Sustainability requires another corporate decision making model

Corporate strategies are a shaky basis for getting society on a sustainable track. They may change, if other strategies would incur more profit. The green CEO may be replaced by a more traditional one. The company may be acquired by a party that does not value sustainability. In order to promote sustainable companies as much as possible, society should take more structural steps: anchor sustainability in corporate structure, and make it visible in society. Companies that pursue sustainability in their strategies could perceive such a structure imposed by law as a form of support by society.

biorefinery
Many companies are on a sustainable course, e.g. in biorefinery (courtesy Dutch Biorefinery Cluster)

Securing sustainability within the enterprise
In our society, sustainable corporate actions are mainly induced by external demands: environmental regulation, waste management requirements, annual sustainability reports. Consumer demand for sustainability is a relatively new phenomenon; it is sustained and even intensifies, and even the sceptical wisdom that consumers do not wish to pay extra for sustainability does not hold any more all along the spectrum. Therefore, a number of large corporations has declared sustainability to be at the core of their strategies – remarkable, as increasingly, measurable standards are set for sustainable actions and therefore, sooner or later, ‘greenwashing’ will be exposed. Ecology and economy, completely adversarial in the seventies, get closer. Sustainability has become a major driving force in society, no longer driven by government interventions, but by corporate actions, motivated by responsible citizens. The number of enterprises led by this broader, ‘sustainable’ goal is increasing. And surprisingly, sustainable actions often incur enough profit to motivate abolishment of former unsustainable actions.

Sustainability-Report
Annual sustainability reports (here: Pepsico), though often criticised for greenwashing, are an instrument to promote reflection on sustainability within the company.

People, planet, profit
Society is on a long track of promoting sustainable corporate actions. Environmental regulation is the first step, because this requires companies to clarify the effects of their actions. Annual sustainability reports carry this process one step further, because these require a form of reflection. Some companies (including listed ones) couple sustainability results to managerial bonuses, even better. The most responsible enterprises (both big and small) try to develop a long-term perspective, soliciting for a long-term involvement of both employees and financiers. Sustainability is a natural motivation for such a strategy: people, plant, profit.

Securing a sustainable attitude in the enterprise may be in the form of a more important role for certification. Companies may obtain a great number of certificates, including on subjects like energy conservation and waste management; these certificates have in common that actions should be taken carefully and accountably. Sustainability too, requires careful and accountable action, certification and sustainability mutually reinforce each other. Certification is on a voluntary basis, but government and consumers may promote it in many ways, notably by procuring exclusively at companies that have acquired certain certificates. A support for organisations promoting sustainable enterprises may be important. Voluntary competitions for sustainability indexes may be of help as well.

shareholder meeting
In listed companies, shareholder meetings should no longer be the most powerful body.

A countervailing force to the financial factor
The ultimate goal is that sustainability would trickle right into the company’s capillaries. Posing accountable sustainability targets for corporate sections is an important tool. Such initiatives will have to come from the top, but companies might lend a more permanent role to initiatives from below, from staff meetings. Both from ‘people’ and from ‘planet’ motives, a plea could be made for a better (legal) status for staff meetings. From this angle we might also develop a preference for the cooperative organisation, in which customers may become members with voting rights.

In the last resort, society will only be able to realise these goals by lending a countervailing power to the financial factor in corporate structure. In listed companies, shareholder meetings should no longer be the most powerful body. Yes, shareholders should decide on financial matters like new emissions. But in deciding on strategy, their power should be restricted. Companies are not the exclusive property of shareholders. They are organisms that can only be productive because many functions cooperate in it. In another sense, companies are also ‘owned’ by their employees who find fulfilment in them. And to a certain extent, they are also ‘owned’ by the environment, that supplies natural riches, resources, space, air, water, biodiversity and soil fertility to the company. The factors ‘people’ and ‘planet’ should be represented in a visible way as strategic decisions are taken, i.e. in the highest decision making platform of the company. We should reopen the discussion on corporate structure with this bid.

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