Any understanding of sustainability, argue these authors, must include not just which raw materials the organisation uses, or even how they are used. It must also take into consideration an evaluation of the how the effects – both positive and negative – are distributed to the various stakeholders concerned. This will require managers to rethink organisational activity and revise processes.
For a few years now the concept of corporate social responsibility has been gaining increasing attention around the world among business people, media people and academics from a wide range of disciplines. There are probably many reasons (see Crowther & Ortiz-Martinez 2006) for the attention given to this phenomenon, not the least of which is the corporate excesses in various parts of the world. These have left an indelible impression among people that all is not well in the corporate world and that there are problems which need to be addressed. Such incidents are too common to recount but have left the financial markets in a state of uncertainty and have left ordinary people to wonder if such a thing as honesty exists any longer in business.
One of the implications of this current concern, however, is the belief that this is a new phenomenon – one which has not been of concern previously. Issues of socially responsible behaviour are not of course new and examples can be found from throughout the world and at least from the earliest days of the Industrial Revolution, and the concomitant founding of large business entities (Crowther 2002) and the divorce between ownership and management – or the divorcing of risk from rewards (Crowther 2004).
Over time there has been a concern for the socially responsible behaviour of organisations, one which has gained prominence at certain times while being considered of minor importance at others. During the 1970s, for example, there was a resurgence of interest in socially responsible behaviour. This concern was encapsulated by Ackerman (1975), who argued that big business was recognising the need to adapt to a new social climate of community accountability but that the orientation of business to financial results was inhibiting social responsiveness. McDonald and Puxty (1979) on the other hand maintained that companies are no longer the instruments of shareholders alone but exist within society and so therefore have responsibilities to that society, and that there is therefore a shift towards the greater accountability of companies to all stakeholders. Recognition of the rights of all stakeholders and the duty of a business to be accountable in this wider context therefore has been a recurrent phenomenon. The economic view of accountability only to owners has only recently been subject to debate to any considerable extent.1 Indeed the desirability of considering the social performance of a business has not always, however, been accepted and has been the subject of extensive debate.
The definition of CSR
Definitions of CSR abound but all can be seen as an attempt to explain and define the relationship between a corporation and its stakeholders, including its relationship with society as a whole. Many too are phrased in terms of the triple bottom line, in a way which we argue trivializes the concept. Because of the uncertainty surrounding the nature of CSR activity it is difficult to evaluate any such activity. It is therefore imperative to be able to identify such activity. We have argued (2007a) that there are three basic principles2 which together comprise all CSR activity. These are:
- sustainability
- accountability
- transparency
Defining sustainability
There is a considerable degree of confusion surrounding the concept of sustainability. For the purist, sustainability implies nothing more than stasis – the ability to continue in an unchanged manner – but often it is taken to imply development in a sustainable manner (Marsden 2000; Hart & Milstein 2003). For many, the terms “sustainability” and “sustainable development” are viewed as synonymous. One problem is the fact that the dominant assumption by researchers is based upon the incompatibility of optimising, for a corporation, both financial performance and social / environmental performance. In other words, financial performance and social / environmental performance are seen as being in conflict with each other through this dichotomisation (see Crowther 2002). Consequently, most work in the area of corporate sustainability does not recognise the need for acknowledging the importance of financial performance as an essential aspect of sustainability and therefore fails to undertake financial analysis alongside – and integrated with – other forms of analysis for this research. We argue that this is an essential aspect of corporate sustainability and therefore adds a further dimension to the analysis of sustainability. We therefore argue (2007b) that there are 4 aspects of sustainability which need to be recognised and analysed, namely:
- Societal influence, which we define as a measure of the impact that society makes upon the corporation in terms of the social contract and stakeholder influence;
- Environmental Impact, which we define as the effect of the actions of the corporation upon its geophysical environment;
- Organisational culture, which we define as the relationship between the corporation and its internal stakeholders, particularly employees, and all aspects of that relationship; and
- Finance, which we define in terms of an adequate return for the level of risk undertaken.
These four must be considered as the key dimensions of sustainability. All four are of equal importance.
The discourse of sustainability has become as ubiquitous as the discourse of CSR. As we have reported (2007c), every firm in the FTSE100, for example, mentions sustainability, with 70 percent of them focusing on it. Any analysis of statements regarding sustainability, however, quickly reveals the uncertainty about the meaning of this sustainability. Clearly the vast majority do not mean sustainability as we have defined it (2007d), or as defined by the Brundtland Report. Often it appears to mean little more than that the corporation will continue to exist in the future.
An almost unquestioned assumption is that growth remains possible (Elliott 2005) and therefore sustainability and sustainable development are synonymous. Indeed the economic perspective of post-Cartesian ontologies predominates and growth is considered to be not just possible but also desirable (see for example Spangenberg 2004). So it is possible therefore for Daly (1992) to argue that the economics of development is all that needs to be addressed and that this can be dealt with through the market by the clear separation of the three basic economic goals of efficient allocation, equitable distribution, and sustainable scale. We argue that this analysis is incorrect and sustainability is more complex than any economic problem, and cannot therefore be resolved through the market. We illustrate our argument in Figure 1.
Figure 1 – The Conventional Transformational Process
This model assumes that inputs of capital labour and finance are used to make goods and services through the employment of the operational factors of production (e.g. employees, suppliers etc.) in order to make goods and services with a resultant profit. The implications of this conventional view of the transformational process are that the inputs can be freely acquired in the desired quantities and that the operational factors of production are commodified. This view of the process enables mediation through the market and is legitimated by the views of such as Spangenberg (2004) referred to earlier.
There are, however, 2 fundamental flaws with this form of analysis:
- The input referred to as capital actually represents environmental resources, which are quite definitely finite in quantity. Thus the market cannot mediate adequately as the ensuing competitive bidding will raise the price but will not bring more of the resource into the market because there isn’t any more of it. Substitution can compensate for shortages only to a limited extent. It is difficult, for example, to see the extent to which more finance or labour can compensate, for example, for the absence of oil.
- The factors of production are not actually commodities. Rather they are stakeholders of the organisation. It may aid analysis to commodify them but they require benefits from the organisational activity. In particular, when resources are recognised to be finite, market mediation in this way does not satisfactorily accommodate the requirements of all stakeholders in the organisation. These stakeholders need to become a part of the output section of the transformational process.
The revised transformational process is therefore depicted as figure 2.
Figure 2 – Equitable Sustainability and the Transformational Process
Additionally, there is a wide variety of such stakeholders who justifiably have a concern with those activities, and are affected by those activities. Those other stakeholders have not just an interest in the activities of the firm but also a degree of influence over the shaping of those activities. This influence is so significant that it can be argued that the power and influence of these stakeholders is such that it amounts to quasi-ownership of the organisation. Our argument therefore is that sustainability can only exist if equity also exists.
Introducing equitable sustainability
Hence we introduce the term equitable sustainability to reflect this argument that sustainability cannot exist without equity in the distributional process. It is our argument that sustainability is presently not really either understood by theorists or addressed by corporations, despite the many claims that are being made. Indeed, we regard such analysis – based on the notion of mediation through the market – as being both complacent and obfuscatory concerning the issues which need to be addressed. It is only by introducing the concept of equity into the analysis that we can start to address the question of sustainability.
Central to our argument therefore is that an understanding of sustainability must include not just what raw materials are used by the organisation, or even how they are used. It must also take into consideration an evaluation of the how the effects – both positive and negative – are distributed to the various stakeholders concerned. This requires some rethinking of organisational activity and a revision of processes and effects.
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References
1 See Crowther (2000) for a full discussion of these changes.
2 See Crowther (2002) and Schaltegger et al (1996) for the development of these principles.
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