Heinrich-Heine-Universität Düsseldorf
Wirtschaftswissenschaftliche Fakultät
12. Fachsemester

Sustainable Development –
a special strategic management issue

von: Thomas Hollwedel

Content

1. The Papers structure  3

2. What is “Sustainable Development”  3

2.1 A definition of sustainable development  3
2.2 The roots of sustainable development  3
2.3 The importance of sustainable development – why now?  5

3. Bringing sustainable development to business 5

3.1 The typical business approach to sustainable development  5
3.2 three drivers why business has to act 6

3.2.1 changes in law are tightening the business framework  6
3.2.2 peoples choice and customer demand 7
3.2.3 OEM’s require certificated suppliers 8

3.3 New business and business models through sustainability  8
3.4 “Eco-Efficiency” – a first step to change business 9
3.5 A green industrial revolution is needed 9
3.6 Environmental Management as a (top) management issue  10

4. Integrate of sustainability into strategic management  10

4.1 Strategy formulating  10

4.1.1 sustainable development as one aspect of strategic management  10
4.1.2 analysis: environment is a stakeholder  11
4.1.3 strategy forming - integration of sustainable development  11

4.2 Strategy implementing 12

4.2.1 change management - the critical factor during the shift of strategies 12
4.2.2 greening corporate philosophy and principles 12
4.2.3 adjusting the organizational structure 13

4.3 Strategy evaluating  14

5. Outlook  14

Literature and references  15
 

1. The Papers structure

This paper is divided in three major parts. In the first one a definition of “sustainable development” and an overview about it’s history and importance will be given before part two (chapter 3) will follow with the consequences and importance sustainable development has for business. In the third part (chapter 4) the author will give an idea how sustainable development and strategic management can be linked. Finally the author will draw a brief conclusion.

2. What is “Sustainable Development”

2.1 A definition of sustainable development

To have a common understanding throughout the text one of the most popular definition will be given. It’s taken from the report “Our Common Future” published 1987 by the WCED better known as the “Brundtland-Commision”: “<Sustainable development> is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within two key concepts: the concept of <needs>, in particular the essential needs of the world’s poor, to which overriding priority should be given; and the idea of limitations imposed by the state of technology and social organization on the environment’s ability to meet present and future needs”1 The idea itself is not new and can be found in a lot of cultures e.g. the Indians say “Treat earth well - it is brought from your grandchildren.” The important aspect of having this rather vague definition is that for the first time a definition on an international level was found and widely discussed by governments, NGOs, and the industry.2

2.2 The roots of sustainable development

The first and massive concerns about environmental issues where probably inspired by Meadows Book “The limits of growth” published in the 1970ies as a report to the Club of Rome. The progress in developing concepts of sustainable development have been rapid since than. The issue was enforced in the 1980ies and in the 1990ies environmental problems where discussed on an international basis with governmental, NGO and industry participation.3 What changed was the historical approach of people, business and industry that regarded nature, extracted natural resources and the environmental system as a given system with non ending resources that are gratis. As a matter of system this lead to a dislocation of goods as the price is the key factor for an economical efficient allocation. And even though resources have a price – it still does not mean that it reflects the harm done to nature and the price for (future) consequences of environmental damage. People nowadays have got a more sensible approach towards the usage of nature. They do have a stronger sense for the environment and do care for it. Their ideas often reflect in their action as citizens, customers, employees or managers.

This change lead to changes on markets and business: In the 1970ies the first “green products” appeared.4 In the 2000ies the US SEC guidelines first required corporations to disclose future environmental liabilities. The importance of avoiding bad environmental outcomes became a question for the stock market and the rating and evaluation of companies.5 Companies start to implement environmental management programs like EMS or ISO 14000. On the political side the green parties –mostly founded in the 1970ies- brought new impulses into legislation and brought changes in law: e.g. recycling regulations or expanded product liability regulations. In 1992 world leaders even developed a framework for an action plan that deals with the environment and development issues for the coming decades – the AGENDA 21. The discussion spread from government and NGO’s to business and the natural environment become an accepted stakeholder in daily life. Unfortunately the progress on implementation of sustainable development has been rather slow.6

2.3 The importance of sustainable development – why now?

[...]

1 Wagner, G.R. 1997, S.35

2 compare Matten, D.; Wagner, G.R. (1998), pp. 55-56.

3 http://sdgateway.net/introsd/definitions.htm 04/02/02 at 12.31

4 Ottman, Jacquelyn A. (2002), Ottman, Jacquelyn A. (2002), http://www.sustainablebusiness.com/features/feature_template.cfm?ID=1791 03/29/02 at 11.37

5 http://www.vanderbilt.edu/VCEMS/papers/insight.html - Owen Graduate School of Management - Martin S. Geisel, Dean - 03/29/02 at 15.13

6 http://sdgateway.net/introsd/definitions.htm