Global Compact International Yearbook Ausgabe 2013

Agenda
Integrated ISO 26000 Reporting
efforts can detect previously overlooked efficiency potentials.
Increasing operational efficiencies then, in turn, contributes to
the firms’ profitability and competiveness. Hillman and Keim
present similar arguments in the stakeholder context: If CSP
practices are directly related to primary stakeholder concerns,
they may not only serve to improve stakeholder relations, but
also improve shareholder value. Following this line of thought,
it has been argued that there is no linear relationship between
CSP and CFP. The managerial advice would be to make use of
cost-benefit analyses to determine when the optimal amount
of investments for enhancing CSP is reached.
Third, there is the long-term value-creation argument: This
school of thought proposes that management should care about
environmental degradation, as this is expected by society. According
to this line of thought, in the short run it is possible
that firms will face a negative effect of CSP practices on CFP, as
such activities do not necessarily result in immediate returns.
However, in the long-term they benefit from such a strategy,
as their stakeholders value more socially acceptable business
practices, which in turn contributes to long-term business
success. The managerial advice would be to investigate when
and how global sustainability trends and challenges are going
to change the business environment, and to implement
corporate strategies that respond to these changes.
Most of the empirical research on the business case considers
rather short-term effects, for example, the return developments
in the following year or the evaluations in financial markets
within a short time frame after an event. However, in practical
terms, it may often be difficult to precisely determine the
optimal amount of CSP investments, especially when purely
looking at the short-term financial benefits. Some investments
may immediately be profitable, others not. Thus, limiting
CSP–CFP evaluations only to short-term considerations can
be seen as an important reason for the inconclusiveness of
the business case debate.
Moreover, in most of the cases, the fundamental negative
consequences of unsustainable business practices are likely
to become visible in the long run. This, in turn, implies
that efforts to become more sustainable may also require
some time to become tangible – or, in business language, to
materialize. First empirical evidence suggests that, in fact, a
long-term orientation has a positive effect on CFP. Wang and
Bansal find exactly that for firms with a high level of longterm
orientation – their relationship between corporate
social responsibility and CFP is stronger compared to firms
with a low level of long-term orientation. Busch, Stinchfield,
and Wood find a positive effect of CSP on CFP in the long run,
whereas there is no support for this effect in the short run.
As such, it may be important to actually answer the “When
does it pay?” question by considering the long-term effects
and implications of CSP.
Managerial implications
The way ahead is that the short-term efficiency-driven objectives
need to be aligned with a long-term value-creating strategy.
In a first step, for example, Unilever has moved its reporting
practices in this direction. As from 2011 the firm has been
releasing a quarterly trading statement every second quarter
instead of publishing full financial results. The purpose behind
this change is to enhance communication about corporate
performance by moving from a short- to a longer-term focus,
which better reflects the way the firm manages its business.
This is a good starting point.
The next important step is to understand a firm’s ecological
embeddedness, as it is a key determinant for the long-term
success of an organization. Based on this understanding, new
questions need to be asked when entering markets, developing
products, and evaluating investment opportunities: How
resource-dependent are the production processes? To which
extent do we explore low-carbon opportunities? Are there
any potentially controversial business practices, notably in
the supply chain? Essentially, as part of its long-term-oriented
strategy, a company does not use the prevailing uncertainties
within the business environment as reasons for inaction.
Instead, the principle of responsible leadership can serve as
the foundation for a proactive business strategy.
As a precondition for firms implementing such a strategy, the
organization’s self-image is important. It has to shift its taken-forgranted
stance toward an attitude of being a responsible leader
that acknowledges the relevance and necessity of taking new,
uncommon, and sometimes even inconvenient pathways that
reflect the firm’s ecological embeddedness. As Amory Lovins
puts it, such leaders who want to get it done need “guts, creativity,
and perseverance.” Responsible leaders can fundamentally
change corporate strategy and influence “others to understand
and agree about what needs to be done and how to do it, and
the process of facilitating individual and collective efforts to
accomplish shared objectives.” Thus, business leaders can become
important drivers of (structural) changes. From this point
of view, the primarily instrumental motivation of a long-term
value-creating strategy finally merges with the normative form
of addressing corporate sustainability.
Dr. Timo Busch is Professor at the
School of Business, Economics and Social
Science, University of Hamburg.
Global Compact International Yearbook 2013 187