Center Sustainability in Your Company’s Strategy
The traditional focus of strategic decision-making on economic value has overshadowed environmental and social considerations, leading to management practices that prioritize profitability. To address the resulting tensions and promote sustainability, there is a need for a shift from competitive to collaborative approaches among stakeholders.
Authors: Maria-Elisa Männistö (University Lecturer) & Saku Mäkinen (Professor) Industrial Engineering and Management, University of Turku
How can you place your sustainability initiatives at the heart of the strategic actions of your company? The history of strategic decision-making has prioritized economic value over environmental and social values. This has led to a situation where management models, reward systems and strategy measurement are aligned with the production of economic value.
In the midst of this decision-making frame, corporate executives and management are struggling with tensions the current situation creates. When considering sustainability initiatives and their implementation, the key solution to these tensions is to assess and communicate the value to the customer. If the customer is straightforwardly willing to make the transaction with higher price for more sustainable products and services, then the task is easy. However, we have found that attitudes and behaviors differ, and in many cases the customers’ willingness to pay a higher price for a more sustainable product is hard to turn into transactions as they are unable to see the true value, preferring economic value over environmental and social value.
We argue that in order to create real, sustainable value that customers can see and feel, there needs to be a rapid shift from competition to collaboration with the company's stakeholders. There are many misaligned logics that explain why customer attitudes and behavior may differ, but the main reasons are lack of knowledge, understanding, motivation and engagement. However, as the stakeholders are engaged to contribute to the company's core strategic actions the demand-market will inevitably be flooded with various views supporting sustainable value creation and delivery, and also communicating the benefits.
The old paradigm of competition should be transformed into a mode of cooperation similar to natural ecosystems, where long-term relationships and mutual trust are valued. This is necessary to tackle the wicked problems of the sustainability challenge and invite stakeholders to solve them.
If we follow the logic of natural systems, we can see that there are limits to growth. All natural ecosystems seek a systemic balance based on mutual relationships and regenerative action. How could this be done between different stakeholders? This occurs in business ecosystems as they find their natural balance where all the stakeholders fulfill certain functions in the value creation and delivery of the business ecosystem as a whole. Hence, we arrive at mission to fulfill certain function for corporations, not mission to grow or maximize economic profit.
We believe that we can identify a certain pattern of actions between different stakeholders when they move into the mode of true collaboration. We have already identified this pattern in another context between people and this is the main goal of our research in the Data-driven Sustainability Management (DDSM) project at the Department of Industrial Engineering and Management at the University of Turku.
We have followed how sustainability initiatives have been integrated into strategic decision making. Similar to any group of people, there is a certain pattern of behaviour that leads to a shared social identity, commitment and activities in the name of common goals. We are trying to develop a management model for strategic sustainable decision making in the context of ecosystems.