Handbook of Sustainable Development

Strategies for Organizational Sustainability

Radha R. Sharma

• Publisher: Business Expert Press
• Year: 2021
• ISBN:
  9781953349439
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

Sustainable development has garnered the attention of the global community when United Nations created Brundtland Commission in 1983 to suggest various ways to save the human environment and natural resources and promote economic and social development. Sustainable development is a way of organizing that an organization can function in the long term. United Nation's sustainable development goals provide a framework to translate these into solutions through responsible business and investment by incorporating the ten Principles of the UN Global Compact into strategies, policies and procedures, and establishing a culture of integrity which are expected to bring out transformative change and create enabling environment for doing business globally. Thus, corporate sustainability, to a large extent, would depend on the capability of the firm to function over a long period with sustainable relationships with the stakeholders.

The Handbook of Sustainable Development: Strategies for Organizational Sustainability provides guiding principles and diagnostic tools for transformation, generates knowledge about sustainable organizational designs, co-creating value with multiple stakeholders, managing diversity responsibly, ecopreneurship with entrepreneurial bricolage, sustainable business model, developing positive synergy, sustainability reporting and organizational transformation for sustainability which are pivotal issues to be addressed in management education and corporate world.

CHAPTER 1

A Manager’s Role in Triple Bottom Line: Global Compact and Responsible Value Creation

Steven D. Olson

A Brief History of the Evolving Social and Moral Expectations Regarding Business

As consensus statements rooted in declarations and conventions that are as close to universally accepted as humans can currently manage, the Ten Principles of the United Nations Global Compact reflect humanity’s best, shorthand understanding to date of what our baseline priorities ought to be in all our commercial activities. The Ten Principles are grounded in the Universal Declaration of Human Rights (1948), the Rio Declaration on Environment and Development (1992), the United Nations Convention Against Corruption (1996), and the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work (1998) and were crafted to cultivate corporate contributions to the UN Millennium Development Goals (Nations, 2000). The adoption of the Ten Principles by some 7,000 businesses established a voluntary, global learning platform that focused managers’ attention on the four areas of greatest ethical risk for the socially, environmentally, and economically sustainable operation of businesses and markets: human rights, workplace rights, environmental impact, and corruption (Kell, 2013; Kell and Levin, 2003).

These four areas delineate the types of rights that we have come to recognize that every human has and that every human must recognize for others (The Universal Declaration of Human Rights, 1948). As such, these rights sketch out the baseline expectations for socially responsible behavior that every company must meet. Rights, of course, logically and practically infer correlative and/or converse duties (The Foundation of International Human Rights Law, 2013; Knox, 2008; Küng, 1998; Saul, 2000; Suter, 2009). As The Universal Declaration of Human Rights obliges, “All human beings are born free and equal in dignity and in rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood” (Article 1) and “Everyone has duties to the community in which alone the free and full development of his (sic) personality is possible” (Article 29.1).

Correlative duties to respect the rights of others and converse duties owed by individuals to society, future generations, and the environment share a common presupposition, namely, that you cannot will for yourself the conditions and behaviors that respect your rights without also willing those conditions for others. The Ten Principles delineate what managers and corporations can do to create those conditions for themselves, their employees, and for the other entities, persons, and communities that they affect.

Just as the experience curve focuses managers’ attention on the learning that they and the corporation must do to meet the industry’s steady improvements, improvements that not only decrease cost and price (adjusted for inflation) but also increase quality and value, the Ten Principles focus managers’ attention on the learning that they must undertake to keep pace with the evolving expectations regarding business (Hirschmann, 1964; Stern and Michael, 2006). The Ten Principles direct a manager toward four key areas in which they must continue to learn and innovate in order to meet evolving social expectations regarding human rights and moral value while at the same time decreasing the cost to produce and the price (adjusted for inflation) to consumers. Whatever else managers do in creating and sustaining value, they must make sure that they respect these rights and fulfill these responsibilities.

John Ruggie, a principal architect of the Global Compact, facilitated the subsequent global learning process around the elaboration of what respecting human rights entails for corporations. In his role as the UN Secretary-General's Special Representative for Business and Human Rights, Ruggie led a global exploration of what it would mean for corporations, states, nongovernmental organizations (NGOs), and other actors to make our universally accepted duties toward other human beings a reality. His final report to the Human Rights Council (Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework, 2011) culminated 6 years of learning and elaboration on Global Compact’s shorthand commitments to human rights, namely, to “support and protect the protection of international human rights within their sphere of influence” (Principle 1) and to “make sure they are not complicit in human rights abuses” (Principle 2).

By endorsing the Guiding Principles, the Human Rights Council formally signaled an end to “the era of declaratory CSR” (Ruggie, 2013). Corporations and other actors would no longer be able to get away with simply saying that they support human rights. They would have to prove it. The “Protect and Remedy Framework” and “Guiding Principles,” together with the “Ten Principles,” make clear that corporations and their managers have a duty “to respect human rights in terms of risk-based due-diligence” (Ruggie, 2013: 125), to remediate violations, just as they would any other area of business risk, and to communicate “a balanced and reasonable presentation of the organization’s significant economic, environmental and social impacts, and enable[s] stakeholders to assess the organization’s performance” (Making the Connection: Using the GRI G4 Guidelines to Communicate Progress on the UN Global Compact Principles, 2013).

The move from declaring a commitment to the UN principles to actually managing these rights and responsibilities through corporate mechanisms of risk and remediation marked a sea change in corporate practices. Though the “Ten Principles” were affirmed by statements of support from nearly every major business association, as well as several major transnational corporations and other actors, Ruggie found that in 2005 less than 100 of the approximately 80,000 transnational corporations—one-tenth of 1 percent—had explicit, due-diligence policies and practices regarding human rights! I think we can safely say that the vast majority of the world’s corporations are failing in their self-acknowledged, socially expected duties both to know what their human rights risks are and to show what they are doing to address them (Ruggie, 2013: 120–122).

Combined with the State’s duty to protect human rights and civil society’s role in mediating between governments and corporations, the Human Rights Council also endorsed a vision in which corporations play a vital role in a system of “polycentric governance” (Ruggie, 2014; Taylor, 2011). By internalizing these universally accepted social norms and standards into their strategic and operating principles, corporations make universal rights and responsibilities a reality within their unique spheres of action and influence (Blitt, 2012). The vision of polycentric governance was cast as a solution to the “governance gaps” that have permitted transnational corporations to act unethically and unsustainably (Backer, 2012; Prenkert, 2014; Weiss and Thakur, 2010).

Directly or indirectly, knowingly or unwittingly, many corporations have been guilty of or complicit in the violation of universal rights and responsibilities toward humans and nature. In industry after industry—oil and gas, mining and minerals, chemicals and pharmaceuticals, consumer products, and financial services—corporations and their subsidiaries, partners, and suppliers have violated human rights and defaulted on their duties (Schwartz and Gibb, 1999). Some pointed to conflicts and contradictions in domestic and international law and pled innocence. Others pointed to the compliance of their own operations and pled ignorance regarding what their suppliers or vendors were doing. Both responses leave holes in our systems of governance and action. Neither response can be socially or economically sustained.

Polycentric governance proposes the most adequate, if still incomplete, solution to date (Abbott, 2009; Lenssen et al., 2008). The Global Compact Principles aim to establish the conditions of integrity that businesses must create within their organization and operations in order to partner with governments and NGOs to fulfill the UN Development Goals. The risk-based due diligence that Global Compact and the Guiding Principles require of businesses ensures that corporations fulfill the conditions that partnering with integrity requires.

Many corporations have already taken up this vision, making it part of their corporate strategy (Avina, 2013; Isdell, 2010; Jones et al., 2004; Prahalad, 2009). For its part in realizing a risk-based, due-diligence approach to baseline CSR, the United Nations Global Compact modeled its “Ten Principles Self-Assessment Tool” on the “Human Rights Compliance Assessment Quick Check,” a tool developed by the Danish Institute for Human Rights to flesh out the implication of the Human Rights Council’s “Framework” and “Guiding Principles.” Therefore, to understand what the Global Compact means for a manager’s role in the triple bottom line we have to view managerial responsibilities within the context of this evolving vision of polycentric governance and risk-based due diligence.

Consensus—Conflict-Clarifying Principles

As consensus statements, the Global Compact Ten Principles and Guiding Principles are not free from conflict, but far from it (Hoover, 2013). An earlier attempt to go beyond the Global Compact Ten Principles in delineating corporate responsibilities for human rights, the “Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights,” aroused sharp divisions between rights advocates and business organizations (Doing the wrong thing: Human Rights Activists Fall Out Over How to Deal with Companies, 2007). Many companies, managers, management scholars, legal scholars, and human rights organizations oppose some or all of Ten Principles and Guiding Principles.

The consensus thinking, reflected in Global Compact’s Ten Principles, about a manager’s role in the triple bottom line does not resolve challenge and controversies, it clarifies them. This conflict-clarifying and engendering feature of Global Compact is not accidental. It is, argues Nobel Prize–winning economist, A.K. Sen, an essential feature of “the general discipline of human rights” (Sen, 2005). When we recognize a right we acknowledge that if we can plausibly do something that would prevent that right from being violated, then we have a duty to do what we can. What might we do? Which rights are in play? How do we integrate the rights claims with other important claims in play? All of these questions remain open to debate and interpretation (Giacomazzi, 2005; Knox, 2008; Kung and Schmidt, 1998; McGregor, 2013). Their resolution into action stands as the hallmark of ethical learning.

To lay out an alternative paradigm for a manager’s role and for the role of management education and training in the triple bottom line, we must first appreciate what it is about these principles that offend so many. I will briefly describe the provocative, learning-stimulating challenges and controversies that surround the Ten Principles. With an appreciation of these challenges in mind, I will then outline the emerging shape of the manager’s role in managing with people and planet, as well as profit, in mind. Managing for the triple bottom line requires the ability to generate sustainable profit margins ethically. The evolving expectations reflected in the Ten Principles have emerged as the “curriculum” that managers will have to master in order to create and sustain triple-bottom-line value. In light of the emerging curriculum for value creation, I will close this chapter by describing the new competencies that managers and corporations will need to develop in order to equip themselves and their organizations to deal with the challenge of creating the triple-bottom-line value.

What’s So Challenging about the Ten Principles?

The challenge of the Ten Principles starts with their emphasis. The Ten Principles weigh heavily toward people and planet. Profit, the main concern of modern management theory, is absent. The absence of explicit reference to profit among a manager’s responsibilities makes most management scholars and managers nervous, if not downright suspicious or hostile. Most Anglo-American scholars and managers believe, wrongly, that both law and economic analyses require managers to maximize the wealth of shareholders (Stout, 2012). Due to the fact that it is both logically and practically impossible to maximize two variables at the same time, most modern management scholars and managers cannot and do not support any rights and duties, legal or moral, beyond that of maximizing shareholder wealth. They even fight many laws and regulations on the grounds that those laws and regulations violate the requirement to maximize shareholder wealth. People (Principles 1–6) and planet (Principles 7–9) have few friends and lots of enemies in modern management theory and in much modern management practice (Ghoshal, 2005).

Second, the “ought-ness” of the Ten Principles and Guiding Principles puts them, and any manager who adheres to them, at odds, conceptually and morally, with the central thrust of modern management theory. Most modern management theory, and by implication, management practice, strives and claims to be “value free” or “value neutral.” While laudable in some respects, the striving for value neutrality has led to much methodological and practical mischief.

Methodologically, management scholars have pursued their vision of a value-free or value-neutral science by overemphasizing falsification as the most important criterion for rigorous knowledge (Van de Ven, 2007). We can say we know something significant, management scholars maintain, when we have established claims that have withstood the attempts of others to disprove those knowledge claims. Disproving a claim requires the ability to conduct an experiment to test it. This condition narrows the focus of management researchers toward variance studies that isolate independent and dependent variables, studies that therefore favor laboratory experiments conducted upon people who have no prior experience with the experimental conditions. All variables that can’t be scientifically controlled, including values, are ruled out.

The knowledge such studies produce is intersubjectively rigorous, but the findings have very limited application. The findings apply only to situations in which such variable...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Description
• Contents
• Acknowledgments
• Preface
• Foreword
• Chapter 1 A Manager’s Role in Triple Bottom Line: Global Compact and Responsible Value Creation
• Chapter 2 On Designing and Developing Sustainable Organizations
• Chapter 3 Generating Knowledge for Sustainable Development: The Case against the Corporate Objective Function
• Chapter 4 Corporate Citizenship for Responsible Management
• Chapter 5 Corporate Impacts
• Chapter 6 Managing Cultural Diversity
• Chapter 7 Ecopreneurship for Sustainability: Role of Entrepreneurial Bricolage, Design Thinking, and Creative Self-Efficacy
• Chapter 8 Walking a Tightrope between Business and Sustainable Development: A Social Enterprise Marketing Perspective
• Chapter 9 Developing Positive Synergy
• Chapter 10 CSR Reporting: Prevalent Practices in Businesses
• Chapter 11 Organizational Transformation for Sustainability
• About the Editor & Authors
• Index