business management, makes numerous additions and also refutes several ideas.
How can we define “sustainable” so that it is useful and enriching for business management? If we google the term, we get more than 100 million hits in less than half a second. But where does the term originate? Sustain has its roots in the Latin word sustinere, which can be translated as maintain, carry, preserve or keep. Sustainability thus implies stable structures which at the same time provide sufficient reserves for the future.1 The origin of sustainability is regularly traced back to forestry, where the limits of short-term overexploitation were already decried centuries ago. Due to lengthy regeneration times and the slow growth of forests, the necessity for a caring treatment of the natural resource wood is obvious if the supply is to be assured over the long term. Only that amount of wood can be harvested which is replaced in type and quantity. Today sustainable development still reflects the self-image in forestry.
Discussions about sustainability frequently make reference to the so-called → Brundtland Report from the year 1987. Gro Harlem Brundtland, born in 1939, is a Norwegian politician and member of the Social Democratic Party. She was minister of the environment in the seventies and later until 1996 repeatedly prime minister of Norway. She narrowly escaped the terrorist attack on the Norwegian island Utoya, since she only left the island shortly before. Beginning in 1983, Brundtland headed the “World Commission on Environment and Development” which was assembled by the United Nations. The final report of the commission is entitled “Our Common Future” and is frequently called → Brundtland Report. The report is credited with mapping out the principles of sustainable development and coining the term sustainability. It is stated: “Sustainable development meets the needs of the present without compromising the ability of future generations to meet their own needs.”2 Sustainable development thus expresses awareness for the responsibility for future generations and the environment. Restraint is exercised and options are foregone in order to enable future generations to have their own options.
A few years later, in June 1992, the first United Nations Conference on Environment and Development took place in Rio de Janeiro. Approximately 10,000 participants from 178 countries compiled lines of action for a sustainable global development. Sustainable development was designated as a guiding political principle. This was based on the insight that global environmental protection is possible only if social and economic aspects are also taken into consideration. This developed into the → Three-Pillar-Model of Sustainability, which consists of an economic, an ecological and a social pillar. If one of the aspects is ignored, sustainability collapses. Unsurprisingly, this initiated a discussion about the most important pillar and the appropriate handling of conflicts among the aims. Should environmental pollution be tolerated if it creates employment? Or should democratic processes be avoided, since a majority is possibly opposed to a project which protects the environment?
Figure 1-1: Three-Pillar-Model of Sustainability
Example: Beiersdorf AG
“We manage our business sustainably and are committed to our ecological and social responsibility. Our actions are determined not only by our company’s economic success, but also by our active approach to environmental protection and occupational safety, and by our commitment to society. Our actions are based on a culture of trust, fairness and equality of opportunity.”3
The following Table lists for each of the three pillars the societal dimension alongside the practical implementation at the company level.
Table 1-1: Societal and business dimensions of sustainability
Especially the field of business management frequently stresses the importance of reaching clear decisions on the basis of unambiguous relationships among variables. Introductory business courses already teach the importance of studying linkages between variables, clarifying conflicts among competing aims and defining a clear hierarchy of targets. Admittedly, this is grounded in a rather mechanical model of a company. On the basis of clearly defined target systems, exactly defined binding constraints and complete information, it is possible to develop solutions that are theoretically clean, but usually have little in common with business reality. In our daily lives, however, we are quite capable of dealing with imprecision, missing information and contradictions. And numerous companies manage to strike an appropriate balance between economic, ecological and social considerations in the face of possible contradictions. Instead of weighing the targets against each other, a commensurate and lasting balance of targets is important. The transfer of the → three-pillar-model to the business world makes it clear that defining the success of a company by maximizing a single key performance indicator it is no longer possible.
This leads us to an important insight for sustainable business management. Ecological and social targets are not merely additional guidelines for the company, further guard rails, which reduce the scope of management even further. Thus it is not just business as usual with less freedom. We should not discuss sustainable business management in such a traditional mode of thinking. Instead we are abandoning strictly linear thinking and company management as managing a machine. Not individual targets are maximized, but instead a balance of targets is sought. Contradictions, incomplete or even incorrect information are a part of daily operations. Not “either – or,” but instead “as well as” shapes our understanding of reality.4
Example: Siemens AG
“Although decisions in these areas are not always free of conflicting interests, we aim to make them transparent and to find the best solutions possible. The responsible use of natural resources, targeted investments in viable technologies that promise profitable growth and offer our customers a competitive edge, and corporate ethics that extend beyond compliance with the law and focus on integrity. These are the factors that enable us to drive sustainable development and to lay the foundations for a successful future of our company.”5
Challenging the simplifying, classical world of business modeling also means abandoning familiar structures that work well in the models and taking completely new perspectives that will likely yield new insights. In complex systems, we need to move away from the erroneous belief that given adequate information, everything can be controlled.6
By now we have familiarized ourselves with two aspects of sustainable development. Sustainability in an ethical sense comprises the three-pillar-model and generational equity, while sustainability in a functional sense deals with the limits to control of complex social systems. Both aspects of sustainability are interrelated and hence must both be included in sustainable business management. In applied work as well as in the literature, sustainability in an ethical sense tends to dominate.
Business sustainability is already well established in many companies. Sustainability targets are defined, measures derived and results presented in sustainability reports. Established terms include → corporate social responsibility (voluntary support for social sustainability), → compliance (adherence to legal and societal as well as self-imposed ethical standards) or → corporate citizenship (local social engagement). Meanwhile, all larger companies are forced to actively position themselves with regard to sustainability. This commitment can be traced to the true support of decision makers or the pressure from customers, employees, business partners, investors, the public, the internet community or regional and supra-regional politicians. And finally it is also the case that invitations to tender or strategic partnerships frequently require certifications to evidence the fulfillment of social or ethical demands (for example ISO 14001, EFQM, SA8000). Thus sustainability has arrived at the company level. It is therefore imperative that the science of business management also actively deals with the many aspects of business sustainability.
At a glance
The term sustainable development may indeed have numerous meanings, but we define it against the backdrop of the Brundtland Report and the Three-Pillar-Model. For business management, sustainability is more than just another binding constraint; it leads to a redefinition of the target system. This means that economic, ecological and social aspects need to be integrated into business management and a balance of targets must be achieved. The frequently dominating mechanical model of the company needs to be extended. Companies are social systems, multi-faceted and dynamic. Sustainable business management must find ways of dealing with such complexity.
Suggestions for further reading
A clearly structured historical classification of sustainability:
Caradonna, J. (2014): Sustainability: A History, Oxford/ New York.
An accessible and comprehensive overview of the field of sustainability:
Robertson, M. (2014): Sustainability: Principles an Practice, New York.
1 Grober, U. (2010), pp. 19–20
2 The Brundtland Report can be found at www.un-documents.net/ocf-02.htm
3 Homepage of Beiersdorf: http://www.sustainability.beiersdorf.com/Our-Way/Guidelines/Sustainability-Guidelines.aspx?l=1, translated
4 Sailer, U. (2012), pp. 90–98
5 Siemens AG, in: http://www.siemens.com/sustainability/de/nachhaltigkeits-verständnis/grundsaetze.htm, translated
6 Sailer, U. (2012), p. 110
2 Sustainable Business Management
by Dietmar Ernst
Learning Objectives
The readers
are able to list the various scientific programs in business management and can name important representatives of these fields,are able to express the most important basic tenets of the different scientific programs in business management,are able to compare the individual scientific programs in business management,are able to explain the contributions of the individual scientific programs in business management with regard to business sustainability and support them with examples,are able to express the main ideas of sustainable business management and explain its contribution to the development of research in business management,are familiar with the principles of sustainable business management, are able to critically discuss them and provide supporting examples.List of Key Terms
Decision-oriented business management Gutenberg’s factor theory Principles of sustainable business management Institutional economics Sustainable business management Shareholder value Stakeholder value Environmental approach
2.1Introduction
On the following pages we want to introduce sustainable business management as a new scientific program in business studies. Business sustainability is a term that is used at every level of human activity. Does the introduction of sustainable business management merely react to the spirit of the times? Should it be considered as an opportunistic attempt to force business management into a straightjacket which may be applauded by practitioners, but does not contribute to any substantial development of the discipline? Or is sustainable business management an innovative approach based on earlier scientific programs in business management and likely to yield value added concerning the “improvement of decisions in business management.”7
The second aspect will dominate the following elaborations. It will be shown that the scientific programs in Germany have made an important contribution to the development of sustainable business management. To that aim, the most important insights will be summarized briefly. In the next step, it will be discussed how both research and applied work in business management have increasingly been dominated by capital market considerations. This has changed the discipline. In the following, the scientific program of sustainable business management will be presented, which can be seen as a counterpoint to the shareholder value approach. First tendencies towards sustainable business management are already present in the literature.8
Figure 2-1: Scientific programs in business management
Before we begin with the analyses of the scientific programs in business management, it should be pointed out briefly that the definition of business sustainability in the context of a Three-Pillar-Model as presented in the introductory chapter should definitely be checked for completeness. A look at business management research reveals that the concepts used are not only influenced by social and environmental aspects, but are also strongly driven by technological factors and the legal sciences. Technology and legislation act as both framework conditions and additional driving forces for sustainable economic management. The five pillars of business sustainability (economy, social sphere, environment, technology and legislation) are reflected in various scientific programs in business management and constitute important components of sustainable business management. Figure 2-1 clarifies these linkages.
2.2 Scientific Programs in Business Management and their Links to Business Sustainability
2.2.1 Gutenberg’s Factor Theory
→ Gutenberg’s factor theory is considered to be the first closed system in the field of business management. According to Gutenberg’s factor theory, the field of business management has the task to “detect the inner logic of things and to intellectually penetrate the circumstances of a company … The scientific path does not depend on the practical relevance of the subject matter.”9 With his three volumes “Production,” “Distribution” and “Finance” he implemented the integrative idea of business management as the science of linkages in production. At its core is the functional production relationship between factor input and factor return. Profit maximization is the chief target criterion and takes center stage.
Insight
The instruments used by Gutenberg are closely related to economics, more precisely to neoclassical microeconomics. Complete rationality is assumed as represented by homo oeconomicus, an ideal-typical economic subject.
These premises, which up to this date are found in most financial models, have the advantage that the complex world can be reduced to a closed system of mathematical equations, which allows the derivation of unambiguous decisions and action plans. The contribution of Gutenberg is the introduction of formal and mathematical methods to business management and the development of the discipline towards a normative approach. At the same time, this entails the danger that business management is closed off from other disciplines. Especially the lack of practical relevance of its model premises (profits as the sole target criterion, rational decision making, harmony of the profit goal with social welfare maximization) are considered to be the major points of criticism, which were taken up by the scientific programs discussed in the following.
Contribution of the factor theory to sustainable business management
What can sustainable business management learn from the factor theory? Initially, it must be accepted that almost all financial models which are helping to shape the development of business management are based on the neoclassical paradigm. This includes among others the → shareholder value approach, the portfolio theory, the theory of company valuation, the capital market theory or the option price theory. Despite continued criticism, research in business management has so far not been able to replace the financial models which were developed primarily in the sixties and seventies with more realistic and at the same time normative models. It must also be stated that these models are very well suited for solving specific questions. But a mistake which was made in the past years and which must be avoided is the assumption that the complex reality can be governed with these models. In this regard, the growing importance of the financial markets has also led to an increasing focus on financial issues in business practice. In fact, business management is dominated by financial management. This certainly offers perspectives for sustainable business management.
2.2.2 Heinen’s Decision-oriented Business Management
In contrast to the approach chosen by Gutenberg, the → decision-oriented approach of Heinen gives greater importance to the practical tasks of business management. It is the scientific starting point for business management. “The fundamental importance of the decisions concerning the objectives becomes evident in the structure of the theory of the corporation, which makes up the core of the quest for knowledge in business. At the beginning of every effort to develop such a theory is the search for the target function of the firm. Depending on the choice of the target function, the theory of the firm will have a different structure.”10
The decision-oriented approach introduced two innovations to business management:
The realistic incorporation of concrete decision situations,
The opening towards questions from the social sciences.
“Decision-oriented business management sends ... the <homo oeconomicus> from classical microeconomics into fairyland. Its analysis of decision making is based on basic models of humankind, organization and society.”11 It moves away from the idea of the firm as “<perfectly functioning> humans and organizations.”12
Heinen considers his approach to be a synthesis of the ethical-normative program of Heinrich Nicklisch on the one hand (the firm cannot be considered only with regard to the productiveness of the factor input, but must be viewed as a sub-unit of societal order) and the program of production relationships of Gutenberg on the other hand. The orientation towards decisions should be seen as the “unification of both approaches.”13
The decisions of individuals who face economic choices are at the heart of → decision-oriented business management. Heinen merges approaches to logical decision making of prescriptive decision theory (which rests on the neoclassical paradigm) with questions concerning the decision making process in reality. These are at the center of descriptive decision theory, which is closer to the social sciences.
Further gains in knowledge of the decision-oriented approach relate to the incorporation of the time factor, since decisions that span several periods or sequences of decisions over time are made predictable. Furthermore, Heinen succeeded in quantifying risk and uncertainty and incorporating it into decision theory. Better than any other approach, decision-oriented business management allows the conceptual integration of tasks related to decisions and design.
Contribution of the decision-oriented approach to sustainable business management
From the current perspective, the decision-oriented approach of Heinen constitutes an important step in the direction of sustainable business management. It opens up the field of business administration towards a unified treatment of management and personnel issues. The relevance of employees for companies in particular is a central component. Due to increased demands on job profiles of employees and the demographic change in Germany, personnel issues will be of increasing relevance in business management. Furthermore, the decisionoriented approach of Heinen takes on the creative challenge without reducing the complex environment to purely functional premises.
2.2.3 The → Systems-oriented Approach
While Gutenberg introduced the development of descriptive and explanatory models into business management, Heinen extended this system by including decision models. The systems-oriented approach goes one step further and sets itself the task of devising models for shaping future developments. As the systems-oriented approach belongs to the field of cybernetic science, it is not interested “in what is, but rather what will be, not in the existence, but rather in the functioning of systems.”14
Insight
Cybernetics is the science of structuring, directing and regulating complex systems via information and communication.
Ulrich writes on this issue: “The essence of the cybernetic systems is their ability as open systems to compensate for interruptions in the context of control and regulation processes, so that the system will independently return into the range of permissible deviations.”15
Systems-oriented business management considers itself to be a design theory related to engineering. The difference is that it deals with social and not with technical systems. The approach is purposefully interdisciplinary and is designed to assure the inclusion of insights from neighboring disciplines (for example behavioral sciences). This gives up the mathematical consistency and formality of Gutenberg’s theory in favor of practical relevance and a stronger focus on dynamic aspects.
The notion of the actual operating process as a black box for management purposes is expressed by Ulrich as follows:
“We do not even try to capture in detail all the activity inside the system and to determine a corresponding causal relationship. We are content with those features that we can observe from the outside: inputs and outputs. We consider the system itself as something inaccessible, as a black box.”16
Is it even possible on this basis to reach the aim of shaping developments, which was given such prominence by Ulrich? If the system “company” is considered to be “inaccessible,” the difficulty of providing direction in business management becomes clear. The systems-oriented approach is honest in accepting that questions in business management are not easily solved with the help of mathematical formulas, but are instead characterized by complexity.
The systems-oriented cybernetic approach entered management education as the so-called St. Gallen-School. The task of management is to position a company in such a way that the system can evolve evolutionary and develop superior solutions.17 This requires the self-organization of the company which is preferred over a rational structure established to reduce complexity.
Insight
Crucial elements of the systems-oriented and cybernetic approach are decentralization, lack of detailed regulation as well as the establishment of a company culture which fosters an evolutionary development of the organization.
Contribution of the systems-oriented approach to sustainable business management
The → systems-oriented approach exhibits numerous features that are relevant for the design of sustainable business management. This includes the opening up of business management towards neighboring sciences and the understanding that business management is an interdisciplinary subject as well as the insight that a company is part of an interrelated system. This insight is explicitly taken up in business sustainability, where the interrelations of economic actions are studied in an economic, ecological and social context. A further central element is the extension of the approaches of Gutenberg and Heinen to include the task of shaping the organization. This responsibility is seen as an evolutionary process. The self-organizing corporation is able to reach innovative solutions in an environment that is subject to constant change. Such innovative power enhances the competitive strength in a global marketplace.
2.2.4The → Behavioral Approach
Gutenberg’s factor theory as well as most decision theories and capital market theories are rooted in the rationality principle. The advantage of this principle is the ability to mathematically model the question at hand and to provide clear decision support on that basis. The price that has to be paid for this is the use of very restrictive premises, which lead to models that cannot adequately capture reality. One example of these premises is homo oeconomicus, which is rejected by Heinen, who moves away from the principle of rationality in his decisionoriented approach. This idea is also taken up by the → behavioral approach to business management.
Insight
The behavioral approach to business management sets itself the goal of explaining the actual decision making behavior of individuals and companies with the help of findings from behavioral science.
Concretely, business management is opening up towards disciplines such as psychology, social psychology and sociology by including insights from these fields. This is supposed to lead to better explanations for the behavior in companies and on markets, which in turn will yield improved forecasts and superior decision support.
The decision-oriented approach of Heinen and behavioral business management have resulted in a shift away from the primarily theoretical orientation of Gutenberg and towards the Anglo-American school of management with its focus on concrete management problems.18 The decision-oriented approach has an influence for example also in behavioral finance, which explains irrationality in financial markets and has gained major influence in the wake of the financial market crisis.
The behavioral approach and the factor approach equip business management with two extremely useful theories. With the behavioral approach it is possible to explain actual behavior in a company rather well, while the normative approach offers mathematical models to calculate optimal solutions. Current research in business management has so far not been successful, however, in merging the two approaches into a comprehensive framework. This may not even be possible, since the two methodologies define different tasks for themselves. For these, they may already offer optimal solution techniques.
Contribution of the behavioral approach to sustainable business management
Which of these two approaches is better suited for the concept of sustainable business management?
Since one of the pillars of business sustainability aims at social targets, the behavioral approach provides an important counterpoint to the shareholder value orientation. The behavioral approach accepts humans with their differences and their individuality. By turning away from homo oeconomicus, it is made possible to individualize the production factor “labor” and to include its potential for company success. In contrast, the normative approach is suitable for solving a large number of decision problems, which are not addressed by the behavioral approach. One example is investment planning.
2.2.5The → Environmental Approach
The environmental approach constitutes a reaction to the increasing environmental problems of our industrialized society, which has led to a reassessment in politics, business and academia. Concerning research in the field of business, two main streams can be discerned at the moment:
The ethical and normative ecological business management,
the ecological approach.
Insight
Ethical and normative business management is demanding a fundamental reorientation of economic thought and action by giving greatest prominence to the consistency between ecological and business perspective.
This approach is not so much concerned with the things that “can be done immediately, but rather about a fundamental debate about the relationship between economy and ecology.”19 Global warming is one example for such a debate about basic principles. The results of this debate will have an effect on the economy via policy measures.
Insight
The environmental approach is not so much about a complete reorientation of business thinking, but rather about the inclusion of ecological topics into the traditional core of business management.
Environmental protection and environmental technologies are seen as new elements in the catalogue of business targets. They should not be seen in competition with the profit motive, but rather as constraints or as opportunities to optimize economic goals.
Contribution of the environmental approach to sustainable business management
Sustainable business management is tightly linked to the environmental approach. As part of an ethical and normative ecological business science, sustainable business management should be an active participant in the debate about the economic framework conditions necessary to ensure a functioning ecosystem for the coming generations. With regard to the ecological approach, the main potential of sustainable business management lies in the development of innovative environmental technologies and products, which can make a contribution towards the attainment of environmental targets at the level of the company and the economy. A related goal is technological and market leadership in order to assure continued business success.
2.2.6The Approach of Institutional Economics
In the sixties, microeconomics turned away from stringent neoclassical equilibrium theory and institutional economics was developed.
New institutional economics analyzes the production of goods not from a technical and economic perspective, but rather against a legal and economic background.
Insight
The focus of new institutional economics is not on the possession of factors of production, but rather on the right of disposition, which can be passed on to another economic agent by means of a contract.
Within the school of new institutional economics, four directions can be distinguished:20
Economics of information: analyzes the uncertainty which exists among contract parties.
Property rights approach: analyses how the distribution of property rights influences the behavior of economic agents.
Transaction cost approach: studies the magnitude of the costs associated with the transfer of property rights.
Principal-agent approach: analyzes the optimal design of a contract as part of business relations and looks at differences in aims and information levels between principal (shareholder) and agent (management).
The approach of institutional economics will be explained in more detail with reference to the principal-agent problem, which exists for example in the case of listed companies (principal: owners; agent: board of management). The model deals with problems of cooperation and dependency between two individuals, who both contribute to the success of an activity.
At a publicly listed company, the shareholders give a mandate to the board of management to maximize shareholder value, in other words the value of the company. But as an opportunistically rational being, the manager may pursue interests that are in conflict with the aims of the shareholders.
Problems for the shareholders arise primarily from a lack of information, the costs of contract design and differences in utility maximization of the various individuals involved. The control mechanisms of the shareholders are limited due to the above mentioned problems. For that reason, the principal must try to defuse the agency problem be creating incentives. Call options on shares for example are an instrument to align the goals of management board and shareholders, because both principal and agent are interested in shareholder value maximization.
Can new institutional economics make a meaningful contribution to sustainable business management? At first glance it may appear that new institutional economics supports the implementation of the shareholder value approach by providing academic legitimacy. But at the same time it makes a contribution towards bridging the gap between normative and behavioral business studies. As an example, new institutional economics provides strong foundations for the use of profit sharing programs in companies. It is not so much the approach but rather the fields of application of new institutional economics to business management that must be subjected to a critical discussion.
Contribution of institutional economics to sustainable business management
Independent of the specific applications, new institutional economics has been influential in moving research in business management further away from classical questions about the real economy. Prior to the outbreak of the financial crisis, this was not well understood. But in the current globally competitive environment with its uncertainties and fragile financial markets, the importance of a strong real economic base both for the economy and for individual firms is becoming apparent. It is possible that a reorientation towards questions related to the real economy will open up new avenues of research in business management. Sustainable business management would be very suitable in this regard.
2.3 What Lies Ahead for Business Research?
A closer look at popular textbooks reveals that the chapters on research in business management end with new institutional economics. What happened to research in Germany, which used to be influential in the field of business management? Where are the new approaches? With the new institutional economics and the global introduction of the shareholder value approach, the critical debate in the field of business management apparently came to a close both among academics and practitioners. It appears that the paradigm of shareholder value maximization is generally accepted as the overarching target for every corporation and any discourse about the “appropriate” direction of research has died out. Research only takes place in the sub-fields of business management. The → stakeholder approach does not offer an alternative to the shareholder value approach. While it puts the firm into a broader context, it does not provide any tools for company management. In the classical introductory textbook by Wöhe, which covers all aspects of business management, the following is written under the heading “Dominance of the shareholder approach in business practice:” “This textbook follows the traditional concept of business management which states that activities inside a company are motivated primarily by the interests of the providers of equity capital. Models in business management follow the shareholder approach, since this conception has been largely successful in the reality of companies active in competitive markets.”21
Has the shareholder value approach really yielded the outstanding practical results which warrant its uncritical acceptance and the end of further debate? A closer look at the price development of publicly listed companies and the causes of the financial crisis does not appear to support this view. A look at the management systems of major corporations also reveals that they do not target the net present value, but continue to be based on numbers related to an accounting period (EVA, ROCE, …). The case gets even weaker when considering that a large share of the value added and of innovations in Germany is produced by medium-sized companies. Due to the cost pressures at their publicly listed clients, these firms are also subjected to the shareholder value principle, but are characterized by a carefully differentiated target system. It should also be asked whether the tasks of corporate management can really be reduced to the idea of shareholder value in the current environment which is subject to a scarcity of qualified experts, the broad availability of capital, the increased importance of knowledge relative to capital, intensifying competitive pressures at the global level and shrinking and increasingly expensive resources.
2.4Sustainable Business Management
Insight
The goal of sustainable business management is to move research in business management beyond the excessively narrow focus on financial considerations.
Is this in contrast to the insight that the sole purpose of a company is to improve the wealth of its owners? This statement is rooted in the microeconomic thinking of homo oeconomicus and merely sheds light on one aspect and one perspective of business management. It should be noted that meanwhile a large number of owners pursue the goal of long-term company success. They are not so much interested in short-term price advances that are mostly volatile. Furthermore, the shareholder value school ignores to think about the success factors of entrepreneurial activities. The groupings “owners,” “management” and “employees” are jointly responsible for the success of a company. Other groups such as customers, suppliers and the government also make their contributions. If thinking in line with the shareholder value approach and new institutional economics is accepted, it is crucial to not only address the principal-agent problem that arises between owners and management, but to also consider in the same light the relationship between owners and employees and between management and employees. All this is needed to assure sustainable economic success.
This brings us back to the new research approach of sustainable business management.
Insight
Sustainable business management is based on the various strands of research that have previously been developed in the field of business. It aims at a consistent development of the existing research approaches.
Sustainable business management is also based on the insight that a corporation must be positioned in a way that assures its long-term success. This requires innovation and market leadership. Business sustainability is not ubiquitous, but a feature that requires hard work and investments. In that sense, sustainable business management can also partly draw on the shareholder value approach, but only if profit-sharing between the parties “capital,” “management” and “employees” is agreed. New institutional economics can make a valuable contribution by solving the associated problems.
This in turn requires the incorporation of the behavioral approach, since homo oeconomicus is not sufficient to model the various parties that contribute to company success. Everybody contributes their individual abilities, which must be utilized in a way that allows the optimal use of the available potential. Company leadership is the subfield of business management which can benefit most from the behavioral approach.
Sustainable business management looks at the company as part of a system. Its interrelations constitute a decisive success factor for a sustainable economy.
Insight
Success in sustainable management requires the ability to adapt to changing environmental framework conditions.
A closed approach to business, which reduces economic activity to processes inside the corporation, fails to address the management challenges posed by a global and volatile world. Instead, business management must react to changes in economic and societal framework conditions. In the period after the war, when a huge demand was met by relatively limited supply, the approach of Gutenberg was still very suitable. Today we are facing different challenges. In a world characterized by increasingly scarce and expensive resources as well as global and competitive markets, the task is to deploy all factors of production (labor, capital and technical progress) in such a way that highly innovative companies can maintain and deepen their technological and market leadership. This includes ecological aspects such as resource-efficient production and behavioral approaches which target an optimally trained and utilized workforce as prerequisites for sustainable and successful economic activities.
Insight
Sustainable business management deals with economic activities of companies that are successful in the long run. It takes into consideration the linkages with other companies and the surrounding economic environment. Long-term success is accomplished via the optimal use of all factors of production. The interests of all involved parties are aligned in negotiations which assure adequate participation in the activities and the success of the company.
2.5 Principles of Sustainable Business Management
The following principles define sustainable business management:
1. In line with traditional approaches, sustainable business management bases its actions on flow variables such as profit, cash flow or sales and incorporates technological, social and ecological aims to reach its economic targets. The economic orientation of the company is not driven by short-term targets, but rather by the preservation of assets and the application of this mercantilist principle to all factors of production.
22
Example
An analysis of globally leading mid-sized companies (hidden champions) reveals that similar to high net worth individuals, these companies base their growth on the available substance, which they gradually expand. Risks that materialize when this basic principle is violated can be observed for example in company takeovers that are largely financed with debt (Porsche – Volkswagen, Schaeffler – Continental or LBO transactions of private equity companies).
2. Sustainable business management incorporates the relevance and limited substitutability of natural resources, human capital and technological progress for achieving business targets.
Example
Sustainable growth of a company cannot be accomplished by the unbalanced substitution of one or several factors of production. Growth at the expense of natural resources, which is partially observable in emerging markets, excessive cost-cutting measures via layoffs, strong substitution of equity capital by debt capital in the financial structure or budget cuts in research and development may trigger short-term economic success, but jeopardize the existence of the company in the long run.
3. Sustainable business management has its main focus on securing the longterm success and development potential of the company. Its normative foundations and strategic orientation are implemented by aligning the operative activities of the company with the defined normative visions and strategic guidelines.
23
Example
This principle finds its expression in company management with a long-term orientation as exemplified by the management model developed by the St. Gallen-School. Business sustainability is always part of the philosophy and culture of the company. It does not matter whether this is stated explicitly in the company principles or only revealed indirectly via the actions of management.
4. Sustainable business management has an orientation on innovation. It pursues a strategy of continuous improvement of the resource productivity by exploiting process optimization and innovative process and product design.
24
Example
Companies that embrace business sustainability are characterized by a large innovative potential, which gives them a competitive advantage at the global level. Business sustainability is not the result of the innovation policies of companies, but rather a prerequisite for successful activity.
5. Sustainable business management aims at a reduction of resource use and emissions, given that the economic condition of the company allows this and the global and national priorities concerning business sustainability demand this.
25
Example
It is in the self-interest of companies with a business sustainability focus to act in a resource efficient manner, since resource costs and costs of hedging volatile resource prices can strongly influence profitability.
