Value in sustainability: the process industry perspective

Abstract

The most important driver for management is successful business that increases its value to shareholders. The adoption of environmentally responsible business practices can open up an additional range of opportunities for companies, for example by improving material efficiency. The choice to improve environmental performance of a company tends to also improve its financial performance. In this paper, our aim is to study the value of sustainability in process and mining industry from the perspective of interest groups such as investors, customers and the public, by using case examples. Interviews and workshops were employed to investigate whether or not investors and customers are interested in sustainability in the process and mining industries. We also illustrate how easy it can be to jeopardize corporate reputation through. The present situation and challenges faced in bringing sustainability into everyday business practices are summarized and proposals made concerning ways to achieve increased sustainability.

Keywords:

• drivers
• decision-making
• sustainability in business strategy and management
• incentive-based economic policy instruments
• demand

1. Introduction

The most important driving force for green initiatives and new sustainable business ideas is a financial one. Economic instruments are quite clearly effective in creating desired business reactions on basic financial grounds. The approach of using market-based instruments for environmental policy and natural resource management therefore couples with this prime driver. Whereas legislative approaches mainly consist of negative enforcements and restrictions, economic instruments are designed to provide more positive financial incentives to promote more sustainable production and consumption.

The European Commission (EC) has presented a series of proposals (e.g. COM/2003/302 Final /2003/302; COM/2005/666 Final /2005/666; COM/2008/397 Final /2008/397; COM/2005/670 Final /2005/670) on sustainable consumption and production that will contribute to improving the environmental performance of products and help increase the demand for more sustainable goods and production technologies. These proposals are also an integral part of the EU's renewed sustainable development strategy (EU SDS), which reinforces its long-standing commitment to meet the challenges of sustainable development and builds on initiatives and instruments at EU and international level such as the United Nations (UN).

It is an unfortunate fact that humankind is not yet living in a sustainable way and continues to use limited non-renewable natural resources in the unsustainable manner to which we have become accustomed (Nature Conservancy 2014; Meadows et al. 1972). Process industry will however play a key role in transition towards more sustainable approaches due to its nature as a heavy user of raw materials and producer of major environmental impacts. It is therefore vital to integrate sustainability aspects into every industrial process from now on.

In this article, we focus on sustainability from the business perspective, especially on the expectations of investors, owners and customers, and how companies are reacting to those expectations (Figure 1). What are the market-based drivers that really improve sustainability in process industry? (See, e.g. Dyllick and Hockerts 2002; Konar and Cohen 2001; Wagner and Schaltegger 2004; Pajunen 2011; Pajunen et al. 2012). In addition, our aim is to point out the importance of having environmental targets in strategy and business plans, and similarly to also report on the progress of sustainability in general.

Figure 1 Framework of the article.

Our approach is to proceed from the perspectives of demand and image. The main research questions here are as follows: are investors interested in sustainability in industry; if companies have sustainability issues embedded in their business strategy then does it really have an influence in investment decisions; and does product sustainability have an influence on purchasing decisions compared to competing products? If corporate image is the external message reflecting a company's values, then what is the financial value of a good image or the disbenefit of a bad one? We will give one example of the result of losing value from damage to this image.

As we have shown in our earlier papers (Watkins et al. 2013; Pajunen et al. 2012, 2013; Pajunen 2011), the stronger focus on sustainability in business requires new thinking from both regulatory authorities and process industry. Strategic decision-making within process industry concerning these issues is greatly influenced by public authorities, market incentives and cost factors. It is essential to remember that the most important objective for a company is to have a profitable business and that without it they cannot exist. A secondary target might be to have both a profitable and more sustainable business. In addition, when something catastrophic goes wrong in terms of environmental damage, and a company loses its reputation, then share value will be impacted and the viability of a company to continue and be in a position to address any environmental damage will be limited (cf. Talvivaara 2014). In situations where major environmental impacts arise from operations (such as the Talvivaara case study introduced here), it is vital to get continued support from the owners to rectify problems (which in this case includes part state ownership). This is especially critical in terms of access to financing, so that a company is in a position to continue to operate and look forwards in terms of ways to deal with problems as a continuing viable operational entity.

2. Literature review

2.1 Sustainability in business

Graedel and Allenby (2009) use industrial ecology principles and cases to ground the discussion of sustainable engineering. Via these cases, they offer practical and reasonable approaches to sustainability. Clarkson et al. (2011) showed that the choice to improve environmental performance of a company tends to also improve its financial performance. Improvements were also seen in profitability compared to companies that choose not to change their environmental performance. Nidumolu, Prahalad, and Rangaswami (2009) presented the case that even where there is no alternative to sustainable development, many companies are convinced that the more environmentally friendly they become, the more they will erode their competitiveness. Konar and Cohen (2001) have presented the other side of this issue, where poor environmental performance has a significant negative effect on the intangible asset value of publicly traded companies. However, it is still not clear whether profitable and reputable companies are environmentally sound because they can afford to be, or because environmental concern valuably enhances their reputation or image. Nevertheless, the fact is that industrial companies utilize more and more environmental information both in business-to-business and in consumer communication, at least as background knowledge, as well as for marketing. The study by Nakao et al. (2007) also supports the idea that governmental actions encourage companies to produce more voluntary environmental information. This type of contextual information is therefore an increasingly effective means of assisting in the transition towards more sustainable market economy.

Almost all heavy industrial companies are now present on international stock exchanges. As such these companies, driven by stock markets, tended to overemphasize short-term gains by concentrating more on quarterly results than longer-term success. This obsession with short-term profits is contrary to the spirit of sustainability, where the target is to meet the needs of company's stakeholders both today and in the future (Dyllick and Hockerts 2002). In this sense, quarterly reporting periods (and this institutionalized shirt-term financial reporting and thinking) does not go hand in hand with life-cycle thinking and sustainability. In research and development (R&D) work, the time frame applied is often counted in multiple years not in months. That R&D plays a crucial role in successful implementations of new ideas and technologies is not in doubt, with companies with high R&D intensity tending to generate more positive reaction among investors in implementing green supply chain projects (Bose and Pal 2012).

The concern about the environmental impacts of business has affected companies in many ways. The demand for sustainability in industrial processes will require changes to the management and operations of the companies (Kotler 2011; Houy et al. 2011). Companies have to react to new regulations (e.g. 2008/98/EC), which reflect increasing concerns about the socio-environmental impacts of business (Husgafvel et al. 2014; Pajunen et al. 2013). As Peattie and Charter (1997) have argued, green driving forces are having effects in both clear and less visible ways. Also drivers, such as green image values, the possibility to develop a process and increase its market share, are more or less related to business (Pajunen 2011; Pajunen et al. 2012).

Environmental strategy has to go hand in hand with business strategy as environmentally strategic decisions are expressing adaptation to opportunities, threats and constraints of the environment (Papadakis, Lioukas, and Chambers 1998). Moreover, as Wagner and Schaltegger (2004) have shown, one key factor for a positive relationship between environmental and financial performance is the strategy choice of the company. Companies should therefore seek to integrate financial goals with environmental goals to optimize the profitable relationship between them (Sharma et al. 2010; Bryson and Lombardi 2009). In addition, a strategy based on end-of-pipe activities alone may even lead to negative effects on economic performance, mainly due to focusing only on the prevention of environmental impacts and not on the improvement of the process and business (Wagner 2005).

Sustainable product development has to take place through the entire supply chain, in every company of the supply chain, not only in one individual company (Pujari, Wright, and Peattie 2003; Pujari 2006; Pajunen et al. 2013). One approach to this is an inter-organizational environmental management system (Sinding 2000). In this way, green supply chain management might also bring value to organizations (Sarkis 1995). In addition, communication with stakeholders and customers emphasizes proactive environmental strategy and should be a two-way process in order to keep ahead of legislation and customer demands for improvement, allowing the participation of stakeholders in discussions regarding environmental issues. Confidential co-operation between companies in the supply chain needs time and patience to produce results. In addition, communication with stakeholders and customers emphasizes proactive environmental strategy and also other way round.

Sustainability issues are taken up by many organizations worldwide for creating value for shareholders (Bose and Pal 2012). Since 1999, the Dow Jones Sustainability Index (DJSI) has been tracking the financial performance of the leading sustainability-driven companies across the world (Knopfel 2001) and includes the top 10% of the biggest companies based on a long-term economic, environmental and social criterion (Bose and Pal 2012).

Small- and medium-sized companies have a key role in this transition as in marked-based economies entrepreneurs play a critical role in the adoption of green business practices by demonstrating the economic benefits, which come from being greener. However, green entrepreneurship is not only important because it provides new opportunities for forerunners, but it also has the potential to be a major force in the overall transition to a more sustainable business (Schaper 2012).

2.2 Sustainability in decision-making

Decisions on corporate strategies, business plans and operational decisions are much more complex and interconnected than those of the past because of social, environmental and economic concerns (Courtny 2001); for example, a technology sustainable from the economic perspective may not be environmentally sustainable, or one that is environmentally sustainable might be politically unsustainable (McConville and Mihelcic 2007). There may be considerable differences in detail in the way environmental decisions are made as a result of legal, political, economic and other social factors (Harding 1998). A number of business and environmental factors therefore need to be integrated into the decisions (Sarkis 2003).

Environmental decisions involve many different stakeholders with different priorities or objectives. Most people, when confronted with complex and multifaceted decision problems, will attempt to use intuitive approaches to simplify the complexity until the problem seems more manageable (Kiker et al. 2005). When a company has chosen an environmentally friendly way to act, they also have to have indicators to evaluate the decision from both business and environmental point of view (Asif et al. 2011).

Effective environmental decision-making requires a clear structure for coordinating joint consideration of the relevant environmental, technological, economic and social factors, and for evaluating and selecting management alternatives (Brady 2005; Figge et al. 2002). Each of these factors includes multiple subcriteria. To integrate this information with respect to human aspirations and technical applications demands a systematic framework to organize the processes and tools for making a defensible decision (Kiker et al. 2005). It is also important to understand the complexity between environmental and economic aspects. Economic outcomes may be influenced by a variety of factors (Goll and Rasheed 1997).

The decision-making process can be summarized in a few steps: definition of possible alternatives, evaluation of alternatives and decision-making. The definition of alternatives includes a wide range of options, none of which can be excluded until after evaluation (Beacon Report 2007). In relation to environmental aspects, evaluation is based on criteria such as material and energy efficiency, environmental impacts of both production and use phases, and life-cycle thinking. However, sometimes there is a gulf between good will and reality, as our case example in next section illustrates.

In the final analysis, reactions and decision-making are always also a question of moral and ethical values. Every individual has the opportunity to choose and make decisions in a moral and ethical way: to choose the most equitable and valuable procedure, behaviour and method. The moral and ethical approach strives to rank the alternatives by assessing superiority between them. An individualistic approach is simplified to: “what is right for me is also right for others” (see also Rake and Grayson 2009). A multidisciplinary ethic can be analysed by different regional development scales; the planet, continentally, super nationally (e.g. EU-wide), nationally and regionally. Different areas are creating different ethical and moral views and needs. Also social and cultural development and the background of a nation raise ethical questions concerning economy, technology, politics, science and the environment. The target is to achieve the balance between every part of the wholeness (Heikkonen 1995; Husgafvel et al. 2014).

Environmental investments must be seen also as a possibility. It appears that it will be crucial, for success of an industrial company, to internalize the value of environmental thinking and the life-cycle approach (Ammenberg and Sundin 2005). On the other hand, as Earnhart and Lubomir (2006) showed, successful financial performance improves future environmental performance.

It is also clear that poor environmental strategy and performance can put a company at a massive competitive disadvantage (Peattie and Charter 1997). Klassen and McLaughlin (1996) found that investors penalize companies with negative environmental event outcomes and reward those with positive environmental ones. Their findings confirm that positive environmental events lead to expectations of positive financial performance in the future.

2.3 How to measure value in sustainability?

Corporate sustainability has been assumed to increase a company's long-term value for shareholders (Herman and Nair 2013). The common principle, both for companies and nations, to participate in sustainability assessment seems to be to gain acceptance (Hildebrandt 2011). The target of using sustainability indices is to provide information for decision makers, politicians, investors, customers and so on, to show the interest of a company in sustainability issues and to create a credible benchmark for corporations across sectors. From the business perspective, investors and owners, who consider sustainability is not only a cost (Hart and Milstein 2003) but also an important value-added dimension, may also profit from this (Hildebrandt 2011).

The most common way to measure the success of the strategy is to have numeric indicators. If the company is using multidimensional indicators, such as losses and amounts of raw materials and waste, they can obtain more results at the same time. For example, by using losses as an indicator, management can see the efficiency of using raw materials. The effectiveness in material use is usually better for the environment and profitable as well. Choosing indicators is demanding however, but if properly done, appropriate mission and vision statements lead to values and each value has from one to three strategic indicators (see also Siche et al. 2008; Holland 2003; Krajnc and GlaviČ 2005). Choosing a strategic indicator demands deep understanding of the essential business elements. For example, monitoring the absolute amount of waste produced is not a valid indicator and even the waste amount in proportion to produced product can be invalid. A proper indicator could be the difference between the theoretical (minimum) waste amount generated per product produced and the actual waste amount generated.

There are many globally recognized indices for sustainability assessment of companies for the evaluation of sustainability, mainly on the corporate level. Indices are created to offer data on environmental, social and economic issues to different interest groups. As an example of indices, the most well-known are perhaps the Dow Jones Sustainability Index (DJSI 2012), Global 100 index (Global100 2011), FTSE4Good-index (FTSE4Good 2011), Carbon Disclosure Leadership index (CDP 2012) and the World's Most Ethical Companies (Ethisphere 2012).

Key performance indicators (KPIs) help a company define and measure progress towards set goals. These indicators are quantifiable measurements that reflect the success factors of a company. Indicators are agreed beforehand and must be quantifiable (measurable) and go hand in hand with a strategy. Depending on the organization, indicators may be different and must reflect the organization's goals (Management About 2013). The target, by using these indicators, is to measure the steps towards success. Indicators can be set for a short period or the long period, depending on stages of the main target.

From the point of view of supply and demand, basically, three different target groups, scientists, decision makers and individuals are interested in the clarity of sustainability assessment tools and how they differ from each other (Braat 1991).

3. Materials and methods

The experiences from Finnish process and mining industry used in this study were collected and analysed from three research projects: Pro-environmental Product Planning in a Dynamic Operational Environment Now and in Future: Methods and Tools, during the Years 2007–2010 (ProDOE 2010); Environmental Footprint, during the years 2010–2014 (EF 2014), and Metrics of Environmental Efficiency for Metal Production Technologies, during the years 2010–2013 (Metric 2014). The target of the ProDOE (2010) project was to find profitable applications for industrial wastes and by-products and to reduce the production of waste. The EF (2014) project focused on life-cycle thinking in industrial design by case study determining the environmental footprint of new light-weight structures and the Metric (2014) project aimed at developing together with companies a measuring system for process industry that can be used for conducting independent and reliable evaluations of the sustainability of an entire enterprise group and especially its individual factories and single investments, such as refinery.

The research material is based on interviews of people in authorities, investors and those in both operations and environmental management at the different companies. The companies that participated in interviews were Boliden Kokkola Ltd., OMG Kokkola Chemicals Ltd., Metsä-Botnia Ltd., Yara Suomi Ltd., Kokkola Industrial Park (KIP) Service, Stora-Enso Ltd., Outokumpu Ltd., Rautaruukki Ltd., Solidium Ltd., Ilmarinen Mutual Pension Insurance Company and Evli Bank Plc., and other organizations were The Finnish Forest Industries Federation, Parliament of Finland, The Finnish Association for Nature Conservation (FANC), The Confederation of Finnish Industries (EK), Finnish Ministry of Finance and Finnish Ministry of the Environment. The format of the interviews was more discussion based than enquiry based. The interviews were analysed by qualitative method to estimate the present situation compared to hypothetical changes in the future.

The research questions about the expectations of the investors were:

Are the investor's interested in sustainability in process industry; Does it really have an influence in investment decisions if companies have sustainability issues embedded in their business strategy or not; Is sustainability an important value added dimension and not only a cost; Does product sustainability have an influence on purchasing decisions compared to competing products and What is the financial value of a good image or disbenefit of a bad one?

In addition, research material was collected from workshops, held during the period 2010–2013. The participant companies were Metso Minerals, Metso Paper, Metso Corporation, Metso Power, Rautaruukki Ltd., Ruukki Metals, Cargotec Finland Ltd., Cargotec Corporation, Konecranes Plc. and Outokumpu Ltd. The nature of individual participants (approx. 20–25 persons) concerning their area of responsibility and expertise was mainly from the industrial design, sales and marketing, communication and environmental departments of the companies.

Main tasks in the workshop held on 4 November 2010 (EF 2014) were:

Life cycle thinking and industrial design; Life cycle thinking in process industry and business opportunities; Life cycle thinking in process industry and challenges; Life cycle thinking in process industry and risks; New technologies, new materials and life cycle thinking; and Life cycle thinking and communication?

Main tasks in the workshop held on 31 May 2012 (EF 2014) were:

Life cycle thinking – drivers and barriers; Strategy, management and operational decision making – importance towards sustainability; Co-operation inside the supply chain in environmental issues; and Life cycle thinking – not just another duty?

The experiences from the workshops were collected by participatory and case study research approaches (Alasuutari 1994; Eskola and Suoranta 1998; Denzin and Lincoln 2009). In participatory research (Cornwall and Jewkes 1995; Macaulay, Sirett, and Bush 2015), the participants have an active role in the research and lay people are involved to generate knowledge about issues, drivers, benefits and challenges that affect them in their daily lives.

The workshops were based on both individual and group work activities. Quantitative research approaches were used for example when describing the drivers for producing voluntarily environmental information. Quantitative researches strength is providing data, which is descriptive, for example, allowing the capture of a snapshot of the present situation in a company (Woodley 2004). The target in our study was to generalize the gathered numerical data across groups of people. The qualitative approach, through the use of interviews, allowed us to study the situation more deeply and better understand both visible and invisible drivers behind the decisions and to use these when formulating guidance to integrate sustainability in business strategy and communication.

In the results section, we answer these questions. First, via the investor perspective to sustainability; second, via a product-based approach; and finally, via an illustration of one example of severe loss of image.

This research touches upon on the areas of technology, environmental economics and management, environmental policy and law, and administrative sciences.

4. Results

Experiences from Finnish process and mining industry were collected and analysed from interviews of industrial actors, authorities and investors, and from the results of three research projects ProDOE, Environmental Footprint and Sustainability Index for process industry (see Section 3). These collected experiences were analysed and three cases concerning different perspectives of the existing challenges in sustainability in business were formulated. These cases are: an investor perspective; a product perspective and a corporate image perspective. There are obstacles in every path; for example, how to change consumers' attitudes towards a sustainable future and encourage them to demand sustainable products.

4.1 Increase the demand for sustainability in industrial business: an investor perspective

The following views were expressed in interviews by representatives of owners and institutional investors.

In strategy, management has a vision of the future and a scenario where they want to lead the business. Concrete drivers, such as taxes and fees are having an effect on the near future, whereas more abstract drivers, such as competitors' strategies and the expectations of customers, have more effect on longer-term planning. The time perspective in most strategies is mostly from 1 to 5 years. However, rapidly growing and changing economies in different regions is challenging for companies. At the present, three years is already a long period over which to plan and forecast where a business should go. If strategy includes major investments, the time perspective is even longer depending on the magnitude of capital investments in different sectors. The main principle is flexibility, a constant capability to update the strategy and business plan. In addition, when organizations incorporate environmental issues into strategy, business plans and operational decisions, the influences of decisions will not only affect the organization that makes these decision, but also its customers, suppliers and the whole supply chain.

When talking about the future and scenarios, the main motives are coming from outside of the company: the main course is determined by the global economy and worldwide technological development, where motive is coming from the operational environment of the company, such as customers and competitors. In addition, legislation, organization and human resources have a role in strategy and especially in business planning. Even where a company has no clear sustainability-related mission, they have to obey the law and must allow for changes in legislation (Pajunen et al. 2013). With a chosen scenario at hand, the next step is to choose how to get there. Usually, the strategy and business plan is from one to five years.

Typically, companies, having environmental responsibility in their values, usually also have environmental policy and some guidelines how to follow policy principles. Sustainability in communication is everyday routine for many industrial companies in the global marketplace. However, when talking about business planning and operational everyday work, the picture is not so clear anymore (Interviews 2009–2013).

Investors are more and more interested in sustainability issues and have expectations that sustainability issues should be included in every reporting period. In addition, annual reports with added environmental information should be a standard approach of businesses for investors continued learning about sustainability in these industrial concerns. Supply and demand are also important here. Communication with stakeholders and customers should be a two-way process in order to increase knowledge of sustainability. If investors are asking for more information about sustainability, then they will get more. Slowly but surely, society as a whole is changing in the level of its demands in this respect, and this adds weight to the topic. Investors also believe that sustainable business might also be profitable business. There are therefore big expectations in this business area.

In the interviews of representatives of the owners and investors, the research themes were:

• Expectations of the owners are only financial?

• Focus of management is on reducing expenditure and increasing the profit?

• It is possible to get good results also from an environmental point of view when improving the process?

• Business potential via environmental solutions?

• Forerunner or content themselves with follow-up?

• Capability to look to the future – business potential, investments etc.?

• Results take time – view of? Quarterly reporting of financials against the long-term return on capital?

As a summary, the main points of the interviews of investors were:

• Decision-making: First, there are variations between companies on how much they take environmental and responsibility issues into account in decision-making. Second, values are in important role when choosing business strategy and making decisions. Quite often sustainability is also part of image marketing, so communication has a big role to play here.

• Business potential: on the one hand, some of the Finnish companies have woken up to the business potential in clean technologies; on the other hand, some not, with many contenting themselves with only adopting a late adopter approach. In the construction industry, this change can be seen where energy efficiency is a driver for new innovations. In addition, decisions made from an economic perspective can lead to sustainable solutions. In marketing and communication, there is also some trepidation about using the sustainability theme, i.e. if we promise too much, the press will turn our promises against us.

• Investments: the most important issue for a company is to have a profitable business that is valuable to its shareholders. So, similarly, investment banking is responsible to investors for the return on capital. In the follow-up of investments, sustainability is only one issue among many others. Environmental offences are not acceptable. Many ethical rules for investing are coming from international agreements.

• Co-operation: conversations between management and representatives of investors (differences between institutional investors and investors with major share) are important. In those meetings, it is possible to raise the opinion of the owners to management, for example. A single mistake is never the sole reason for the sale off of shares. Common language is also important; not greening but responsible profitable business.

• Sustainability in strategy and business planning: the executive of the company has a duty to listen to owners, not necessarily at operational level. With minority shareholders, these owners have no decision-making rights. A company needs a licence (also a social licence) to operate from the investors. However, institutional owners and investors only usually get their information from public sources, so, the opinion is based on that.

• Time perspective: usually it is a question of long-term investments and long-time profit. There is no room for hasty reactions.

Owners and investors are more and more interested in the sustainability issues of industrial companies. If the share of ownership is major, the interest is more extensive. The representatives of the owners might meet the executive group of the company at regular intervals and also ask about sustainability issues besides other things. The institutional investor is more dependent on public information however. The message to management was that companies should include sustainability and responsibility issues in every annual report. Currently, there are still big differences between companies regarding whether those issues are included in report presentations or not. It was very clearly stated that sustainability issues are also becoming part of the toolbox for investors, but that it is still not yet everyday routine, with it being just around the corner for late adopters.

4.2 A product perspective

One Finnish metal company developed a new element structure product (see also Perks, Cooper, and Jones 2005; Johansson 2002), which was more sustainable than similar competing products. The company replaced traditional insulator material with recycled material. However, because it was a new product, the price also included R&D costs and was little bit higher than rival products. The product sold very poorly to begin with; however, as the company changed the marketing strategy, they marked down the new product to the same level as other similar products. In addition, they trained the sales department to market and sell this new product as more sustainable product alternative on the market. Customers did not know about this new product, so the sales work was begun to raise its profile and benefits with the target of increasing sales. Figure 2 shows how the decision-making process within the development process proceeded. Profitable trade is key when deciding to continue. In this case, it needed a strong investment of time and money for training, especially marketing and sales personnel.

Figure 2 Eco-designed product versus basic product.

These products were rapidly in great demand (Interviews 2009–2013). Afterwards, when evaluating the process, the main turning points were, first, on the strategic level: a sustainable solution has business potential; second, on the operational level: the will and know-how to develop more environmental friendly products; and third, belief in the chosen strategy and investment in sufficient marketing of the new product.

4.3 A corporate image perspective

The mission, vision and values of almost all global industrial companies are towards sustainable future: “Renew: Everyday we build our future in sustainable way” (Stora Enso 2013); “As the frontrunner of the new forest industry we lead the integration of bio and forest industries into a new, sustainable and innovation-driven future” (UPM 2013); “Sustainability has always been – and continues to be – a key element of our strategy. Over the years, we have been a leader in environmental performance in the industrial sector” (Outokumpu 2013); or “The primary objective of the company's environmental management is to ensure the sustainable and economical use of natural resources and to minimize the adverse effects on the environment caused by its mining operations” (Talvivaara 2013a).

In Finland, mining is a growing industrial sector with the country benefiting from abundant mineral deposits, good geological research and databases and good infrastructure. The new mining legislation (Mining Act (621/2011) [2011]) has also been received with satisfaction due to its modernization and clarity. One of the newest mines is Talvivaara mine in the middle of Finland. Talvivaara mine's deposits are one of the largest known sulphide nickel resources in Europe, exploited by using a bioheapleaching technology to extract metals from the ore.

The first geological survey was carried out from 1977 to 1983. The resource was found to be large but of relatively low grade. It was concluded at the time that the exploitation of the deposits was not economically viable using conventional metal extraction techniques. At the time, mineral rights were owned by another Finnish company. As a part of its strategic decision to withdraw from mining activities, the former owners sold the rights of the Talvivaara mineral deposits to Talvivaara Mining Company Plc. in February 2004. First metal production took place in October 2008, with full-scale production started in 2009 (Talvivaara 2013b). The ore body is estimated to be able to support anticipated production for several decades (Solidium 2013a).

The company is partly owned by Solidium Oy, a limited-liability company that is owned by the State of Finland. Its mission is to strengthen and stabilize Finnish ownership in nationally important companies and to increase the value of its holdings in the long term. Its role in its portfolio companies is that of an active owner. The understanding of the companies' business, operating environment, competitive circumstances and financial standing are the parts of the active ownership strategy. Also, encouraging active interaction between Solidium and other portfolio companies and the other shareholders is a major role (Solidium 2013b). Solidium's holding of Talvivaara is 9% at present (Solidium 2013a).

At the beginning of operations, the image of the company was at a good level and in particular there were major expectations of the mine, which would provide employment and bolster the local economy in an isolated fringe area. Bioheapleaching makes the extraction of metals from low grade ore economically viable (Solidium 2013a); however, as it is still a relatively recent technology, it was considered to be too risky for large-scale operations in earlier times (Talvivaara 2013c) especially in northern climates. The technological development was carried out at only a small pilot scale to begin with using an initial test heap at the mine site. Due to the large scaling up needed for economic reasons, the scale-up factors became very large causing several operational problems including odour and wastewater issues resulting in breach in the gypsum containment pond causing leakage into the aquatic environment.

After the onset of environment issues, the main turning points in the loss of image were quite clearly seen: application for an additional mining permit for uranium, denial of the problems and environmental impacts by the chairman of the board, excuse after excuse for continuing poor performance, for example by claiming that no earlier experience of operating at a larger scale constituted a defence, etc. When industry is coming into a pristine area, there are questions that local people want to know, for example: ldquo;What's in it for me?; What will happen to the water I drink?; What will happen to my children?” (CSR Seminar, 21 March 2013). After the accident, they want to know the same things. If the management diminish the importance of their concerns, they have lost the game, which is what seems to have occurred in the case of Talvivaara. The local municipal manager of the company drew a curve of the reputation and image of the company to illustrate what happens when you fail. How did the major initially positive expectations collapse? The mines' CSR manager said (CSR Seminar, 21 March 2013) that “now they have only one way to go; up from the bottom”. The curve of the value of the share was added to the same figure. In Figure 3, it is shown how the value of the share was going down with the reputation. The curves are almost identical.

Figure 3 The reputation and value of shares of Talvivaara mining company.

Owners might also have a major role in responsibility and sustainability issues. After the big problems in Talvivaara mine, the board of directors of the company decided on a share offer in February 2013, by which the company intends to raise approximately €261 million in gross proceeds by way of a rights offering to existing shareholders (Talvivaara 2013d). Solidium Oy decided to participate in the €260 million rights issue:

As a responsible owner, Solidium wants to ensure that the company is able to solve its environmental issues and ramp-up its production to the full capacity. In addition, Solidium wants to participate in the development of the Finnish mining expertise.

said the Solidium's Managing Director (Solidium 2013c). The operation of the mine has been highly problematic as the company has not been able to adequately treat process tailings and polluted rain water to the standards required by the environmental permit and had to resort to storing large volumes of acidic wastewater in the gypsum storage ponds and temporary dams and even the open pit. The outcome of the omission of the risks in decision-making is company bankruptcy (6 November 2014) and Finnish Government assuming the responsibility to clean environmental damages.

The main results of this case example are, for management: if something goes wrong, do not deny it, promise to solve it, listen to interest groups, share all information you have and be there for them. The questions are same as in the beginning; “What's in it for me; what will happen to the water I drink; and what will happen to my children?” with the weight on the last two last questions. The main results for the owners and investors are: as a responsible owner do not abandon the company, see how you can help, look for the solutions and believe in future possibilities.

5. Discussion

The most important driver for a company is to have a profitable and sustainable business that increases its value to shareholders. However, the short-term thinking encouraged by financial reporting and the normal time horizons over which financial returns are generally expected and are acceptable to businesses and investors, does not go easily hand in hand with life-cycle thinking and sustainability. In research and development work, the time frame is counted in years and not in months. It needs time and patience to await results. This goes for greening business benefits as well as progress towards sustainability.

Our main questions in the beginning of the paper were: are the investors interested in sustainability in industry and does it really have an influence in the investment decision if the company has sustainability issues in strategy or not? We found out that the increasing concern about the environment has affected companies in many ways.

At present, there is lack of demand for sustainability (Figure 4). From the investor perspective, there is of course demand for excellent financial performance of the company, and from the customer perspective it is question of the lowest price for the product or service. Global companies have similar image with the promise to be reliable and responsible from the social, environmental and economic perspectives. What is lacking is strong demand for sustainability.

Figure 4 Three different perspectives on sustainability.

The demand of sustainability in industrial processes will require changes to the management and operations of the companies. It will be crucial for success of the industrial company to internalize the value of environmental thinking and sustainability in their business. It is predicted that sustainability is the next big trend in the business world, also in process and mining industry. However, there also exists new business potential. In addition, it is obvious that poor environmental strategy and performance can put a company at a massive competitive disadvantage.

To achieve notable progress, the need for change cannot be overstated. Some of the managing directors of the process industry companies are already leading their business towards sustainability choosing their focus on, for example, clean technologies. But there might be a gap inside companies; the operational level is still in a business as usual mode. In addition, an individual role is important: if the operational manager gets paid and promotion based only on sales, he is selling the most marketable products. He is not using his time to develop new more sustainable products. Process industry is turning the corner, only very slowly.

To achieve progress, the success factor is to create an environment where not only one supply chain or value chain but the whole value network can benefit. There are models for decision-making, tools for assessment of sustainability, life-cycle assessment procedures, different key performance indicators and many other methods to proceed towards sustainability. However, the most important decision is to take the first step: believe in sustainable business. The steps are different, depending on culture of the company, but the roadmap is the same: (1) create the working environment where innovation is allowed, despite position or education; (2) fully utilize the know-how and expertise of the human resources of the company; (3) enable favourable cooperation between different kinds of employees; (4) challenge work community to change towards sustainability; and last but not least (5) give positive feedback. In every field of life, the best way to achieve results is create positive and favourable co-operative working environments and give people, multidisciplinary teams and the opportunity to work out solutions to challenges by themselves. More leadership and coaching are needed, not command and control.

As illustrated in Figure 5, it is important to focus on the demand for sustainability. The market economy is based on plain rules: supply and demand, and profitable business, so the most fruitful way to proceed is to apply those same rules. With increasing demand for sustainability, the production and sale of sustainable products will also increase.

Figure 5 Three different perspectives on sustainability – proposals to increase the demand for sustainability.

One of the results of investor's interviews was very clearly that companies should include sustainability and responsibility issues in every annual report. Nowadays, there are big differences between companies as to whether sustainability issues are reported or not. Sustainability issues are, step by step, also becoming part of the toolbox for investors. It is not everyday routine yet, i.e. not actively sought but where available it is used.

However, at present, the challenge is not the lack of information, but rather the production of useful content and its delivery to those who really need it and will get additional value from it in decision-making. The decisions today are more complex and interconnected than those of the past. It is crucial to understand the connection between environmental and economic aspects: environmental investments must be seen also as a possibility. Those businesses that look ahead and actively manage their ecological risks and see their opportunities under sustainability can gain a strong competitive advantage (see also Nidumolu, Prahalad, and Rangaswami 2009).

The nature of sustainability requires users to make trade-offs between or among different aspects of sustainability. For example, an actor might have to select between using recycled material that must be transported over a long distance or using locally provided virgin material. Both of these options (recycled material vs. local material) are related to sustainability (Invest 2013).

6. Conclusion

In this article, we had three different perspectives on sustainability. Based on our study, we found that without more external pressure nothing concrete is happening. From the product perspective, the determining point was strong will and the decision to focus on marketing the sustainable product with more effort, first, at the strategic level: a more sustainable solution has business potential; second, at the operational level: the will and know-how to develop more environmental friendly products; and third, belief in the chosen strategy and investment in marketing of the new product.

From the image perspective, it is most important to give a realistic picture of industrial extractive activities that are coming to a pristine area. What are the environmental risks and are there any risks to health and security? In addition, the local community also want to know what the benefits are for them. If something unexpected happens, people want to know the same things. Management cannot diminish the importance of their concerns or they will lose the game.

One challenge with management tools and indices is to estimate the future trends related to, for example, the time to improve the process and invest in environmental technology. Is it better to be a forerunner or wait until forced to take an action? Briefly, with past information it is possible to measure, forthcoming activities are always only a forecast or just a good guess. Environmental policy is closely related to this; what are the next five years' targets in environmental policy in EU and what is an outgrowth of the policy?

Unfortunately, many companies choose obvious indicators such as waste amount or waste amount per product in mass or in numbers. Some of these obvious indicators are always there; for instance, there is no production with absolutely no waste. Probably, the best way to assess the activity of the company, especially in sustainability issues, is to choose a few multidimensional indicators, which can measure many issues at the same time, for example investments towards sustainability and hours devoted to environmental issues. If the indicators are chosen wisely, by using them management can get more information about their operations and will help them manage better. The complexity in global markets and in business is a reality and so when choosing indicator, this aspect should be taken into account.

Transition towards sustainability is not only an issue of one supply chain. It is more like a net or grid, a big system formed from different sectors of the society. In all change processes, there are always forerunners, opponents, followers and the public. There is no clear course, only a general flow in the right direction, i.e. towards a sustainable future. Information and knowledge promote sustainability in business and in daily routines, but there is still much to do. As described above, financial issues matter and economic incentives are the most effective drivers towards sustainability. Along with economic reasons, individual values have an important role also in official decision-making. To achieve real transition to a more sustainable society, co-operation between different industrial actors is needed. Our research plan in the following years is to focus on this: how to increase co-operation between different actors and silos to focus on moves towards sustainability and determining the incentives to spur this along?

We should challenge our present way of doing things, for example, as one forest industry company says in their strategy: rethink. As Rake and Grayson (2009) have presented earlier, and as presented in this article, sustainability is everybody's business. So this questioning is vital to progress, are we interested in sustainability and does it really have an influence on our choices if a company has sustainability issues in its strategy and operations or not? Sustainability in business is not a soft value any more; it is reality and it could also be profitable.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Disclosure statement

Our research has been supported by the Academy of Finland (http://www.aka.fi/eng) Ketju Program, research project ProDOE (2007–2010) and Finnish Metals and Engineering Competence Cluster Fimecc Ltd. (http://www.fimecc.com/en/index.php/Main_Page), research project Environmental Footprint (2010–2013). The support of these organizations and projects and participating companies is gratefully acknowledged.

Notes

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