Corporate Social Responsibility - Sustainable Leadership

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Sustainable Leadership

In order to understand the challenges that a sustainable leader faces, a deeper description of sustainability and the arising problems, is provided.

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Five Cornerstones of Sustainability

According to Prof. Dr. René Schmidpeter (2015), five cornerstones have been developed, explaining the entire concept of sustainability.

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Sustainability: Should or Can?

First of all, the question of “Should or Can” needs to be answered. As already explained in the previous chapter, as well as in the introduction of this chapter, sustainability is nowadays demanded by the society as well as the government. Air and water pollution, missing human rights in the developing countries and the global climate change are only a few examples for challenges that companies face today. But these examples also show the urgent need for more sustainable companies. Sustainability should not only be more considerated, it must be.

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Sustainability: Functional or Systematic Thinking

[pic 4][pic 5]“Business plays an enormous role worldwide, affecting people and nations by creating jobs, wealth and social value. The goal of business is to make money. But experienced managers understand due consideration also must be given to business ethics.” (Cavusgil, Knight, & Riesenberger, 2013, p. 151) This citation shows the dilemma managers are facing. In a short-term thinking sustainability is associated with additional expenditures and an increased workload, which reduces the business value and the profitability of the company. But in a long-term perspective, effective and sustainable leadership can provide an alignment between environmentally and socially responsive activities and corporate goals (Epstein, 2008, p.84 )

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Sustainability: Three Pillars

The three pillars of sustainability are another powerful instrument for defining the complete and complex problem of sustainability. This consists of the economic, social, and environmental pillar. As already explained in the introduction, if even one of these pillars is disregarded or even not enough considered, then the system as a whole is unsustainable. Environmental sustainability, probably the most popular one, is hereby the “ability to maintain rates of renewable resource harvest, pollution and non-renewable resource depletion that can be continued indefinitely. “ (Instiutional author, 2015) Its goal is to reduce consumption costs, improve resources efficiencies, reduce waste and recycle materials and to reduce energy costs. Overall target is to make facilities and operations green. Social sustainability refers to “how the firm performs relative to societies and social justice” (Cavusgil, Knight, & Riesenberger, 2013, p.156). Social sustainable companies try to optimize work conditions. They avoid using sweatshops, child labor, and other practices that harm workers. Instead, a sustainable firm provides safe work environments, health insurance, retirement benefits, and educational opportunities for employees. The last pillar, economic sustainability considers the firm’s economic impact on the localities where it does business. It is about the effect of the firm’s activities on local concerns as job creation, wages, tax flows, and public work. (Cavusgil, Knight, & Riesenberger, 2013, p.158)

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Sustainability: Material or Not?

An increasing number of companies make sustainability investments. To date however, it has been never distinguished between investments in material versus immaterial sustainability issues. Researches, conducted at the Harvard Business School, have shown that “firms with good performance on material issues and concurrently poor performance on immaterial issues perform the best.” (Khan, Serafeim, & Yoon, 2015, p.2) This result proves that investing into material sustainability is recommendable and gives implications for asset managers who have committed to the integration of sustainability factors in their capital allocation decision. (Khan, Serafeim, & Yoon, 2015, p.4)

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Sustainability: Static or Dynamic Thinking?

Sustainability can be seen as an “unending process defined neither by fixed goals nor by specific means of achieving them” (Hjorth & Bagheri, 2006, p.74). People see a sustainable development as a “project” which has an “end state”. But this is not the case, sustainability is neither the state of the system nor is it a target to be achieved. Sustainability is an “ideal to the system, which as an ongoing process, needs to be rgarded as part and parcel of everyday work”. (Hjorth & Bagheri, 2006, p.90).

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Implementation of Sustainability

Once managers are aware of the need for sustainability and willing to implement sustainability into the organization, several aspects need to be considered. The entire process of implementing sustainability into the corporate governance of the company is recommended to be conducted as a top down approach. This means that the complete board of directors as well as the senior executives should be aware of the current situation; all of them should realize the need for a change and be completely committed to these upcoming changes. It is their responsibility to “initiate, communicate and implement sustainability values and strategy” (Epstein, 2008, p.62) throughout the company.

The implementation is based on a development of a corporate sustainability strategy. According to Marc J. Epstein (2008, pp.59-60), there are six core principles may, that may help formulating the strategy:

- Leadership: provide a framework, identify and build skills to address sustainability issues

- Stakeholder Engagement: Support engagement as a corporate value through dialog and consultation with stakeholders

- Alignment: Establish operational practices and incentives that align with sustainability policies and performance goals

- Diversity: Include a diversity of races, skills, experiences,