Sustainable Business Challenges and Opportunities Tom Johnstad Gjøvik University College Konin, Polen, Projekt współfinansowany ze środków funduszy norweskich i krajowych 1

The Sustainability Concept From the Brundtland Commission “Our Common Future” – a UN report from 1987 – A synthesis or compromise between environmentalists and development experts – Pioneered the definition of sustainability as “meeting the needs of the present without compromising the needs of future generations” – Developed also a conceptual framework to evaluate any action as truly sustainable, with the “three E’s” of sustainability – – Environment – Economy – Equality – These three interrelated spheres represent sustainability Projekt współfinansowany ze środków funduszy norweskich i krajowych2

Sustainable business: From single, via triple, to multiple bottom line Projekt współfinansowany ze środków funduszy norweskich i krajowych3

What happened in the nineteenth century? Projekt współfinansowany ze środków funduszy norweskich i krajowych4

The market and industrial revolution Liberalism Greater freedom – political, economic and social (Adam Smith) Technological development and innovation Steam engine, R&D and entrepreneurship (Schumpeter) Infrastructure and urbanization Increased markets, big scale production, and agglomeration and concentration Capitalism – industrial and financial The protestant ethics and spirit of capitalism (Max Weber) Joint stock company, limited liability and shareholder profit Projekt współfinansowany ze środków funduszy norweskich i krajowych5

From unlimited to limited liability companies A revolutionary organizational change Unlimited liability and public control During the Medieval and Mercantilism ( ) – Partnership and Mutual companies – Corporations – legal personality Opened up for limited liability (liable only for invested capital) Chartered companies used to develop the colonies – The East Indian Company chartered by Elisabeth 1 – then copied by others Joint stock company – with limited liability (from 1850’s) A separation between the State and the companies, and company and owners Limited liability and control for the owners/shareholders – Reduced risks and willingness to invest Fought through with great resistance – By rentier investors – But, seen as an irresponsible form  A revolutionary change that created growth, but also negative externalities – not sustainability Projekt współfinansowany ze środków funduszy norweskich i krajowych6

The further economic and political development «The managerial revolution» (Chandler) – a further separation of ownership and control Corporations, professional managers, manager control (1910- ) Scientific Management (Taylorism) + Labor unions fighting for social and economic rights + Children’s and woman’s rights Financial markets and shareholder activism (1950/ ) Maximize profits (Shareholder values) Short termed (quarterly/financial capitalism) + Environmental movements and activism (1960/70- ) + Poverty and Global development (1960/70- ) Financial crises and social responsibility ( ) + Climate crises Co-created values (Stakeholder values) More long term views and focus on opportunities/innovation  A new form of (stakeholder/sustainable) capitalism? Projekt współfinansowany ze środków funduszy norweskich i krajowych7

Focus in the struggle for sustainability Global and national – Agreements, laws, regulations and actions Climate, and social aspects of the value chains Local/regional – Regulations and actions Environmental focus Individual and families – Mindset and adjustments On consumption Sorting of garbage Business – stretch all levels – Ethics, governance, strategy and practice Corporate Social Responsibility (CSR) – Philanthropy Sustainability – Advanced and integrated Projekt współfinansowany ze środków funduszy norweskich i krajowych8

Epstein (2008/2014) on Sustainability Sustainability is more than just talking or ‘window dressing’ It is a comprehensive and holistic approach – Visions/strategies – Structures/systems – Procedures  Part of day-to-day decisions/actions Focus on how – the implementation Projekt współfinansowany ze środków funduszy norweskich i krajowych9

10 Corporate Sustainability Model Epstein & Buhovac (2014)

Stakeholder reactions: Do you by cloths «Made in Hell»? Projekt współfinansowany ze środków funduszy norweskich i krajowych11 In April 2013 – More than 1200 people died when the textile factory Rana Plaza in Bangladesh collapsed. A company with bad ethics, governance, and social and environmental conditions The factory produced cloths for the Western brands Mango and Primark A situation that could ruin the reputation of their brand  H&M have employed 300 sustainability controllers Dinside, May 2013

A report on ‘The toxic trail of clothes’ unveil that many of the clothes that we wear are toxic. The giant Zara promised to take action Projekt współfinansowany ze środków funduszy norweskich i krajowych12 KK desember 2012

Starbucks do not pay taxes in the UK This is ruining the tax base and the public services Activists and the media put heavy pressure on the multinational They are now paying voluntary tax (£ 10 mill. in 2012 and 2013) Projekt współfinansowany ze środków funduszy norweskich i krajowych13 Vårt Land, September 2014

A basic Sustainable Business challenge: Integrating Performance and Reporting «Corporate failure is typically a reflection of ineffective corporate governance and the lack of focus on sustainability performance» A focus on EGSEE performance and reporting Ethical Governance Social Economic Environmental Projekt współfinansowany ze środków funduszy norweskich i krajowych14

Sustainability Performance Framework & Integrated Reporting Projekt współfinansowany ze środków funduszy norweskich i krajowych15 Brocett & Rezaee (2012)

Sustainability – dimensions and some indicators Economy Profits/surplus/balance Avoid waste/Lean R&D&I Environment Pollution (air/water/land) CO2-emission Natural resources use Energy use Water use Social Heath/work environment/safety Education/skills/teaching Rights/wages/participation Ethics Sustainability vision and mission Anti-corruption/black labor/children labor Governance Comply to laws and regulations Transparency/reporting Projekt współfinansowany ze środków funduszy norweskich i krajowych 16  A lot of reporting, but most companies do have the information – if not, the access would make for a better company

A good start for Storebrand’s Sustainability Fond (SPP) Projekt współfinansowany ze środków funduszy norweskich i krajowych17

A pioneering Sustainability Company An American producer and distributer of leisure cloths and equipment More than 40 years experience in business The Responsible Company Projekt współfinansowany ze środków funduszy norweskich i krajowych18

Projekt współfinansowany ze środków funduszy norweskich i krajowych19

To become a Sustainable Business It is needed to – Change mindset (ethics/culture) and strategy – Be able to measure and control performance – Develop good governance and management – Develop new sustainable products/services and business models – Create sustainable production/manufacturing and supply chains – Use sustainable marketing, and – Create sustainable brands Must not look at sustainability as a cost or obligation, but as an opportunity and advantage !!! Projekt współfinansowany ze środków funduszy norweskich i krajowych20