Sustainable Management

European Perspectives

Prof. Dr. René Schmidpeter

Dr. Juergen Meyer Endowed Chair for International Business Ethics and Corporate Social Responsibility, Cologne Business School

Foto Schmidpeter

Foto Schmidpeter

Worldin

Transition

Business Challenges in a “World in Transition”

• Fossil Fuels• Rare Earths• Fertile Farmland• Freshwater

• Volatility of Demand / Supply

• New markets• Changing

demographics

• Interdependencies• Disruption risks• Stability of supply

networks

• Record Profits• Societal Issues• Compliance

Business Challenges Accelerators

“What is the right approach to value

creation?”

Market Volatility Natural resources

Profit vs. PurposeGlobal Value Chain

xSocial Pressure

Natural disasters

Key Question

Source: Michael Dheur (2013) CSR und Value Chain Management. Management-Reihe CSR (Schmidpeter)

Gesellschaftlicher Mehrwert

Corporate Social Responsibility

reine Philanthropie

ausschließlicheGewinnmaximierung

ohneZiel und Plan

Eigene Darstellung (2012)

PureProfit

Maximation

SocietalPressure

PurePhilantropy

Scarcityof Resources

FinancialCrises

EconomicPressure

© Schmidpeter, 2014

Current Business Models get under pressure

Limitsof

Growth

Integrative Growth through Sustainable Business

Pure ProfitMaximization

PurePhilantropy

CorporateSocial

Responsibility

Social Entrepreneurship

InclusiveBusiness

Shareconomy

???

New Opportunities

New Challenges

Limitsof Good Causes

New GrowthOpportunities

© Schmidpeter, 2014

High Expectations towards Business

Edelmann Trust Barometer 2011

Seite 12

Source: Edelmann Trust Barometer 2011

Factors influencing Corporate Reputation

Factors influencing Corporate Reputation

Source: Edelmann Trust Barometer 2011

Bewertung von Unternehmen

Quelle: Edelmann Vetrauensbarometer, 2011

Hohe Qualität der Produkte und Services

Transparente und faire Geschäftspraktiken

Unternehmen dem ich vertraue

Fairer Umgang mit Mitarbeiter

Wie wichtig sind diese Faktoren für die Unternehmensreputation ?

Kommuniziert oft

Faire Preisgestaltung

Aktives Engagement für Gesellschaft

Innovator

Bekannte Führungspersönlichkeiten

Finanzielle Gewinne für Investoren

Corporate Social Responsibility

as Cornerstone of Sustainable Growth

„CSR is a process whereby companies integrate social, environmental and ethical issues into their business operations and strategy in close interaction with their stakeholders, going beyond the requirements of applicable legislation and collective agreements. …

A strategic approach to CSR is increasingly important to the competitiveness of enterprises, helping them to create value both for owners and shareholders … to win the trust and respect of citizens …

Source: Communication European Commission , Oktober 2011

Business and Society: Win-Win Perspectives

86 % of the people are convinced, that corporationswhich are investing in society are more successful

in the long-term

87 % of the citizens appreciate social engagement of business, 76 % see it as an important

business challenge to invest in solutions for societal and ecological problems

Win-Win

University of St. Gallen 2004

Sustainable Business Models are performing

betterDuring the crisesnon-sustainable companies

lost 50 %, Sustainable company only 43 %

of their market value

Sustainable companiesin 16 out of18 branches/industries

have 15 % less capital costs

non-sustainable companies lost

1.9 $ billionmore in average

Source: Oekom Research 2010, A.T. Kearney 2009, Sloan Management Foundation 2013

Sustainable Investments

over 5.000 Billion Euro worldwide

Over 60 % of the topmanager: „Sustainability adds to profit“

Source: Philipp Schreck (2012) in Schneider/Schmidpeter (Hrsg.): Corporate Social Responsibility, S. 78

Sustainable Management: New Strategic Management

Thinking

Strength & Weaknesses

Opportunities & Threats

Analysis of Contigency

Internal and externalImpact mechanism

Impact of CSR

Contribution toSolve societalChallenges

Economic:

Societal:

Dimensionsof Responsibility

1. Dimension:Value Creation Processes

2. Dimension:Value Creation Idea

3. Dimension:Beyond Value Creation(Corporate Citizenship)

New Strategic Thinking

• On a long-term perspective, social and economic objectives can be combined

• The success of companies is dependent on local conditions

• Social improvements strengthen economic developments

• Ideally, companies and society benefit at the same time from an engagement

Source: Porter, M. / Kramer, M. (2002): The Competitive Advantage of Corporate Philanthropy, in: Harvard Business Review, Vol. 80 Issue 12, p56-69.

Source: Eva Grieshuber (2012) in Schneider/Schmidpeter (Hrsg.): Corporate Social Responsibility, S. 375 nach Savitz/Weber

Business Ethics: Aligning Social and Organisational

Interests

Organisation Stakeholder/Society

New Products and ServicesNew ProcessesNew MarketsNew Business Models (Sustainable Value Creation)New Management- and Reportingsystems

Business Ethics and Value Chain Mangement

Quelle: Otto Schulz(2012) in Schneider/Schmidpeter (Hrsg.): Corporate Social Responsibility, S. 272

Several Companies Have Decided to Lead the Way Towards Sustainable

Value CreationValue Creation

Strategy

Sustainable Products

Sustainable Operations

Enterprise Architecture

Stakeholder Collaboration

Business Planning

Continuous Cost Reduction

Supplier & Partner Networks

1

2

3

4

5

6

7

8

Creating Shared Value Program

Plan A Committment

Energy Saving ICsReduced Impacts during Use Phase

Sustainable Supply Chain

Sustainable Apparel & SC

Integrated ScorecardMeasuring sustainability in the Agro SC

Regional Administration Development Partnership

Safe & Fair Labour

Planning for Asset Recovery

Demand-Supply Synchronization

Logistics Cost Reduction

Environmental P&L

Empowering rural women

Localized Vanilla SC

Sustainable Management: Extended capital theory

market value of the firm

physical capital human capital social capital

Sustainable Management: Stakeholder theory I

Traditional management model

The traditional management model identify four stakeholders for the company: suppliers and employees (provide the basic resources for the corporation ), customers and shareholders (the owners of the firm)

Stakeholder model

For the stakeholder model, shareholders are only one group of stakeholders. The company has several obligations to all the groups affected by or that can affect the firm’s actions

Business and society

ILO (2013) Training Course: Introduction to CSR

Sustainable Management: Stakeholder theory II• The network model of stakeholder theory suggests that

firms have indirect relationships with a whole range of constituencies via their immediate stakeholders.

Business and society

ILO (2013) Training Course: Introduction to CSR

Corporate sustainabilityA sustainable enterprise is able to continue its activities in the long run, taking into account the impact of its actions on natural, social, and human capital.

The CSR concept has become the managerial framework wherein the relationship between business and society are studied.

Convergence between corporate strategy

and CSR

Social responsibility is essential to sustainable development

CSR and sustainability

ILO (2013) Training Course: Introduction to CSR

Carroll’s pyramid

The most established and accepted model of CSR (Carroll 1979, 1997, 2009) regards CSR as a multilayered concept.

Business and society

ILO (2013) Training Course: Introduction to CSR

CSR and Management practice

“Corporate Social Responsibility is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large” (WBCSD, 1998)

28

What is CSR?

ILO (2013) Training Course: Introduction to CSR

Integrate social and environment concerns in business operations

Voluntary basis

Exceed compliance with the law

Business contribution to sustainable development

To sum up…

29

CSR

What is CSR?

ILO (2013) Training Course: Introduction to CSR

EconomicResponsibility

EcologicalResponsibility

Social Responsibility

Tri

ple

Bo

tto

m L

ine

Co

rpo

rate

So

cial

R

esp

on

sib

ilit

y

Corporate Governance

Corporate Citizenship

Su

stai

nab

leM

anag

emen

t

Norms and Values

Norms and Values

Bu

sin

ess

Eth

ics

Philanthropy

Activities integrated in core business

Activities related to core business

Activities without a connection to business

Source: Schulz, Frankfurt 2013

CSR: Innovation through Sustainability

environmental and climate issues are becoming more important

accumulated needs for eco-efficient products

start of the Green Flagship Concept 1998development of innovations and product leadership in 6 areas: energy use, packaginghazardous substances, weight, recycling and waste, durability

eco-efficient products as market strategysupport through environmental lobbyingeducation initiatives

Unilever: Sustainable Iglo Fish production

• pioneer in the field of sustainable fishing

• cooperation with the World Wilde Fund: Founding of the Marine Stewardship Council (MSC) in 1997: Development of a certification program for sustainable fishing

• change to MSC certified coalfish in Mai 2005

• more than 40 certified fisheries as suppliers

3. November 2007 Page 33

CSR matters – public policy too Of course: first and foremost CSR

addresses the business world

But: CSR can only reveal its full potential when public policy plays an active role in implementing and supporting CSR

Facing the complex problems of today‘s world – we need the contribution of all societal actors to find appropriate solutions

Capabilities of actors tocontribute to problem solving

sources: World Bank, Public sector roles in strengthening corporate social responsibility: a baseline study; Bertelsmann Stiftung: The CSR-Navigator – Public Policies in Africa, the Americas, Asia and Europe

New Trends: Bringing Business and Society

togetherSustainable growth models have always been based on serving the needs of society. Due to its problem solving capacity business has always been a main driver for social innovation.

Under the current circumstances business models which are cooperative and sustainable are becoming more relevant again. Sustainable Entrepreneurship und Corporate Social Responsibility.

many examples and initiatives do exist in order to reactivate mainstream businesses’ role as a driver for social innovation

Corporate Responsibility and Sustainability can be a driver for new business approaches in the fields of education, job creation, minority integration

Thank you