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Business Strategy & Sustainability Summary
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Business Strategy & Sustainability- Milestones in terms of global warming e.g. paris-agreement,
- Questions;
- Why haven’t we been able to address climate change?
- What is the role of business in addressing climate change
and other sustainability problems?
- Are companies supposed to engage with societal issues and problems?
- What pressures do companies face to engage with sustainability?
- Do companies gain from being more sustainable?
- How are sustainability challenges reflected in challenges
for businesses?
- What are some possible solutions?
Week 1 : Read Week 4: Read
Background on CSR Climate change & Beyond
Bansal & Roth, 2000 McGrath
Milton Friedman, 1970 Blog on Hardins Article
Porter & Kramer, 2006 Lee, Georgallis & Struben
Freeman & Elms, 2018 Bhattacharya & Polman
Week 2: Stakeholder, Social Week 5 : Impact
Mitchell, Agle & Wood, 1997 Georgallis & Lee, 2020
Spar & La Mure, 2003 King & Toffel, 2009
Hoffman, 2009 Hengst et al., 2020
Georgallis, 2017 Mann, 2022
Week 3: Financial value Cases
Porter & Kramer, 2011 Michigan University
Ambec & Lanoie, 2008 DSM
Barnett et al., 2021 Tesla
Lonkoski & Smith, 2018
1
,Lecture 1 - Background on CSR - 10.02
- Non-consequentialist moral theories: Principles and actions
- Consequentialist theories: Action and Outcome
CSR: is: “managing a firm in such a way that its activities meet the needs of the present,
without compromising the ability of future generations to meet their needs”
- “CSR and CS refer to company activities – voluntary by definition– demonstrating the
inclusion of social and environmental concerns in business operations and in
interactions with stakeholders”
- Main Elements:
- Triple bottom Line: Economic, Social & Environmental dimensions
- Stakeholder
- Voluntary
- Context - specificity
- Managing externalities / impacts
- Rooted in values and ethics
Why companies go green (Bansal & Roth, 2000)
Corporate ecological responsiveness: “set of corporate initiatives aimed at mitigating a firms
impact on the natural environment”
- Initiatives include
- Changes to firms products, processes and policies e.g. reducing waste
generation
- Find the motives for corporate greening; regulatory compliance, competitive
advantage, stakeholder pressures, ethical concerns, critical events & top management
initiative
- Purpose: identifying motivations for adopting ecological initiatives and the underlying
factors leading to motivation
2
,3 basic motivations for ecological responsiveness
1. Competitiveness: Potential for ecological responsiveness to improve long term
profitability i.e. sustained advantage - innovative
2. Legitimation: Improve appropriateness of actions within established set of
regulations, norms & values i.e. threats can undermine Firm survival,
Compliance, Government, local community - imitate their peers
3. Ecological responsibility : concern a firm has for it’s social obligations and values
i.e. Corporate morale, Social good - independent
Employee morale goes up
Perspectives on CSR & Purpose of corporation ?
- Milton Friedman (1970) - Shareholder theory
- Freeman & Elms (2018) - Stakeholder theory
- Porter & Kramer (2006) - Social impact, shared value
3
, Milton Friedman (1970)
Social responsibility of business is to increase profit → That means:
- Use resources / capabilities to increase profits for shareholders
- Executive is an agent of the stockholders,
- Fudiciary (trustee/beneficiary) responsibility of managers to owners i.e. shareholders
- Hence: People can be socially responsible with their own money and as a company
doing CSR activities are equal to theft or imposing a tax
- CSR is costly, you cannot exploit others for CSR so it is at own expense
- All these are true unless you can make the case that a company would be more
profitable if they engaged in CSR
Is this consistent with any ethical/theory approach? consistent with B&R’s motivations?
- Competitiveness can only be a business case if there is profitability, and can make more
money if they are being socially responsible
Selected criticism
1. Legal basis?
- shareholders are beneficiaries, but they do not have “dominion” over firms
- managers are expected to make discretionary decisions
- they are owners? well not really, they can’t go to apple’s factory and start taking
phones, or break things. They own shares, and should get dividends on those
shares
2. Incentives aligned?
Shareholders can sell at any point, no long-term interest in the company
- Shareholders are shielded by limited liability for debts, wrongdoings… etc
- what’s good for the stock price =/= is not necessarily good for the company
3. Other stakeholders?
- doesn’t include / consider impact on other stakeholders or broader society
4. Relies on implausible assumptions
- e.g. perfect markets (no externalities, rationality, full information…)
4
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