Structure of industrial or corporate sustainability programmes

Abstract

The 15 years up until 2008 have seen an escalating growth in corporate or industrial sustainability programmes to a current level of about 25% of the Fortune 1000 firms. This preliminary study of corporate sustainability programmes yielded a repeatable structure of these programmes that may be unique to industry in the broader sustainability field. These corporate sustainability programmes are different from the prior corporate social responsibility programmes and also are a subset of the vast current use of the word sustainable. The corporate sustainability model is built on four pillars (business excellence, innovation, human contribution and environment) that offer important directions for long-term decision making. In-depth sustainability programme studies revealed recurring principles that reflect current industry or corporate sustainability programmes.

Keywords:

• corporate sustainability
• sustainability research
• industrial sustainability

1. Introduction

Corporations seek to improve their short- and long-term performance. The extent that external social issues can limit the ability of corporations to grow and succeed has led to the development of corporate social responsibility (CSR) programmes. From the description of CSR programmes by various authors, Table 1, it appears that these programmes are meant to achieve the support of the social system as a means of improving their own performance (Lindgreen et al. 2009a). Several authors have described the diversity of CSR from ethical to business orientation (Sharp and Zaidman 2010, Van der Heijden et al. 2010). Sustainability programmes for corporations have subtle, but important differences from the representative CSR programmes. In some ways, corporate sustainability programmes have evolved as an expansion of CSR and would likely be less successful if earlier CSR goals had not been started. However, corporate sustainability programmes appear to have some important characteristics used to address long-term goals for corporations. Hence, there is a need to study and categorise these sustainability programmes in order to understand common principles, assist in organising new sustainability programmes and understand the basis for models or theory of corporate sustainability.

Table 1 Definitions of CSR.

CSR Definition	Citation
Minimisation of negative externalities of a firm's operating activities and the maximisation of beneficial impacts on society	Jamali (2008)
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	Lindgreen et al. (2009a, 2009b)
Activities that protect and improve both the welfare of society as a whole and the interest of the organisation	Morhardt (2002)
CSR implies bringing corporate behaviour up to a level, where it is congruent with the prevailing social norms, values and expectations	Sharp and Zaidman (2010)
Organisations should be not only concerned about making a profit, but also engaged in actions that appear to further some social good beyond the interests of the firm, which is required by law	Sustainability Asset Management (SAM) Group (2007)
Business decision making related to ethical values, compliance with legal requirements and respect for people, communities and the environment	AccountAbility (1994)

Sustainability is actually a broad umbrella of concepts and definitions that evolved, because of the wide societal appeal of the concept of sustainability. There is a general agreement on the philosophical definition referred to as the Brundtland description (World Commission 1987),

To meet the needs of the present without compromising the ability of future generations to meet their own needs.

However, this description is not so effective in defining actual steps, programmes nor metrics at the operational level of the variety of groups advocating sustainability. Hence, there is a diversity of sustainability definitions (Vos 2007) with only an agreement for verbal truce (Upton 2007) as various organisations (levels of government, non-governmental organisations, political parties, corporations, professional associations, etc.) seek sustainability improvements. There also are how-to books on developing only the ‘green’ or environmental programmes of the sustainability model, or how to construct a sustainability report (Morhardt 2002, Willard 2002, Esty and Winston 2006). However, these background sources in this sustainability review do not examine in detail the structure of corporate sustainability programmes separate from the wide discussion of sustainability and sustainable development. In addition, it is also true that when using broad terms such as CSR and sustainability programmes, either of them could be stretched to include most topics, but this is not helpful and so there is a need to look at the central thrust and practices of industrial or corporate sustainability programmes.

The various sustainability definitions and graphical representations are actually models proposed by organisations as to how sustainability functions or by what means one could actually study how sustainable are such organisations. As such, models need to be tested, measured with tools or otherwise researched to determine how closely these reflect the actual systems. For example, Figure 1 is a frequently used model of sustainability in which three co-equal concepts overlap and where actions in the centre are proposed to be more sustainable. However, for industrial sustainability, this model would appear not to be an accurate description because environmental factors are rarely as critical as economical factors; and, social factor is more like an essential background to which corporations must adhere to than being a structure controlled by industry. Interestingly, as described later under Section 4, corporate sustainability programmes appear to adopt a different conceptual structure than Figure 1.

Figure 1 Frequently used model of interacting concepts for sustainability (Dow Jones 2008).

2. Objectives

With this background on sustainability, a research benchmarking study was undertaken to determine what operational structure or model had evolved in the field of corporate or industry sustainability programmes. The overall objective was to analyse corporate sustainability programmes in order to understand common concepts or models which reflect this important industrial segment of the US economy. This information would be used to eventually formulate a model of industrial sustainability. The present study focuses more on what are corporate sustainability programmes and structure than on how these work within companies. The discussion of sustainability refers to industrial and corporate programmes. Corporations are the focus of this study since these organisations developed sustainability programmes; however, most corporations are in the industrial sector (as contrast to government sector or communities) and thus the results reflect the principles of industrial sustainability.

3. Methodology

Extensive descriptions of individual corporate sustainability programmes were used as a database for the study of industrial sustainability. The scope was restricted to Fortune 1000 corporations as a reflection of the resources typically needed to maintain the long-term decision making of such sustainability programmes. This study was supported by Hawker Beechcraft, the first firm in the General Aviation sector to develop a sustainability programme.

The process started with online searching among the Fortune 1000 and thus reflects US corporations, most of which are truly global. All searches conducted employed Google, Yahoo and business magazines. The Fortune 1000 list used was found on the 2008 CNN Money website. The list was copied to an Excel sheet and a random sample of 100 firms was generated. Thus, these 100 firms were selected only on the basis of being large corporations. Another search was made of these 100 firms to find the website for each company to get more information about each company. As the website was found, a search was done for a sustainability report inside the company website. The sustainability reports established an active sustainability policy, as to when it was started, and to what has been done. After documenting the sustainability information, another search was done to find the number of employees in the company and the total yearly sales or total revenue. The final step was to find the percentage of companies which have a sustainability policy and those who do not. This first study was to understand the percentage of corporations with sustainability programmes and the rate of adoption of these concepts.

The second phase was a comparative analysis of the structure and philosophy of industrial sustainability programmes. For this phase, we started with information in the Dow Jones Sustainability Index (DJSI). The DJSI tracks the performance of the top 10% of companies on the Dow Jones Global Index that are leaders in corporate sustainability (Dow Jones 2008). All companies included in the DJSI are evaluated using criteria given by the Corporate Sustainability Assessment. This assessment is conducted by the Sustainability Asset Management (SAM) Group, who specialise in sustainability investments assessments. The assessment uses questionnaires, company documents, media and stakeholders and some contact with the company (Sustainability Asset Management Group 2007). SAM invites 2500 of the largest companies worldwide to participate in its analysis every year. To be included in the DJSI, a company must be on the Dow Jones Index.

From the DJSI, 31 firms that had corporate sustainability programmes were selected, reflecting peer industry, as judged by Hawker Beechcraft, and studied through their published reports, often over multiple years. The companies selected were approximately distributed as 45% manufacturing and technology, 20% chemical and materials firms, 15% energy firms and the remainder in finance, healthcare, services and food. These reports were analysed to determine structure and sustainability principles used by industry. Results were grouped to form categories or pillars (when portraying these programmes graphically). Synonyms were necessary to consolidate the different descriptive language found in these industrial sustainability programmes so that more direct comparisons could be made.

The third phase was in-depth interviews and/or visits. Because of limited resources, only three manufacturing companies were selected to assess the development and measures of current sustainability plans. These three firms were from the 31 previously analysed for corporate sustainability. These in-depth studies were centred on the categories or pillars of corporate sustainability so that the mechanisms and accomplishments of sustainability programme techniques could be described. The in-depth interviews used common question categories for all firms, Table 2, but ample time was available to expand or add information. Comparisons of common questions across these companies allowed the development of corporate sustainability programme characteristics.

Table 2 Benchmarking categories of inquiry for corporate sustainability programmes.

Benchmark issue	Inquiry group
Manufacturing system	Aspects of system that were most and least successful
	Measurement systems
	Impact on sustainability
	Goals and metrics
Communication and stakeholders	How to define stakeholders and metrics
	Involvement in sustainability goals
	Employee involvement
	Extent and success of communication on sustainability
Environment, health and safety	Evolution into sustainability pillar
	Elements that were most and least successful
	Internal and external aspects
	Metrics
Sustainability programme	Origins and evolution
	Elements that were most and least successful
	Management and employee involvement
	Goals for each pillar

4. Results

From the various reports and interviews in this benchmarking study, some generally held definitions of industrial or corporate sustainability were obtained. Three related definitions of corporate sustainability from our study are

1. a strategy that leads to year-by-year increase in value of the assets of a firm through business excellence plus attention to innovation, social and environmental issues,

2. the collective set of decisions that are made in a corporation over time that advance their productivity, market position and environmental efficiency,

3. a long-term plan to be in business in 100 years and to be even better than today.

It is of research interest that the first two may be measurable and thus serve to characterise the extent of sustainability in a given firm. In addition, these definitions contrast with Table 1 for CSR.

Within the Fortune 1000 set of corporations, there has been a growth of sustainability programmes (Figure 2). At the last date sampled, 2008, there were about 25% of these organisations with sustainability programmes having evolved over a 15-year period. These data indicate an increasing utilisation of sustainability programmes to organise current and future decision making.

Figure 2 Cumulative growth of sustainability programmes in Fortune 1000 corporations from a random sample of 100 firms.

Results from the study of 31 Dow Jones sustainability programme firms indicate that nearly all define industrial sustainability as consisting of four pillars.

• Business excellence. The most important pillar to achieve long-term success comprising the concepts of planning and controlling an organisation for the purpose of accomplishing goals. Without this, long-term excellence is not possible.

• Innovation. Creating products or services that appear at the leading edge of markets and thus assure long-term demand for these corporate outputs.

• Human contributions. Investing in the internal employees and community organisations to achieve sustainability (CSR programmes are largely found in this single pillar).

• Environment. Reduced impact on the natural system shared with society.

These pillars are actually domains of decision making that are felt to be the most significant in promoting industrial sustainability. The identification of four pillars appears to be an organisational strategy by which a wide range of important concepts can be integrated into the sustainability programme, but also allowing real diversity of ideas within each pillar. Thus, the pillars appear to be common across industry and provide a repeatable platform for corporate sustainability. CSR appears not to have a common structure across industry (Jamali 2008, Lindgreen et al. 2009b). However, the universality of this sustainability concept as measured by effectiveness was not studied in detail, although some form of industrial sustainability structure clearly exists for a diversity of corporations. The sustainability programme structure similarities across many firms indicate a low level of proliferation, which has been identified as characteristic of CSR (Jamali 2008).

Within each pillar is an array of objectives and metrics to measure progress and this array is selected and reassessed by each company separately, but in sustainability reports is reasonably transparent. These pillars have a high content of decision making with less emphasis on utilising social, ethical and legal standards. This industrial sustainability model also creates four sets of opportunities (the four pillars) for moving towards sustainability and reflects the importance and behaviour of corporations, regardless of the Standard Industrial Classification (SIC) code or sector. We also note that a subset of the industrial sustainability programmes studied included two other pillars (although not necessarily together). These are

• Governance. Processes and accountability among corporations and stakeholders.

• Safety. The attention to manufacturing, customer and supply chain safety in all industrial operations and product usage.

These two pillars occurred in less than 10% of the programmes and showed no pattern related to SIC sectors. Interpreting this pillar concept graphically, one might view the model for corporate sustainability as in Figure 3. It could not be determined whether this sample of corporate sustainability programmes reflects truly independent analysis of the issue of sustainability by each corporation. However, the ability to effectively use the four pillar model by all these firms seems reinforced by their reports and thus is an indirect reflection that the model is reasonable for sustainability in the industrial field.

Figure 3 Schematic of industrial or corporate sustainability programmes developed from this benchmarking study.

The similarities among the 31 corporate sustainability programme structures, Figure 3, are one indication of a common or generalisable structure as a four pillar concept. This four pillar structure appears to differ from the three part concept, known as the triple bottom line, although there are common elements in both models. Thus corporations, while familiar with the triple bottom line, have chosen a different structure and thus it may be interpreted that corporations needed a different model and hence have evolved into the current structure. The four pillar structure is more closely aligned with general corporate national and international award structures found in each of these pillars. The pillars and some example awards for each are

1. business excellence – Deming Prize,

2. innovation – Chicago Innovation Award,

3. human contribution – Fortune 100 Best Companies to Work for,

4. environment – J. Deane Sensenbaugh Environmental Technology Award.

This 4D structure for industrial sustainability is a different model (than Figure 1) and is likely to better reflect the actual sustainability behaviour of a corporation because it is developed internally. Four dimensions also offer a more definitive set of metrics and choices for sustainability improvement. Some research challenges related to the corporate sustainability model were thus developed.

1. What scale or measurement criteria are most widely used in each pillar?

2. In what quantitative way can the measurement scales of each pillar be compared?

3. What envelope of sustainability performance among the four pillars (or five or six pillars) would differentiate various levels of sustainability improvement in a set of corporations?

The in-depth interviews with successful corporate sustainability programmes were based on a large set of questions in four areas (Table 2). These areas contained 10–20 individual questions designed to investigate such things as process, effectiveness, employee acceptance, integration and motivation. Extracting from these in-depth corporation interviews, nine recurring observations were developed that characterise current industrial sustainability programmes (note, some exceptions were found, but the observations were predominately valid). We cross referenced answers from the three in-depth studies to determine these nine sustainability concepts. We then re-examined sustainability reports from the list of 31 firms and found that these concepts were largely repeated.

• (1) Corporate Sustainability programmes are built on activities that have economic justification or cost savings, therefore these programmes are cost effective.

• (2) Sustainability programmes are built on top of successful systems for analysis of improvements and future directions, such as

  1. Lean,

  2. Six Sigma or

  3. Business Case and Balanced Scorecard.

  Successful means these management and analysis tools are widely used throughout the companies and have become a dominant language.

• (3) No sustainability programme is just statements on environment, because the expectations of sustainability are excellence in manufacturing, business, innovation, social and environment, thus presenting a much larger overall strength.

• (4) There appear to be business gains from sustainability programmes and in some markets, it may be a requirement for entry. However, economic quantification of such advantages has not yet been developed.

• (5) Sustainability appears to be an effective distinction currently in recruiting employees.

• (6) Companies with successful sustainability efforts have clearly stable upper management who are strong advocates and convey the long-term commitment to sustainability.

• (7) The preparation of a sustainability report requires a good deal of work, but yields many benefits to the organisation.

• (8) Life cycle information and thinking is growing in usage as a part of sustainability programmes because of the quantitative information provided.

• (9)Many elements of sustainability programmes already exist in corporations.

These characteristics of corporate or industrial sustainability programmes lay the groundwork for metrics or possible analytical studies to understand what are some of the characteristics that emerge from ongoing sustainability programmes.

5. Limitations

1. This initial study was restricted to large global US firms as entities more likely to have the resources to direct long-term activities (Lindgreen et al. 2009a). Furthermore, the limited resources for the study restricted analysis of corporate sustainability programmes to three firms, and hence the observations should be carefully interpreted.

2. Successful corporate sustainability programmes operate within the important social background and thus select goals and metrics in the four pillars that also reflect this social background. This same background is largely the domain of CSR programmes, but in this first study of corporate sustainability structure, the extent of interaction between the pillars and the social background was not undertaken.

3. The detailed operating mechanisms and dynamics of developing and operating these corporate sustainability programmes was not studied.

6. Future research

The research questions listed in the above results discussion represent overarching issues for the entire sustainability community interested in corporate or industrial concepts. Some more immediate research planned to build from this preliminary study includes the development of metrics that reflect the major characteristics of corporate sustainability programmes. The extent to which this structure is similar for small firms is another area of investigation. Another important extension is to determine how to assess progress (rather than success) towards overall sustainability from metrics of accomplishment in the four pillars.

7. Conclusions

The structure and characteristics of industrial sustainability leads to an important model for corporate sustainability programmes. The path followed by the 31 example industrial sustainability programmes demonstrates the importance of the four pillars (or even the five or six pillar cases) as distinctive concepts to be fostered and developed for industrial sustainability. That is, this 4D model reflects the important areas for simultaneous improvement that underlay sustainability. It is also clear that simply substituting sustainability for environment or green in terms of programmes or products misses the full array of improvements that are possible for a corporation's sustainability. The emphasis on these four areas would thus signify greater balance and hence serve as a better basis for long-term sustainability decision making.

Acknowledgements

The authors would like to thank the Hawker Beechcraft Corporation for their commitment to sustainability and this collaborative study.

Additional information

Notes on contributors

Janet M. Twomey

1

Notes

1. Email: [email protected]