Försök till tentasvar Corporate Sustainability
One of the key messages in "Making Sustainability Work" by Epstein and Rejc Buhovac is
that structure is a bedrock for corporate sustainability. The book describes how the
sustainability strategy is implemented using different types of management systems.
Name three of these management systems.
Capital investment decision systems
The capital investment decision system takes is a process for identifying and measuring costs
and benefit concerning environmental impacts. This should be done before making
investments decisions, because it helps companies with the long-term visions that
environmental investments require. Small-medium enterprises (SME) can have a hard time
with this since their lack of resources often result in more of a short-term perspective, at the
same time this kind of management is good for that reason since its helping SME’s to
operate with a more long-term perspective.
Risk assessment system
The risk assessment system takes environmental and social risks in consideration together
with the financial risks. This system requires a lot of analyzing and evaluation, which can be
very resource demanding and time consuming. However, it is important for driving
sustainable performance since it provides a better view of the future, reduced unwanted
surprises, and improves the chance of sticking to budget and timeframe regarding projects.
It is a proactive approach which I would say is the key to succeeding with sustainability
performance.
Environmental performance and incentive system
This system connects the sustainability performance with the financial performance and
helps managers to include employees and pay attention to their contribution. With this type
of management system, it is important to properly communicate the sustainability strategy
to the whole organization. Three essential parts of this are, according to Epstein:
• Explain the strategy
• Monitor the process
• Develop with continuous discussions
Which is also relevant to Key Performance Indicators, visually presented on dashboards, to
succeed with this.
One example that differs the traditional performance systems from these just mentioned, is
the broader way of including environmental and social impacts within the company. The
traditional performance often lays the focus on financial goals since the shareholders and
top management is more interested in a positive financial outcome. In the sustainable
management systems, there are several parts of the company that are involved, for example
the environmental performance and incentive system, which then takes in more opinions
and a wider environmental focus into consideration.
This could in a way mean that there is an upcoming generation shift in corporation
management, together with a greater focus on corporate sustainability, the traditional
management systems could seem less up to date. Arguably, there is paradigm shift on its
may where companies naturally take more responsibility regarding all three aspects of
sustainability because its what stakeholders now want. And for sustainability to truly be a
part of the company, it needs to be implemented in the core of the business as well as all the
human resources in the company, which is why the traditional management systems no
longer will be relevant.
In the book “Making Sustainability Work” Epstein introduces the “Corporate Sustainability
Model” consisting of four elements (inputs, process, output, and outcomes). Please specify
and develop explanations to the following questions:
A. Explain the underlying logic of the model and describe its main components (4p)
B. Give an example of how the sustainability performance of a corporation can be seen
both as an output and an outcome in the model. (2p)
C. Explain and give examples of how different inputs can shape the content of the process
element in the model. (4p)
Answer:
A. According to Epstein, the Corporate Sustainability Model is a structured approach with
the social, environmental, and economical dimensions as its foundation. It consists of three
main parts:
1. Drivers for corporate sustainability (inputs)
2. Actions that managers take (processes)
3. Consequences of the actions (outputs and outcomes)
Also included is a feedback-loop, which gives an opportunity to evaluate and make
improvements. It is important to customize the CSM for the specific company and industry,
to achieve a more precise model which will help the managers to an effective sustainability
strategy.
The drivers (1) are the company’s inputs, it consists of four categories:
- External context includes government regulations, which is an important input for
any firm, but especially for a firm operating in an environment-sensitive industry
since regulations can possibly put an end to products, services, or processes. For
example, the ban of plastic single-use products in EU.
- Internal context relates to the business strategies and how they will impact social and
environmental issues.
- Business context relates to the product’s characteristics and whether they are
sustainable.
- Human and financial resources are an important input since it determines what the
company can use in their processes in terms of labor and capital.
The actions (2) are the processes, for example how the company use the inputs to create
something. In this component we find leadership, sustainability strategy, sustainability
structure and sustainability programs and actions.
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Leadership is the main component in the processes since the top management
decisions has an impact on the entire organization. Essential for the leadership is to
have great knowledge about sustainability to have a chance of truly implementing it
into the daily operations, decision-makings, strategies etc.
The sustainability strategy can be proactive or reactive, where proactive is
preferable.
The sustainability structure is about managing sustainability as a part of the business,
instead of only seeing it as a legal issue that needs to be dealt with.
The sustainability programs and actions include rewards systems, and management
systems such as ISO 14001 to help measure the environmental impacts.
The consequences (3) is the output and outcomes, which is the results of the processes.
- Output is the stakeholder’s reactions on the processes and sustainable performance,
which is short-termed. The stakeholders are important because they can have a big
impact on short-termed revenues and costs, which is why their reaction on our
output is important. Regarding the sustainable performance, it is important to focus
on specific issues to evaluate the performance, since sustainability goals are often
very broad.
- The outcomes are long-termed and is the financial performance, which is where the
outputs are converted to monetary measures to really capture the effect on
organizational performance. The stakeholder’s reactions directly affect the
outcomes.
B. The stakeholder’s reaction, which is an output, could both be seen as an output and an
outcome. The logic behind this is since the stakeholder’s reactions on sustainable
performance reflects how it impacts the financial performance, which is an outcome. Hence,
the sustainable performance is an output, but together with the stakeholders’ reactions it
becomes an outcome.