Download - Sustainability Defined
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Hector R RodriguezDirector of Sustainability at Biogen IdecAdjunct Professor, School of Business at Mount Ida College
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Objectives of this Talk – An Overview of…
What is Sustainability?
What is Sustainability Management?
Review of tools that assist in developing and implementing a Sustainability Strategy
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Challenges of this DefinitionDoes not address resource consumption issues, nor the distinction between
renewable resources and non-renewable resources. Does not really answer the question of what sustainability means and also leaves it to our imagination to
determine which “needs” are legitimate and which ones are not. 2
Part I - What is Sustainability?
Traditional DefinitionSustainable development is development that meets the needs of the
present without compromising the ability of future generations to meet their own needs.1
Philosophically, Sustainability could be thought of as the goal and Sustainable Development one of the requirements needed to achieve it…
1. “Our Common Future.” World Commission on Environment and Development. Aug. 1987. 2. “Re-Casting the Triple Bottom Line.” Center for Sustainable Innovation. Jun. 2007
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Addresses questions such as: 3
A Better Definition of Sustainability…
1. Is it possible for the rate of human use of renewable resources to exceed the rate at which such resources are renewed or replenished?
3. Daly H., Beyond Growth: The Economics of Sustainable Development. 253 pp. Boston: Beacon Press, 1996.
2. Is it possible for the rate of human use of non-renewable resources to exceed the rate at which renewable replacements for such resources are developed?
3. Is it possible for the rate of waste emissions by humans to exceed the rate at which the environment can assimilate such wastes?
4. Is it possible for the rate of human, social, constructed and economic needs to exceed the rate at which they are being created?
YES… Freshwater… fisheries… clean soil
YES… e.g. Minerals… Oil… Subsidies required for renewable resources
YES… e.g. Superfund sites… Contaminated rivers… Smog
YES… Healthcare in Africa… Education in the US… Infrastructure in Mexico…
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As the answers to the questions on the previous slide can be yes, we can say that the
human activities associated with them are unsustainable.
A Better Definition of Sustainability… (cont)
In order to be sustainable, we must therefore address the impacts of human activity on the quality and sufficiency of vital capitals (renewable, non-renewable and societal) in the world.
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What is Capital?
“Capital” is a stock of anything that yields a flow of valuable goods or services to people who need them.
Sustainability must therefore address and manage the impacts of human activity on the quality and
sufficiency of vital capitals in the world…
Linking Vital Capitals and Well-Being…
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This is the capitals-based theory of sustainability, the foundation for most of what passes for mainstream practice in Sustainability Management.
Vital Capitals and Well-Being
Economic Capital
Social Capital
Environmental Capital
Available flows of beneficial goods and services
Appropriated by individuals and collectives
Resulting in levels of individual and collective well-being
CAPITAL FLOWS
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Environmental Capital
Is the extension of the economic notion of capital to environmental goods and services. Environmental capital is thus
the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future. For example, a
stock of trees or fish provides a flow of new trees or fish, a flow which can be sustainable indefinitely. Environmental capital may
also provide services like recycling wastes, water treatment and removal of air contaminants.
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Social Capital
• Social capitals required for human well-being include:– Human capital - Individual knowledge, skills, and
other assets (including human rights) required to take effective individual action.
– Community capital - Shared knowledge and cooperative networks of people committed to achieving common goals (schools, hospitals, government, etc.)
– Constructed capital - The material world that humans produce such as roads, utilities, etc.
• Also known as anthropogenic capital, because these capitals are produced by humans
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Should not to be confused with financial capital“So, while the economic component of the triple bottom line
is often assumed to be synonymous with financial performance [i.e., with the financial bottom line], in fact, there are significant differences between the two….[E]conomics
extends beyond the boundaries of a single organization….A company’s investment in a community can
serve as an engine of growth in the economy through employment, boosting local supply chains and developing a new skills base. The goods and services that companies produce can also contribute to a higher quality of life.” 4
Economic Capital
4. Henriques A., Richardson J. The Triple Bottom Line: Does It All Add Up? London: Earthscan Publications Ltd.., 2004.
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Economic Capital
• There are many, and could be considered variants of social capital:
–Employment rates–Employees’ wealth–Owners’ wealth–Local, regional and global commerce–Trading partners–Customers–Community economic affairs–Etc.
This diagram depicts an outdated model… Economic Capital is not just
about profit…
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Sustainability is the subject of a social or management science that studies and manages the impacts of human activity on
the quality and sufficiency of vital capitals in the world, as required to ensure human well-being. 5
What is then Sustainability?
5. McElroy, M. Social Footprints – Measuring the Social Sustainability Performance of Organizations. Dissertation, 2008
The Sustainability Professional studies and manages the impacts of an organizations’ activities on the quality and
sufficiency of vital capitals wherever it operates, as required to ensure human well-being.
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Part II - What is Sustainability Management (SM)?
Sustainability ManagementSustainability Management
Enterprise OrientationEnterprise Orientation
Social Benevolence
Social Benevolence
Eco-efficiency
Eco-efficiency
Triple Bottom-Line
Triple Bottom-Line
Context Based OrientationContext Based Orientation
Life Cycle OrientationLife Cycle Orientation
Environmental Capital
Environmental Capital
Economic Capital
Economic Capital Social CapitalSocial Capital
LCA’s of Products and Services
LCA’s of Products and Services
Environmental Capital
Environmental Capital
Social Capital (Emerging)
Social Capital (Emerging)
Refresher: to achieve Sustainability, SM must address all three vital capitals
1 2 3 4
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Life-Cycle Orientation
As here defined, LCA’s form an important element of Sustainability Management
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• Product- and life-cycle-based• Takes the position that it is more important to influence the environmental impact of a
product throughout its entire life cycle• This approach examines the impact of a product from its inception as a raw material to
its ultimate disposal following consumer use
Emerging UNEP-driven initiative
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Eco-efficiency
Social Benevolence
Triple Bottom Line
Context-based Sustainability
Enterprise Orientation – Four Schools of Thought
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“Industry is moving toward ‘demanufacturing’ and ‘remanufacturing’ — that is, recycling the materials in their products and thus limiting the use of raw materials and of
energy to convert those raw materials…It is the more competitive and successful companies that are in the forefront
of what we call ‘eco-efficiency’ ” 6
Arguably the basis of the “green” movement; also the basis of LCAs. As eco-efficiency narrowly
evaluates economic implications (profit only), and tends to ignore social concerns, it could at most
be considered an element of Sustainability Management.
Eco-Efficiency
6. Schmidheiny S., Changing Course, The MIT Press, Boston: Apr. 1992
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Social benevolence views sustainability in terms of social responsibility and
philanthropy. Companies that adhere to this view tend to focus on social and
economic impacts, and less in terms of environmental performance. As such,
social benevolence can be considered an element of Sustainability Management.
…“is the continuing commitment by business to behave ethically and contribute to economic development while
improving the quality of life of the workforce and their families as well as of the local community and society at large”
(WBCSD, 1999)
Social Benevolence (Corporate Social Responsibility)3
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“Today we think in terms of a ‘triple bottom line,’ focusing on economic
prosperity, environmental quality, and social justice.” 7
Explicitly pluralistic in its orientation: social, economic, and environmental. Arguably the dominant sustainability
paradigm in use today, including reporting requirements under the GRI.
Triple Bottom Line
7. Elkington J., Cannibals with Forks, Capstone Publishing LTD. Sep.1999.
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Context-Based Sustainability 8
8. McElroy M., “Sustainability Measurement and Reporting.” Deloitte. Weston, MA. 2010
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• An approach that quantitatively express sustainability performance in the form of a quotient
• Numerators represent actual impacts on vital capitals• Denominators represent normative impacts on the same vital
capitals– Most mainstream tools and methods have been
numerator only in scope– While denominators are normative, they are usually
grounded in factual claims about the world• Ecological limits• Minimal social and/or economic conditions required for
human well-being
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Freshwater Use Report for Company X
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3
3.1
2003 2004 2005 2006 2007 2008 2009
Gal
lons
/Cap
ita/Y
ear (
Mill
ions
)
Gallons/Capita/Year (Millions)
Here’s the Company X performance with context missing
Context-Based vs. Context-Free Example
Source: Center for Sustainable Innovation
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Ecological Quotient of Freshwater Use for Company X
0
0.5
1
1.5
2
2.5
3
3.5
2003 2004 2005 2006 2007 2008 2009
Gal
lons
/Cap
ita/Y
ear (
Mill
ions
)
Gallons/Capita/YearUsed by Company X(Millions)
Gallons/Capita/YearAvailable on Earth(Millions)
Sustainability Threshold
Sustainability Threshold (performance above
threshold is unsustainable)
Here’s the Company X performance with context added
Context-Based vs. Context-Free Example (cont.)
Source: Center for Sustainable Innovation
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Another hypothetical scenario
Context-Based vs. Context-Free Example (cont.)
Ecological Quotient of Freshwater Use for Company X
0
0.5
1
1.5
2
2.5
3
3.5
2003 2004 2005 2006 2007 2008 2009
Gal
lons
/Cap
ita/Y
ear (
Mill
ions
)
Gallons/Capita/YearUsed by Company X(Millions)
Gallons/Capita/YearAvailable on Earth(Millions)
Sustainability Threshold
Source: Center for Sustainable Innovation
Sustainability Threshold (performance above
threshold is unsustainable)
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The Sustainability Quotient
Source: Center for Sustainable Innovation
The Sustainability QuotientA formula for Measuring and
Reporting Corporate Sustainability Performance
S = A/NWhere:S = Sustainability Performance*A = Net Actual Impacts on the Carrying Capacities of Vital CapitalsN = Net Normative Impacts on the Carrying Capacities of Vital Capitals
*For Ecological Quotients, S scores of ≤ 1 are sustainable, ≥ 1 unsustainable; for Societal Quotients, S scores of ≥ 1 are sustainable, <1 are unsustainable
Source: Center for Sustainable Innovation
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Sample of Context-Based Metrics
Areas of Impact Example/Description*
Environmental
- Water Use A metric that measures an organization’s use of water resources against an allocated and proportionate share of locally renewable supplies.
- Solid Waste A metric that measures an organization’s use of local landfill resources against an allocated and proportionate share of available capacity.
Social
- Work/Life Balance A metric that measures an organization’s impacts on employee work/life balance against standards grounded in employee family well-being.
- Community Involvement
A metric that measures an organization’s contributions to community well-being against a standard expressed as a percentage of profits.
Economic
- Livable Wages A metric that measures an organization’s compensation practices against locally-relevant livable wage standards.
- Economic Institutions
A metric that measures an organization’s contributions to economic institutions (e.g., regulatory bodies) as a percentage of profits.
*Note: All standards of performance must be grounded in levels required to ensure human well-being.
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What is then the Right Framework?
As Sustainability Management concerns itself with managing the impacts of human activity on the quality and sufficiency of our vital
capitals as required to ensure human well-being, it follows that:
Only the Triple Bottom Line, implemented in context, allows us to appropriately manage the impacts of human activity on all vital capitals
as required to guarantee human well-being.
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Part III – Developing a Sustainability Strategy 9
Objectives
• Specific targets
Mission
• Fundamental purpose
• Values
Strategy
• Prioritizes initiatives
SupportingOrganizationalArrangements
• Structure• Rewards• People• Systems
Strategic Analysis
• Benchmarking• Assessment of
impacts on vital capitals
• Assessment of internal strengths and weaknesses
9. Hambrick D., Fredrickson J., “Are You Sure You Have a Strategy.” Academy of Management Executive. 2001. Vol 15, No. 4.
Basic and formulaic in nature; the models used on this and
the next slide are just examples of available tools
which could help in the development of a sustainability
strategy.
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Infrastructure
Human Resource Management
Technology Development
ProcurementInboundLogistics
Operations OutboundLogistics
Marketing& Sales
Service
Support Activities
Primary Activities
Education and job trainingDiversity and discrimination
PhilanthropyWork-Life Balance
Transportation impactsPricing practices
Marketing practicesProduct Safety
TransparencyLobbying
Tax PlanningStakeholder Alliances
Supply chain practicesUtilization of natural resources
Trading PracticesCommerce Impacts
Emissions and wasteEnergy and water usage
Worker safety and labor relationsHazardous materials
Packaging useTransportation impacts
Customer AssistanceQuality of Life
Relationships with universitiesEthical research practices
Conservation of raw materialsRecycling
Assessing Vital Capital Impacts – Value Chain 10
10. Porter, M. E., “Strategy & Society.” Harvard Business Review, Dec. 2006
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Porter’s Model Hambrick & Fredrickson
Other Useful Business Frameworks
McKinsey’s 7-S
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Prioritizing Initiatives - Materiality Assessment 11
11. Global Reporting Initiative. Sustainability Reporting Guidelines. Amsterdam: 2006.
Organization should concentrate its efforts on those activities that:
1. Significantly impact vital capitals, and / or
2. Are of great importance to its stakeholder community
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Summary and Conclusion
Sustainability is defined as that subject of management science that studies the impacts of human activity on the quality and sufficiency of vital capitals in the world as required to ensure human well-being.
The Sustainability Professional studies and manages the impacts of corporate activities on the quality and sufficiency of vital capitals wherever it operates.
Vital capitals include Social, Environmental and Economic capitals. The Triple Bottom Line approach, together with Context-Based Sustainability, is the Sustainability Management framework which most appropriately studies and manages those vital capitals
Management frameworks such as the “Value Chain,” Hambrick and Fredrickson’s model, “McKinsey’s 7-S,” “Five Forces” and SWOT’s are of help in developing a Sustainability Strategy.
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1. “Our Common Future.” World Commission on Environment and Development. Aug. 1987.2. “Re-Casting the Triple Bottom Line.” Center for Sustainable Innovation. Jun. 2007 3. Daly H., Beyond Growth: The Economics of Sustainable Development. 253 pp. Boston:
Beacon Press, 1996.4. Henriques A., Richardson J. The Triple Bottom Line: Does It All Add Up? London:
Earthscan Publications Ltd.., 2004.5. McElroy, M. Social Footprints – Measuring the Social Sustainability Performance of
Organizations. Dissertation, 20086. Schmidheiny S., Changing Course, The MIT Press, Boston: Apr. 19927. Elkington J., Cannibals with Forks, Capstone Publishing LTD. Sep.1999.8. McElroy M., “Sustainability Measurement and Reporting.” Deloitte. Weston, MA. 2010 9. Hambrick D., Fredrickson J., “Are You Sure You Have a Strategy.” Academy of
Management Executive. 2001. Vol 15, No. 4. 10. Porter, M. E., “Strategy & Society.” Harvard Business Review, Dec. 2006 11. Global Reporting Initiative. Sustainability Reporting Guidelines. Amsterdam: 2006.
References