Organizational Ecosystem Embeddedness and its Implications ... - Iefe

Organizational EcosystemEmbeddednessand its Implications forSustainable Fit StrategiesStefano Pogutz, Università Bocconi, ItalyMonika Winn, University of Victoria, CanadaResearch SeminarIEFE, Università BocconiMarch, 11 2011

Agenda• Overview• Outline of the research program• Nature and Organization Theory• Organizations and Ecosystem Relationship• Sustainable Fit Strategies• Implication and conclusionS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Overview - Goal• To bridge the gap between greening of management studiesand ecological sustainability• To integrate the biophysical foundations of organizations intomanagement theorizing such that business organizations canoperate in accordance with nature’s functioning principlesS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Overview - Research ProblemPracticeResearchMore and more firmsadopt increasinglyambitious strategies ofgreening and CSRResearch in managementcan draw on a growing bodyof literature on corporatesustainabilityAnd yet:Real progress toward sustainable developmentremains elusive (IPCC, 2007; MEA, 2005)S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Overview - Research ProblemS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Outline of the research program• Examine how organization and management research mayincorporate these principle• Introduce critical concepts from ecologyto the management literature– Ecosystems– Ecosystem Health– Ecosystem Services• Develop a theoretical model of the the two relationships betweenthe firm and ecosystems: impact and dependence• Introduce a typology of strategies that have the potential to providea “sustainable fit”S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization TheoryS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization TheoryONE research has been very effective in introducing “nature” to organizationtheory (e.g., Bansal & Gao, 2006; Etzion, 2007; Kallio & Nordberg, 2006),• but … “…most management theorizing and research continues to proceedas if organizations lack biophysical foundations” (Gladwin, Kennelly &Krause, 1995).• …and has not introduced nature’s functioning principles; instead, it “entirelyignores issues like biodiversity and habitat protection” (Etzion, 2007: 656).• BUT: “Without an adequate model of the world, effective action iscertainly unlikely” (Pfeffer & Salancik, 1978: 60).S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization TheoryS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization TheoryS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization Theory• Ecosystems: The most fundamental, widely used … conceptintroduced in ecology.– But complex, with multiple layers of meaning and use (Pickett &Cadenasso, 2002)• Definition: “Any entity or natural unit that includes living andnonliving parts interacting to produce a stable system in which theexchange of materials between the living and nonliving partsfollows a circular path” (Odum, 1953)S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization Theory• Ecosystem Services: the benefits human populations derive,directly and indirectly, from ecosystem functions (Costanza etal., 1997).S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization Theory• The MEA has classified the ES into 4 main categories:- provisioning services, the goods and the products obtained fromecosystems (i.e. food, freshwater, fiber, genetic resources, timber);- regulating services, the benefit obtained from natural processes likeclimate regulation, erosion regulation, pollination, disease regulation, waterflow regulation;- cultural services, the non-material benefits that ecosystems provide (i.e.,recreation, tourism, spiritual values, aesthetic enjoyment);- supporting services that underpin the other services (i.e., nutrient cycling,primary production and water cycling) (MEA, 2005; WRI et al., 2008).S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization TheoryS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization Theory• Ecosystem Health:”An ecological system is healthy and free from‘distress syndrome’ if it is stable and sustainable – that is if it isactive and maintains its organization and autonomy over time andis resilient to stress”(Costanza 1992: p. 9).• The assessment of ecosystem health requires a definition of bothecological and societal goals (Costanza, 1998; Muñoz-Erickson etal., 2007 Wilcox, 2001)• Preserving ecosystem health is a necessary condition forsupporting services that humans value (DeLeo & Levin, 1998)S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Nature and Organization Theory• According to Arrow et al., “economic activities are sustainable onlyif the life-support ecosystems on which they depend are resilient”(1995: 521).• In other words, when carrying capacity has been exceeded,ecosystem resilience is lost, thus compromising the capacity of anecosystem to provide services (Arrow et al., 1995; Seidl & Tisdell,1999).• The concept of ecosystem health thus critically captures the abilityof ecosystems to provide for and sustain humansS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Organizations and ecosystem relationshipOrganization impact onecosystems and ecosystemservicesEcosystem relationshipOrganization depend onecosystems and ecosystemservicesS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Organizations and ecosystem relationshipDependenceImpactOrganizationsEcosystemservicesEcosystemhealthImpactFocal firmDependenceS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Organizations and ecosystem relationship• Dependence: the state of relying on something in order to be ableto survive or operate properly (Collins Essential English Dictionary,2006, http://www.thefreedictionary.com/).• We draw on Organizational Theory to explore this notion Resource Dependency Theory (Pfeffer & Salancik, 1978;Emerson 1962, etc.)• “Ecosystem Embeddedness” captures the notion that businessorganizations are spatially and temporally embedded in, andconstantly interact with, ecosystems• Organizational dependence on services provided by ecosystems,and organizational impact on the health of ecosystems constitutethe two primary dimensions of organizational ecosystemembeddedness.S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Organizations and ecosystem relationshipPROPOSITIONS1. Dependence on ecosystem is a function of the importance of theseservices for the firm (magnitude and criticality)2. Dependence can be:– Direct when the services support the firms functioning and itsperformance– Indirect when organization that exchange resources with thefirm depend on these servicesS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Organizations and ecosystem relationshipPROPOSITIONS3. Possession of and access to ecosystem services affect the natureand the degree of firm dependence on these services4. The ability to exercise control over the use (manageability) ofecosystem services influences the firm’s dependence on theecosystemS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Organizations and ecosystem relationshipPROPOSITIONS5. The existence of social or institutional rules that regulate thepossession, access, and use of ecosystem services influences firmdependence6. The absence of alternatives or cost-effective substitutes to theecosystem system services a firm uses increases the firm’sdependency on those services.S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Organizations and ecosystem relationshipPROPOSITIONS7. Dependence is a function of the health of the ecosystemWhen negative impacts from firm operations (individual and collective) exceedthe capacity of an ecosystem to adapt to such stress, ecosystem health isweakened and the provision of ecosystem services reduced.7a. When the flow of ecosystem services is reduced, a firm’s dependence onES increases and its capacity to sustain its activity is reduced.When an ecosystem’s health declines below a certain threshold, abruptsystem changes can lead to abrupt decline in ecosystem services.7b. When the flow of ecosystem services changes abruptly, the nature of a firm’sdependence changes, dramatically reducing the firm’s capacity to sustain itsactivity.S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Sustainable fit strategies• We define sustainable fit as:the ability of the firm to adapt to and align dynamically with theresilience of the ecosystem where it is embedded, preservingecosystem health to the extent that the provisioning ofecosystem services on which the firm depends is notjeopardized• In the long run, the effectiveness and robustness of a firm, thatis its capacity to operate, create value and survive, is a functionof its “sustainable fit”• The firm sustainable fit is a function of its dependenceS. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

Implication and conclusions• Which capabilities firms need to address the ecosystem degradationchallenge?• Which are the impact on the dominant business models?• What type of specialized for-profit or not-for-profit organizationsmight arise with regard to emerging markets for ecosystemsconservation and management providers?• What kind of local, regional and global alliances may emerge?• Which specific tools must be developed to help managers tointegrate sustainable strategies into decision making processes:tools to assess ecosystem health, ecosystem dependence, impactsand risks (including operational, business, market/consumerbehavior, reputational and legal risks)?S. Pogutz, Università Bocconi, Italy and M. Winn, University of Victoria, Canada

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