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. - - 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.