Corporate Sustainability Suzanne Benn and Dexter Dunphy

The New World transformed by new technologies increasingly dominated by global organisations rapidly transforming under the impact of high levels of innovation highly competitive driven by knowledge development consuming resources at unsustainable levels In the late 1990s a few leading organisational theorists began to look at where the Organisational Renewal Movement should go next. HR and OD had moved into the Boardrooms but what was to be their role in this new world. Dunphy, Griffiths and Benn in 2003 argued for a fusion of the ORM with the environmental movement. This work brings together human and ecological sustainability. To deal with this new world we will need to understand the nature of transformational change and to explore the critical role of HR in bringing it about, as well as grasping the lifeline that new technologies are offering.

chaordic organisation Welcome to the world of unpredictable change and the chaordic organisation Dee Hock the Chaordic Age – 1997 book written by the founder and CEO of Visa. Organisations are a combination of order and chaos – as the environmental crisis deepens, the degree of chaos will increase. We must learn to lead in chaos. Dexter Dunphy

The dilemma and the challenge The Dilemma: we cannot continue to conduct business as usual The Challenge: to create a sustainable economy and society Readings: J. Porritt, Capitalism: As if the world matters, Earthscan, London, UK, 2006 R. Wright, A Short History of Progress, Text Publishing, Melbourne, Australia, 2004 The Dilemma of development and patterns of consumption. The reality of China and India and the activities of multinationals. Need to go beyond the rhetoric of CSR

WHAT IS SUSTAINABILITY? Sustainability results from activities which: extend the socially useful life of organisations enhance the planet’s ability to maintain and renew the viability of the biosphere and protect all living species enhance society’s ability to maintain itself and to solve its major problems maintain a decent level of welfare for present and future generations of humanity Sustainable organisations engage in activities that contribute in these four ways. OD but in the frame of society

Can we rely on governments to achieve a sustainable world? “Like it or not, the responsibility for insuring a sustainable world falls largely on the shoulders of the world’s enterprises, the economic engines of the future.” Professor Stuart Hart Kenan-Flager Business School, USA Bottom of the Pyramid

So how will the drive for sustainability affect you and your organisation? What should you be doing now as a HR leader to plan for sustainability? What do you need to do to get up to speed now to ensure you and your organisation are prepared and contributing? These are the questions I will try and address and we must all answer in our own ways

First, we need to understand that achieving sustainability is a process – organisations advance by stages

The Phase Model Rejection Non-responsiveness Compliance Efficiency Strategic proactivity The sustaining corporation Health risks and uncertainty Economic risks - lack of job security Social risks – personal safety, Breakdown of community Rich/poor divide increasing From Dunphy, D. , Griffiths, A. and Benn, S., Organisational Change for Corporate Sustainability, Routledge, London and New York, 2003; revised edition 2007)

Less formally, the organisations at these stages can be labelled: Phase 1: the freeloaders and stealthy saboteurs Phase 2: the “bunker wombats” Phase 3: the reactive minimalists Phase 4: the industrious stewards Phase 5: the proactive strategists Phase 6: the transformative futurists

Transformational or incremental Transformational or incremental? Both human sustainability and ecological sustainability are needed for the sustainable organisation Nudging or leaping? Copyright Dunphy, Griffiths and Benn, Organizational Change for Corporate Sustainability, 2007

A blueprint for transformation (from Q. Jones, D A blueprint for transformation (from Q. Jones, D. Dunphy et al, In Great Company: Unlocking the Secrets of Cultural Transformation, Human Synergistics, Sydney, 2007, copyright) Systems acting back on themselves. Increasingly organisations will face the need for transformational change and the larger the delay the more the need for transformation. This book presents 5 case studies of outstanding examples and the model summarises what the authors learnt about how to lead for transformational change.

So where are the opportunities? Leave the Freeloaders, Stealthy Saboteurs and Bunker Wombats to experience increasing isolation The real opportunities begin with the Compliance Phase. So let’s look more closely at the last four phases: compliance, efficiency, strategic proactivity and the sustaining corporation. So where are the opportunities particularly the business opportunities associated with these changes?

3. COMPLIANCE PHASE: The Reactive Minimalists Objective: Seek to be compliant to the law and all environmental, health and safety requirements and relevant community expectations. Business opportunities: Avoid the potentially huge costs of non-compliance and create an effective risk management system. Typical actions: Determine what is relevant legislation, regulations and community expectations Build an effective risk management system with an informed workforce committed to compliance Establish organised measurement and monitoring system. Positive outcomes: Risk minimisation Easier finance Basis for positive reputation Improved relationships with regulators. The Reactive Minimalists are those making the first major step forward on the road to creating more sustainable organisations. While this is a minimalist approach it is a vitally important step. Executives in these organisations are surveying the key legislative and regulatory requirements of their industry. Governments are increasingly raising the bar on environmental pollution, OHS, energy and waste etc. The costs of ignoring this can be significant the real payoff is your licence to operate. Basically these organisations are making a step forward by cleaning up their act. Mining giants for instance, have been hit by the collapse fo tailings dams or other such disasters and are trying to put positive programs in place to prevent further occurrences. At its best these companies have effective programs of risk management. A recent KPMG survey found that 85%of executives believe that an effective risk management strategy is critical to achieving the objectives of their company. A great resource in this area is the Compliance Institute of Australia which has hundreds of members and runs courses in identifying areas of concern in achieving compliance and risk minimisation. You have to walk before you can run and there is no point in skipping this phase.

Capabilities for effective operation with organisations in the Compliance Phase Knowledge of relevant legislation/regulations Monitoring of community expectations Risk management expertise Ability to construct measurement/monitoring systems Resource: Compliance Institute of Australia Avoid Trouble and Conflict is the motto here

4. EFFICIENCY PHASE: The Industrious Stewards Objective: Progressively eliminate waste and increase process and materials efficiencies. Key business opportunity: Increase efficiencies by waste reduction and reorganisation. Typical actions: Reduce resource use (energy, water, materials) Design/redesign buildings/plant to dramatically reduce ‘footprint’, create adaptable spaces Move to front-of-pipe solutions to eliminate waste or return it to the production cycle as a resource (biomimicry). Recycle/remanufacture (life cycle stewardship; cleaner production) Dematerialise –service provision rather than material production Redesign products: sustainably produced and environmentally friendly Meet international Global Reporting Initiative (GRI) guidelines. Potential business benefits: Cost reduction; savings Increased employee productivity Increased employee involvement/engagement Better teamwork and lateral communication. “DO MORE WITH LESS” This is the next step in achieving sustainability and is often taken when the benefits of compliance have been achieved. HP for instance became an industry leader in going beyond compliance, becoming “dissatisfied with mere compliance”. They wanted to be an industry leader in actively contributing to the formulation of governmental environmental standards for the industry. They are engaged in redesigning their products to make them easier and cheaper to recycle. Efficiency means making sustainability an integral aspect of the supply chain and production process. Sustainability has to be built in not bolted on to get the rewards. Interface is the world’s leading manufacturer of modular carpets. In 1994 Interface made a commitment to become sustainable not an easy ambition for a company whose product was based on petrochemicals. They started by eliminating waste – rather than costing them money the exercise has saved them $300 million since 1997. Interface is redesigning its carpets to replace oil-based carpets with fibres manufactured from starch. Even more importantly, the firm has moved into servicing carpets rather than supplying them. The firm has reduced its greenhouse gas emissions by 46% and solid waste to landfill by 65% In Australia more and more organisations are signing voluntary agreements with environmental agencies such as DECC in NSW. For example, Pilkington Glass is Australia’s largest glass manufacturer and has signed a Sustainability agreement with the Victorian government in which it has agreed to reduce its greenhouse gas emissions at its Dandenong plant by 35%. Other companies associated with such covenants include Sensis and HP.

Capabilities for effective operation with organisations in the Efficiency Phase In-depth knowledge of at least one key basis for resource efficiency (eg. energy, water, materials) Understanding of systems analysis, production processes, supply chain analysis and/or product redesign Track record in producing efficiencies and building customised systems (TQM). Resource: NSW Department of Environment and Conservation (DEC)

5. STRATEGIC PROACTIVITY PHASE: The Proactive Strategists Objective: Pursue the strategic opportunities in sustainability. Key business opportunity: Become market leader through pursuing the strategic potential of sustainability. Typical actions: Commit strongly to sustainability Re-brand and build wider stakeholder support Be early in on new product/service demand curves Creatively destroy existing product designs, manufacturing models and re-invent the firm, leapfrog competition by early breakthroughs Increase employee and stakeholder engagement to source innovative ideas Shift the prevailing business paradigm in environmental and social ideas Innovate with new models of stakeholder governance Concentrate on adding value and innovating. Potential business benefits: Increased revenue and market share Stronger stakeholder support (reputation and commitment) Higher customer retention rates; faster attraction of new customers Established lead in developing new markets Employer of choice – attract and retain skilled managers and professionals Operate at high value-added end of market. “LEAD IN VALUE-ADDING AND INNOVATION” Example of BP switch in branding which reaped it benefits in terms of reputation but it has to be sincere and applied over the organisation. Innovation is the mark of this phase. For example, Vicptr Smorgon and International Power are working on developing biofuels from carbon dioxide using algae and photosynthesis. Waste becomes fuels.

Capabilities for effective operations in the Strategic Phase: Understanding and experience in strategic planning processes. Eye for strategic potential of sustainability Skills for involving and managing stakeholders. Ability to think ‘outside the square’ Understanding of social and market trends.

6.THE SUSTAINING CORPORATION PHASE: The Transforming Futurists Objective: Redefine the business environment in the interests of a more sustainable world and to support the core strategies of the firm. Key business opportunity: Create a constructive culture that continually renews the long-term viability of the organisation. Typical actions: Participating in changing the ‘rules of the game’ to achieve sustainability Participate in public policy formation Reorganise the company’s supply chain to ensure that the whole production process is sustainable Build human and relational capital Support dematerialisation and the growth of the knowledge-based economy Model best practice; support/publicise best practice elsewhere Participate in international agreements Seek external auditing of sustainability Influence capital markets to support long-term value-adding Build a constructive culture that encourages openness, debate, innovation and participation. Potential business benefits: Global leadership of the sustainability movement Enhanced reputation and stakeholder support and involvement Increased share value Attraction/retention of talented, highly motivated employees. “TRANSFORM OURSELVES: LEAD IN CREATING A SUSTAINABLE WORLD”

Capabilities for effective operation with organisations in the Sustaining Phase ‘Big picture’ thinking, broad business knowledge Political skills Knowledge of sustainability best practice Reputation and confidence in working with CEO/senior executives Active involvement in leadership of the sustainability movement

Is Corporate Sustainability Possible? A case study in hopeful achievement:

Fuji-Xerox Eco-Manufacturing Centre FX moved from selling to leasing office equipment The Eco-MC takes used products, reprocesses their componentry, rebuilds the machines Most parts are recycled in the plant Zero waste to landfill “Waste” becomes important to others (e.g. carbon to steel making) Rebuilt products have enhanced quality and reliability Major R & D payoff Basis for new business Savings in 2000 = $25 million Savings in 2001 = $30 million Since then, 20% ROI To achieve these results demanded a transformation of the corporate culture.

What’s the relevance of all this to HR? Movement toward sustainability depends on corporate culture change: achieving sustainability involves a major transformation of business assumptions and practices Science and technology will be vital but successful planning and implementation will depend on people If the introduction of sustainable business practices is directed only by technologists, human factors will be ignored, underestimated and implementation will fail Given the increasing priority of sustainability issues, HR must be a key part of the change or it will be shouldered aside.

Achieving human sustainability

Constructing the human sustainability agenda: the internal agenda Adopt a strategic perspective on workplace development Build the corporate knowledge and skill base Foster productive diversity Increase employees’ role in decision-making Develop capability for corporate reshaping and renewal: revisioning, reflexivity, redesign Ensure that investment in people enhances present and future performance, including ecological sustainability. the external agenda Reinterpret strategy around a range of stakeholders Add value for all stakeholders Sustain on-going dialogue with stakeholders Define social goals and action plans with KPIs Build stakeholder support for license to operate and grow.

A new challenge for HR: Constructing the ecological sustainability agenda Initiate life cycle assessment and resource stewardship throughout the organisation and in its supply chain Eliminate waste and pollution by product/service redesign and development of industrial ecology Form active partnerships with community groups to inform, critique and collaborate on sustainability initiatives Institute external monitoring, reduce environmental footprint

The central problem for leaders working to create a sustainable world:

Our leadership objective: Sustainable and sustaining organisations that - add financial value for shareholders produce valued goods and services for society sustain those who work for organisations sustain our social world sustain and renew the biosphere

Third wave organizations Value-driven and transformative Responsive to emerging shift in global values Making corporate citizenship and corporate sustainability core business strategies

Resource books: how to do it D. Stace and D. Dunphy, Beyond the Boundaries: Leading and Recreating the Successful Enterprise, 2nd edn, McGraw Hill, Sydney, 2001 D. Dunphy, A Griffiths and S. Benn, Organisational Change for Corporate Sustainability, 2nd ed., Routledge, London, 2003 Q. Jones, D. Dunphy et al, In Great Company: Unlocking the Secrets of corporate Transformation, Human Synergistics, Sydney, 2007 D. Grayson and A. Hodges, Corporate Social Opportunity - 7 steps to make corporate social responsibility work for your business, Greenleaf, Sheffield UK, 2004 B. Willard, The Next Sustainability Wave: Building Boardroom Buy-In, New Society Publishers, Canada, 2005 B Doppelt Leading Change Toward Sustainability: A Change Management Guide for Business, Government and Civil Society, Greenleaf, Sheffield UK, 2003.