WHAT IS
A SUSTAINABLE ENTERPRISE?
Maurizio Zollo
Sustainable Enterprise (SE)
Core Concepts:
• What is a sustainable enterprise?
• What are its defining elements?
• How can organizations act on these
elements to transition towards
Sustainable Enterprises (S.E.)?
• What are the barriers to
change? How to address them?
• Capabilities to innovate, learn
and adapt the key elements
• This transition process is fundamental
to achieve any SDG and related target
• Policy interventions should be informed
by the micro-foundational aspects
described in this transition map
What is distinctive of SE?
•
•
•
•
It applies to all types of organizations: governments,
businesses, NGOs/civil Society (cities, communities,
associations, etc.)
It introduces an exhaustive list (a framework) with
mutually exclusive, inter-related, elements critical to
transition towards S.E.
“Enterprise of the Future” prioritizes digitalization &
technological change as core trends to adapt to, with
(some) elements of S.E. as “means to that end”
S.E. does the opposite. SDGs are the core trends to
adapt to, and digitalization/technological change is a
“mean to that end”
Maurizio Zollo
1. Purpose
•
•
•
The first element to adapt for transition to SE
Every organization needs to define what value is for all its stakeholders and set the purpose of
its existence as the creation of value for one, some or all of them
For SE purpose usually evolves towards:
1. The definition of value creation for a broader set of stakeholders, rather than only one
or few categories.
2. A broader definition of purpose, beyond only economic value, inclusive of common
goods
– quality of the natural environment
– equal access to growth opportunities for community members
– Well-being, trust, care diffused among internal/external stakeholders
Maurizio Zollo
2. Governance
•
•
The rules and norms defining the rights and responsibilities of the key stakeholders investing in the wellbeing of the firm
In the transition towards SE, it typically evolves:
1. To give voice to a broader set of stakeholder categories in top (board) level decisions
– Representation in Board of Directors and/or key decision committees at the Board and the
executive levels
2. To recognize the investments made in different forms of capital (financial, human, social,
natural…) through sharing/allocation of residuals from operations
Maurizio Zollo
3. Strategy
•
•
The set key decisions related to how the organization intends to the realize its purpose:
1.
Scope of activities (degree/type of diversification)
2.
Speed and mode(s) of growth
3.
Mode of competition in existing/new markets
4.
Extent/mode of cooperation with stakeholders
In transitioning to SE models, strategies focus on value creation for stakeholders, aligning:
– Decisions across different strategic domains (#1-4)…
– With firm purpose, governance, capabilities, culture…
– With strategies of key stakeholders (e.g. value chains)
Maurizio Zollo
4. Activities
•
•
•
Action systems dedicated to functional, support, transactional or relational processes
Developed to realize the firm’s purpose through its strategic choices, within governance norms
In sustainability-driven transformational change, activities adapt in several ways:
– Oriented to create value for multiple stakeholders
– Assessed towards multi-dimensional performance metrics (economic, ecological and societal
impacts)
– Engaging all relevant stakeholders in decision-making, execution, performance tracking and learning
processes
Maurizio Zollo
5. Capabilities
•
•
Organizational capabilities necessary to tackle the transformational change challenge related to
developing a SE include competence in:
– Innovation: product, process, business model
– Relationship development vs. all stakeholders
– Change/adaptation processes (dynamic capabilities)
– Deliberate learning: from experience to insight
In SE transitions, capabilities of these kinds can make the difference between shallow or failed change
efforts, and successful ones, leveraging stakeholder support throughout the process
Maurizio Zollo
6. People
Individuals and groups of employees carry/own human capital (capabilities) and social capital
(relationships) of the firm
• They choose how much of this capital to invest in firm’s success depending on:
– Rewards and purely extrinsic incentives
– Recognitions, reputational gains, well-being
– Intrinsic motives: aligned value systems and cultural traits, personal development goals
• In SE transitions, people hold the keys to success in transformational change processes
– Stakeholder oriented behavior will emerge and be embedded in cultural norms/routines only if all
motivational mechanisms are aligned in the same direction
– Diffusion of stakeholder-orientated mindset requires very specific and typically non conventional
forms of education, since they need to stimulate and facilitate the evolution of cultural norm and
value systems
•
Maurizio Zollo
7. Values & Culture
•
•
•
Cultural traits and the fit between individual and shared values are paramount for a SE:
– Cooperativeness, rather than competitiveness
– Self-transcendence, rather than self-enhancement
– Resource-sharing: fairness vs. “winner takes all”
– Long-term value vs. short-term rewards
– Integrated economic and social well-being
The key challenge is to identify the most effective public/private interventions to facilitaate the
development of such values
To this end, a collaborative effort by public, private & academic actors to experiment, select and diffuse
the most effective approaches for systemic change
Maurizio Zollo
Transformation Map
Purpose
(Value
creation for
stakeholders,
common
good)
Values
(Common
Good, Trust,
Collaboration)
& Culture
Governance
(Voice, rights
& duties of all
stakeholders)
Sustainable
Organization
(Gov't.,
NGOs, Firms)
People
(human &
social capital,
motivation,
well-being,
growth)
Innovation,
Relational,
Change &
Learning
Capabilities
Strategy
(competitive,
cooperative
and growth
decisions)
Activities
(functional,
support and
collective
action
systems)
Maurizio Zollo