Environmental Management Leadership Symposium

May 2 & 3, 2011

Eco-efficiency, growth and the nature of corporate sustainabilityStefano Pogutz and Valerio MicaleUniversità Bocconi

Goal

Understanding under which conditions firms can realistically target environmental sustainability

How far individual companies can contribute to environmental sustainability?

How much are companies prisoners of the system and dominated by exogenous forces that limit the real possibility to pursue sustainable business models?

Market growth

Growth rate, size, evolution stage,

consumption pattern

Environmental manageability

Ecosystem complexity and organizational

structure

The notion of CES: Literature Review

Late 80s → WCED– The term sustainable development is defined …

Early 90s → Greening of Industry & ONE Interest Group– Diffusion of concepts like greening and natural environment– “Organizational theories cannot adequately address environmental concerns

because of their limited ideas of 'organizational environment‘” (Shrivastava, OS 1994)

– “Organizations studies have de-naturalized the environment” (Shrivastava, OS 1994)

– Knowledge and theory develops “… as if as if organizations lack biophysical foundations” (Gladwin et al., AMR 1995)

1995 → Academy of Management Review special Issue on “ecologically sustainable organizations”

– Developing the theoretical roots /Starik and Rand, Hart, Gladwin, Kennelly and Krause, Jennings and Zandbergen, Purser, Park and Montuori, Shrivastava, etc.)

– Critics to the dominant organizational paradigms

The notion of CES: Literature Review

After 1995 → two main streams of research

Firm level studies– Resources and capabilities for the greening of companies– “business case”: environmental performance, competitiveness and financial

performance

Relations with the actors of the organizational environment– Institutional and stakeholder theories

The State of the Art → (Bansal & Gao, 2006; Berchicci and King, 2007; Etzion, 2007; Kallio & Nordberg, 2006)

Rich and rigorous body of research

Mainly incremental with dominant org.

theories

Opportunity for more disruptive contributions

Corporate environmental sustainability

Eco-efficiency The attempt to combine ecological and economic efficiency while

allowing the delivery of goods and services, and while progressively reducing the environmental impacts and the resource intensity throughout the life cycle of the product

Integrates environmental concerns into companies' existing business models

Produces win-win solutions, reducing relative impact and production costs

But … Focus on relative improvements … and preserves dominant business practices

Corporate environmental sustainability

Triple Bottom Line Balancing economic goals with social and

environmental goals Increasingly adopted by companies

But … Trade-offs among the three variables and absence of

a methodology

Environmental sustainability is not concerned with relative improvements, but it depends on absolute thresholds and on the capacity of ecosystems to absorb external shocks and emission

releases (Arrow et al., 1995).

Economy

Environment Society

Conditions of unbalance …

Managerial practices have ultimately proved to be partially effective, with sustainability-driven strategies only marginally mitigating the firm impact on nature

The large majority of firms has continued staying protected in the current dominant business framework

Two conditions: – only partially controllable by the single firm– strongly influence and limit the possibility to stabilize its relation

with ecosystems dynamics

Market growth

Environmental manageability

Market growth …

Growing consumption pattern and primary demand– Geographical extension of markets (emerging economies …)– New market opportunities intercepting unsatisfied needs

The attractiveness of business is driven by its rate of development

Firms use market growth as a strategic option to maintain or increase competitiveness

Market growth is a partially exogenous variable

But … Market growth negatively influences corporate

environmental sustainability…

Manageability …

The possibility, for the individual firm, to effectively manage the harm caused to the natural environment by its processes and products

Complex nature of ecosystems– Complex adaptive systems– Non-linear, variety of species, different flows– Resilience of ecosystem depends on factors exogenous to the company– Ecosystems time-scales and spatial-scales do not match the companies' ones

Structure of the firm and company position on the supply chain

Mass balance: input and output

Firm

Harm

Ecosystem

Four scenarios for corporate env. sust.

Market growth

High

Low

Manageability of the environmental impact

High Low

Implications

Companies– attention to the effectiveness of environmental strategies– learning about the complexity of the ecosystems– environmental sustainability goals must intercept the relation

between the individual firms and the environmental thresholds– new environmental knowledge and competencies to manage

ecosystem complexity– …

Policy makers– strong governance – involvement of agencies and organizations operating at several

hierarchical levels– links between system environmental indicators and corporate

environmental indicators– …

Implications

Future research– understand the linkages between competitiveness, growth and the

possibility to develop alternative business models, that evolve in balance with ecosystem functions and ecosystem dynamics

– exploring innovative ways to challenge dominant consumption patterns

– exploring emerging economies and the trade-offs with local/global

environmental aspects, and social issues – acknowledging the complexity of ecosystems where organizations

are embedded – …

– bridging the disciplinary distance between ecology and management theory

Thanks!!!