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Journal of General ManagementVol. 28 No. 3 Spring 2003

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David Wheeler is Erivan K. Haub Professor and Barry Colbert isSenior Research Fellow in the Business and Sustainability

Programme in the Schulich School of Business, York University,Toronto, Canada. R. Edward Freeman is the Elis and Signe Olsson

Professor of Business Administration and Director of the Olsson

Centre for Applied Ethics in the Darden School of Business,University of Virginia, Charlottesville, USA.

Focusing on Value:Reconciling Corporate SocialResponsibility, Sustainabilityand a Stakeholder Approach

in a Network Worldby

David Wheeler, Barry Colbert and R. Edward Freeman

Two decades ago, Peter Drucker [1] famously asserted: the proper

social responsibility of business is to tame the dragon, that is to turn a

social problem into economic opportunity and economic benefit, into

productive capacity, into human competence, into well paid jobs, and into

wealth. In the intervening years there has developed a lively public

debate over the role of business in society most acutely with respect

to the supposed social and environmental impacts of economic globalization.

This development has led to the concerns of anti-globalization protestors

on issues like third world development, poverty, the environment and

employment being echoed by large numbers of ordinary citizens worldwide

[2]. More recently, a heightened sense of international insecurity has

added further urgency to questions surrounding the role of business in

society [3].

Academic debates on the purpose of business have tended tofocus on the interplay between the rights of investors versus those of

other stakeholders. In Anglophone jurisdictions, backed by the weight of

company law and corporate governance practice, strategic management

How does corporate social responsibility and sustainable development relate to the

creation of business value?


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Vol. 28 No. 3 Spring 2003Journal of General Management

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theorists tend to emphasise a simple agency theory of the firm predicatedon essentially economic principles; whereas stakeholder theorists advance

both normative and instrumental constructions of how and why business

creates value for its various constituencies [4]. However, in the context

of wider societal developments, i.e. globalization, international security

issues, etc., both agency theorists and stakeholder theorists of the firm are

now having to address three interwoven concepts: (i) corporate social

responsibility (CSR); (ii) susta inable deve lopment; and (iii) a

stakeholder approach to strategic management. These concepts are

often assumed to be consonant but are variously advocated from political,

sociological, ethical, ecological and business perspectives [5]. Their

academic and civil society proponents frequently employ normativeovertones and assumptions, but sometimes balance their arguments

according to the commentator, the context or the audience with a more

instrumental business case. Thus it is safe to assume that even

proponents and sympathetic practitioners risk becoming confused.

To address this problem, we wish to move the discussion to a

place where it becomes grounded in the assumed central occupation of

practi tioners, i.e. the creation of business value. However, we

acknowledge that even the concept of business value carries ambiguity,

with academics, commentators and business practitioners all searching

for more useful and compelling ways to describe value and the value

creation process. In a world that is becoming ever richer in informationand opinion, it is increasingly clear that intangible business assets in

particular and business value in general cannot adequately be described

in purely economic terms [6]. Similarly, it seems incomplete to describe

other forms of intangible value created by business e.g. reputational

value, brand value, etc., without some reference to how these relate to

economic value over the long term.

So, although we begin this paper by asserting that the creation ofvalueis the central motive force of market economies, and by extensionthe primary purpose of private enterprise, we also acknowledge the

paradox that value may be defined by different actors in different ways.Following these two premises our aim is to put forward a simpleframework to reconcile the concepts of corporate social responsibilityand sustainable development (or sustainability in business terms) with astakeholder approach, through a focus on the creation of value asdefined by different actors and networks as an integrating ground. We

believe that a business model that places value creation at its core willallow concepts of CSR, sustainability and the stakeholder approach to findtheir natural homes, whether at a strategic or a managerial level. We willnot attempt to redefine or refine the three terms; simply to demonstratetheir practical consonance as they are presently understood.

The structure of this paper is as follows. First we offer a range ofcontemporary business stories to ground our discussion, and to illustrate


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some emerging forms of discourse in what some commentators refer toas the new or network economy. We then present a simple navigational

tool that we believe will assist managers in navigating the relationship

between business and society in the context of value creation. By way

of illustration we relate our stories to that tool. Finally, we discuss the

theoretical and practical implications of our arguments.

The New Economy and the Growing Recognition of Communities

of Interest or Value-Based Networks

Advocates of new economic and social paradigms believe that the world

is changing fundamentally [7]. They assert that new technologies andeconomic globalization are changing the very nature of business, with

increasing emphasis being placed on the centrality of knowledge and

innovation generated increasingly through networks [8]. The advent of

the so-called new or network economy has, in turn, given rise to new

forms of discourse surrounding the nature and purpose of the firm,

business strategy and the process of value creation [9]. And these raise

new questions of corporate social responsibility and sustainability [10].

In Anglophone marketplaces such as the US, the UK, Canada and

Australia, long-standing assumptions about how to maximize the

effectiveness of the firm (as measured by traditional metrics such as

profits or economic value added) have been tempered by the novelrecognition at least in some quarters [11] that in certain circumstances

the creation of communities and social networks united by a common

sense of what is valuableis a pre-requisite to economic pay-off. This

argument may be made for a range of business sectors: from information

and communications technologies through life sciences, energy and

natural resources. So, in this paper, we will present narratives from all of

these sectors. But first we should say a little about the phenomenon which

some call the new or network economy and how this phenomenon

leads to the need to consider new communities with a common sense of

how value is created and appreciated. We shall refer to these communities

as value-based networks (VBNs).

Echoing many of the concerns of Putnam [12] in The Future of

Success,Robert Reich critiques the notion that communities should be

discussed simply in commercial terms in the US whilst noting the specific

nature of the value offered to individual joiners by new groups such as

cyber-communities [13]. He notes the socially divisive impacts of new

sorting mechanisms in residential, educational, social security and

health domains whilst wistfully marvelling at the burgeoning array of deals

and opportunities for individual customization of value added services

offered as by-products of globalization. These products are avidly

accessed by new groups of users and consumers keen to avoid missing

great deals, whether they are customers, investors or potential employees.


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The critical factor here for Reich seems to be the speed with which thesenew groups form and, presumably, may also collapse facilitated by

the advent of new communications technologies.

Less critical observers of globalized deal-making, customization

and other technology-enabled business activities than Robert Reich have

coined a range of terms to describe the value creation phenomena they

are witnessing. E-business commentators refer to business webs,

communities of creation and relational or network capital [14] in

almost exactly the same terms as management theorists would use

references to inter-firm networks and intra-organizational linkages,

stakeholder value and social capital [15].

In Digital Capital, Don Tapscott and co-workers cite James

Moore [16] as having blazing insight when he wrote about business

ecosystems of customers, suppliers, lead producers, competitors and

other stakeholders who co-evolve their capabilities and roles. Tapscott

et al describe digital industry b-webs as places where sets of contributors

come together to create value for customers and wealth for their

shareholders..inventing new value propositions, transforming the rules

of competition, and mobilizing people and resources to unprecedented

levels of performance.

Similarly, in Tech-Venture, Mohan Sawhney and co-workers citeFrederick Reichheld, author of the Loyalty Effect, in making a case for

relational capital claiming In a network world, where everyone and

everything is connected, economic value behaves very differently than in

the traditional world [17]. Sawhney et al go on to provide quite detailed

examples of how to measure intangible assets i.e. intellectual capital

defined as human capital, structural capital and relational capital.

In Rosabeth Moss Kanters in-depth study of the e-business world

described inEvolve!, a rich constellation of terms is coined to describe the

processes of on-line community and network building many with

evocative allusions to space travel. Rather more seriously, Kanter arguesthat community-building is as crucial to the value-creation propositions of

well-established players such as IBM and Hewlett-Packard as for new

entrant firms such as Abuzz, e-Bay and Razorfish [18]. Based on her

direct interviews, surveys and observations, Kanter provides five lessons

on how to build value-driving collaborative networks in e-business and

proposes seven competencies required to maintain them. She notes:

Many people have written about the rise of dynamic networks of

partnerships...but not many have recognized the extraordinary shift of

consciousness it takes to live in such a world.

Two companies strongly associated with these phenomena (and,

indeed, frequently cited both by Reich and Kanter) are Amazon.com and


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America Online (AOL). In Amazon.coms case the firm has had to workvery hard at establishing a conventional model of profitability and economic

value-added for investors, but few commentators would dismiss the

companys success in rapidly creating interlocking value-based networks

(VBNs) that have been the source of enormous levels of investment,

trading and deal-making with diverse partners. By last quarter 2001,

Amazon.com had still to reach profitability, but after a difficult year for

many in the e-business world, the firm maintained a market capitalization

of more than $4 billion and in 2001 a poor year for many stocks the

companys share price dropped only 30 per cent, closing the year at just

under $11. Having appreciated a little in the first quarter 2002, at mid-

year the stock was around $12. This more realistic price effectivelyreturned Amazon.com to mid-1998 stock price levels having reached

highs of more than $100 in 1999 and 2000 [19]. In their case, two core

competencies have emerged: (i) rapid and effective joint venturing with

multiple actors in widely differing business arenas; and (ii) maintenance

and development of well understood VBNs seeking customized value for

their dollars.

AOLs record-breaking merger with Time Warner in January 2000

demonstrated a potentially astronomic level of economic and social value-

add through uniting complementary VBNs in communications and

entertainment [20]. In a world of rapidly convergent media technologies,

AOLs timing seemed impeccable effectively taking over TimeWarners movie, music and entertainment businesses when AOLs stock

could not have been stronger and grafting them on to a set of semi-captive

audience subscribers to internet services (i.e. AOL, Compuserve,

Netscape, etc.) now numbering more than 150 million people. AOLs

2001 was pretty good; the company ended the year with the release of the

movie The Lord of the Ringsand an annual loss of market value of just

4.9 per cent and a market capitalization of more than $135 billion [21]. US

subscriber on-line sales increased to $33 billion in 2001 i.e. + 67 per cent

on the previous year. 2002 has not treated AOL quite so kindly, with

further share price declines leading to erosion of market capitalization to

just under $43 billion by mid-year, although earnings remained relativelystrong [22]. Perhaps on a significantly larger scale, AOLs core

competencies are not dissimilar to those of Amazon.com and the company

has an interesting way of describing its strategy: our business plan will

be based on adding value to peoples lives [23].

Yahoo! and eBay may also be cited as firms for whom it may be

argued that their entire market valuation is predicated on the quality of the

VBNs they unite and serve on a global basis [24]. Again, it is the sheer

speed and scale with which a variety of communities of interest have

formed around these companies which makes the phenomenon noteworthy.

Since inception in 1995 eBay grew to a community of 42.4 million and $1.1

billion sales in 2001/2002, with a staggering 1.5 billion web-site page views


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per month. The company is known for its relatively conservativeforecasts and has enjoyed a relatively stable stock price ($50-$60 for

most of 2002), real earnings, and a market capitalization in July 2002 of

nearly $15 billion [25].

In contrast to firms like Cisco and Nortel, whose businesses depend

far more on the hardware side of the new communications technologies,

Yahoo! and eBay made reasonable progress for all stakeholders during

2001. But even in the torrid recent experiences of Cisco and Nortel and

their stakeholders, some instructive lessons may be drawn with respect

to the importance of rapidly forming and re-forming VBNs and how those

communities might interpret the question of value.

During 2001, Cisco experienced a one year loss of value of 51.5

per cent and a significant reduction in head count; in late July 2002 stock

was trading at $12.5, similar to prices in 1997/98, but somewhat short of

the 1999 high of $80 [26]. Ciscos 2001 market value decline was similar

to Ontario-based Nortels 49.5 per cent loss in shareholder value for the

same period, a timeframe which included nearly halving the companys

workforce and the posting of a record-breaking single quarter loss of

$CAN 19.2 billion. By July 2002, Nortels stock price was trading at

around 10 per cent of its 97/98 price of $10-15, but even more significantly

awry of its 1999 high of around $80, but it was recommended as a buy by

at least one analyst who believed the stock had good prospects of reaching$2 [27].

Cisco and Nortel were once renowned for their employee friendly

practices, corporate philanthropy and their ability to forge trust-based,

productive relationships with business partners and acquired/merged

businesses. Indeed, Charles OReilly and Jeffrey Pfeffer in Hidden

Valueand Rosabeth Moss Kanter inEvolve!, both used Cisco as a model

for describing the skills required to manage acquisitions, collaboration and

competition with business partners in the new economy [28]. But there

are lessons in adversity, and some of the most powerful in the cases of

Nortel and Cisco relate to the question of transparency, where theinterlocking VBNs included business partners, suppliers, employees and

investors.

In November 2000, Nortel CEO John Roth asserted, looking

forward to 2001.we continue to expect to grow significantly faster than

the market, with anticipated growth in earnings per share in the 30 to 35

per cent range [29]. This assertion proved somewhat misleading for all

stakeholders when in mid-February 2001 the company announced a profit

warning and promptly lost a third of its value [30]. Continuing the theme

and drawing attention to the dangers of unaudited, proforma announcements

from companies in volatile markets, in November 2001 the San Francisco

Chronicle posed the question What do you get if you marry a creative


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writer with an aggressive accountant? The answer: Ciscos thirdquarter earnings news release [31].

We are not arguing that these exemplars of firms riding the

network economy demonstrate anything fundamentally new with respect

to the way market economies work. But what these stories do illustrate

is that value-based networks on the software and the hardware side of the

economy comprise large numbers of customers, employees, investors and

business partners whose interests converge in a rapid, visible and mutually

dependent way. Any question of one group taking undue advantage or of

non-transparency affects all. These companies stories demonstrate the

interdependence (both long term and short term) of stakeholders and theirinterlocking VBNs within a broad community of interest [32].

The cases described so far suggest that there may be nothinginherentlystakeholder-inclusive, socially responsible or sustainable inthe normative senseabout information and communications technology(ICT) firms in the network economy. But let us examine another highgrowth, high technology sector phenomenon, namely biotechnology, totest this observation further.

Few would argue that the success of life sciences companies isvery much predicated on the degree to which they can successfully win

public support for the merits of their businesses and mobilize VBNs fortheir offerings, be they foods, drugs or other products [33]. Theirnetworks include a broad array of consumers, users, health, agriculturaland civil society organizations, research institutions, and governments. Inthis respect, the acute difficulties experienced by Monsanto a companywhich failed to address European consumer and other stakeholdersconcerns about genetic modification of foods can be contrasted withthe more peaceful and successful strategies of avowedly stakeholderinclusive, socially responsible and sustainability-minded biotechnologyfirms such as Denmarks Novo Group.

In 1995, Monsanto acquired a CEO in Bob Shapiro who was

almost messianic in his desire to convert the 100 year old chemicals firminto a 21st century sustainable agribusiness using gene technology [34].

Unfortunately for Shapiro and Monsanto, small scale farmers were less

than impressed by the new dependencies which might arise for them and

a major backlash occurred in European consumer markets as a result of

perceived imposition of unlabelled, genetically modified food, ingredients

[35]. Despite several years and $8 billion of aggressive acquisitions, that

saw Monsanto propelled to number two position in the agrichemicals

business in 1998, confidence in the company, its products and its leadership

began to wane.

Following a failed merger with American Home Products in 1998,

by late 1999 investor confidence in the future for genetically modified


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seeds and foods had slumped. The company was bought by Pharmaciain March 2000, largely to gain access to the GD Searle pharmaceutical

division. And in November 2001, Pharmacia announced it would be

selling its 85 per cent stake in the remainder of the under performing

Monsanto agribusiness, much to the relief of its investors. With further

problems of alleged patent infringements in 2002, Monsantos stock price

continued its downward glide from an average of more than $30 through

most of 2001 to under $15 by July 2002 [36]. Rather poignantly, both

Shapiro and the new President and CEO Hendrik A. Verfaillie expressed

mea culpato stakeholders, in Shapiros case to a Greenpeace conference,

and in Verfaillies to a November 2001 Farm Journal Conference in

Washington D.C., where he stated that Monsanto was so blinded by itsenthusiasm for (this) great new technology that it missed the concerns the

technology raised for many people [37]. The company now has five

pledge commitments to make good on the original commitment i t made

to sustainable agriculture in 1990 under the headings respect, transparency,

dialogue, sharing and benefits [38].

In contrast to Monsantos misfortunes, Danish life sciences firmNovo Group (now trading as Novo Nordisk and Novozymes) is deeplyinvolved in genetic modification and yet maintains highly interactive andconstructive relationships with stakeholders and publishes a highly ratedenvironmental and social report each year. These skills have helped the

firm to maintain a strong reputation whilst de-merging its main businessesin late 1999 with a subsequent doubling of shareholder value [39].

Again, these two stories seem to show that biotechnology firmsare not inherently responsible, inclusive or sustainable by nature, but wecan perhaps detect a common pattern the convergence of the interestsof the firm with those of stakeholders and societal interests representedwithin VBNs.

Let us now examine some stories from more traditional sectorswhere there is a longer history of stakeholder approaches to strategy.Indeed, it is in energy production, mining, forestry and oil and gas

industries that references to stakeholder approaches, sustainability andcorporate social responsibility are found most frequently, and where

phenomena such as corporate transparency and dialogue on environmental

and social performance are often best developed [40].

The recent history of power deregulation and privatization of

utilities in the UK and the US provides much evidence for VBN

phenomena both positive and negative. But, with the possible recent

exception of WorldCom, few stories can rival that of Enron for

demonstrating the short and long term symbiosis of networks of investors,

employees, business partners and customers. Seldom can a company

have suffered such rapid and catastrophic failure and embroiled so manystakeholders and networks at one time. With echoes of the transparency


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and reporting problems alluded to above in another sector, Enron wascondemned for overstating profits and keeping billions of dollars in

liabilities off the balance sheet [41]. Early on in the debcle, Ken Johnson,

spokesperson for Senator Billy Tauzin, Chair of the US Congress Energy

and Commerce Committee noted that Enrons partnerships created a

sort of accounting black hole. And, in the context of this paper, financial

analyst Jon Kyle Cartright observed rather perceptively: The majority of

the asset value at Enron was the trading operations. And the assets of that

are really personnel and customer relationships none of which tend to

survive bankruptcy [42]. Again, Enron was a firm well known for at least

some employee-friendly practices and maintained a good reputation for

corporate philanthropy.

In oil and gas, a number of Anglophone companies have discovered

that in the presence of supportive social networks, access to sources of

natural capital (e.g. oil and gas reserves) may be enhanced and business

opportunity and profitability increases. The difficulties experienced by

Shell during the 1990s have been described explicitly in terms of

catastrophic failures in stakeholder relationship [43]. But because of their

reputational and potential economic consequences these failures were

addressed in a highly instrumental fashion, with the result that the

company regained much of its former license to operate with key

stakeholder groups. Thus, with the possible exception of Nigeria, Shell no

longer experiences severe political difficulties as a direct result of its trackrecord on social or environmental performance. In contrast to Shell, two

companies in the same sector, BP and Suncor (in Canada), have avoided

such catastrophic mishaps, although BP has experienced criticism for its

joint venture operations in Colombia and with PetroChina. As a result, BP

and Suncor secured clear community support for important exploration

and production opportunities in Alaska and Alberta respectively and

consequent competitive and commercial advantage [44]. Many would

assert that these industries are not inherently responsible, stakeholder

inclusive or sustainable, but again in these stories we can detect some

evidence for the convergence of stakeholder and societal interests and

the pursuit of successful business outcomes.

As already noted, in presenting these narratives, we are not seeking

to draw attention to entirely new phenomena, still less to claim a causal

relationship between responsible, stakeholder-inclusive behaviours by

firms and subsequent commercial sustainability. We simply note that if

it was ever possible to assert that investors might secure disproportionate

value over the long term by ignoring or negating the claims and interests

of other stakeholders (or vice versa), there are some powerful

contemporary stories from a wide variety of sectors which suggest the

contrary. At a minimum, we might describe these cases as demonstrating

the value of stakeholder approaches to strategy in diverse sectors and

begin, therefore, to make a case for pluralistic definitions of value.


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We will now present our navigational tool and thereby hope todemonstrate the practical utility of value creation as an organizing

principle for reconciling CSR, sustainability and a stakeholder approach.

Reconciling a Stakeholder Approach, Corporate Social

Responsibility and Sustainability with the Creation of Value: A

Navigational Tool

Carroll has reviewed a number of models for describing how concepts of

ethics and corporate social responsibility may be embraced by business

[45]. Two models in particular have undiminished relevance today. The

US Committee for Economic Development, in 1971 [46], describedcorporate social responsibility as: (i) related to products, jobs and economic

growth; (ii) related to societal expectations; and (iii) related to activities

aimed at improving the social environment of the firm. Sethis 1975 [47]

three level model included: (i) social obligation (a response to legal and

market constraints); (ii) social responsibility (congruent with societal

norms); and (iii) social responsiveness (adaptive, anticipatory and

preventive).

In both the CED and Sethi models, the first tier was about

compliance, while the second tier required an ability to respond to and

balance reasonable stakeholder requests and to internalize basic societal

expectations perhaps with trade-offs. Consistent with this thinking,Roger Martin has recently referred to the discretionary strategic choices

available to corporations in terms of social responsibility and contrasted

them with less negotiable components of a civil foundation of norms and

expectations, emphasising that the foundation has different characteristics

in different cultures [48]. We would argue that it is in the discretionary

domain that long term strategic advantage resides and where corporations

require the capabilities to navigate complexity and engage and integrate

external stakeholders, i.e. VBNs, in service of the maximization of value

however the stakeholders and network members choose to define it

[49].

If we take these three tier models as a starting point for our

exploration of how firms may create value across the three dimensions of

the aspirational notion of sustainability, i.e. economic, social and ecological,

the picture depicted in Figure 1 emerges, where we may distinguish

between three types of corporate culture [50] with respect to organizational

attitudes to stakeholders and the creation of value:

Level 1 a compliance culture, where the organizationalunit is not especially engaged with its stakeholders but where

basic societal norms are respected and thus the organization

seeks to avoid the unacceptable destruction of value(either:

economic, social or ecological);


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Level 2 a relationship management culture, where theorganization recognizes the instrumental value of good

relations with immediate stakeholders, e.g. customers,

workers, communities and business partners, and seeks to

provide what value is appropriate in each case, within the

limits of what is possible and usually after the demands of

investors are satisfied; we might also describe this as a

value-neutralor trade-off perspective, typically associated

with effective corporate philanthropy and stakeholder

communications; and,

Level 3 a sustainable organization culture, where theorganization recognizes the interdependencies and synergiesbetween the firm, its stakeholders, VBNs and society, and

seeks to maximize the creation of valuesimultaneously in

economic, social and ecological terms.

Each of these levels might be representative of a stakeholder

approach in the sense that each is cognizant of a wider set of obligations;

and, indeed, each could be considered ethical as they exist in the

continuum do no harm to do maximum good. Each level may be

associated with one or more definitions of corporate social responsibility,

from the highly normative: everything should be legislated (Level 1), to

the more instrumental and voluntaristic business case (Level 2). Whatdistinguishes the levels however is the depth of understanding of the

nature of value for the firm and its stakeholders and our belief that

economic, social and ecological sustainability resides in Level 3.

Figure 1: Framework for Classifying Organizational Cultures

Level 3

Level 2

Level 1

Sustainable OrganizationCulture

Value maximised and integrated:economically, socially and ecologically.Organization takes a societal level focusand seeks synergistic outcomes betweenvalue dimensions.

Relationship Management

Culture

Value created but typically traded off.

Compliance CultureValue preserved consistentwith laws and norms.

Do Maximum Good . i.e. CreateMaximumvalue

Do Minimum Harm . i.e. AvoidDestroyingvalue


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Culture is defined in Figure 1 as the values, beliefs and assumptionsof the organization (after Schein, 1985).

In proposing such an integrative framework, we are not suggesting

that firms have static cultures or that they can, should or do operate only

in one mode with respect to all stakeholders at all times [51]. Values,

beliefs and assumptions change and it is important to understand that any

such prescription would be antithetical to our basic premise. There are

relationships with stakeholders and value-based networks associated

with firms which will vary over time in terms of: (i) the orientation the firm

brings; (ii) the orientation the stakeholder group or VBN may bring; and

(iii) the economic, social and environmental context and constraints. Theimportant thing from our perspective is for the organization and its

stakeholders:

i) be cognizant of economic, social and ecological contextfor

strategic reasons ;

ii) to recognize and be able to describe what is happening within

and around the firm over timefor managerial reasons; and

thus develop capabilities..

iii) to focus on value and the processes of creation of value in

both the short term and the long term for reasons of

competitiveness and performance.

Relating our contemporary stories to the framework, we now have

some new possibilities for narrative.

For example, we can describe the Cisco and Nortel stories as

examples of firms operating with high levels of ambition to create short-

term economic and social value, whilst presumably believing themselves

relatively unaffected and unconstrained on issues of ecological value,

possibly treating these as Level 1 requirements. But the result in the

longer term was rather lower levels of economic and social delivery, with

investors, workers and business partners all sharing the eventual pain of

dislocation. Interestingly, depending on ones perspective, these twocompanies were either very unlucky or their corporate cultures allowed

them to become grossly disconnected from their economic realities and

negligent of their stakeholders long-term interests. Those taking the

latter view would undoubtedly point to the lack of candour with which the

seriousness of the developing business situation was related to stakeholders.

Whatever their history and former ambitions to create Level 3 type

outcomes, the story since 2001 has been one of rapid decline to fire

fighting on or even below Level 1, in order to avoid the ignominy of

complete organizational failure. Whilst continuing to trade, these two

firms have struggled to preserve social and economic value and by the end

of 2001 their sustainability was therefore in question. Certainly in terms

of the investor perspective of value, Cisco was (by July 2002) only valued


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similarly to its market capitalization of 1997 and Nortel much lower eventhan that.

We can relate the story of Monsanto in terms of somewhat flawed

Level 3 ambition matched by Level 1 performance. Here was a company

with a culture which apparently espoused the synergistic creation of

economic, social and ecological value but which courted controversy on

stakeholder perspectives of ecological value and totally failed to deliver

on social value for key stakeholders. We can also compare Monsanto

with Novo Group a company that currently appears to maintain both

the culture and the capabilities to operate at Level 3, to the general

approval of most stakeholders. Novo has shown up as sustainablebecause of its approach to value creation; Monsanto has not.

We can describe Shells story since 1995 as having moved from a

Level 1 culture, in terms of values, beliefs and indeed behaviours, through

to Level 2 in terms of the companys performance and its development of

new capabilities for stakeholder responsiveness, growing social and

economic value with some consistency. It may even be argued that Shell

is aspiring to Level 3 in terms of espoused values and strategy for the

longer term. In contrast, BP and Suncor seem to have maintained a longer

and more credible track record at Level 2, and may thus appear more

comfortable and credible when they espouse Level 3 type values and

beliefs on economic and social value. However, where all thesecompanies may yet be challenged is in their long-term ecological

sustainabili ty. Although all three have nascent renewable energy

businesses, none would claim that their overwhelming reliance on fossil

fuels is consistent with global sustainability. Thus, it may be argued that

these firms are currently creating economic and social value but eroding

ecological value (what some would call natural capital). Whatever their

stated philosophies, they will require new technologies and matching

organizational capabilities to achieve Level 3 performance.

In each of these cases, it is possible to apply normative, ethical or

moralistic judgements. With the gifts of hindsight and perfect knowledge,we can all express where we think it was right (or wrong) for a firm to

be at any given point in time. In terms of stakeholder orientation and the

creation of value, Shell should have been more like BP and Suncor in 1995,

Monsanto should have been more like Novo between 1995 and 1998,

Nortel and Cisco should have been generally more grounded and more

honest with themselves and their stakeholders when faced with

catastrophic changes in market conditions and, perhaps, more generally

as conservative as e-Bay with respect to investor relations.

But, we do not believe these judgements are especially helpful.

And whilst the framework may be used retrospectively in a descriptive

sense as we have done here we believe its real value lies in being


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used as a prompt for assessing organizational approaches to stakeholdersand value creation in the present and future. For example, we can use the

framework to pose some very simple questions that every manager and

entrepreneur might ask of their existing business, product, or service, or

indeed of a proposed new venture:

1) Is our value proposition feasible? Can it be done within thecurrently accepted societal framework of how we treat eachother? Does it operate at Level 1 (do minimum harm) or atLevel 3 (do maximum good)?

2) Is there support for the proposition from those groups that areaffected? Is there a process for gaining stakeholder

cooperation and support for the proposition? Is value createdfor each stakeholder group in a synergistic way, avoidingexcessive trade-offs?

3) Can the value that is created be sustained over time economically, socially and environmentally? As we havenoted this is both a short term and long term issue and aculture and capability issue.

Value propositions which fail any of these questions risk failing tocreate lasting value and may not ultimately be practically feasible. It may

be the case that some value propositions may take from one stakeholder

group and give to another, but surely there are enough horror stories for

us to see the error of our ways here.

In this analysis we are not arguing that organizations seek to treat

stakeholders equally, but that the voluntary agreements and norms which

define value creation in a capitalist society must be respected. Fraud and

lack of transparency do not respect these agreements and clearly fail the

first question. Business developments which do not meet basic expectations

of stakeholders fail the second. And, business ideas that do not create

economic value and maximize social and environmental gain over the long

term will not be sustainable.

We will now turn to the theoretical implications of this approach.

Reconciling Corporate Social Responsibility and Sustainability

with a Stakeholder Approach to the Creation of Value: Theoretical

Implications

Our collection of stories and observations about the creation of value and

convergent rather than divergent interests of stakeholders leads us to two

conclusions. First, that value creation is the primary motivator for

virtually all business activity, and that in certain industries the locus of

value creation may rest outsidethe single firm. We have coined the term

value-based networks or VBNs to acknowledge that stakeholders aresometimes grouped in key networks with a common sense of what is


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valuable. Second, a critical characteristic of successful, i.e. sustainable,business models is that they need to recognize explicitly the importance

of acknowledging multiple perspectives in defining value. The process

of defining and creating value is fundamentally pluralistic and iterative,

i.e. socially constructed within networks associated with firms (the

VBNs), and thus the business firm is a key player in the construction of

what we may one day recognize as a viable, sustainable society. These

observations have potentially profound implications for the nature of

business.

For decades, writers and scholars have raised the question In

whose interests should corporations serve? from the perspective of lawand corporate governance, with the attendant wrangling over the rights

and duties of business firms in society [52]. With the rise of managerial

capitalism, and the de factoseparation of ownership from control, ideas

concerning property rights began to shift in the early twentieth century,

and there was a call for greater recognition of corporations as social

institutions. That inquiry coalesced over time into the field known as

corporate social responsibility (CSR) and, latterly, corporate citizenship

[53], in which the primary aim was to draw attention to the social impact

of business activity. The main tenor of work in the field of CSR is an

ethical appeal to organizational leaders to minimize the harm done by

corporations in the pursuit of profits and, in some cases, to make a case

for linking conventional philanthropy to constructive community involvement[54]. Ideas in CSR have been extended into investigations of corporate

social performance (CSP), wherein a normative ethical conception of the

corporation is used as an independent variable to measure the dependent

variable of firm performance, mainly on financial metrics [55]. Discussions

of CSR and CSP have been readily accommodated within stakeholder

frameworks [56].

Over the past fifteen years, stakeholder theoryhas emerged as a

primary organizing framework undergirding all of business ethics [57],

and is more recently gaining ground as a viable framework in the field of

strategy [58]. Stakeholder theory is not so much a formal unified theoryas a broad research tradition that encompasses philosophy, ethics, political

theory, economics, law and organizational social science. In its applied

form we therefore refer to a stakeholder approach. Philosophers and

social scientists have converged on stakeholder theory from different

points, and for different reasons [59]. The former see a stakeholder focus

as a way to foreground the idea that business should be accountable to

others; the latter have seized stakeholders as a useful unit of analysis to

depict the social effects of business activity. In the mainstream of

Anglophone business, however, a stakeholder approach has yet fullyto

supersede the shareholder primacy model of corporate governance,

though a narrower, but still responsive construction (which we have

termed stakeholder relationship management) is now commonplace.


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Stakeholder theory is concerned with value creation on multiplefronts, with social justice, with stability, and with the role of business in

society. Stakeholders are most often defined in relation to a focal

organization or business firm and, so, stakeholder concepts are usually

anchored at the organizational level. We saw in the illustrative stories that

the locus of value creation increasingly resides beyond the boundaries of

the single firm, in what we termed value-based networks. For that

reason, it is strategically useful to add a third level to the mix, one that is

centered outside the firm, at the societal level. Sustainable development

or sustainability(in business terms) is a construct whose foundational

ideas are consonant with those of stakeholder theory and which allows

such a bridge to important global societal issues.

There are many definitions of sustainable development, but few

that are simultaneously authoritative and satisfying. Most cited is that of

the World Commission on Environment and Development (WCED), the

Brundtland Commission: development that meets the needs of the

present without compromising the ability of future generations to meet

their own needs [60].

From a business perspective, the World Business Council on

Sustainable Development, which comprises 150 of the worlds largest

companies and which operates at the CEO level, now explicitly and

effortlessly describes the purpose of business in terms of threeresponsibilities: to create economic, social and environmental value [61].

This in part reflects the popularization of the concepts of sustainability

and the triple bottom line rhetorical devices coined by Elkington [62],

which have created a safe linguistic haven for business, government and

civil society, allowing previously antagonistic players to share a common

vision of the longer term, rather than simply fight over an unsatisfactory

current reality [63].

Also employing the linguistic logic of the accountancy profession,

the term social capital is now in vogue as a means of describing the value

embedded in stakeholder relationships within and external to the firm[64]. Similarly, the concept of natural capital [65] is seen by environmental

commentators as a useful construct, again harnessing the power of the

term capital. We can postulate that all of these devices serve to create

new meaning for the nature of capitalism far in advance of how it has

been conceptualized and operated in English-speaking countries to date,

and perhaps more relevant to the needs of a globalized and increasingly

complex and insecure world.

At a humanistic level, Ehrenfeld [66] refers to such definitions as

variants of the current economic development paradigm, which in itself is

unsustainable. Jennings and Zandbergen suggested that the definition of

sustainability be more closely connected to the social system and the


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natural ecology, and offered this: sustainability is a concept embeddedin a larger theory about how the ecological system and the social system

must relate to each other in order to remain intact over long periods of

time [67].

We believe (like the WBCSD) that there is merit in defining

sustainability in simple, pragmatic terms as value creation on three

dimensions: economic, social and environmental. As noted, this is

consistent with the thinking of Elkington and the business case arguments

advocated by leading academic commentators in the field such as Stuart

Hart [68].

However, so that we have some aspirational point of focus for

anchoring the notion of value we will also cite the more expansive

definition of sustainability offered by Ehrenfeld [69]:

I define sustainability as the possibility that humans and other

life forms will flourish on the earth forever. Flourishing means not

only survival, but also the realization of whatever we as humans

declare makes life good and meaningful, including notions like

justice, freedom, and dignity. And as a possibility, sustainability is

a guide to actions that will or can achieve its central vision of

flourishing for time immemorialIt is a future vision from which we

can construct our present way of being.

If sustainability is an ideal toward which society and business can

continually strive, the way we strive is by creating value, i.e. creating

outcomes that are consistent with the idealof sustainability along social,

environmental and economic dimensions.

Questions of sustainable development are intimately concerned

with the nature of society, of justice, of liberty, of the value of each

individual as an end in itself; in that sense sustainability in business is

stakeholder theory writ large. If stakeholder theory is concerned with the

essential character of a firm, sustainability in business helps bridge to theconcerns of a global society. Stakeholder theory exists as a set of

narratives, as a genre of stories about how organizations create value.

Thus, stakeholder concepts are highly relevant and useful to thinking

about sustainability and sustainable development, although from a

humanistic perspective it might be argued that the former do not necessarily

fully stand as a proxy for the latter; that is, embracing stakeholder notions

of value and striving for sustainability are consistent but not synonymous.

Some measure of conflict (or creative tension) is inherent and

unavoidable in the intermingling of stakeholder perspectives and attendant

value systems. Resolving or leveraging the trade-offs and potential

synergies in such tension is abetted by guidance from a higher-order set


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of end values, a common aspirational agenda. The concept of sustainability,defined as an ideal, offers such a value framework. Sustainability is not

equatedper sewith environmentalism, social justice, economic prosperity

or spiritual development, though all of those ideals are consistent with a

sustainability mindset. Nor is it concerned only with long term

consequences. It is aspirational in nature, a meta-ideal, one inherently

infused with societal values of justice, integrity, reverence, respect,

community and mutual prosperity.

A business model consonant with societal aspirations to sustainable

development might encompass, accommodate and evince a similar value

set. Therefore it can be argued that a stakeholder approach, with itsinherent values of freedom, responsibility, justice, inclusion, participation,

and mutual dependence in service of creating value for different actors,

offers the best hope in effecting the pursuit of global as well as organizational

sustainability.

Conclusions and Practical Implications

According to F. Scott Fitzgerald, the test of a first class mind is the ability

to hold two opposing ideas in the head at the same time and still retain the

ability to function. We may apply this epigram to the idea that there is

some sort of choice to be made between the interests of the firm, its

stakeholders and society an academic debate to which we alluded inour introduction. Our view, as stated by Freeman (2000), is that the

choice is spurious and that in simple terms stakeholder capitalism sets a

high standard, recognizes the commonsense practical world of business

today, and asks managers to get on with the task of creating value for all

stakeholders.

Some would argue that the best firms have always sought to

leverage their communities of interest for the instrumental purpose of

creating value. In many cases they have done this by balancing (or ideally

integrating) stakeholder interests and combining them with a clear vision

of what is achievable for customers, employees, investors and otherstakeholders whatever their corporate officers may have said to the

analysts or investors at annual general meetings [70].

Happily, the evidence is now mounting that what is said to one

stakeholder group, i.e. the investors, need no longer be in conflict with

what is said to employees, customers, supply chain partners and local

communities. A wide range of empirical studies [71], together with

growing evidence of correlation of environmental, social and economic

performance from special stock market indices, e.g. the Dow Jones

Group Sustainability Index and others [72], demonstrate that stakeholders

and value-based networks may be celebrated without apology or convoluted

ethical reasoning [73]. This may soon help to eliminate a potent historical


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source of double-speak by corporate Board members and executiveofficers as well as the limitless potential for cognitive dissonance caused

by the disconnect between the rhetoric of corporate leaders and

stakeholders actual experience.

Again, the practical evidence is compelling. Whether it is a

recognition of the strategic value of reputation [74], or brand value [75],

few business leaders today ignore the tangible business benefits of loyal,

trust-based relationships with networks of customers, suppliers and

distributors [76]. The same point is made in the sociology, human

resources and organizational behaviour literatures with respect to

relationships with employees [77], and in the strategy and generalmanagement literature with respect to relationships with a broad range of

stakeholders who may bring resources of innovation and loyalty in an

increasingly competitive world [78]. And this explains, at least in part, the

success in strategic management terms of techniques such as the

balanced scorecard or the business excellence model of the European

Foundation for Quality Management [79], both of which give at least

equal weight to customer and employee relationship factors as to financial

factors. All these systems do is to turn a strategic stakeholder approach

into an implementable management framework with appropriate metricsattached.

In the non-Anglophone world, where corporate governance andcorporate law provisions have not been predicated on the primacy ofinvestors interests, e.g. in Continental Europe and Asia, it may be arguedthat this approach is somewhat less than novel. Notwithstanding recentsetbacks in some economies, e.g. Japan, relatively sophisticatedapproaches to balancing and integrating the interests of differentstakeholders and maximizing the economic and social value of the firmhave long been a hallmark of the most successful mainstream continentalEuropean and Asian businesses [80].

The navigational framework offered here, building from the businessstories described at the outset and our observations of the way the world

now works, captures the idea that firms with the necessary capabilities tounderstand where they can (i) avoid destroying value (doing harm asdefined by different actors), and (ii) maximize opportunities for creatingvalue (doing good as defined by those same actors), are those that will

prosper in the long term. Moving from compliance, to attention tostakeholder needs, to pursuit of valuesimultaneouslyin all three dimensionsof sustainability requires that organizations develop the necessary cultureand internal capabilities to do so. Value creation at the highest levelrequires an ability to build value-based networks where all stakeholderssee merit in their association with and support for a business.

As noted, there is much theoretical controversy in the literature

between normative and instrumental stakeholder approaches, but we


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have argued that a more careful and pragmatic look finds very little thatis of substance. We have not proposed a way to integrate a stakeholder

approach, CSR and sustainability, but we have suggested how we can

begin to talk about them in the context of creating value to avoid the

seeming points of linguistic or conceptual conflict. Despite the undoubted

enormity of the problems faced by the world insecurity, development,

ecological and social stress we hope this may avoid unhelpful versions

of the CSR and sustainability stories dragging everyone down. In our

experience this only serves to alienate practitioners and kill the creativity

of managers and policy-makers.

Perhaps the problem has been that traditionally we have tended totake too narrow a view of each of these ideas. Stakeholder theory has

never been just about social issues. It is about real customers, suppliers,

investors, employees and communities, and integrating and sustaining

these relationships as part of a community with a common sense of what

is valuable. Likewise, sustainability is not just about environmental issues.

There is no real distinction between nature and culture. And there is no

necessary dichotomy between sustainability and profitability.

The abiding challenge, of course, is the temporal one. Perhaps,

particularly in view of the speed and scale with which value-based

networks now form and reform, real value must be created for all

community members including investors in the short term if it is tobe worth sustaining. The practices associated with a stakeholder approach,

including CSR, relationship management and sustainability cannot be

separated from the very basics of what makes a business tick, both in

terms of vision and aspiration and as immediate day-to-day priorities:

good HR management, excellent customer service, effective delivery of

returns, maintenance of license to operate with community groups and so

on.

In presenting these ideas we hope we have provided some clues as

to how this challenge may be addressed. But we recognize that many

more narratives, with underpinning qualitative and quantitative evidence,will need to be assembled in order that managers, stakeholders and their

networks can learn and act together more effectively in the creation and

appreciation of value. Druckers 1982 assertion and F Scott Fitzgeralds

maxim imply nothing less. Perhaps, then, it will not be too long before we

can begin to assert that the business of business is the creation of

sustainable value economic, social and ecological.

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[2] See, for example, the Environics Global Public Opinion research onpublic attitudes to globalization prepared for the World Economic

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the Pyramid, Strategy + Business, 26, 2001, pp. 2-14, and

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A.C. Wicks, S. Kotha, and T.M. Jones, Does Stakeholder

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Management Models and Firm Financial Performance,Academyof Management Journal, 42, No. 5, 1999, pp. 488-506; Freeman,

R. E. Divergent Stakeholder Theory (A response to Jones and

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Washington, D. C. 2001.

[5] Freeman, R. E., Business Ethics at the Millennium, Business

Ethics Quarterly,10, No. 1, 2000, pp. 169-180.

[6] The literature on intangible value is well developed and includes

references to intellectual capital, human capital, social capital and

so on; equally well developed is the literature on how CSR,Corporate Social Performance and environmental performance

correlate with economic value; we return to this literature later in

the article. But according to McWilliams and Siegel (2001), CSR

investments have seldom been considered in the context of cost-

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A. and Siegel, D. Corporate Social Responsibility: A Theory of theFirm Perspective, Academy of Management Review, 26, No.1,2001, pp. 117-127.

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[8] Tsai, W., Knowledge Transfer in Intraorganizational Networks:Effects of Network Position and Absorptive Capacity on Business

Unit Innovation and Performance, Academy of Management

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Responsibili ty , Freedom, Business and Power in the New

Century, London: Vintage, 1998; Castells, M., The rise of the

Network Society, Malden: Blackwell Publishers, 2000; Kanter,

R.M., Evolve! Succeeding in the Digital Culture of Tomorrow,

Boston, MA: Harvard Business School Press, 2001.

[9] Evans, P. and T.S. Wurster, Blown to Bits: How the New

Economics of Information Transforms Strategy, Boston, MA:

Harvard Business School Press, 1999; Tapscott, D., D. Ticoll andA. Lowy, Digital Capital. Harnessing the Power of Business

Webs, Boston, MA: Harvard Business School Press, 2000; Sawhney,

M. and J. Zabin,The Seven Steps to Nirvana. Strategic Insights

into E-Business Transformation, New York: McGraw-Hill, 2001.

[10] Post, J. E., Moving from Geographic to Virtual Communities:

Global Corporate Citizenship in a Dot.Com World,Business and

Society Review,105, No. 1, 2000, pp. 27-46.

[11] Many would argue this is merely a rediscovery of a timeless truth

predating the capitalist project altogether and already well understood

in non-Anglophone markets.

[12] Putnam, R.D., The Prosperous Community: Social Capital and

Public Life, The American Prospect,13, 1993, pp. 35-42; Putnam,R., Bowling Alone: American's Declining Social Capital,Journal

of Democracy,6, No. 1, 1995, pp. 65-78; Putnam, R., Bowling

Alone: The Collapse and Revival of American Community, New

York: Simon & Schuster, 2000.

[13] Reich, 2001, op. cit.

[14] Tapscott et al, 2000; Sawhney and Zabin, 2001, op cit.

[15] Freeman, R. E., Strategic Management: A Stakeholder Approach,

Englewood Cliffs, NJ: Prentice-Hall, 1984; Freeman, R.E. and J.

McVea, A Stakeholder Approach to Strategic Management, in

Handbook of Strategic Management, edited by M.A. Hitt, R.E.

Freeman and J.S. Harrison, pp. 189-207, Oxford: BlackwellBusiness, 2001. 2001, op cit; Tsai, W. and Ghoshal , S., Social

Capital and Value Creation: The Role of Intrafirm Networks,

Academy of Management Review,41, No. 4, 1998, pp. 464-476;

Tsai, W., Social Capital, Strategic Relatedness and the Formation

of Intraorganizational Linkages, Strategic Management Journal,

21, 2000, pp. 925-939; Wheeler, D. and M. Sillanpaa, The

Stakeholder Corporation: A Blueprint for Maximising

Stakeholder Value, London: Pitman, 1997; Wheeler, D. and M.

Sillanpaa, Including the Stakeholders: The Business Case,Long

Range Planning, 31, No. 2, 1998, pp. 201-210; Nahapiet, J. and S.

Ghoshal, Social Capital, Intellectual Capital and the Organizational

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pp. 242-266; Cohen, D. and L. Prusak, In Good Company: HowSocial Capital Makes Organizations Work, Boston, MA.: HarvardBusiness School Press, 2001; Adler, P.S. and S-W Kwon, SocialCapital: Prospects for a New Concept, Academy of Management

Review,27, No. 1, 2002, pp. 17-40.[16] Moore, J., The Death of Competition, New York: HarperCollins,

1995.[17] M. Sawhney, R. Gulati, and A. Paoni, Tech-Venture. New Rules

on Value and Profit from Silicon Valley, New York: John Wiley,2001; Reichheld, F., The Loyalty Effect, Boston, MA: HarvardUniversity Press, 1996.

[18] Kanter, 2001, op. cit.

[19] Bloomberg, http://quote.bloomberg.com, 2002 (cited January 2,2002 and July 28, 2002).

[20] BBC, The AOL Time Warner Merger, (http://news.bbc.co.uk/hi/english/business/newsid_597000/59782.stm) 2000 (cited January2, 2002).

[21] Bloomberg, 2002, op. cit.[22] White, E. and Wingfield, N., Web Provides Silver Lining in

Retailing's Dark Cloud: Growth in Christmas Season On-LineSales Surprisingly Brisk, Surveys and Stores Say, Wall Street

Journal, January 3, 2002. N.B. In a fascinating post-script to theAOL story for 2001, in early January 2002 the firm was forced toabsorb a non-cash charge of up to $60 billion to reflect changes in

accounting rules for intangible assets. Between January 1standMarch 1st, this historic writedown hardly affected AOLs stock

price which continued to oscillate between approximately $23 and$28. Tuck, S., 2002. AOL to take massive charge. The Globe and

Mail, January 8, B1. Later in the year, however, share price diddecline to under $11 by July. Bloomberg, http://quote.bloomberg.com2002 (cited July 28, 2002).

[23] AOL.com, http://www.corp.aol.com (Corporate Website). AmericaOn-Line, 2002 (cited January 2, 2002).

[24] Govindarajan, J. and A.K. Gupta, The Quest For GlobalDominance. Tr ansfor ming Global Presence In to Gl obal

Competitive Advantage, San Francisco, CA: Jossey-Bass, 2001.[25] http://pages.ebay.com (cited April 18, 2002). Bloomberg, http://

quote.bloomberg.com 2002 (cited July 28, 2002).[26] Bloomberg, http://quote.bloomberg.com 2002 (cited January 2,

2002 and July 28, 2002).[27] Smith, G., A Bad Year for Prognosticators. Nortel goes Kaplooie,

The Globe and Mail, December 31, 2001, A3.[28] Rather poignantly, four years before the significant Cisco layoffs in

2001, CEO John Chambers was quoted in OReilly, C.A and J.Pfeffers Hidde n Value : How Grea t Compani es Ach iev e

Extraordinary Results with Ordinary People , Boston, MA:Harvard Business School Press, 2000, as saying that having donemajor layoffs at Wang he would never do that again to employeesor shareholders.


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[29] Quoted in Smith, op. cit.[30] Ebner, D., Investors Optimism Failed Them in 2001, The Globe

and Mail, January 2, 2002, B2.

[31] Quoted in Milner, B., Firms Must Sort Fact from Fiction, The

Globe and Mail, December 19, 2001, B10.

[32] Clearly it is insufficient even to say that multiple interests are only

interdependent in the long term, as some have argued; for as the

dot.com bubble showed, without real short-term interdependence

economic as well as social the long-term never arrives.

[33] Rifkin, J ., The Biotech Century: Harnessing the Gene and

Remaking the World, New York: Penguin/Putnam, 1998.

[34] Magretta, J. Growth Through Global Sustainability, inHarvardBusiness Review on Business and the Environment, pp. 59-84,

Boston, MA: Harvard Business Review, 2000.

[35] Simanis, E. and Hart, S.L., The Monsanto Company: Quest for

Sustainability (A) - Case Study, wri.com: World Resources Institute,

Washington, 2001.

[36] Pierson, R. and J. Seltzer, Pharmacia Plans to Spin off Monsanto,

The Globe and Mail, November 29, 2001, B11. Bloomberg, http:/

/quote.bloomberg.com 2002 (cited July 28, 2002).

[37] Verfaillie, H.A., Securing our Commitments to Agriculture, paper

presented at the Address to the Farm Journal Conference,

Washington D.C., November 27th, 2001.

[38] Monsanto, Corporate web-site, (http://www.monsanto.com/monsanto/about-us) 2002 (cited January 2, 2002) .

[39] Novo, Corporate web-sites (http://www.novo.dk and http://

www.novonordisk.com) 2002 (cited January 2, 2002).

[40] Wheeler, D. and J. Elkington, The End of the Corporate

Environmental Report? Or, The Advent of Cybernetic Sustainability

Reporting, Business Strategy and the Environment, 10, 2001,

pp. 1-14.

[41] Hays, K., New Enron Could Rise from the Ashes of the Old, The

Globe and Mail, December 5, 2001, B12.

[42] Hays, 2001, op cit.

[43] Wheeler, D., H. Fabig and R. Boele, Paradoxes and Dilemmas ForAspiring Stakeholder Responsive Firms In The Extractive Sector

- Lessons From The Case Of Shell And The Ogoni, Journal of

Business Ethics, 39, No. 3, pp. 297-318.; Wheeler, D., R. Rechtman,

H. Fabig, and R. Boele, Shell, Nigeria and the Ogoni: A Study in

Unsustainable Development. III - Analysis and Implications of

Royal Dutch/Shell Group Strategy, Sustainable Development,9,

No. 4, pp. 177-196.

[44] McKague, K., D. van der Veldt and D. Wheeler, Growing a

Sustainable Energy Company: Suncor's Venture into Alternative

and Renewable Energy, Schulich School of Business Case, Toronto:

York University, 2001.


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[45] Carroll, A.B., Corporate Social Responsibility: Evolution of adeFinitional Construct,Business and Society,38, No. 3, 1999, pp.

268-295.

[46] Committee for Economic Development, Social Responsibilities of

Business Corporations, New York: CED, 1971, cited in Carroll

1999, op. cit.

[47] S.P. Sethi, Dimensions of Corporate Social Performance: An

Analytic Framework, California Management Review,17, 1975,

pp. 58-64.

[48] See Martin, R.L., The Virtue Matrix: Calculating the Return on

Corporate Responsibility, Harvard Business Review, March

2002.[49] Wheeler has further developed issues of sustainability and

organizational capability in a manuscript for the forthcoming

Blackwell title, Leading in Turbulent Times, to be edited by

Burke, R. and C. Cooper.

[50] Here we use the definition of Schein, E., Organization, Culture

and Leadership, San Francisco: Jossey-Bass, 1985, i.e. that

corporate culture comprises an amalgam of the values, beliefs and

assumptions of the organization.

[51] A similar point has been made recently by I.M. Jawahar and G.L.

McLaughlin in relating the dynamic nature of stakeholder

relationships to the life cycle of the firm in their article,Toward a

Descriptive Stakeholder Theory: An Organizational Life CycleApproach,Academy of Management Review, 26, No. 3, pp. 397-

414.

[52] A. A. Berle and G. Means, Private Property and the Modern

Corporation, New York: MacMillan, 1932; A. A. Berle, Power

Without Property: A New Development in American Political

Economy , New York: Harcourt Brace, 1959; Clark, J. M., The

Changing Basis of Economic Responsibility, The Journal of

Political Economy,24, No. 3, 1916, pp. 209-229; Dodd Jr., E. M.,

For Whom are Corporate Managers Trustees? Harvard Law

Review, 45, 1932, pp. 1145-1163; Margaret M. Blair, In Whose

Interests Should Corporations Serve?, in, Ownership and Control:Rethinking Co rporate Governance for the Twenty-First

Century, pp. 202-234, Washington, D. C.: Brookings Institution,

1995.

[53] McIntosh, M., D. Leipziger, K. Jones and J. Coleman, Corporate

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London: Pitman, 1998.

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[58] Freeman, 2001, op. cit., Hillman and Keim, op. cit.

[59] Freeman, 2000, op. cit.

[60] WCED, World Commission on Environment and Development,

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[63] To borrow terminology from the learning organization concept of

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[65] Hawken, P., A. Lovins and L.H. Lovins, Natural Capitalism.Creating the Next Industrial Revolution, Boston, MA: Little

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[68] Hart, S., A Natural-Resource-Based View of the Firm,Academy

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[76] Reichheld, op. cit.

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[80] Wheeler and Sillanp, 1998, op. cit.

focusing on value

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