Many of the most interesting and useful books in the growing literature on Corporate Social Responsibility (CSR), corporate citizenship and corporate sustainability are written by authors who combine academia with work as consultants to companies and non-government organizations (NGOs). Two examples that come to mind are Simon Zadek’s The Civil Corporation, a recommended text in the course on Corporate Citizenship at the University of Sydney and several jointly authored books by Malcolm McIntosh such as Living Corporate Citizenship – Strategic Routes to Socially Responsible Business. The Sustainable Company by Chris Laszlo follows in this tradition. With a Doctorate in Economics and Management Science and almost two decades industry experience with Deloitte & Touche and the building materials company Lafarge, Laszlo now runs his own consulting and research firm in sustainability and teaches sustainability at the leading European business school INSEAD.
This book makes a good start towards addressing two areas of growing importance and debate in the "corporate citizenship movement". First, how can companies integrate social responsibility and sustainability into their everyday way of doing business? Unfortunately, too many companies still adopt an "end of pipe" model of CSR, where social and environmental issues are addressed at the end of business operations, often with little thought given to the inherent sustainability of their product or business practice. As Laszlo argues, "corporate giving says nothing about what the company produces, how it produces it, or what its impacts are on its stakeholders". This approach also leaves corporate citizenship open to claims that it is just a public relations exercise with little benefit for society. The real challenge for companies, especially those that espouse sustainable development, is how they can make sustainability meaningful for the people that use their products and services. Simple but pertinent examples of companies doing this in Australia include the Insurance Australia Group and the Members Education Credit Union in the financial services sector. The latter for instance, offers a "goGreen" car loan rewarding consumers who purchase more environmentally friendly vehicles with cheaper loans and the offsetting of greenhouse gas emissions.
The second area of growing importance in corporate citizenship surrounds the measurement of sustainability and CSR practices in terms of their financial impact on the company as well as their social impact on the wider community and environment. The focus has been on the applicability of frameworks such as the Global Reporting Initiative (GRI), the Global Compact and a myriad of other codes and standards.
The Sustainable Company makes a valuable contribution to both of these areas. The book is structured into three distinct sections. The first sets the scene by reviewing the concept of corporate sustainability and sustainable value, which is defined as "lasting value based on economic, social and environmental performance". Laszlo aims to bridge the gap between the traditional shareholder-value model of the firm and more recent approaches that emphasize increasing stakeholder expectations and social responsibility. This section also contains a novel chapter that provides a fictional account of a CEO appointed to lead a company in 1963. We witness some of the key changes and pressures that have led companies to adopt a sustainable value path over the past 40 years through the eyes of this fictional CEO, all the more telling as it is based on the experiences of some of the companies detailed in the second part of the book. The theme is one of transformation and it shares with other books in this area a conviction that to some readers may seem somewhat "evangelical". Those who do not belong to the "corporate citizenship movement" reading this first chapter may feel unsettled by the statement that companies are institutions "facing the prospect of an evolutionary leap to sustainable value – or irrelevance and extinction". These readers may however be more comforted by the remaining chapters of the first section as Laszlo argues that the only sustainable business model is one that combines shareholder and stakeholder value. The problem for Laszlo is not the concept of shareholder value itself but how it is applied, namely leaving out of the shareholder value calculation the true sustainability revenues and costs such as pollution, waste disposal, loss of biodiversity, and social exclusion. Those whose prefer their arguments presented logically and with facts and figures will find useful examples on how some relatively simple sustainability practices (e.g. quarry rehabilitation) can add millions of dollars to shareholder value as well as stakeholder value.
This section also contains a useful and concise chapter on the new approaches to measuring sustainability used by the Socially Responsible Investment (SRI) rating agencies. According to Laszlo, these sustainability benchmarks that have been developed in the capital markets have the potential to also be used as management tools to measure and manage corporate social responsibility. These measures are less about the traditional moralistic approach to SRI, such as screening out "sin" goods, but benchmarking sustainability like any other business process and assessing how it is adding or subtracting from shareholder and stakeholder value. He cites the example of SIRIS in Australia that uses over 1,200 indicators in its approach to scoring companies. Laszlo argues that these new SRI benchmarks have done for corporate social responsibility what the balanced scorecard methodology did for customer relationship management in the early 1990s.
The second section of the book consists of four case studies that illustrate the logic of sustainable value, including some of the problems that may be encountered in implementing it. The cases include Patagonia (specialty clothing and equipment); Atlantic Richfield Corporation (oil and gas); The Co-operative Bank (financial services) and Bulmers (beverages). They show how companies have transformed their mind-set and organizational cultures, made sustainable development an organizational capacity at all levels of the firm and adopted a stakeholder view of the firm.
The third section of the book is the most valuable and provides a toolkit to assist managers in transforming their organizations and implementing strategies to create sustainable value. The core concept throughout this section is that the financial value created by a business is always associated with a stakeholder value that can be either positive or negative. It outlines some of the ways that stakeholders can contribute to shareholder value. Laszlo’s tool kit, based on his experience of working with large and small organizations, is structured around eight disciplines of sustainable value:
- Understanding where and how the company is creating or destroying shareholder and stakeholder value
- Tracking key trends, identifying emerging issues and anticipating new stakeholder expectations
- Setting sustainable value goals that establish a strategic intent on how to create additional value for shareholders while reducing negative impacts and/or creating value for stakeholders
- Identifying sources of value and design initiatives to capture shareholder and stakeholder value
- Building a compelling business case and obtaining the resources needed to capture shareholder and stakeholder value
- Undertaking activities and implementing initiatives to capture shareholder and stakeholder value
- Validating results and capturing learning through measures of progress
- Developing the mind-set, capabilities, and skills needed to capture shareholder and stakeholder value
One can start anywhere along these eight steps as long as they are all eventually included in the overall change management process needed for sustainable value creation. This section contains figures, diagrams and matrices that illustrate in greater detail the "how to" for each of the eight disciplines. A simple but effective one is the "shareholder/stakeholder value map" that Laszlo regularly uses throughout the text. It describes four different quadrants in which companies can operate (with stakeholder and shareholder value as the two key axes). Only companies in the upper-right quadrant, where shareholder and stakeholder value are both positive, can achieve sustainable value creation as the value they deliver to shareholders is not transferred from other stakeholders. This simple framework can be a useful starting point for organizations to begin mapping their sustainability journey.
This book is not one that can be just read and left on the shelf. It is a practical guide that will assist those working in and with organizations in the field of corporate citizenship and sustainability. If you need help in putting together a business case for sustainability to convince a sceptical Board or CEO, Laszlo’s book is a good starting point. It will also continue to be of use once you have convinced the Board or CEO and they ask you to implement a model that integrates shareholder and stakeholder value rather than a CSR program that may exist in parallel with unsustainable business practices. Particular chapters will also make good reading material for students in graduate courses in corporate citizenship and sustainability.
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