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- Herausgeber: UVK Verlag
- Kategorie: Fachliteratur
- Sprache: Englisch
This comprehensive textbook gives an insight into all relevant aspects of business administration, as they are all subject to fundamental changes due to the transformation to a more sustainable economy. It starts with the background on sustainability and the scientific classification of sustainable business administration. Next, it sheds light on the boundary conditions regarding environmental economics and social responsibility. The next section deals with management functions, from strategy and international management to change management, legal implications and HR management. The last part focuses on value creation. Here, the authors shed light on the influence of sustainability in all areas of the corporate value chain, from procurement on to production and ending with marketing and sales. Also addressed are expert functions such as environmental management or sustainable product design, which are essential in driving sustainable innovation in a dynamically changing environment.
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Veröffentlichungsjahr: 2023
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Dietmar Ernst / Robert Gabriel / Ulrich Sailer
Sustainable Business Management
2nd edition
UVK Verlag · München
Umschlagmotiv: © iStockphoto shark_749
2nd edition 2023
1st edition 2013
DOI: https://doi.org/10.24053/9783739882017
© UVK Verlag 2023— ein Unternehmen der Narr Francke Attempto Verlag GmbH + Co. KGDischingerweg 5 • D-72070 Tübingen
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Einbandgestaltung: siegel konzeption | gestaltung
ISBN 978-3-7398-3201-2 (Print)
ISBN 978-3-7398-0591-7 (ePub)
Contents
Accompanying Words
Sustainability management is not a special discipline of business administration. Rather, sustainability management is a fundamental and comprehensive, future-proof organizational and environmental development. Since no company can become sustainable without all operational functions, the core business, the strategy, the products and services, the supply chains and all stakeholder relationships being designed sustainably, sustainability management is modern business administration.
Prof. Dr. Dr. h.c. Stefan Schaltegger
Professorship for Sustainability Management
Head of the Centre for Sustainability Management
Head of the MBA Sustainability Management Leuphana University Lüneburg
Sustainability is also a very current topic in business administration. The book has already become a standard with the first edition!
Prof. Dr. Dr. h.c. Ernst Ulrich von Weizsäcker
Honorary President of the Club of Rome
Former President of the Wuppertal Institute for Climate, Environment and Energy
Former Member of the German Bundestag
Currently, there is often a tension between social responsibility and sustainability on the one hand - and profitability on the other. But in the service of the next generations, they must become team players. It is clear that our world must become more sustainable if it is to remain livable in the future. In the transition, however, economic efficiency must not be lost. Efficient entrepreneurial activity protects jobs and safeguards the ability to invest. We are convinced that companies can only be successful in the future if they combine sustainability and profitability. In this respect, it is to be welcomed if sustainable business management is taught at universities. This book provides a very good basis for this.
Sandra Coy, Spokesperson Corporate Responsibility & Quality, Tchibo GmbH
The aim of the book is to show how sustainable management can be implemented in all functions and business areas of companies and thus in all fields of business administration. With this integrated perspective, the book represents an innovative and interesting enrichment of the approaches pursued in existing business administration textbooks.
Prof. Dr. Dr. h.c. F. J. Radermacher
Research Institute for Applied Knowledge Processing
Zalando's sustainability strategy "do.More" is an important part of our future business success. Our vision at Zalando is to be a sustainable fashion platform with a net positive impact on people and the planet. This means we run our business in such a way that we give more back to society and the environment than we take. Our ambitious sustainability goals can be implemented all the better the more consciously and openly our stakeholders engage with the topic of sustainability. In this respect, we welcome the fact that sustainable business studies are taught in universities such as HfWU. This textbook is an excellent example of how economic success and sustainable action can be combined.
Patrick Kofler, Head of Investor Relations, Zalando SE
For more and more market participants, environmental, social and governance (ESG) issues are of great importance in their investment decisions. Institutional and private investors alike want to support the development of a more sustainable economy. This also leads to banks increasingly embracing sustainability issues and offering corresponding products for customers and investors. This book makes a valuable contribution by presenting the sustainable management of companies in a structured and innovative way in a textbook. It shows how sustainable management in companies not only becomes possible but also develops into a competitive advantage.
Rainer Neske, Chairman of the Board of Managing Directors, Landesbank Baden-Württemberg
Foreword
Sustainable business management encompasses the economical, ecological and social responsible actions of companies. All over the world, there are convincing examples of such responsibly acting companies that are also extremely successful economically with their sustainability concept. These companies are not "in spite of" but successful "because of" their sustainable actions.
More and more companies are setting out to follow this example. However, they are often still at the beginning of the journey and ask themselves how sustainable management can be implemented in their company. The aim of this book is to provide companies, managers, and students with comprehensive work to guide them on their way towards sustainability. This book, "Sustainable Business Management," is a joint effort by 23 professors from three faculties at the Nuertingen-Geislingen University of Applied Sciences (NGU; in German: HfWU). This Nuertingen approach to sustainable business management was developed over many years at NGU and represents a common understanding of sustainability in business management. With this basic book, we want to show both students of business administration courses and managers with responsibility how companies can be managed successfully in a sustainable manner. This includes the examination of the environment, society, the design of value creation, and management functions.
The first edition dates back to 2013. Since then, sustainability has evolved enormously in companies, society as well as in universities. Consequently, this second edition has not only been consistently revised, but also expanded to include numerous important aspects of business administration. As a pleasing trend, it can be observed that students from different disciplines are now very interested in dealing with sustainability.
We would like to thank UVK Verlag, in particular Dr. Jürgen Schechler, for their excellent cooperation. Furthermore, we thank Philipp Seidel for the professional revision of the illustrations and to Daniela Horna for her comprehensive support in the preparation of the English edition. The editors welcome feedback from the readership, of any kind.
Prof. Dr. Dr. Dietmar Ernst ([email protected])
Prof. Dr. Ulrich Sailer ([email protected])
Prof. Dr. Robert Gabriel ([email protected])
Introduction
Sustainable Business Management
Sustainability - An Introduction
Planetary Boundaries and Society
Management and Value Creation
Outlook
1Sustainable Business Management
Learning Objectives:
The readers
understand the transformational pressure that the need for sustainable development is creating in our economic system.
can classify the approach of "Sustainable Business Management" in the history of business administration with its evolving research focus.
recognize that there are constant developments within sustainable business management in order to find the best possible answers to social, technological and ecological challenges.
understand how sustainability poses diverse, global and complex challenges for companies.
understand that sustainability projects can have an impact on economic success in both positive and negative ways
learn about the concept of "Creating Shared Value" as a mindset for linking sustainability with economic success
know a business value framework with which the business case of sustainability projects can be systematically determined
understand the "Nuertingen Model" of sustainable business management, which serves as the conceptual basis for this book.
Keyword List:
Decision-Oriented Business Administration, Factor-Theory Approach, Environment-Oriented Approach, Ethical-Normative Ecological Business Management, Ecology-Oriented Approach, Corporate Social Responsibility, Creating Shared Value, Sustainable Business Management, Sustainability Business Case, Business Value Framework, "Nuertingen Model", Conflict of Goals
1.1Introduction
Only a few years ago it was absolutely necessary to explain to the reader at the beginning of an article related to sustainability why the topic under consideration was seriously affected by sustainability.1 In the meantime, this usually means carrying owls to Athens, since - especially in times of "Fridays for Future" - most people have understood the ecological and social challenges.
Many countries are also increasingly committed to making their economies more sustainable.2 A growing number of decision-makers are calling for a new, sustainable definition of economic success and new ways of thinking and acting.
Jacinda Ardern, former Prime Minister of New Zealand
"Economic growth accompanied by worsening social outcomes is not success, it is failure. Turning things around requires changing both the way we think, and the way we act, and the way we measure success".3
The pressure to act has arrived in the economy. Some sectors, such as automotive and energy, are in the midst of a transformation4 toward sustainable systems and technologies. However, opportunities and risks arising from sustainable development can be perceived in all sectors. In addition, there is a growing sense of responsibility for the environmental and social consequences of global value chains. The pressure from stakeholders is accelerating this change.
Example: Transformation of the Automotive Industry
The automotive industry is facing the biggest transformation of recent decades. In addition to technology-related triggers such as connectivity, digitalization or autonomous driving, sustainability is a key driver of change. The agreement under international law to limit global warming to 2 degrees, or 1.5 degrees, (see the so-called Paris Agreement5) results in an urgent, disruptive need for change for the automotive industry.
Globally, 18% of CO2 emissions are caused by road transport. 6 In Europe, more than 60% of CO2 emissions from road traffic are caused by passenger cars. 7 As a result, automobile manufacturers are getting focused attention and are facing strong regulatory requirements. In 2021, new passenger cars could only emit 95 g CO2/km on average in the fleet, and in 2030 this target value is to be reduced by a further 37.5%.8 This cannot be achieved by further optimizing combustion engines but requires the widespread use of new drive technologies such as electromobility or hydrogen propulsion. This will radically change the global value chains in the automotive industry. Managing these risks and opportunities properly is a huge task for the entire industry.
Integrating the requirements of sustainable development into business management is a major challenge. This chapter shows how this integration can be mastered. To this end, it first looks at the historical development of business management. Then, the requirements for sustainable business management are elaborated. Important principles, that are of central importance for successful implementation, are highlighted. And finally - as a common basis for this book - an understanding of "Sustainable Business Management" is explained and visualized. This shows how the individual contributions fit into the conception of the book.
1.2History of Sustainable Business Management
Business administration is a scientific discipline that has been continuously developing since its inception. It takes up current social and political developments and is in exchange with other scientific disciplines. The treatment of ecological and social issues within business administration was already a topic long before the orientation of sustainable business administration emerged.
After the Second World War, business administration was decisively influenced by the factor theory approachFactor Theory Approach. Reconstruction and the associated industrial production were the focus of business administration. The aim was to produce as efficiently as possible. Methodologically, the neoclassical models of microeconomics were used, which dealt with production functions. Social issues were not explicitly dealt with. Labor was regarded as a factor of production and the image of man was reduced in the models to the rational being of "Homo oeconomicus". The environment served to provide the necessary raw materials for production. There was little awareness of ecological issues.
In the course of time, business administration increasingly developed into a scientific discipline independent of economics. A milestone was certainly the decision-oriented business administrationDecision-Oriented Business Administration, which is closely associated with the name Edmund Heinen. The decision-oriented approach introduced two innovations into business administration:
the realistic consideration of concrete decision-making situations and thus the further development of business administration to management theory and
the opening of business administration to social science issues.
"Decision-oriented business administration dismisses the homo economicus of classical microeconomics into the realm of fable".1 This sentence is formative for the development of business administration into a sustainable business administration.
A further step towards the inclusion of social aspects is the behavioral science-oriented business administration. Its goal is to explain the actual behavior of individuals and companies with the help of the findings of the behavioral sciences. This means that business administration opens itself to disciplines such as psychology, social psychology, and sociology, and their findings.
The ecological side of sustainability was only incorporated into business administration very late in the 1980s.
The environment-oriented approachEnvironment-Oriented Approach was a reaction to the increasing environmental problems of industrial society, which led to a rethinking in politics, business, and science. Two basic currents can be identified in business management research today:
ethical-normative ecological business management2 and
the ecology-oriented approach.3
Ethical-normative ecological business managementEthical-Normative Ecological Business Management is acritical approach to economic systems and calls for a fundamental reorientation of economic thinking and action by focusing on the compatibility of ecological and economic perspectives. It is less about what is immediately feasible in individual areas, but rather about a fundamental examination of the relationship between economy and ecology.4 Global warming is an example of this fundamental debate, the results of which flow into the economy via political measures. A prominent representative of ethical-normative business economics is Maja Göpel.5 She doubts that the capitalist-market economic system is capable of averting the climate catastrophe and calls for an alternative economic system. What this might look like in concrete terms, however, remains to be seen.
The ecology-oriented approachEcology-Oriented Approach does not involve a reorientation of business management thinking, but rather the inclusion of ecological issues in traditional business management. Environmental protection is understood as a new element in the business target system. It does not compete with the pursuit of profit, but is a secondary condition in the pursuit of economic goals.
The sustainable business management concept presented here is strongly anchored in classical business administration and in the ecology-oriented approach, yet it encompasses all three dimensions of sustainability. It can also be described as functional-sustainable business management, as it deals with the integration of sustainability in the various functional areas of the company. This approach often dominates in practice. With the help of innovative environmental technologies, new, environmentally friendly processes and products are to be developed that contribute to achieving corporate and societal environmental goals. Nevertheless, companies should also contribute to the discussion on the ethical-normative aspects of a sustainable economic system and assume responsibility so that future generations will find an intact economic, ecological, and social system.
The question of what contribution sustainable business management can make to sustainable development can be seen in the area of conflict between the ethical-normative and the ecology-oriented approach. The ethical-normative approach demands that the political and legal framework be set in such a way that ecological goals are quickly achieved without endangering prosperity. In a globalized economy, for example, it is important to ensure that sustainable companies remain competitive with international competitors. If this is the case, companies are expected to make an active contribution to sustainability within the framework of the ecology-oriented approach. Corporate action geared towards sustainability can thus lead to competitive advantages.
1.3Sustainable Business ManagementSustainable Business Management
The challenges that arise for companies from the maxim of sustainable development1are diverse, global, and complex. This diversity is primarily due to the fact that the three dimensions of sustainability – economic, ecological, and social – comprise numerous individual issues. This can be seen, for example, in the indicator catalog of the sustainability reporting standard provided by the Global Reporting Initiative (GRI).2
In addition, the value chains of most industries are globalized and have a strong division of labor. An almost uncontrollable number of actors interact in the value chain, and changes are very difficult to implement. The following example on conflict minerals illustrates this situation. The value chain should be considered not only "upstream", which includes the activities before materials or goods reach the company, but also "downstream". This includes further processing as well as the use and final exploitation of the products and services.
Example: Conflict Minerals
The extraction of minerals can have serious social consequences in certain politically unstable regions. For example, corruption or human rights violations such as forced labor or the use of violence can be observed. The so-called conflict minerals - tin, tungsten, tantalum and gold - are particularly in focus here. These minerals are used, for example, in information technology, cars and jewelry. One country that is particularly affected by this problem is the Democratic Republic of Congo.
To address this issue, the EU has put in place requirements via a new regulation that came into force on 1 January 2021. All companies importing these minerals or metals into the EU (around 1,000 importing companies are affected) must establish management systems, assess risks, carry out audits and report on them annually, using a five-stage framework developed by the OECD.3 The requirements of sustainable development thus have a strong influence on value chains.4
The activity in many different countries, with differing legal frameworks, value systems, and cultural influences, further increases the requirements for sustainability management. At this point at the latest, the system changes from a complicated to a complex, hardly predictable system that is difficult to manage and control.
A central question the actors are facing is the conflict of goalsConflict of Goals between economic success and sustainable economic activity. In the capitalist economic system of the Western world, economic success is the inevitable target. Without economic success, no company can survive in the long term. And now these additional requirements for sustainable management emerge. Doesn't this make it even more difficult for companies to achieve the economic success they need to survive?
In the minds of more than a few decision-makers, the idea prevails that sustainable action is ethically desirable, but at the expense of economic success. A much more differentiated view is necessary here. This one-sided "traditional" view has been refuted many times. There are numerous examples in which companies have been able to increase their economic success through sustainability measures. These measures can be, for example, reduction in energy costs and mitigation of CO2 emissions through increased energy efficiency.
At the same time, however, there are also examples where decisions for sustainability lead to rising costs or decreasing sales, at least in the short term. This can be, for example, the voluntary installation of an exhaust filter on a chimney, when there is no legal requirement for this filter. The company may nevertheless succeed in deriving long-term economic benefits from this through credible communication or increased acceptance among stakeholders. Nevertheless, this will not always be possible, so there are cases in which sustainability and economic success are very much in direct conflict with each other. Functional-sustainable business management is critical of such projects. In this case, it is rather the ethical-normative ecological business management theory, which questions the absolute importance of economic success and the system requirements, which is supportive.5
As a result, the relationship between economic success and sustainability performance must be viewed in a differentiated manner. Figure 1.1 illustrates this graphically.
Correlation between economic success and sustainability performance according to Wagner and Schaltegger.6 (own translation)
Sustainability measures, therefore, do not always reduce economic success, but can also increase it. These financially beneficial measures should be identified and implemented. The increasing sensitivity of stakeholders and regulatory intervention by the state will cause the curve in the above figure to shift upward toward the dashed line, and the number of measures that are economically, environmentally, and socially beneficial will increase over time.
Even without government intervention, many sustainability measures with which companies assume responsibility already lead to an improvement in economic performance. Consequently, there is no conflict of goals for these measures. Consistently identifying, developing, and implementing these projects, products, or business models is an important part of the competitiveness of companies today, and thus also at the core of modern, sustainable business management.
Ray Anderson, CEO and Founder of Interface Floor
"Business and industry is the major culprit, causing the decline of the biosphere, but it is also the only institution that is large enough, and powerful enough, to really lead human kind out of this mess".7
1.4Sustainable Corporate Success
If we look at the implementation of sustainability and Corporate Social ResponsibilityCorporate Social Responsibility (CSR) in companies, we see that many companies try very hard to "look good" and protect themselves from criticism. Adaptation and change at the core of the business model are rarely observed in these companies, or at least do not take place in a sufficiently consistent form. This is also reflected in the fact that social and environmental problems have not been adequately addressed to date.
Companies are therefore often busy trying to safeguard the business models that are successful today. This happens through lobbying, or by reporting success stories. The responsibility is not accepted, but shifted to the consumers or the state. There is more reaction than action, and the core of the business model is not touched as far as possible in order not to endanger today's success. In this context, sustainability activities are mainly there to protect against external pressure and to boost short-term success through an improved reputation. Such an approach could be described as "playing not to lose", as an attempt to protect today's model of success - which will be yesterday's model tomorrow. In recent years, however, the number of companies taking sustainability seriously has been on the rise. These companies are taking an entrepreneurial approach to the challenge. They recognize the inevitable development and take action, asking themselves what opportunities and risks the sustainability megatrend entails. Options are examined and evaluated, and strategy and core processes are adapted. This requires entrepreneurial courage, as there is great uncertainty about future developments. This approach could be described as "playing to win!" A strategy that takes up a major challenge at an early stage is obviously more successful in the long run.
How can companies best tackle these new challenges? Here it depends strongly on the mindset. One positive approach is the one outlined by Porter and Kramer:
The concept of "Creating Shared ValueCreating Shared Value" (CSV). It builds on the idea of products and business models that generate value for society and companies at the same time. The two authors show (in an over-simplified manner) the differences between CSR and CSV (Table 1.1.). The bottom line is that CSV is about developing new solutions. In these solutions, the contribution to sustainable development shall be generated through the core activities and the business model. At the same time, of course, the new approaches should be as profitable as the existing activities. These new, profitable activities, which are at the same time welcomed by society, are superior to the previous solutions: they provide the company with long-term, secure, and socially accepted business success and a stronger competitive position. For society, these new business models and products offer ecological, social, and/or economic advantages.1
Corporate Social Responsibility (CSR)
Creation of "Shared Value
Target:
Doing good as a respected element of society
Target:
Creating value for companies AND society
CSR activity is decoupled from core business and profit maximization; philanthropy
Social added value is an integral part of core activities and profit maximization
Attention to reporting and self-selected focal points
Focus on concrete entrepreneurial opportunities and competitiveness
Firmly defined and limited CSR budget
Opportunities and risks determine the investment
Comparison of CSR and "Shared Value" according to Porter and Kramer (2011)2
With such a mindset of "Shared Value Creation", the role of sustainability management changes. A staff unit that is responsible for the sustainability report becomes a nucleus for innovation and new solutions. Sustainability managers thus need a high level of understanding of the core business and good networking within the company in order to develop new, sustainable solutions with the departments. Sustainability experts act as a catalyst, helping to achieve business goals and sustainability goals at the same time. The example of Kimberly Clark shows how greenhouse gases can be reduced and energy costs cut at the same time.
Example: Energy Efficiency at Kimberly Clark
The Kimberly Clark (KC) company, known for example through the Kleenex brand, made approximately $18 billion in sales of hygiene products in 2019 with 42,000 employees. The pulp and paper industry is very energy intensive, and KC had energy costs of over $1 billion.
By using a sophisticated technology benchmarking approach, the company was able to achieve energy cost savings of more than $150 million within two years. By transferring an Excel-based system with more than 10,000 linked Excel files into a dedicated sustainability software (SoFi Software), KC has transparency about the effects of their decision options. The system currently contains planned or outlined measures with a volume of 300 million US dollars. By selecting the right projects, KC has the potential to save an additional $200 million in annual energy costs by 2022. This represents approximately 7% of the 2019 operating income. 3, 4
For sustainable business management, it is crucial to develop new business models, products, services, and processes that are sustainable and profitable. For this, it is important to understand the business case of the respective projects. Frameworks exist for implementation, such as those from McKinsey5 or the "Business Value Framework"Business Value Framework from thinkstep (Figure 1.2).
"Business Value Framework" according to thinkstep (own revision)6
1.5"Nuertingen Model" of sustainable business management
As part of the implementation of this book project, the authors jointly developed a visualization for the concept of a new, sustainable business administration (Figure 1.3). This visualization, referred to as the "Nuertingen ModelNuertingen Model" of sustainable business management, is the underlying foundation of this publication.
"Nuertingen Model" of sustainable business management
The visualization is based on the understanding that business administration has made an important contribution to prosperity and peace in the past. Despite all justified criticism of the prevailing economic system, these positive achievements must be acknowledged. A new, more modern model of business administration should therefore not discard existing concepts, but rather develop and adapt them, making them sustainable and future-proof. This means that social, ecological and also economic sustainability aspects must be integrated.
Against this background, the visualization, viewed from the outside in, presents the following basic relationships:
1. Planetary boundaries for value creation and society
Society, including economic activity and value creation, must operate within planetary boundaries for obvious physical reasons1. A linear system of "take, make and waste" is only possible for a certain period of time with finite resource supplies and a limited possibility to absorb pollutants and emissions. In the medium and long term, there is no way around a circular economy and a consideration of the unchangeable planetary boundaries in the future design of our society, and thus also in our economic system and companies.
2. Value creation is only possible within society
Any economic activity has innumerable points of contact with society. Obviously, the development and operation of value creation systems requires the production factors labor and capital, i.e. employees and investors as partners. In addition, there are many other stakeholders who try to exert influence on value chains and strategies of companies. There are two reasons for this: either stakeholder groups are affected by companies' actions, or companies depend on certain stakeholder groups for their success.2 Examples of typical stakeholder groups are customers, business partners, the government/authorities or even the residents of a large industrial plant. All these groups represent parts of society, and the dependencies shown underline that value creation can only take place in exchange and balance with society, i.e. "within" society.
3. Management as a compass, taking into account all dimensions
In business administration, there has traditionally been a great deal of focus on how management designs value chains for the greatest possible economic success. Today, this is no longer sufficient for long-term success. In addition, management must also consider interactions with society and planetary boundaries in strategy and decision making. As explained above, this is important for the success of the company for functional reasons, but it also serves to meet the ethical and normative expectations of stakeholders and society,
The content of the visualization is based on the nested circles of sustainability shown in Figure 2.1 (Chapter 2). Further development lies in the role of management, which must act as a guiding element (compass), keeping all three systems - economy, society, and the planet - in view and taking them into account. Visually, there is also a certain similarity to Kate Raworth's donut model3 resulting from the identical motif of planetary boundaries.
This "Nuertingen Model" of sustainable business management forms the conceptual basis of this book. In the introduction, after an introduction to sustainable business management in chapter 2, there is a detailed presentation of the concept of sustainability. This is followed in Chapters 3 and 4 by a consideration of planetary boundaries and the role of society. For this purpose, aspects of environmental economics are presented and in the chapter on social responsibility the field of tension between profit and public welfare is discussed.
Chapters 5 to 21 then deal with the subject area of management and value creation. Here, all activities and functional areas of companies are taken up individually and the concrete significance and effects of sustainable business management for these areas are explained. The approach behind this is that value-adding does not mean that sustainability is imposed by a separate staff unit. Rather, the individual departments must develop new solutions and take responsibility for their area, knowing their environment, their tasks, and their challenges. This is the only approach that allows for a holistic and effective implementation of sustainable business management.
The book concludes with a utopia, a view of our economic life in the year 2050. This utopia stands for something we all wish for, and which has essentially motivated the writing of this book: a LIVABLE FUTURE!
At a Glance
Our economic system is under great pressure to change due to the sustainability megatrend. Business administration has taken this on board, and an ethical-normative as well as a functional approach have been developed for sustainable business management. Companies should adapt their strategies and core processes early and courageously, to best manage the risks and opportunities of the upcoming transformation to a sustainable economic system. By developing new business models, products, and processes that are not only sustainable but also profitable, companies improve their competitiveness. The "Nuertingen Model" presented in this book - which is mainly based on the approach of functional-sustainable business administration – provides a new and in-depth methodological basis.
Suggestions for Further Reading
Wagner, M. and Schaltegger, S. (2003): How Does Sustainability Performance Relate to Business Competitiveness. In: Greener Management International, No. 44, Winter 2003, p. 9
Porter, M.E. and Kramer, M.R. (2011). Creating shared value: How to re-invent capitalism and unleash a wave of innovation and growth, in: Harvard Business Review, Vol. 89 (1/2), pp. 62-77.
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European Parliament (2019): CO2 emissions from cars: facts and figures, updated 18/04/2019. https://www.europarl.europa.eu/news/en/headlines/society/20190313STO31218/co2-emissions-from-cars-facts-and-figures-infographics, accessed 4 March 2021.
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Freimann, J. (1988): Zum Stand der Ausarbeitung einer sozial-ökologischen Betriebswirtschaftslehre, in: Freimann, J., Priem, Or. (1988): Ökologische Betriebswirtschaftslehre und -praxis, in: Schriftenreihe IOW, Band 12.
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Heinen, E. (1976): Grundfragen der entscheidungsorientierten Betriebswirtschaftslehre, Munich.
Kimberly Clark (2020): Kimberly-Clark Announces Year-End 2019 Results And 2020 Outlook [Press release]. https://kimberlyclark.gcs-web.com/news-releases/news-release-details/kimberly-clark-announces-year-end-2019-results-and-2020-outlook, accessed 4 March 2021.
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Introduction
Sustainable Business Management
Sustainability - An Introduction
Planetary Boundaries and Society
Management and Value Creation
Outlook
2Sustainability - An Introduction
Learning Objectives:
The readers
understand the concept of sustainability and its origins,
know how sustainability has developed from the Brundtland Report to the Three-Pillar Model and the Sustainable Development Goals, and
recognize how concrete requirements for companies can be derived from sustainability challenges at the societal level,
understand that these new requirements must be integrated into the traditional target systems of business management in a balanced manner.
Keyword list:
Brundtland Report, Three-Pillar Model, Sustainable Development Goals (SDG), Corporate Social Responsibility, Sustainable Business Management
2.1Development of the concept of sustainability
The concept of sustainability - central to this book - is difficult to grasp for many people. This section 2.1, therefore, outlines the historical development of the concept of sustainability as a basis for the following contributions. The following section 2.2 then considers the general significance of sustainable development for companies.
Sustainability is a very old term whose meaning has changed over time. Sustain is borrowed from the Latin sustinere, which can be translated as maintain, carry, preserve, or hold back. Sustainability thus expresses structures that are sustainable and have sufficient reserves for the future.1 It is regularly claimed that the origin of sustainability lies in forestry, where the limits of short-term overexploitation were denounced centuries ago. In the early 18th century, Hans Carl von Carlowitz (1645-1714) advocated a sustainable use of the forest. Due to the long regeneration period and the low growth rates of the forest stand, the necessity of a careful handling of wood as a raw material was obvious to secure long-term supply. People should cut only as much wood as could regrow in terms of species and quantity.2
Another milestone in the development of sustainability was the publication of the study "The Limits to Growth" in 1972 by a group of young scientists at the Massachusetts Institute of Technology (MIT) in the USA, commissioned by the Club of Rome. By means of a computer-based system analysis, the development of the world economy and of mankind, in general, was simulated in a world model. This led to alarming results and attracted great attention worldwide.
"If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next one hundred years."3
The publication ignited the discussion about sustainability, about people's economic and living conditions, even though it did not go uncriticized and numerous forecasts had to be corrected later. It was also significant that the environmental problem must be viewed systemically, due to the complex interconnections and interactions.
In the same year, the first United Nations Conference on the Environment was held in Stockholm. This was the first of a series of conferences that led to a global awareness of environmental problems. At this first conference, fundamental principles for the environment and the development were adopted. The event was the starting point for the international cooperation on sustainability.
In 1987, another milestone in the development of sustainability emerged: the Brundtland ReportBrundtland Report was published. This was the final report of the "World Commission on Environment and Development" set up by the United Nations. This report is entitled "Our Common Future" and is usually referred to as the Brundtland Report after the Commission's Chairwoman Gro-Harlem Brundtland (former Prime Minister of Norway). This report identifies the cause of global environmental problems as poverty in the South and unsustainable production and consumption patterns in the North. The report is also known for creating the guiding principle of sustainable development and coining the term sustainability. It states:
Sustainable development is development that "meets the needs of the present without compromising the ability of future generations to meet their own needs."4
Beyond this clarification of the term "sustainable development" (synonym: sustainability), the report expresses the need for a significant process of change involving resource use, financial flows, the direction of technological innovation, and institutional structures.
The definition quoted above emphasizes that the present generation should not live beyond its means so that future generations have comparably good living conditions. This is referred to as intergenerational justice. Furthermore, the report addresses the fact that also a fair distribution should take place within a generation (intragenerational justice). Finally, the three dimensions of sustainability are already reflected in this report: economic, ecological, and social living conditions are explicitly addressed.
Most literature sources see economic sustainability as defined by the fact that humanity has a need for a permanently secure income. This presupposes that the sum of available capital - e.g., natural capital or human capital - is not reduced.5 Ecological sustainability is understood to mean that humanity may only satisfy its needs in such a way that the capacity of the ecosystems surrounding us is not exceeded and biological diversity does not suffer.6 And behind the concept of social sustainability is the understanding that all people, in present as well as in future generations, can satisfy their basic human needs, and at the same time elementary principles such as equality, social justice or social security are applied.7
The three dimensions of sustainability must be brought into balance with each other, into a target balance. In the same year, the three dimensions are presented for the first time in the familiar form of the three overlapping circles in a publication. In this form of representation, sustainability is found in the middle between the circles. In later publications, the familiar "Three-Pillar ModelThree-Pillar Model" of sustainability is increasingly used. A third form of representation of the interdependencies between the three dimensions of sustainability are nested ellipses.8 They express that economy can only take place within society, and that it is dependent on interaction with it. Society, in turn, can only act within the planetary boundaries of its environment. These three most familiar representations of the three dimensions of sustainability are found in Figure 2.1.
Forms of representation of the dimensions of sustainability9
A few years after the publication of the Brundtland Report, in June 1992, the UN Conference on Environment and Development, also known as the World Summit, took place in Rio de Janeiro. At this conference, the largest of its kind, with 10,000 participants from 178 countries, the future of the earth was discussed and guidelines for action for sustainable global development were drawn up. In the process, sustainability was declared to be guiding principle of politics. The Rio Declaration states that economic progress is only possible in the long term if environmental protection is considered. This is based related to the realization that global protection of the environment is in turn only possible if social and economic aspects are also taken into account. Other important results of the Rio Conference are the Framework Convention on Climate Change (as the legal basis of the global political climate process), Agenda 21 (as an action program for a new development and environmental partnership between industrialized and developing countries), and the Biodiversity Convention (for the protection of the diversity of life on earth).
Following these environmental conferences, the German Federal Government appointed the "Rat für Nachhaltige Entwicklung" (Council for Sustainable Development) in 2001, which advises the Government on sustainability and initiates exchanges with the various interest groups. Since then, Germany has had a sustainability strategy that not only identifies important fields of action but has also gained influence on practical policy.
At the Millennium Summit in New York in 2000, the 189 member states of the United Nations agreed on goals in the areas of poverty reduction, peace, human rights, and environmental protection to be achieved by 2015. For this purpose, measures were defined, and measurement criteria established to determine whether the goals had been achieved. In the final report from 2015, the United Nations reported great successes in the fight against poverty, in education, child mortality and the supply of drinking water. There is criticism of continuing poverty and inequality and, in particular, increases in environmental degradation and climate change.10
Even during the lifetime of these Millennium Development Goals, their implementation was sometimes described as slow and criticized in terms of content. This criticism referred, for example, to the fact that the goals of the industrialized countries were transferred to the developing countries and that most of the measures were to be borne by the developing countries. An international panel of experts then developed the next stage of development goals, the Sustainable Development GoalsSustainable Development Goals (SDGs), which were adopted by all member states of the United Nations in 2015.11 A key sentence in the preamble to the SDGs is: "As we embark on this great collective journey, we pledge that no one will be left behind."12 Compared to the Millennium Development Goals, the SDGs also include a stronger commitment by developed countries to achieve economic, environmental, and social goals by 2030. The goals are also more diverse and international cooperation is required to implement them. Although the SDGs are geared towards countries, it can be observed that large companies, such as Allianz, SAP, BASF, or Daimler, refer to selected SDG goals, which are relevant to them, in their sustainability strategy.
Example: Daimler AG13
"Our Sustainability Strategy 2030 supports the implementation of the Sustainable Development Goals (SDGs) that were approved by the United Nations in September 2015. Although the SDGs are directed primarily at governments and countries, the achievement of these goals will depend greatly on businesses because of their innovative spirit and extensive ability to make investments. As a result, we also took the SDGs into account during the realignment of Daimler's Sustainability Strategy. We focused our sustainability-related activities on those SDGs that are greatly influenced by our business model and value chain and where we can actually bring about change."
In recent years, sustainability has seen growing awareness and has gained increasing importance at very different levels. This is also due to the fact that science has worked out more and more clearly that humanity has already reached planetary boundaries in various areas.14 A very interesting initiative is En-ROADS, coming (again) from MIT, together with Climate Interactive. Both organizations have developed a scientifically- and systems-based simulator available on the Internet. In this application, anyone can see how political and technological decisions affect key problem areas of environmental protection, such as global warming.15
The last major movement whose medium- and long-term effects remain to be seen is Fridays for Future. It emerged in 2018 as a global youth movement with a very high media profile and a demand on politics and society to take elementary measures to prevent climate change and protect the environment in the short term.
2.2Importance for companies
The concept of sustainability is defined from a societal perspective and is thus a formative task of politics. As a key player, politics can, for example, enact bans and rules, levy taxes and grant subsidies. However, governmental and supranational activities cannot be seen in isolation from the economy and from companies. Companies make a very significant contribution to the prosperity of a society, but at the same time they also cause social disruption and global environmental damage. Businesses have a key role to play, as a driver for achieving sustainable development goals. With their products and solutions, they have a particular impact on societies and how we live - today and in the future.1
The European Commission plays an important role in defining this responsibility of companies, also known as "Corporate Social ResponsibilityCorporate Social Responsibility" (CSR). In 2001, the European Commission published a Green Paper on CSR. Here, CSR was defined as a " a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis."2 Over the next ten years, it became apparent that this soft, non-binding, and voluntary approach was not sufficiently effective. Thus, in 2011, a much more binding definition was established: according to this definition, CSR is "the responsibility of enterprises for their impacts on society."3 In addition, it is noted that enterprises should seek to optimize value creation for the benefit of the enterprise AND society and to prevent or at least mitigate negative societal impacts in a binding manner.4
The EU's activities are flanked by various directives and guidelines. Since 2017, for example, the non-financial reporting directive applies to all companies with 500 or more employees, across Europe. Since then, these companies, and in many cases their suppliers and business partners, have been obliged to report on their sustainability.5
This leads to the central question for business management: how can sustainability be implemented in companies? Sustainability management in companies can be defined as follows, following the definition of the Brundtland Report:
Sustainability management comprises all activities of a company to develop, design and manage a sustainable economic development in accordance with the requirements of the ecological and social dimensions, in such a way that they take into account the needs of the present generation without depriving future generations of the opportunity to fulfil their own wishes.6
The Three-Pillar Model therefore applies not only at the societal level, but also at the business level. The following table shows examples of which aspects play an important role for the respective sustainability dimension in companies.
Dimension
Business aspects (examples)
Economic sustainability
Long-term capital preservation
Reasonable rate of return
Cost optimization over the life cycle of products
Ecological sustainability
Low pollutant emissions
Low use of resources
Circular economy & recycling
Durability
Social sustainability
Employee satisfaction Secure jobs
Tax payments
Social commitment E
thical responsibility
Occupational health and safety
Examples of the business level of sustainability
In the economic sciences, it is often important to take clear decisions based on unambiguous target systems. This is often difficult for aspects of sustainability, as in many cases there is still no clear scientific reference for a permissible "dose" that could be operationalized for a company. One example of a positive exception is climate change, and the Science Based Targets initiative. By 2020, this approach is already being used by more than 1,000 leading companies worldwide. It allows very specific emission and reduction targets for one's own company to be calculated from the scientifically calculated budget of permissible climate gas emissions for the coming years, in order to make one's own appropriate contribution to meeting the 2-degree target.7
Students learn to examine such target relationships in the introductory courses on business administration. The next step is then to clarify conflicting targets
