Theme Exposition Essay

Sustainability and Social Science: Round Table Proceedings 95

HUMAN AND ECOLOGICAL FACTORS: A SYSTEMATIC APPROACH TO CORPORATE

SUSTAINABILITY

Suzanne Benn and Dexter Dunphy

University of Technology, Sydney

Introduction

In this paper we propose an integrated perspective on organisational learning

designed to progress the corporation to a position of both human and ecological

sustainability. We take human sustainability to mean the development and fulfilment

of human needs; ecological sustainability is the protection and renewal of the

biosphere. The paper defines key steps along the way to this organisation of the future.

We indicate how to make an incremental transition from step to step, or in some

cases, a transformative leap to the fully sustainable and sustaining corporation. Case

study examples are given of organisations we have studied which have made both

incremental and transformative shifts towards ecological sustainability through

developing their human sustainability. We differ from those theorists of ecological

modernisation who interpret corporate sustainability as corporate environmentalism.

Ecological reforms are seen as driven by market forces that have been manipulated by

government policy in the form of incentives, subsidies and sanctions or by the

increasing importance of social movements in decision-making institutions (Dryzek

1996; Hajer 1995; Mol 1997). For these theorists, corporations develop more

sustainable products and processes in response to external stimuli, such as government

policymaking or social movements, according to procedures set by the technical

requirements of environmental restructuring.

While we agree that international and national governments should continue

experimenting with a variety of policy incentives and models of governance to ensure

corporate accountability, we argue that a perspective which looks solely to the role of

external agents of corporate change misses the crucial relationship between human

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and ecological sustainability in the individual firm. We argue that the organisational

move to ecological sustainability is reliant upon human sustainability: the

development by the organisation of the human capabilities and skills that enable more

consistent compliance, the implementation of eco-efficiency measures and forward

planning for sustainability. In other words, we argue that the concepts of human and

ecological sustainability need to be merged. Progress towards corporate

environmental sustainability is a deliberative process which relates to human decision-

making and capabilities. Similarly, corporate social responsibility relates to the

capability or capacity of managers to look strategically at the organisation’s long term

future in the local and global communities.

This paper builds on recent work which has indicated a relationship between human

resource policies, the successful implementation of the Environment Management

System (EMS) and its maintenance as a strategic business and risk management tool

(Daily and Huang 2001; Dunphy, Benveniste, Griffiths and Sutton 2000; Wilkinson,

Hill and Gollan 2001). This research concluded that EMS programs are more

successful if factors such as training, empowerment, teamwork, and rewards are

addressed and suggested a relationship between human and ecological sustainability

in the form of a phase model.

The drivers for change

An integrated perspective on corporate sustainability is necessary if we are to capture

the complex set of corporate responses to the wide array of influences impinging on

the contemporary marketplace. One result of the merging of the internal and the

external spheres of the firm's interest is recognition by management that the firm

needs to respond to both the primary (those who are essential to the firm) and

secondary stakeholders (those who are not essential for the firm but who can influence

or are influenced by it). So external drivers include the actions of internationally

mobilised human rights and environmental activists as well as international and

national agreements and regulations concerning environmental protection and social

and environmental justice. Internal drivers include management push for business

advantage as well as employee awareness and the drive to accumulate new forms of

capital

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The need to accumulate new forms of capital is a recent force for corporate change.

For instance, companies now trade in symbolic capital. Their interaction with the

consumer and with their workforce is symbolic as well as economic (Beck 1999;

Tsoukas 1999). Many corporations now market themselves as compliant according to

standards set by governments, by negotiated arrangements between government,

industry and non-government associations or by a range of other non-government

associations. The leadership for this change is also coming from managers who

recognise the benefits for the firm in participating in the new co-regulatory system.

That is, they see reputational rewards for the firm in voluntarily working towards

social and environmental standards which are not enforced by government.

Public (and employee) awareness is running ahead of most government and corporate

initiatives. For example, Energy Australia’s Pure Energy scheme, which offers

customers energy derived from renewable sources for a higher price, has not been

able to keep up with the demand for clean energy (Peatling 2003: 1).

Knowledge management is drawing attention to the value of an organisation's human

resources. Motivation, qualifications and commitment, when combined with a

significant store of 'corporate memory', are a major asset to the corporation. As prized

employees hunt for the firm with a strong sense of values, there are real rewards in

becoming an employer of choice. Firms need employees who can give high levels of

customer service and which are sufficiently motivated and inspired to achieve by the

long range philosophy of the firm. All industry sectors accept the importance of

employee loyalty and commitment (Wilkinson, Hill and Gollan 2001).

Shareholders and investors are also looking to more than financial success in the

assessment of performance. Their selection of investments increasingly takes into

account reputation and performance on the more long-term factors of both social and

ecological sustainability. The growth of the socially responsible investment (SRI)

industry reflects this shift. In the UK, for instance, the total value of SRI assets in the

UK increased from £23bn in 1997 to £225bn in 2001—that is, an increase of over

£200bn across four years. Although this leap partly reflects the passing of the SRI

Pensions Disclosure Regulation in 2000, it is also due to many insurance companies

applying SRI criteria across all their equity funds (Sparkes 2002). Investors are also

placing more value on the human capabilities and commitment that the organisation

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has built. In the new economy the building of knowledge systems, social capital and

other strategies designed to increase and sustain human capability are vital to

corporate performance.

More and more employees have strong expectations for workplace safety and

heightened environmental awareness; they are searching for more meaningful work,

particularly for work that makes a social and ecological contribution as well as

providing an income. The recent Eye on Australia survey, for instance, consumers

identified the key attributes of the successful company as being innovation, care for

employees and demonstrable community involvement (Lloyd 2004).

Concerns about developing social capital, too, can explain why companies may wish

to support local community participation in corporate decision-making. Social capital

is fundamental to the successful working of the new organisational forms such as the

network organisation and communities of practice. Companies are increasingly

dependent on employees who can work cooperatively and contribute to the social

capital of the organisation (Sagawa and Segal 2000). Yet the dangers of 'over-

embedding' (Adler and Kwon 2002), where the build up of social capital within the

organisation means mistrust of external stakeholders, or external experts, are also

increasingly recognised.

In this context, the principles of industrial ecology, of community, interconnectedness

and cooperation, can be seen as a model for the way forward for corporation wishing

to move towards sustainability (Ehrenfeld 2000). They provide a framework for new

levels of resource productivity and generate new strategic directions. Our

developmental model (Table 1) indicates how human and ecological sustainability are

interrelated developments along this path. At each step of the way, new human

capabilities or characteristics of the organisation enable further progression of

ecological sustainability.

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Table 1

Human Sustainability Ecological Sustainability

Level 1 Rejection

Employees and subcontractors exploited. Community concerns are rejected outright.

The environment is regarded as a free good to be exploited.

Level 2 Non- Responsiveness

IR a major issue with the emphasis on cost of labour. Financial and technological factors exclude broader social concerns. Training agenda focusses on technical and supervisory training.

Environmental risks, costs, opportunities and imperatives are seen as irrelevant.

Level 3 Compliance

HR functions such as IR, training, TQM are instituted but with little integration between them.

Ecological issues likely to attract strong litigation or strong community action are addressed.

Level 4 Efficiency

Technical and supervisory training augmented with interpersonal skills training. Teamwork encouraged for value-adding as well as cost-saving purposes. External stakeholder relations developed for business benefits.

ISO 14000 integrated with TQM and OH&S systems or other systematic approaches with the aim of achieving eco- efficiencies. Sales of by- products.

Level 5 Strategic Pro-activity

Intellectual and social capital are used to develop strategic advantage through innovation in products/ services.

P r o a c t i v e e n v i r o n m e n t a l strategies are seen as a source of competitive advantage.

Level 6 The Sustaining Corporation

Key goals both inside and outside the firm are the pursuit of equity and human welfare and potential.

The firm works with society towards ecological renewal.

Building capability for sustainability

Moving to compliance

According to the developmental model shown at Table 1, the organisations most in

need of change are those in the rejection and non-responsive phases. Because

expenditure on personal and professional development are kept to a minimum and

the community concerns are rejected completely, firms in the rejection phase remain

ignorant of the benefits of progressing along the sustainability spectrum. In the non-

responsive organisation, financial factors so dominate corporate decision-making that

often both the human resource and environment factors are taken for granted, usually

with the exception of industrial relations issues. Management policymaking of the

non-responsive organisation focusses on ensuring that the workforce is easily moulded

to the corporate will in order to derive maximum financial return. Barbara

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Ehrenreich's work Nickel and Dimed (2000) provides us with graphic descriptions of the

HR and OH&S policies of many such organisations.

For organisations like this, to move to compliance requires cultural change.

Compliance is not just a matter of changing policies and values. It involves enlisting

the commitment of all employees and building practical procedures which everyone in

the organisation can understand. Moving to a risk-free, ongoing position of

compliance is not possible without this commitment.

Approaches to organisational change are seen as ‘soft’ (associated with adaptive

strategies, cultural changes, continuous improvement, empowerment, and social goals)

or ‘hard’ (associated with rational strategies, structural change, radical transformation,

leadership and command, and economic goals) (Stace and Dunphy 2001: 14). Since

moving to compliance is dependent upon both hard and soft variables of change, the

human resource function is crucial. A major barrier to the organisational learning

required for the change may be that employees see the natural environment as a

technical issue and difficult to understand. Attaining compliance with environmental

laws may require new technical solutions or programs being implemented to enable

cleaner production techniques and improved worker health and safety. These often

include operating within specific, technical considerations such as development

consents or specified standards, eliminating hazardous operations, waste disposal,

water quality and planning requirements for new developments. Consequently,

ongoing HR support may be required if these measures are to be successfully

introduced and maintained. Having encountered this difficulty, management at

KLM, for instance, have developed an awareness-raising course and have instigated a

regular staff information day.1

As surveillance at all levels of the corporation is not possible, compliance requires the

internalisation of new standards by people at all levels of the organisation. Major

litigation costs, for example, often result from employee carelessness. So attitudinal

change is essential to ensure respect for all legislative requirements. Values and

attitudinal changes are required where employees have not been aware of their

responsibilities to environmental legislation as members of the organisation. If the

collective assumption within the organisation has been that exploitation of community

groups, employees or the environment is justified by economic benefits to the

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corporation, the cultural values of the organisation are in need of reformulation. Such

cultural change cannot be enforced, it only evolves with leadership and over time.

Structural change underpins and provides some of the social organisation needed for

the shift to compliance. But the enthusiasm and commitment of the workforce at all

levels has to be generated. Again as an example, management at KLM is now

recognising that new ideas on environmental sustainability need to come from the

bottom up.2 Community consultative committees can facilitate the internal and

external cultural changes required. Placing employees in face-to-face situations with

those who will be most affected by their work activity can have a powerful impact on

attitudes. However, although employee empowerment and engagement is a key aspect

of these initial changes, both top-down and bottom-up approaches are needed.

Neither approach is sufficient on its own (Stace and Dunphy 2001).

There is a limit to what can be achieved by an ad hoc approach to compliance. A

more systematic approach to compliance usually involves making structural changes

and developing new coordinating mechanisms to create a systematic, integrated

compliance framework. The usual framework for environmental compliance is an

Environment Management System (EMS). But the EMS needs to be supported by a

range of human resource and community development tools or techniques. These

techniques focus on two areas, the management and operation of facilities and the

design, manufacture and delivery of products or services. For the latter, various laws

such as those concerned with the emissions of toxic substances (e.g. the Toxic

Substances Control Act in the US) must be complied with. At this stage, strong

adherence to codes of occupational health and safety and well advertised workplace

safety precautions are leading areas of change for human sustainability. Progressing

this requires an Occupational Health and Safety (OH&S) Policy and an OH&S

Committee with representation from employees and managers.

Compliance requires the implementation of both environmental and human resource

reviews. A stakeholder analysis which defines roles and responsibilities, including those

of senior management, is a key aspect of the review. For instance, the Dutch

investment bank, the ING Group, has identified its core stakeholders as employees,

clients, shareholders and society. To ensure compliance, it has established a Code of

Conduct and Business Principles as internal regulations applicable to these

stakeholders. A compliance organisation has been created within ING and an

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Executive Board member serves as Head of Group Compliance.3 The relationship

between human resource policies and environmental sustainability is reflected in the

increasing role played by external organisations in monitoring for compliance. One

reason for this shift is the trend toward flatter organisational structures, voluntary

commitment to change, more participative management styles and the

implementation of self-managed teams, task forces and project groups. These policies,

while increasing employee engagement, can make compliance monitoring according

to concrete goals, continuous and relentless improvement and consistently applied

performance assessment criteria more difficult. In these conditions external

monitoring can enable more systematic assessment and add legitimacy to change

programs aimed at ensuring compliance.

In sum, establishing a structured, systematic response to compliance requirements

depends on implementing learning strategies and appointing change agents or specific

change units, such as Compliance Committees, Environmental Management

Committees, Human Resource and Environmental Health and Safety Units to gate-

keep information.

Moving beyond compliance

To go beyond compliance, these responsibilities need to move from the periphery into

the core function of the firm (Hoffman 1997). They need to be integrated into such

departments as marketing and product and process design. Importantly, these reforms

will succeed only if employees recognise that the reforms create value for them.

Employee ownership of the changes takes us into the area of cultural change within

the context of an overall Sustainability Plan. The organisational change strategy

developed to achieve the Sustainability Plan must be selected to suit the mission and

context of the firm. Too often environmental managers and human resource

managers move in different worlds from strategic business managers. The

environmental manager is technically focussed and often unaware of business

objectives, except in the broadest sense. Similarly the human resource manager’s

interest may be in training and other intra-organisational needs. As a result, if

sustainability rests in their hands alone, sustainability issues can be marginalised or

moved off to agendas unrelated to the firm's core business. As a counter to this,

human and ecological compliance policies can be integrated into an overall

Sustainability Policy which is an integral part of the firm’s business strategy.

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Integration is a key concept for both successful business and sustainability. It points to

the need for cross-functional relationships and the building of trust between areas of

business that have previously been regarded by managers as only loosely connected

(Piasecki 1995). Active relationships can be fostered between line managers and

sustainability experts, so that the issues of human and ecological sustainability are not

perceived by employees as an add-on, irrelevant to the core priorities of management.

For instance, at KLM, line managers all have sustainability action points and targets.4

Limiting staff training to the technical training required for compliance is an add-on

approach, not likely to bring about either attitudinal changes or allow the

development of a culture capable of adopting self-regulation. Restricting skills

development to a few key individuals can also lead to disaster, particularly in some

industries where toxic chemicals or dangerous technologies are used by others in the

corporation. The global banking, insurance and investment company, the ING Group

has attempted to avoid these problems by developing an e-learning compliance course

in order to familiarise its 7000 employees in 11 countries with compliance principles.

Sharing knowledge across the institution and developing an integrated policy

according to the Triple Bottom Line of social, environmental and economic objectives

requires more coordination between internal elements of the firm. A significant step

along this road is the merging of human and ecological sustainability policies through

the explicit recognition by management of the need for a comprehensive sustainability

strategy. Nuon Energy, for instance, the second largest energy producer and largest

producer of green energy in The Netherlands, has an Environmental Knowledge

Centre which is part of a larger section, Human Relations Management.5 On the

other hand, informal roles can also enable inter-unit collaboration. Examples of these

roles include the champion, the gatekeeper, the idea generator and the sponsor (Adler

and Tushman 1997). These informal roles can become ineffective if formalised, but

thrive when those in them are good networkers and strongly committed to the core

value of sustainability.

At the environment-award winning nickel plant in South Wales, INCO Pty Ltd, for

example, the company doctor acts as the ‘champion’ and represents the company at

international conferences and forums. The Environmental Officer acts as the ‘idea

generator’. He attends meetings of Business Units on a regular basis, negotiates

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standards with the regulatory agency and ensures that employees are trained

according to ISO 14001 requirements. The role of ‘gatekeeper’ is played by some

senior people who are also trained as auditors for ISO 14001. The ‘sponsor’ is the

plant manager whose idea it was the start the plant down the road to ISO 14000 and

who gives ‘very decisive leadership’.6

When a firm makes the move beyond compliance, in accordance with standards such

as ISO 14000 or industry-specific codes such as Responsible Care, some ‘old ways’

may still be appropriate if they help the organisation achieve compliance with

regulatory standards efficiently and effectively. The processes upon which a structured

compliance have been built do not necessarily need to be discarded. What must go is

the ‘machine’ metaphor of the closed and highly regulated system. If a structured

EMS has been adopted, for instance, it now needs to be re-assessed for its value in

delivering the negotiated understandings of ‘regulation’ (where government facilitates

a form of self-regulation). With the firm now partly responsible for instigating and

monitoring compliance, institutionalising reflection and implementing feedback

become priorities. The whole organisation needs to emerge from a legalistic

understanding of regulation and begin to support what may seem less tangible ends,

such as the capacity of employees to examine their own attitudes towards change.

For example, many managers are recognising that learning capacity is the true capital

of the firm. Dealing effectively with such issues as risk liability is dependent on this

capacity. According to de Geus (1997), the successful company encourages the

development of a culture which is sensitive to its general environment. Ongoing

improvement in ecological sustainability is assured because the organisation becomes

an open system, capable of learning through interaction among employees and

between employees and the wide range of stakeholders. These stakeholders include

not only customers, competitors and suppliers but the environment and society (Laszlo

and Laugel 2000). In an organisation of this kind, environmental responsibility simply

becomes an integral aspect of the way people conduct business.

More organisations are moving into the new structural forms which will characterise

the second millennium, such as networks, ‘spider-webs’, the ‘infinitely flat’

organisation, alliances and the virtual organisation (Morgan 1997). In this new order,

fewer interactions within the organisation involve hierarchical relations and more

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depends on trust. Bureaucratic implementation of procedures will still remain

important for some regulatory requirements. But increasingly, managers gain

credibility from their ability to put in place voluntary codes for healthy human and

ecological relations.

Managers are increasingly required to expand the knowledge base of the workforce

and institute high performance management practices. Studies demonstrate that these

practices (such as reduction of status differences, sharing information and extensive

training) can build commitment (Pfeffer and Veiga 1999). In other words, a culture of

voluntarism can only be developed through a shared sense of identity. However, this is

increasingly difficult to create given that career paths are ill-defined and unpredictable

and more employment is contractual and part-time rather than permanent and full-

time. Palmer and Dunford (1997) point out that as a result of these conditions,

managers need high-level skills in team- building, empowerment and the development

of trust. Because a certain proportion of expert knowledge is tacit, working in self-

managed teams requires trust, otherwise the critical knowledge needed to make the

new systems work will not be exchanged (Pfeffer and Veiga 1999).

Developing systems to take the firm to compliance and beyond requires building a

baseline level of human and technical competence. Moving voluntarily beyond

compliance enables change flexibility as the internal corporate system is modified to

address the requirements of external stakeholders. However, voluntary initiatives

alone often lack rigorous performance criteria and specific objectives. To ensure

rigour, the voluntary phase should be tied firmly to efficiency and strategic objectives.

Moving to the efficiency phase

In the shift to the next stage of efficiency, human resource management becomes

resource management (Gollan 2000). Specific targets include how to identify cost

inefficiencies and how to develop ‘natural capitalism’ by increasing resource

productivity and operational efficiency (Lovins, Lovins and Hawken 1999). These

authors (1999) have described natural capitalism as profiting from increasing the

productivity of natural resources, closing materials loops and eliminating waste,

shifting to biologically inspired production models, providing customers with efficient

solutions, and reinvesting in natural capital. For many corporations, improving

performance in terms of efficiency enables and justifies shifting along the spectrum of

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ecological sustainability. But improving corporate performance in terms of cost, such

as by reducing energy use and waste to landfill, is highly reliant on company-wide

awareness and educational programs. These in turn rely on human resource and

quality management systems, on communication and motivation strategies. In

general, developing eco-efficiency requires a number of human resource management

measures to be implemented such as highly organised knowledge management and

transfer systems, re-organisation of line managers to take more responsibility for both

reputational and technical risk areas and change agent development in order to

facilitate incremental change

As pointed out, a well-established learning culture will act as a base for the moves to

eco-efficiency. For instance, Carlton United (CUB), a major Australian brewer, has

been well known for more than 10 years for its Lifelong Learning Program, a team-

based approach to organisational learning, work practice and problem-solving. This

culture change at CUB means that work area team managers are also responsible for

Health, Safety and Environment instead of just focussing on production. As a result,

the role of the Environmental Coordinator at CUB is to help teams address their

particular issues. CUB is also moving to a systems approach to gain certification

through ISO14000, as well as health and safety and TQM. The general level of staff

awareness has assisted the gains made in efficiency through automation so that the

litres of water required for beer production has halved in 8 years.7

Business advantage can also be obtained by following the principles of industrial

ecology. Tracking material and energy flows over the whole producer/ consumer

cycle reduces the likelihood of 'suboptimal solutions' and 'unintended consequences'

(Ehrenfeld 2000: 226). Such a system can be introduced using incremental changes

such as those initiated by another environment-award winning firm, the Panasonic

TV Factory situated in Sydney's outer western suburbs. Panasonic employees describe

a workplace culture enabling the ready development of such sustainable practices.8

Television manufacture requires the assembly of many different components and is

dependent on an assembly line staffed by skilled employees. The corporate shift

towards ecological sustainability has been built upon a base of human sustainability

developed through open workplace communication systems, a policy of ongoing skills

development, a customer-driven ideology and an ongoing commitment to the local

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community. The employee response is to see the company as a long-term employer,

demonstrated in the low level of staff turnover.

Many employees have visited Matsushita Training Centres in Malaysia, Japan and

taken study tours to similar centres in Europe. The company has a policy of

continually upgrading skills through accredited courses, setting competency standards

and awarding medals. Integration of human and ecological sustainability initiatives

has been facilitated through a monthly communication meeting for all employees.

The meeting is led by the Managing Director and addressed by various speakers on a

wide range of issues relevant to the business. This commitment to communicate the

ideas and strategies driving the firm comes from the example of Matsushita himself,

who was noted for his passionate efforts to propagate his ideas. More than 3,000 tape

recordings of his talks exist, and numerous in-house newsletters and messages

A small group of highly motivated employees, a supportive and enabling corporate

culture, and the high social capital of the business networks in this area of Sydney,

have resulted in the firm developing ingenious arrangements with a range of local

firms for either the sale or free removal of by-products instead of paying for landfill.

Major energy saving initiatives, such as addressing eco-design principles for

ventilation and heating, have been included in new warehouse and building sites.

Even though the parent company is a multinational (the 8th largest in the world),

Panasonic tries to concentrate on the Penrith community. For instance, there is a

community welfare committee which makes shop floor decisions about product gifts.

Staff assist in the local ‘Meals-on-Wheels’ program in paid time. In fact, in 1998

Panasonic was one of only three firms in Australia identified by Volunteering

Australia as being genuinely involved in projects which promote community well-

being. Overall, the community-based activities reflect a relatively seamless ‘family’

relationship between employees, firm and community.

However, efficiency initiatives alone will not generate the competitive advantage

required for long-term high performance. The already lean and trim organisation will

need to leverage other sources of competitive advantage such as their symbolic capital

(Dunphy et al 2003; McIntosh, Leipziger, Jones and Coleman 1998). Their

reputation, their capability to communicate meaningfully with internal and external

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stakeholders and their ability to develop intangible assets such as the tacit knowledge

of long-term employees becomes more important. Panasonic is a case in point here.

The strategic phase

Lovins, Lovins and Hawken (1999) have argued that if firms persist with the win-win

business logic of natural capitalism, they can gain a commanding and strategic

competitive advantage. It needs to be recognised, however, that building this

perspective into an organisation requires the development of innovative capacity.

A firm in the strategic phase will have the capability and learning capacity to

recognise and develop the skills and organisational culture necessary to innovate inline

with the new business standards set by ecological modernisation (Hoffman 1997: Mol

and Sonnenfeld 2000). Hewlett-Packard's Environmental Strategies and Solutions

program, for instance, showed that sustainability can offer companies a strategic

competitive advantage (Preston 2001). The firm based the program on the premise

that the planet is a closed system which will eventually face limits, placing the firm in a

new social and economic situation. In other words, the firm strategically scoped the

challenges of a new business environment, developing strategies which would

transform potential environmental liabilities such as climate change, resource

exhaustion and the energy crisis into competitive advantage (Preston 2001: 29).

More generally, movement to this phase requires management to formulate a strategy

which anticipates and scopes future issues and intended impacts of company

operations, products and services (Roome 1992). In another approach to increasing

ecological sustainability through developing human capability, the firm can then focus

on redesigning products, processes and service layouts to gain strategic business

advantage.

For instance, the Fuji Xerox group of companies has successfully undertaken

remanufacturing for years. However the sustainability benefits achieved by the

Australian plant at Zetland in Sydney make it one of the most successful of the

company’s plants worldwide and has contributed to the success of this firm in recently

being awarded the prestigious Museum of Sydney Eureka Prize: Environment

Section. The concept of eco manufacturing involves detailed analysis of “why things

fail” and produces remanufactured products with improvements intended to eliminate

future failures. This concept enables business to become more sustainable while

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making savings and supplying local operators with high quality locally reprocessed

parts.

“Eco Manufacturing” takes used components, tests them and then re-engineers and

reassembles them into “new” products while ensuring that the production process and

the products do not have adverse environmental effects. However, to produce a re-

engineered product as good as, or better than new, and to meet the new sustainability

challenges, requires addressing some complex technological challenges. For example,

the materials of the components may have changed during their first use. These

changes occur due to heat, vibration or some other physical effect of the operational

processes within the equipment. So remanufacturing cannot simply replicate the

original production process. In addition, in order to qualify as “Eco Manufacturing”

the remanufacturing process may have to meet new and higher environmental safety

standards.

Fuji Xerox managers describe the work of their Eco Manufacturing Centre as re-

engineering and re-designing a product or product component and developing it to

equal or better than new condition. This process involves scientifically examining the

causes for failure while looking for opportunities to extend the life of the product and

in general improve its performance. These processes also have environmental benefits

by reducing the demand for raw materials, energy and waste to landfill. Another

major benefit to the business is the acquisition of data about problems that develop in

its products over time. That data was previously lost as used products that were

defective were sent to landfill. Part of the new remanufacturing/re-engineering

process involves analysing the defects in the components that have been returned.

This analysis provides information that can be used to improve component design and

thereby leads to the production of “as new” or better remanufactured products. So

there are multiple benefits from re-manufacturing:

> Decreased costs due to recycling (over the year 2000-2001 savings were

approximately A $22.5 million)

> Improved design for increased reliability and enhanced performance

> Savings from import substitution and new export earnings.

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Not only are parts renewed or recycled but the technical processes involved in

achieving this have been developed to eliminate environmentally damaging emissions,

pollution and waste. For example:

> All solvents have been eliminated from the cleaning of parts and components;

> Frozen carbon dioxide (dry ice) is used under high pressure to clean components,

a process that creates no liquid wastes or pollutants;

> Environmentally 'neutral' bicarbonate of soda is used under high pressure to

remove the old coating from the fuser rollers used in photocopiers. The spent

bicarbonate of soda is then reused as an industrial water softener;

> Carbon by-product of waste toner (57,000 kilos p.a.) is extracted and can be used

as a combustion agent in steel making;

> All unusable metal parts are sent to Sims Metal to be recycled;

> The company is also undertaking ongoing research and development into ways of

reducing all packaging waste through re-use of a range of packaging materials,

including plastics. The Centre is working with Collex Waste Management to solve

these problems;

> Reduction in energy use through the implementation of a range of initiatives and

monthly tracking to evaluate improvement through these programs.

The Eco Manufacturing Centre has clearly reached beyond the efficiency phase in

these measures. In our research we looked for the cultural and human resource factors

at the Zetland plant that have enabled this strategic perspective.9

A key success factor at the Fuji Xerox Eco Manufacturing Centre in Sydney has been

the presence of a small group of skilled, innovative and committed managers willing to

listen to staff, customers and other stakeholders. Staff are assigned to teams, each team

being responsible for quality, engineering and production capacity around products or

product groups, for example, print cartridges or lasers. The product-based team

structure promotes multi-skilling, enhances communication around problem

identification and problem solving, builds deep expertise and cumulative experience

and ensures that improved quality is constantly built into the work process. Managers

at Fuji Xerox see this structure as the leading cause of the high level of innovation in

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the plant. It has also led to a close working relationship between the engineers and the

production workers and joint ownership of the production targets and product quality.

The plant is systematically building the human capabilities of its staff. Staff members

are offered a range of developmental opportunities and most have had training in

various aspects of “people management”. Employees are also well remunerated. Staff

turnover has been low over the last eight years, a period of growth for the company.

In 2000, 37 staff were employed on contract work, and of these staff, 28 stayed on to

become permanent employees. Clearly, Fuji Xerox is seen as an employer of choice.

The shift towards a more enabling and committed culture at Fuji Xerox Eco

Manufacturing Centre has been significant. According to management, the better

pay, team-based conditions with considerable team spirit and loyalty, have resulted in

virtual elimination of industrial unrest. The nature of the work at the Eco

Manufacturing Plant seems to have generated a sense of worthwhile purpose and a

shared sense of commitment across the organisation.

The eco manufacturing process builds on the quality control systems already in place

throughout the company, particularly the ISO 9001 (quality endorsed company), ISO

14001 (Certified Environmental Management) accreditation and the systematic

processes that accompany it. Gaining and maintaining accreditation with these

systems is now company policy for Fuji Xerox plants throughout the world. The

Australian plant is both ISO 9001 and ISO 14001 accredited and has in place systems

and procedures to ensure that all products leaving the site receive a full quality

guarantee. The ISO 14001 Enviro Accreditation is integrated into the company’s

Quality Management Systems and audits of ISO 9001 also include ISO 14001

Progress Audits.

Occupational health and safety (OH&S) is viewed as part of the quality process. The

Director of Manufacturing and Supply in the Zetland and Mascot offices personally

undertook the site inspections for OH&S in order to demonstrate its importance to

staff. Similarly, all quality processes including environmental standards have been

given great importance in redefining the business. Management's position is that

commitment to this standard of environmental accreditation will keep

remanufacturing as a core business function. The regular audits associated with the

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Sustainability and Social Science: Round Table Proceedings 112

accreditation identify the company’s environmental impact and require steps to be

taken to solve any identified problems.

The organisational changes at Fuji Xerox illustrate the links between an

organisational culture of innovation and one designed to deliver sustainability.

Practices designed to enhance human sustainability and social capital within the

organisation (such as empowerment, teamwork and continuous learning) are linked to

the capacity to innovate and escape from rigid models of operation and production.

Arguably, implementing practices which support human sustainability creates an

organisational culture that also facilitates product differentiation (Orssatto 2000). A

number of companies have been successful in employing a strategy of environmental

product differentiation. While Reinhardt argues that the success factors of such a

strategy include consumers who are prepared to pay more, and the innovation to be

unique long enough for a profit to be made, Reinhardt (1999) also acknowledges that

the benefits must be able to communicated readily. Communication systems are a

feature of the human sustainability of the organisation.

Corporations face an accelerating rate of change and an increasingly complex society.

For these business conditions, innovation depends on cultural and structural

characteristics of the organisation. Both sets of characteristics are linked to the

organisation's capacity to engage with sustainability. Cultural factors such as those

associated with the learning organisation also underpin a culture of precaution.

Structural factors such as an internal network culture, employee participation and the

capability to develop community partnerships, are aspects of human sustainability.

In other words, innovation, business concept redesign, and human sustainability can

be readily linked in a dynamic relationship aimed at delivering long-term business

advantage. Importantly, such qualities enable the corporation to be more responsive

to the external drivers of change. An organisation geared to innovation is ready to

take up government incentives for ecological modernisation. That is, it can readily

translate social and moral issues into market issues and can exploit the potentially

huge market that ecological sustainability, in particular, represents. But more than

that, such an organisation can more critically reflect on the possibilities of new

relationships between nature, society and technology that will mark a new, more

sustainable age (Hajer 1995).

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The sustaining organisation

In order to develop to the stage of the truly responsible and responsive organisation

the firm will need to make the transition to an organisation that functions as an

instrument for the fulfilment of human needs and the support and renewal of the

biosphere. It will need to develop a codified set of values that are able to be

internalised in all employees. We argue that the skills necessary for such an

organisation will be process-based and include higher order skills of personal

resilience, self-confidence, adaption and learning, empathy, communication and

influence, coaching, negotiation and conflict resolution. The truly sustaining

organisation will attempt to use its influence so that society as a whole will progress

toward a more equitable position both between and within generations.

Hence, Nuon Energy for instance, the second biggest energy supplier in the

Netherlands, has a long-term vision based on the fact that eventually all energy it

supplies will come from renewable sources.10 But it is also working with other energy

suppliers and NGOs in areas such as Mali, the Sudan and Albania to develop their

use of renewable energy resources. 11

In its relationship with the Landcare movement in Australia, the Fuji Xerox Eco

Manufacturing Centre in Sydney displays some of the characteristics of this phase.

The 4,500 Landcare groups across Australia are part-funded by government, but also

dependent upon voluntary labour and corporate sponsorship. Management at Fuji

Xerox sees a relationship with Landcare as a means of enabling organisational

learning around environmental responsibility as well as bringing business benefits.

This corporate-community relationship goes beyond the transactional phase of

collaboration to a more integrated relationship (Austin 1999). The Fuji Xerox

managers have taken the unusual measure of attempting to get corporate dollars down

to the local Landcare groups, arguing that central administration often takes too great

a share of such funds. As well, several senior managers have become Board members

of the Landcare Foundation and have persuaded other companies to sign up as

sponsors. The firm also initiated the Olympic Landcare project, which developed a

number of solutions to help deliver the first “green” Olympic Games. These measures

are the more ideologically committed measures of the sustaining corporation, an

organisation which will attempt to persuade other corporations to support the cause of

ecological renewal.

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Change for sustainability

Incremental and transformational change

For some organisations the change to a more sustainable position on the sustainability

developmental model will be incremental change in human sustainability. For

instance, for the organisation to move from the non-responsive stage to compliance

requires incremental change. Small wins can in fact provide the basis for ongoing

change (Weick 1984). The case of Panasonic illustrates this. The informal initiatives of

a few employees gained the efficiency results which encouraged the organisation to

move towards a more structured EMS. But these employees were encouraged by the

enabling corporate culture of Panasonic.

Key human capability features of incremental change include standard project

management skills so that progress may be monitored and reported adequately;

awareness of external auditing systems and legislative changes; transparent actions of

managers and change agents so that problems and challenges are honestly faced and

addressed; cross-functional team building; managers who walk the talk and emphasise

on innovation.

For other organisations change along the sustainability phase model will be

transformational, requiring a redefinition of the company's core business area, or its

key manufacturing processes or perhaps its human resource policies and community

relationships. For example, for the organisation to move from the rejection phase to

compliance is a transformative change requiring a major shift in values and a re-

inventing of the corporate image and culture according to a powerful conception of

future need.

For some organisations this will be a slippery path. In one example, Orica Ltd,

previously the Australian branch of ICI Ltd, attempted what it claimed to be a

paradigmatic change in its closed culture, fixed in the traditional norms of industrial

science, when it established a Community Participation and Review Committee in

1996.12 The main function of the Committee was to advise on the disposal of 10,000

tons of highly toxic organochlorine waste stored at its site on the shores of Botany Bay,

Sydney. But the protracted communications with the local community are still

unresolved; Orica failed to persuade the local community that their scientific experts

could be trusted in their recommendations for the safe disposal on site. As uncertainty

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concerning the risks associated with the disposal of the waste has mounted, the

community representatives on the Committee have become convinced that Orica is

working with its traditional allies of government, professional scientists and corporate

power to ensure disposal on site.13 The upshot is a mistrustful community and the

potential for considerable loss in reputation for Orica as the results of the negotiations

are publicised.

For other organisations, however, transformative change will be enabled because the

firm has a more accurate perception of where it is now. Orica failed in its attempt at

change because it did not recognise that it faced the classic conditions of the 'risk

society' (Beck 1992; 1999). This is a society in which risk becomes a preoccupation,

when the uncertain nature of risk causes expert to contradict expert, in which

therefore trust and credibility become all important (Beck 1992; 1999).

Other companies such as Hewlett-Packard and 3M have shown themselves as able to

continually re-invent themselves. These companies have clearly identified the

established cultural characteristics that inhibit profound change and accepting change

as at the heart of their culture (Stace and Dunphy 2001).

An example of the human capability which can underpin such transformative change

is the ability of management to build alternative scenarios for the future. But to

implement these visions requires other abilities such as the employment of reframing

techniques (Palmer and Dunford 1996; Senge 1992). In particular, the political frame

is useful. Managers need a good understanding of political issues associated with the

change (Stace and Dunphy 2001). Stakeholder analysis will assist in identifying the

entrenched interests inside and outside the organisation which may organise against

the change.

A number of organisational characteristics dependent upon human capability can

make useful criteria for the monitoring of transformational change. These include:

progressive engagement of key individuals and groups; the development of actionable

plans; progressive development of skilled change agents at all levels; development of

trusting relationships with all stakeholders; a culture of non-defensive learning

(Dunphy et al 2003: 257).

Ad hoc initiatives are important but systematic progress needs competent, qualified

professional change agents. Developing a specific sustainability change unit and a

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Sustainability and Social Science: Round Table Proceedings 116

cadre of change agents enables attitudinal change, the building, managing and

accounting for social as well as environmental capital and fosters the innovation

needed for significant corporate change toward sustainability objectives.

Proactive and collaborative leadership

Proactive leadership is required if the firm is to develop along the spectrum towards

becoming a sustaining organisation. In our work with organisations we have

consistently noted the importance of leadership for collaboration:

> between corporate members of networks and alliances through the identification

of negotiated standards of human and ecological sustainability;

> between internal environmental and human resource managers as they negotiate

performance criteria that integrate their fields of activity;

> between external change agents such as government policymakers, NGOs and

community groups and the internal change agents of the firm.

Again we quote the example of Orica, where although the standards of Health Safety

and Environment had been re-negotiated internally, the corporate culture remained

one closed to the recognition of the values of other stakeholder groups. The leaders of

the firm throughout the dispute in question did not practice the 'inclusive leadership'

required for the firm to take the responsive and responsible position of the longterm

high-performance organisation.

By contrast, there are obvious benefits for a firm which takes a more democratic and

collaborative approach to its relationship with community groups. The relationship

between Fuji Xerox in Sydney and the Landcare movement in Australia is one

example. Managers at the Fuji Xerox Eco Manufacturing plant in Sydney are also

committed to establishing ongoing collaborative relationships with its customers,

believing that high quality products and efficient responsive service will result in Fuji

Xerox being the preferred supplier of office equipment. Fuji Xerox also offers training

to its customers. This includes developing an understanding of the technology and of

the company’s approach to business. Customers identify talented people in their own

organisation who are then trained by Fuji Xerox to identify problems, install

remanufactured components and ensure that damaged components are returned for

remanufacturing.

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Sustainability and Social Science: Round Table Proceedings 117

The close relationship between the nickel manufacturer INCO, in South Wales, UK,

and the regulatory agency also illustrates this inclusive leadership approach. The

Environmental Officer of this Environment Award-winning nickel processing plant

keeps a high level of personal contact with the local community. The Officer also

negotiates standards with the Environment Agency so that high achievement in one

area can be traded off against poor results in another. For instance, INCO’s

management is currently looking at improving their stack emissions. The firm is pre-

empting expected legislative changes, currently looking at new dust pollution

measures. According to INCO’s Environmental Officer: ‘It’s better to be ahead of the

change and perhaps even influence the direction of legislation. Our emphasis is on a

very transparent, negotiated relationship with the regulator’.14

This collaborative approach acts as informal reflexive regulation (Matten 2001; Orts

1995), enabling the social learning now recognised by policymakers as an essential

component of compliance. For writers such as Orts and Fiorino, putting corporate

managers in situations which encourage self-criticism is more productive than a

prosecutorial approach (Fiorino 2001; Orts 1995). In this form of regulation, a

regulatory agency which cooperates in the setting of standards with the firm is in effect

encouraging the firm to 'self-transform' (Fiorino 2001). This development of self-

awareness or 'reflexivity' is the key factor in INCO moving incrementally through the

sustainability phases, building human capital in the form of skills and capabilities

along the way (Stace and Dunphy 2001).

This company also cooperates with the community within which it is based. Many of

the ideas for environmental improvement come from its employees, who are also

members of the local community since most employees live locally. Putting these ideas

into practice is in INCO’s interest since it encourages long-term worker satisfaction

and commitment, helping to maintain a well-trained workforce and giving the

company a competitive advantage. Cooperation and community are vital elements of

INCO’s success.

Similarly with Panasonic, leadership for collaboration has directed the firm's

relationships with the local community including local business organisations. Indeed,

with Panasonic and INCO, we see the management practices of two companies

which, geographically, are far apart from each other, but which otherwise are

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Sustainability and Social Science: Round Table Proceedings 118

remarkably similar. Their sensitivity to the communities in which they are based

shows the similarity of their ideals and is a common factor in maintaining their

competitiveness. Panasonic is an admirable example of a firm that is prepared to fund

its employees in endeavours that support the community, both through social

initiatives and in terms of setting an example to industry of environmental

responsibility. It sees itself as having a social function and thus has supported the

sustainability initiatives spearheaded by its employees. In Panasonic's case, the

champion for the change remains the embedded ethos of Matsushita, but driven by

committed employees, rather than top management, through the firm.

Tensions between human and ecological sustainability

This paper has attempted to draw out the synergies between human and ecological

sustainability, arguing for an integrated perspective on corporate sustainability. But

are, as many critics have argued, both normative and business cases for integration

flawed? Does attempting the simultaneous achievement of human and environmental

sustainability inevitably mean a trade-off?

In terms of ideology, for instance, there are tensions between human sustainability

which focusses on the development of employee and community capability, and the

ideals of the 'ecocentric' organisation or strong sustainability (Kearins, Milne and

Walton 2003; Shrivastava 1995). Underpinning sustainability with features associated

with development of human capability encourages a technological fix, or mechanistic

approach to sustainability. Such an anthropocentric approach puts humans outside

the realm of the natural world. It restricts the development of the interconnectedness

and reciprocity associated with a more ecocentric perspective (Shrivastava 1995).

Stepwise approaches based on the human journey metaphor can lead to acceptance of

imperfection in implementation or weak sustainability (Kearins et al 2003).

At an operational level, there is evidence that while a humanistic approach and

investment in employee development produces stakeholder benefits (Sexton 2003), the

extra costs of training and other forms of human resource development may also

cause companies to reduce money spent in replacing beyond end-of-pipe with

pollution prevention environmental management systems. They may rely on

increased employee skills alone to bring about change. At a strategic level, an

emphasis on the principles of natural capitalism (Lovins, Lovins and Hawken 1997) is

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Sustainability and Social Science: Round Table Proceedings 119

technocentric, shutting out the ‘people element’ of the organisation and the capacity

to change. Achieving environmental sustainability, for instance, may also require an

overemphasis on Taylorist principles and lead to intensive, rather than sustainable

work systems (Doherty, Forslin and Shani 2002). Further tensions at the strategic

planning level may arise in association with the unbounded nature of environmental

risk (Beck 1992) and the fact that the social perpetrators of the risk may be far distant

from the effects (Beck 1992; 1999).

Conclusion

Our major motivation in applying the phase model to sustainability issues is to

examine the relationship between human resource management and corporate

citizenship (human sustainability) and ecological sustainability, areas of management

which are usually studied in isolation. Despite some tensions between the human and

ecological aspects of corporate sustainability, the case studies described here

demonstrate that human and ecological sustainability are more readily actioned as

integrated processes. In organisations such as Fuji Xerox, INCO and Panasonic, all of

which are award-winning organisations for the quality of their environmental

management, this ecological capability has been built upon and developed through

the trusting relationship that exists between staff, management and the communities

in which they are based. Each firm has been prepared to invest in the development of

social capital. While the motivation for this may be instrumental, in that cultivated

social capital may be exploited in the future by the firm, the social relations described

could also be motivated by the norm of 'generalised reciprocity' (Putnam cited in

Adler and Kwon 2002: 25). As Adler and Kwon point out, this shared norm of 'I'll do

this for you now if you do something for me later', allows the firm to bind with

employees and local communities, so giving the firm the right to expand in the future

(Adler and Kwon 2002; Elkington 1977).

Our research indicates that firms which progress toward ecological sustainability are

also investing in the development of human capital. Because their employees are

viewed as a long-term investment, the companies have been prepared to put resources

into their environmental training and into the time allocated for environmental

projects. In particular, Panansonic and Fuji Xerox indicate the development of both

scientific and normative systems of industrial ecology. Not only are their by-products

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Sustainability and Social Science: Round Table Proceedings 120

becoming the raw materials for other organisations, but this is being enabled through

the internalised norms of interconnectedness and community (Ehrenfeld 2000).

In conclusion if we were to name one key property of the human sustainability agenda

which gathers together the various organisational properties that support corporate

sustainability, it would be the firm's capacity for social learning. A culture which

fosters this property will give the corporation the flexibility, visionary leadership and

generative capacity required to move forward in an era where ethics and morality will

be increasingly important for societies and the corporations within them.

Environmental sustainability can only be effectively created through first building the

human capabilities of the organisation—no amount of technical capacity can by itself

ensure corporate sustainability.

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1 Interview with U. Huiskamp, Environment Manager, KLM, Amsterdam, February 2002

2 Interview with U. Huiskamp, Environment Manager, KLM, Amsterdam, February 2002

3 Interview with P. Kroon, Head of Public Affairs, The ING Group, Amsterdam, 5 February 2002

4 Interview with U. Huiskamp, Environment Manager, KLM, Amsterdam, February 2002

5 Interview with Hans Nooter, Nuon Energy, Hardewijk, The Netherlands, 7 February 2002

6 Interview with R. Savage, Environment Officer, INCO, Swansea, Wales, 14 February2002

7 Interview with David Ford, Environmental Co-ordinator, CUB, Sydney, 18 December 2002

8 Interview with Danny Lett, Manager, Personnel and Administration, and A. Holmes, Supervisor, Local

Purchasing, Panasonic TV Factory, Penrith, Sydney, 29 August 2000 and November 2002

9 The authors conducted semi-structured interviews with members of Fuji Xerox staff from the Eco

Manufacturing Centre at Zetland, New South Wales. Interviews were conducted with Veera Chippada,

Logistics and Warehouse Manager, Gunawan Komardjaja, Project Manager ROS (Raster Optic Scan)

Operation, Manwinder Mavi, Project Manager, Bruce Fremann, Production Supervisor, Dan Godamunne,

General Manager, Giovanni Calabrese, Operations Manager Cartridge Re- manufacturing and Graham

Cavanagh-Downs, Australian Director of Manufacturing and Supply and a number of other staff.

Promotional and other literature produced by Fuji Xerox and other sources were also examined

10 Interview with Hans Nooter, Nuon Energy, Hardwijk, The Netherlands, February 2002

11 Interview with Hans Nooter, Nuon Energy, Hardwijk, The Netherlands, February 2002

12 Interview with B. Gotting, Site Manager, Orica Pty Ltd, Botany Industrial Park, Sydney, December 2001

13 Interview with Nancy Hillier, community representative on the Orica Community Participation and

Review Committee, Sydney, June 2002

14 Interview with R. Savage, Environment Officer, INCO, Swansea, Wales, 14 February 2002