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MNG10253 Sustainable Business

Management Written by: Geoff Lamberton

Study Guide Fifth edition

Fifth edition 2014; reformatted 2014

Southern Cross University Military Road East Lismore NSW 2480

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher.

Contents

Unit introduction ........................................................................................................................................................................5

Topic 1 Business, society & stakeholders ...........................................................................................................................7 Introduction ..................................................................................................................................................7 Sustainability ..................................................................................................................................................7 Sustainability and business ..........................................................................................................................8 Supporting the transformation to sustainability .......................................................................................9 Role of stakeholders ......................................................................................................................................9 References ................................................................................................................................................... 12

Topic 2 Ethics, CSR & governance .......................................................................................................................................13 Introduction ................................................................................................................................................ 13 An ethical business .................................................................................................................................... 14 Corporate governance ............................................................................................................................... 14 Corporate social responsibility ................................................................................................................. 14

Topic 3 Sustainable economics ...........................................................................................................................................17 Introduction ................................................................................................................................................ 17 Sustainable economic development ......................................................................................................... 18 Sustainable development policy tools ..................................................................................................... 18 Sustainable development indicators ........................................................................................................ 18

Topic 4 Sustainable business models ................................................................................................................................21 Introduction ................................................................................................................................................ 21 Industrial ecology ....................................................................................................................................... 22 Biomimicry ................................................................................................................................................. 22 Natural capitalism ...................................................................................................................................... 22 Cradle to cradle design & the Natural Step ............................................................................................ 23 A general model of sustainable business ................................................................................................. 23

Topic 5 Carbon management ............................................................................................................................................. 25 Introduction ................................................................................................................................................ 25 Climate change ........................................................................................................................................... 26 Carbon management tools ........................................................................................................................ 26 Climate management ................................................................................................................................. 27

Topic 6 Sustainability accounting and finance ............................................................................................................. 29 Introduction ................................................................................................................................................ 29 Environmental accounting ....................................................................................................................... 30 Environmental management accounting ................................................................................................ 30 Global Reporting Initiative ....................................................................................................................... 30 Critique of sustainability accounting ....................................................................................................... 31 Sustainability and finance ......................................................................................................................... 31

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Topic 7 Marketing and consumption ................................................................................................................................33 Introduction ................................................................................................................................................ 33 Sustainable consumer behaviour ............................................................................................................. 33 Sustainable marketing strategy and practice .......................................................................................... 34 Social marketing ......................................................................................................................................... 34

Topic 8 Sustainable production ..........................................................................................................................................37 Introduction ................................................................................................................................................ 37 Regulating the environmental impact of production ............................................................................ 38 Eco-efficiency ............................................................................................................................................. 38 Life cycle assessment .................................................................................................................................. 39

Topic 9 Strategy & HRM ..........................................................................................................................................................41 Introduction ................................................................................................................................................ 41 Business strategy in a sustainable world ................................................................................................. 42 Strategic phases of sustainable business .................................................................................................. 42 The human component of organisational change to sustainability ..................................................... 42

Topic 10 Global development & social business ...........................................................................................................45 Introduction ................................................................................................................................................ 45 Governing for global sustainability ......................................................................................................... 46 Culture and sustainability ......................................................................................................................... 46 Social business ............................................................................................................................................ 46 Social entrepreneurship ............................................................................................................................. 47 Fairtrade and bottom of pyramid ............................................................................................................ 47

Unit introduction MNG10253 Sustainable Business Management is a unit about transformation to sustainability. An underlying assumption is that reform to the current economic system, the design of which was founded during the 18th century Industrial Revolution, is insufficient and will fail to achieve sustainability. Extensive change at multiple levels from the individual consumer, household, organisational, regional, national and global level is required.

Business organisations working alone cannot achieve global sustainability, but they do represent the essential component of change, given the levels of pollution and resource depletion caused by unsustainable economic production, as well as the resources and innovative capacity and hence potential they possess to shift society towards sustainability.

This unit is about the next industrial revolution, the socially, economically and environmentally sustainable one. As you will see from the many inspiring examples from around the world, this revolution in business has already begun.

Our study of sustainable business will be informed by two major resources. Firstly a new Australian text Sustainability in Australian Business: principles and practice provides the latest theoretical and applied knowledge in the relatively young discipline of sustainable business. We also provide an additional academic journal article each week to keep up with the latest research which is essential in an advanced undergraduate unit.

You have two assessments which very much reflect the design of this unit as a research focused unit. The major assignment is a substantial task which requires your attention from Week 1. You will note that we have provided major assignment planning activities throughout the study guide, as well as review timelines where you can submit your major assignment plan and draft report to the academic staff teaching this unit for review and feedback.

The weekly online Collaborate classes will focus on the major assignment and provide substantial guidance as to how to apply the knowledge from each topic to preparing your sustainability report. If you cannot participate live please keep up with the recorded Collaborate sessions. The second assignment is a group project where you present your findings online so that all students can benefit from your research.

Sustainable business is a new and dynamic discipline. It’s important you read the latest ideas and research which is available online using the search engines with which you are already familiar. The learning materials we have assembled for you reflect this dynamism. The basic pattern underlying your learning materials is:

Study Guide – One topic per week which includes readings from the text, an additional journal article and in some cases a recommended film included in the MNG10253 unit DVD. Each topic has a review question which forms part of the Assignment 2 group project assessment and most weeks there is a major assignment planning activity. You may wish to draft your own answers to these review questions to compare to the solutions which are provided on an online discussion forum as part of Assignment 2.

Online class – A weekly 90-minute workshop using Collaborate provides an opportunity to ask questions and discuss the major assignment. These sessions are recorded.

MySCU unit website – Discussion forums, unit documents, marking rubrics and exemplar assignments provide a high level of support and interaction with academic staff and other students.

Assessment – It is recommended you commence the major assignment in Week 1. We will finalise group membership for your online group projects by the end of Week 2 to enable an early start to this assignment as well.

As with all disciplines sustainable business has its own unique terminology so you will need to utilise the Glossary which you can find on pages 453–460 in your text.

We look forward to working closely with you as we explore the new and exciting field of sustainable business.

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Topic 1

Business, society & stakeholders

Introduction Our first topic examines definitions and core principles of sustainability. Applying sustainability principles to business and making the transition to a sustainable business is not a simple task. Hence we discuss the forces and frameworks enabling this transition and, acknowledging sustainability as essentially a global movement, in the additional reading we examine barriers to sustainability in China.

A discussion of the relevance of stakeholder theory to sustainability leads to a strongly recommended assignment planning activity, as successful completion of your sustainability report is essential.

Learning objectives • Compare various definitions of sustainability • Discuss what sustainability means in a business context • Construct arguments both for and against sustainability being good for business • Explain the paradigm change required for the transformation to business sustainability • Examine the frameworks available for supporting business sustainability

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapters 1 and 2.

Reading F. Birkin, A. Cashman, S.C.L. Koh & Z. Liu (2009) New Sustainable Business Models in China, Business

Strategy and the Environment, 18, 64–77.

Film The Corporation (2004) by Mark Achbar, Jennifer Abbott & Joel Bakan.

Sustainability In 1992 at the Earth Summit in Rio de Janeiro, 171 nation states from around the world signed the declaration of sustainability committing their nations to a sustainable form of development. The business sector was not exempted from this commitment; in fact it is an essential component as business organisations and the global economy in which they operate are major contributors towards unsustainability being responsible for pollution and resources depletion on an enormous scale.

More importantly the business sector has the resources, research and innovative capacity to lead the global community towards sustainable solutions to these problems. In Topic 10 we explore the social business movement and witness its remarkable capacity building impact, as people in developing countries use the tools of sustainable business to lift themselves and their families out of poverty.

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Whilst the issues of poverty, pollution, resource depletion and ecosystem degradation are central to sustainability, the concept is much broader than this. Within a business context sustainability is generally viewed as some combination of environmental, social and economic components or the ‘triple bottom line’ (TBL). This terminology was framed in the early 1990s to reflect the need for business to measure not only ‘bottom line’ financial performance, but to also measure social and environmental impacts which are integrated into a TBL report which includes social performance and environmental performance together with accounting reports that already measure economic performance.

An evolving view within the sustainability literature is that sustainability requires ecological preservation, social wellbeing for all people and economic viability. However this view and any view of sustainability is very much contested. As you broaden your reading you will see many different and sometimes conflicting perspectives of sustainability. Importantly, sustainability is a multidimensional concept, where the various dimensions are interconnected rather than separate, as well as a multilevel concept.

As the economy grows providing more jobs it may encroach on fragile coastal ecosystems thereby providing positive economic impacts at least in the short term but together with negative environmental impacts. This suggests the multiple dimensions of sustainability may conflict. However given the economy is totally dependent on the natural environment, as is the health and wellbeing of humankind, preservation of the natural environment is not only interconnected with but absolutely essential to achieving economic viability and social wellbeing in the long term.

Sustainability represents such an enormous challenge it must be pursued at individual (as conscious consumers we can make an enormous contribution to removing unsustainable consumption patterns), household and community, organisational, regional, national and international levels.

The focus throughout this unit is of course sustainability at the level of the business organisation which follows soon after this general introduction. Your first reading discusses the triple bottom line definition of sustainability, examines its core principles and provides a brief summary of the history of sustainability including a list of some the most important co-operative efforts to achieve sustainability at a global level.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 1–13.

Sustainability and business Business organisations pursue, or are assumed to pursue, economic objectives such as sales growth, profit maximisation and wealth maximisation. For sustainability to become the primary goal of business, management will need to change their focus from purely economic objectives to a mix of ecological, social and economic objectives.

The principle of corporate social responsibility holds that corporations are responsible for their social and environmental impacts to a broad range of stakeholders including society-at-large and even future generations. Society sanctions the existence of business entities which are considered the most cost efficient means of producing economic goods and services. If specific organisations are perceived to do more harm than good then government would be expected to remove their licence to operate.

According to DesJardins (2007), a US business ethicist, we are coming to an age where sustainability becomes the primary goal of business, requiring business to be economically vibrant, ecologically informed and ethically sensitive. DesJardins believes that sustainability rather than continuing volume-oriented economic growth is the path to long-term profitability given the inherent conflict of continued economic growth and the environmental damage it causes within a finite ecological system.

Your next reading examines the three dimensions or pillars of sustainability, leading to a discussion as to why sustainability is good for business.

Topic 1 Business, society & stakeholders 9

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 19–27.

Supporting the transformation to sustainability A major objective of this unit is to understand the process of transformation from an unsustainable to a sustainable business organisation. Theoretical models of what these sustainable business organisations should look like and how they differ from conventional business organisations are explored in Topic 4.

The transition to sustainable business will undoubtedly be difficult as are all major change processes, and will require an enormous investment in technology and new global economic infrastructure. Some rough estimates suggest it will cost $30 trillion to build a global renewable energy infrastructure. Whilst this actual estimate is probably grossly inaccurate, the sheer size of the investment cannot be disputed.

Given the size of the global economy and the reality that the transition to sustainability will necessarily occur over at least a 20–30 year timeframe, the investment required each year becomes more manageable.

However there are many barriers to making this transition as well as the obvious financial ones. Your next two readings examine some of these barriers in Australia as well as in China, which is the world’s fastest growing economy, identifying the forces and frameworks which provide essential support for widespread change.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 14–17 & 55–60.

In the following journal article Birkin et al. explore the meaning of and barriers to sustainable development within Chinese business enterprise. You should recognise many of the barriers (lack of skills, finance and knowledge) as being the same as those experienced in Western business. However the Chinese example is different to the West given the strong authoritarian leadership provided by the Chinese Government and the potential for a uniquely different form of sustainability to emerge from the myriad of Chinese philosophical influences such as Daoism, Confucianism, Marxism and Maoism.

r Reading 1 F. Birkin, A. Cashman, S. C. L. Koh & Z. Liu (2009) New Sustainable Business Models in China, Business Strategy and the Environment, 18, 64–77

Role of stakeholders You are no doubt familiar with stakeholder theory from your management studies. Stakeholder theory challenges the narrow view that corporations are accountable to shareholders alone. An important driver of corporate sustainability is the accountability relationships which exist between business and a broad collection of stakeholders.

Your next reading links stakeholder theory with sustainability which leads to further discussion of corporate social responsibility in Topic 2.

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r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 35–46.

c DVD The Corporation (2004) by Mark Achbar, Jennifer Abbott & Joel Bakan.

This is an excellent film which covers a broad range of issues concerning social responsibility, sustainability and ethical aspects of corporate activity. The film is provided on the MNG10253 unit DVD and is available on YouTube.

It is recommended you watch the film over the next two weeks.

a Major assignment planning activity It’s important you start planning your major assignment now! Your first task is to select an appropriate organisation and define a small segment of the organisation which you will transform into a sustainable business (segment).

We’ll start this planning exercise with some suggestions of what you should not do. You should not: 1. select an organisation where your primary source of data is the company website; i.e. you

need physical access to the business and its staff 2. transform a large company or even an entire small to medium business; i.e. you must define

a segment of the business on which you will focus your recommendations 3. cover all stages of the product life cycle from mining and growing raw materials and fossil

fuel inputs through to the disposal of the product at the end of its economic life; i.e. you need to define the stages of the life cycle and production and distribution cycle which are excluded from your study.

Here is an example!

The following is a Sustainability analysis plan for a Pizza Hut home delivery service. This business also has a restaurant and take-away service, but the segment chosen is home delivery pizza. This means that the environmental impact of the restaurant is ignored in your sustainability analysis as is the impact of customers driving to the Pizza restaurant to pick up their pizzas (given the take-away service is excluded).

We’ll start by defining the various stages of production. In the example below the process starts with farmers growing food ingredients which are sold at the wholesale markets. However, these stages are excluded from the sustainability analysis as stated in the ‘notes’ following the diagram.

Topic 1 Business, society & stakeholders 11

Farmers

Markets

Pizza Hut Restaurant Take-away

Customer

Landfill

Pizza Hut Purchasing Preparation Cooking Packing Home delivery

Ingredients, petrol light and heat electricity pizza boxes petrol

carbon carbon carbon solid waste carbon

electricity petrol packing materials

carbon water dis. solid waste

Inputs fertiliser chemicals diesel fuel

Outputs carbon methane

Figure 1.1 Input-Output chart

Notes 1. The rectangle encloses the business segment being transformed i.e. the pizza and home

delivery service, as the eat-in and pick up options are excluded from this analysis. 2. The oval defines the boundaries of the study which includes delivery from markets and

delivery to the customer. 3. Exclusions include growing food on farms, operation of markets, transport from farm to

market, impact after pizza delivered to customer.

Your plan 1. Clearly define the business or business segment which you’ll transform. Keep your study

small and focused. 2. What is the primary product or service output? 3. Prepare an input-output chart, identifying the major materials and energy inputs and waste

outputs at each stage of production and distribution. 4. Where will you draw the boundaries around your study? What specific activities are included

and excluded? 5. What are your primary sources of information which you will use to inform your study and

recommendations of how to transform the business segment into a sustainable business segment?

Note that exemplar assignments from past years are provided in unit documents on the MySCU unit website. It is recommended you review the structure, style and content of these past sustainability reports.

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a Review question Sustainability has environmental, social, cultural and economic dimensions. Discuss the link between business and these four dimensions of sustainability. Provide examples of how business impacts each of these sustainability dimensions.

f Feedback The review questions are one of the options available for the Assignment 2 group projects. Solutions to review questions are posted on the online discussion forums during Week 8. You may wish to draft your own solutions to these questions to compare to the online feedback.

References DesJardins, J. (2007) Business, Ethics, and the Environment, London, Pearson.

Topic 2

Ethics, CSR & governance

Introduction Topic 2 begins with an examination of the social responsibility of business, recognising the need for business decision makers to factor in social impacts of their actions. The considerable overlap between ethics, sustainability, social responsibility and governance is acknowledged prior to a discussion of a range of possibilities for the fourth dimension of sustainability.

Ethical principles and theories are presented as is an ethical decision making model; which together with corporate ethical codes is presented as a means to building an ethical business culture. This topic includes a detailed discussion of the key principles of good corporate governance and corporate social responsibility.

The additional reading links sustainability with social responsibility and ethics. Given the importance of the major assignment we continue the discussion of this assessment and encourage you to complete the planning activity provided at the end of this topic.

Learning objectives • Examine the components critical to building an ethical business culture • Explain the principles of good corporate governance • Compare the conceptual similarities and differences between CSR, corporate sustainability and

ethical behaviour

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapter 3.

Reading G. Svensson, G. Wood & M. Callaghan (2010) A corporate model of sustainable business practices: An

ethical perspective, Journal of World Business 45, 336–345.

DVD Enron: the Smartest Guys in the Room.

t Key terms (Definitions provided in the glossary to your text on pages 453–460) • Corporate governance • Corporate social responsibility

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An ethical business Ethics concerns what we ought to do. Ought we ask a Sherpa to carry our bags weighing up to his own bodyweight up a mountain? The opening case in chapter 3 of your text suggests not identifying the unethical nature of exploitation of workers’ impoverished circumstances.

Business has a social responsibility to all those affected by its operations. A path to becoming a socially responsible corporate citizen is to make ethical decisions and build a strong ethical culture throughout the entire organisation.

As we discuss the transformation from unsustainable to sustainable business throughout this unit, consider the imperative that a sustainable organisation must be an ethical organisation. An organisation may reduce its environmental impact by investing in the best clean technology, but if human rights are violated somewhere up the supply chain, then this is not sustainability.

Your next reading discusses the ethics of the Nepalese Sherpa prior to identifying the means essential to building a strong ethical culture within business.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 67–78.

Your next reading links sustainability with ethics using a model of sustainable business which contains five interconnected elements. Be sure to note the strong ethical components contained in the various elements of the model.

r Reading 2 G. Svensson, G. Wood & M. Callaghan (2010) A corporate model of sustainable business practices: An ethical perspective, Journal of World Business 45, 336–345.

Corporate governance It’s the people within the business organisation who make decisions. Governance concerns the organised systems, rules and procedures used to make these decisions, and the principles of good governance can be applied to government, business or other organisational decision making.

These important principles of good corporate governance are discussed in detail in your next reading.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 78– 87.

Corporate social responsibility The principle of corporate social responsibility can be traced to the early 1900s when the negative impacts of corporate excesses were recognised by American society. This led to the view that a social contract exists between corporations and a wide group of stakeholders, including society-at-large which sanctions the continuing operation of business.

Topic 2 Ethics, CSR & governance 15

Corporate social responsibility (CSR) has become a mainstream business activity. Examples of good corporate behaviour include a vast array of environmental activities, local community investment, charitable donations and poverty alleviation programs.

No doubt some of the CSR growth is defensive and in direct response to bad publicity from corporate scandals, consumer watchdogs and environmental groups which have undermined public trust in the corporate sector.

In many companies, CSR is still an add-on or a separate activity divorced from its core business decisions. However some companies recognise that it makes strategic sense to embed CSR throughout the corporation’s activities so that social and environmental impacts are considered as a routine part of corporate decision making.

Your next reading explores various definitions and dimensions of CSR leading to the chapter summary.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 87–94.

c DVD Enron: the Smartest Guys in the Room.

Enron is the largest ethical scandal in US business history. This film explains some of the unethical behaviour as well as the prevailing corporate culture which enabled this behaviour. You can watch this film on YouTube.

a Major assignment planning activity By this stage you should have chosen the organisation which you will work with for the major sustainability assignment. Ensure you have contacted the organisation and confirmed they are willing to provide information which will help you form recommendations to enable transformation to sustainability.

You need to define a small segment of the business on which you will focus your sustainability analysis. What information can you collect concerning the major inputs and outputs? You do not need to quantify each input or output or perform a financial analysis. Although some inputs such as electricity usage should be easy to obtain and will assist your recommendations concerning the viability of renewable energy options.

Have you reviewed the assignment exemplars available on the MySCU unit site in unit documents? These will provide a guide as to structure, content and depth. Many of your recommendations will be short-term eco-efficiency improvements; for example, reducing energy consumption by training staff to become more conscious of unnecessary usage at the point of consumption. These recommendations are important but small incremental improvements are not sustainability.

You do need to form a long-term vision for sustainability rather than just being less destructive or less unsustainable. It is recommended you start considering the redesign of the product, service and production system by adopting the closed loop model of sustainable business. This model is discussed in detail in Topic 4.

It is highly recommended that you utilise the Collaborate weekly online class or the online discussion forums to discuss this assignment activity and present your ideas and assignment plan for feedback from staff and students. An active discussion from Week 1 will benefit the progression of this task.

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a Review question Using the business you have chosen for your major assignment, explain how you would improve the ethical culture within this organisation.

Topic 3

Sustainable economics

Introduction In this topic we contrast an important underlying assumption of neoclassical economics with ecological economics concerning the nature of the interrelationship between natural capital, human capital and the economy. This interrelationship is summarised on pages 103–104 of your text in the neoclassical circular flow model of the economy compared with the three concentric circle depiction of economy as a subset of society and the natural environment used in ecological economics.

We also explore an alternative measure of progress by contrasting gross domestic product (GDP) with the genuine progress indicator (GPI) and discuss the relevance of each as a measure of sustainability. The additional reading presents the business case for sustainability utilising a tool described as a ‘sustainability balanced scorecard’. The main objective of this article is to provide a systematic approach to managing for sustainability to enable business organisations to increase their economic returns whilst in the pursuit of sustainability objectives.

It is recommended you watch the David Suzuki film on biomimicry. Biomimicry is explored in more detail in Topic 4; however as it offers an alternative design for the new sustainable economy it is appropriate to gain an introductory understanding this week. The topic content concludes with economic policy goals and a brief introduction to the potential economic impact of the transition to sustainability.

Learning objectives • Explain the ecological and economic limits to growth. • Distinguish the three main economic policy goals of sustainability. • Analyse the business implications of the shift to economic sustainability.

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapter 4.

Reading S. Schaltegger (2011) Sustainability as a driver for corporate economic success; consequences for the

development of sustainability management control, Society and Economy, 33, pp. 15–28.

DVD David Suzuki’s The Nature of Things episode on Biomimicry.

t Key terms (Definitions provided in the glossary to your text on pages 453–460) • Biomimicry • Circular flow model • Genuine progress indicator (GPI)

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Sustainable economic development You will notice in this topic the readings from the text use the term ‘sustainable development’ rather than ‘sustainability’. Sustainable development is a predominantly economic derivative of sustainability, and is shorthand for environmentally and socially sustainable economic development. In other words the type of development which sustainable development focuses on is economic development.

Central to our discussion of sustainable economic development is how we view the interrelationship between the economy and the world in which we live. Your first reading in this topic answers this question by contrasting the standard circular flow model of the economy (p. 103 of Moscardo et al.) with the three concentric circle model (p. 104), identifying the critical assumptions which underpin both models. One of these assumptions is the circular flow model depicts the economy as an isolated system, whereas the concentric circle model emphasises the interdependence of economic production with natural and social systems.

The relevance of this different interdependent view of the economy for the policy of economic growth is discussed. The concepts of natural and social capital are also discussed in this reading leading to the important distinction between strong and weak sustainability.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 99–109.

Sustainable development policy tools An important business principle is that we cannot manage what we cannot measure. To enable business to be managed for sustainability, a system which accurately measures sustainability is essential. Organisational level sustainability performance measurement (sustainability accounting) is examined in Topic 6.

In this topic the focus is on macroeconomic measures of sustainable economic performance, and specifically a comparison of GDP and GPI. This comparison is discussed in your next reading followed by a brief introduction to the ecological footprint indicator.

Take careful note of the Spotlight on China which illustrates the different picture of progress which is painted using ecological footprint and GPI indicators as opposed to GDP.

Sustainable development indicators

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 109–117.

Your next reading provides an introduction to sustainable development policy goals and the instruments available to achieve them. You will note the three policy goals concern a sustainable scale for the economy, an equitable distribution of wealth and an efficient allocation of resources. It is in each of these three areas that ecological (sustainable) economics provides different objectives and solutions to conventional neoclassical economics.

The discussion of policy goals is followed by a discussion of the major policy instruments. Two examples are carbon pricing and emissions trading schemes which have received much attention in the media in Australia

Topic 3 Sustainable economics 19

in recent years. Australia’s proposed emissions trading scheme is a cap and trade auction system of trading the right to emit carbon and other defined greenhouse gases.

These policy instruments are introduced briefly followed by an analysis of the economic implications of sustainable development at the level of the firm.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 117–132.

In your final reading of this topic, widely published international sustainability researcher Stefen Schaltegger presents the business case for sustainability, explaining why and how business organisations can benefit financially from pursuing sustainability. The business case for sustainability can be distinguished from the moral case (sustainability is the right thing to do) or the social case (sustainability is good for people).

The extension of the business case is that sustainability becomes the primary objective of business with profit and wealth creation being secondary objectives essential for economic viability, but not pursued in a manner which is contrary to organisational sustainability. In the long term any apparent tension between profit and sustainability objectives recedes as long-term sustainable profit is dependent on sustaining the natural and social systems which enable these activities.

r Reading 3 S. Schaltegger (2011) Sustainability as a driver for corporate economic success; consequences for the development of sustainability management control, Society and Economy, 33, pp. 15–28.

The recommended film this week focuses on the ‘other’ economy which is operating here on planet Earth. We are familiar with the ‘human built’ global economy which produces an astounding volume of goods and services for our consumption and enjoyment. The other economy is ‘nature’s’ economy. This economy produces plants and animals and food, water purification systems, climate regulating capacity, waste assimilation capability and many more ecological goods and services.

Remarkably, nature’s economy produces no waste, requires no fossil fuels to be mined or combusted, is a net sequester of carbon, and reduces pollution through its economic activities. Nature’s economy is the blueprint for the new sustainable economy using the process of biomimetic design (biomimicry) which is explained in the film and in some detail in Topic 4.

c DVD David Suzuki’s The Nature of Things episode on Biomimicry.

This film is provided on the MNG10253 unit DVD.

a Major assignment planning activity This week you need to consider the path to long-term economic viability for your business. Consider issues of long-term consumer demand, availability and security of supply of essential natural resource inputs, product or service design, and energy and carbon intensity of the production system.

Once you identify barriers to sustainability within the economic production system you may wish to consider how nature deals with equivalent problems. This design exercise is referred to as biomimetic design and is explored in more detail in Topic 5.

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a Review question Critique the dominant neoclassical economic model drawing on insights from ecological economics.

Topic 4

Sustainable business models

Introduction As explained in the unit introduction, this unit is transformational rather than merely reformist, focusing on the transition from unsustainable to sustainable business organisations. In Topic 4 theoretical models of sustainable business are introduced identifying basic ethical, operational and design principles. These models offer a pathway to business embarking on the transition to sustainability.

The additional reading this week introduces the idea of hybrid organisations which pursue social and environmental objectives whilst maintaining their essential income generating activities. The authors place sustainability at the centre of the design and purpose of hybrid organisations.

This topic is also essential for your major assignment as you will need to select one sustainable business model to guide the transformation process for your selected business.

Learning objectives • Describe the major principles of the natural capitalism, industrial ecology, cradle to cradle to cradle

design and the Natural Step sustainable business models • Compare the major assumptions of these models • Apply the principles contained within these models to business organisations in the pursuit of

sustainability

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapter 5.

Reading 4 N. Haigh & A. J. Hoffman (2012) Hybrid organizations: The next chapter of sustainable business,

Organizational Dynamics, 41, pp. 126–134.

DVD Waste equals food (2007) SBS Future Focus

t Key terms (Definitions provided in the glossary to your text on pages 453–460). • Biomimicry • Hybrid organisations • Industrial ecology • Closed loop model • Natural capitalism • Waste equals food

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Industrial ecology Given sustainability is a multidimensional, multidisciplinary concept, the study of sustainable business is necessarily trans-disciplinary, that is the ideas are drawn from different academic fields of study including environmental science, social science and economics. Industrial ecology is a prime example of a new trans- disciplinary field of academic study and now business practice, as it fuses together ideas from business and ecology into an emerging study of the ‘science of sustainability’.

The primary lesson for business gained from observation of natural systems is the design of the closed loop model of industrial production where all materials are continuously recycled through the production systems, there is no concept of waste and, production is fuelled by clean, renewable energy form the sun. This is the critical insight of industrial ecology for the design of business systems.

Your next reading presents two excellent examples of industrial ecologies; one from Kalundborg in Denmark and the other from Guitang in Guangxi, China.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 133–141.

Biomimicry The idea of industrial ecosystems was examined in your previous reading from the text on page 136. The other idea crucial to industrial ecology is biomimicry, an idea introduced in Topic 3 in the recommended film ‘Biomimicry’ from the David Suzuki TV series.

We have not arrived at this point of an unsustainable global economy by accident. We are here by design, as we chose the take-make-waste model as the appropriate design for the industrial systems that form the global economy and we have continued designing new production systems using this design model since the industrial revolution.

The new sustainable economy requires more than minor adjustments and refinements at the edges. We need a new design model with a new set of design criteria and this is what biomimicry provides.

Your next reading examines the revolutionary concept of biomimicry.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 141–143.

Natural capitalism The natural capitalism sustainable business model is defined by four key principles which include biomimicry (the design principle); dematerialisation (based on the assumption that our production systems are currently highly inefficient in both an environmental and economic sense); service solutions (which defines a new type of business contract between producer and consumer which encourages long-term thinking); and the need to reinvest in natural capital (as natural resources are identified as the critical limiting factor of production).

Your next reading discusses these four principles and provides a critique of natural capitalism’s main assumptions.

Topic 4 Sustainable business models 23

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 143–147.

Cradle to cradle design & the Natural Step The cradle-to-cradle design system has much in common and no obvious incompatibilities with natural capitalism. It presents an explanation of sustainable business using new terminology with a more predominant focus on design as the critical step in the process of transformation to sustainable business. Waste equals food is the critical idea underpinning cradle to cradle design as economic systems are redesigned so that waste is no longer a production output.

The film this week is a documentary called Waste equals Food.

c DVD Waste equals food (2007) SBS Future Focus

This film is provided on the unit DVD.

Your next reading discusses two sustainable business models: cradle to cradle design and the Natural Step including case spotlights of both models.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al., (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 147–152.

A general model of sustainable business Your final reading from the text provides a general model which draws together the major insights from each of the four sustainable business models discussed in this topic, concluding with the four-stage Natural Edge transformation to sustainability model.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 153–159.

Sustainability is necessarily a combination of environmental, social and economic dimensions. Neglect of any single dimension precludes the possibility of achieving the desired end result. Your next reading approaches the objective of sustainability from the perspective of hybrid business organisations that have clearly defined social objectives which are achieved by establishing economically sustainable income streams.

r Reading 4 N. Haigh & A. J. Hoffman (2012) Hybrid organizations: The next chapter of sustainable business, Organizational Dynamics, 41, pp. 126–134

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a Major assignment planning activity You must select and utilise one of the sustainable business models to derive and add structure to your recommendations for transformation to sustainability. For example if you select the natural capitalism model, you could develop a series of recommendations using the four main principles (dematerialisation, biomimicry, service solutions and reinvest in natural capital).

You will note from the major assignment exemplars provided in unit documents in the MySCU unit website that natural capitalism is a useful model for guiding the transformation to sustainability, as each principle provides inspiration for new ideas consistent with the business objective of sustainability.

a Review question Utilising cases from around the world, describe examples of sustainability in business identifying barriers to full sustainability.

Topic 5

Carbon management

Introduction The objective of sustainability has grown out of concern for deterioration in the natural environment. To enable humankind to sustain our social and economic systems, we must restore and preserve the ecological systems on which we depend. One essential ecological system is the Earth’s climate.

The problem of climate change and its causes represent a crisis of unsustainability, and possibly the largest single cause of unsustainability confronting humankind. We begin this topic with an overview of the problem of climate change before switching back to the micro level of the firm where we examine carbon management strategies at the organisational level. Both the text and the additional reading demonstrate there is much that business organisations can do with current technology to reduce carbon emissions.

Energy management is integral to any carbon reduction strategy and hence the major assignment planning activity focuses on energy and transport decisions which together account for the majority of carbon emissions caused by the industrial sector.

Learning objectives • Discuss the implications of climate change for business • Describe the systematic six step carbon management strategy • Discuss climate adaptation and geo-engineering options • Compare alternatives strategies for managing carbon

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapters 6 & 13.

Reading 5 S. Y. Lee (2012) Corporate Carbon Strategies in Responding to Climate Change, Business Strategy and the

Environment, 21, 33–48.

DVD The Burning Season (2009) Screen Australia, Hatchling Productions Pty Ltd, Virgo Productions Pty Ltd,

Directed by Cathy Henkel.

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t Key terms (Definitions provided in the glossary to your text on pages 453–460) • Carbon footprint • Carbon offsets • Carbon mitigation • Carbon sequestration • Climate risk.

Climate change The Intergovernmental Panel on Climate Change (IPCC) is the world’s leading scientific authority on climate change. The IPCC’s assessment reports collate and present the latest peer-reviewed research from an enormous number of climate science experts from around the world.

Our starting point is essentially acceptance of the advice from the world’s leading climate experts that the problem of climate change is real and in need of urgent action. Hence your first reading in this topic provides only a brief introduction to the IPCC and the science of climate change, as our concern is primarily with how business should respond to the problem of climate change. This reading also distinguishes two types of climate response: carbon emission mitigation and climate change adaptation.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 375–385 and 392–394.

Carbon management tools Carbon management at the organisational level is presented in your next reading as a systematic six step process which begins with measuring actual carbon emissions and includes energy efficiency and renewable energy alternatives as well as emissions trading and carbon credit options. A strategic assessment of climate risks and opportunities is also essential, so that business decision makers are fully aware of the threat of climate change to their organisation as well as opportunities available in the new low carbon economy.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 161–178.

c DVD The Burning Season (2009) Screen Australia, Hatchling Productions Pty Ltd, Virgo Productions Pty Ltd, directed by Cathy Henkel.

This film is provided on the unit DVD and presents the work of a young carbon entrepreneur (Dorjee Sun) to stop deforestation in Indonesia by encouraging corporate investors to invest in carbon offset schemes.

A critical question underpinning this work is whether carbon offset schemes encourage or discourage the process of transformation to sustainability. Does the option of buying credits to offset carbon emissions

Topic 5 Carbon management 27

encourage corporations to continue with business-as-usual rather than seek low carbon renewable energy alternatives?

t Reading 5 S. Y. Lee (2012) Corporate Carbon Strategies in Responding to Climate Change, Business Strategy and the Environment, 21, 33–48.

This reading provides evidence from Korea of a broad range of carbon management activities undertaken within the sample of 241 Korean companies.

Climate management You will have noticed an argument presented in the media from so-called ‘climate sceptics’ that climate change is caused by natural phenomena and therefore there is no need for the enormous investment which is required to enable the transition to low carbon energy, transport and agricultural infrastructure. The IPCC have rejected this notion and their recommendations for change recognise that human-caused climate change (anthropogenic global warming), mainly in the form of carbon emissions from burning fossil fuels, is the major cause for recent accelerated changes in climatic conditions.

However, there is of course a natural cycle of change, as climate like everything else is in a continuing state of change. One day the Earth will become uninhabitable. The changes suggested in this topic so far focus on removing the human-caused component of climate change to enable humankind to enjoy a relatively stable and human friendly climate for as long as possible.

But humans like to interfere with natural systems! Your next reading looks briefly at geo-engineering which is attempted manipulation of Earth’s climate on a massive scale.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 179–185.

a Major assignment planning activity The management of energy and carbon emissions is a critical step in the path towards sustainable business. You must apply each step in the six step systematic carbon management process which is relevant to your business. Identify climate risks and opportunities. Provide details of energy efficiency schemes specifically designed for your business. Consider the feasibility of using renewable energy. This requires a site visit and investigation of, for example, solar energy options. So you cannot choose a distant organisation for this assignment or an organisation which you do not have physical access to. Are carbon offsets feasible; if so, at what cost?

Whilst you are not required to calculate the cost of each of your recommendations, the energy management section is one area where you should obtain some factual quantitative evidence. For example obtain electricity accounts to determine consumption. If you recommend photovoltaic panels obtain details of the cost and generating capacity from a supplier.

a Review question Using recent corporate examples compare different approaches to world’s best carbon management practice.

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Topic 6

Sustainability accounting and finance

Introduction Over the next four topics we will be examining what sustainability means for each specific business function of accounting, finance, marketing, production and human resource management. The major focus this topic is sustainability accounting and particularly the contribution of the Global Reporting Initiative (GRI) to increasing the transparency of business organisations’ social and environmental impacts.

The additional reading provides a critique of sustainability accounting by examining the inherent contradiction in the concept of sustainable development and whether attempting to measure sustainability at an organisational level is a feasible endeavour.

Chapter 9 of the text discusses finance in the context of sustainability. There are no assessments on sustainable investment and finance so you may treat this chapter as optional reading. However if you have an interest in socially responsible investment you should find it of interest.

Learning objectives • Describe the unique features of ethical and sustainable investments • Describe sustainability accounting • Discuss the contribution of environmental financial and environmental management accounting to

the goal of sustainability • Evaluate the contribution of the Global Reporting Initiative to sustainability

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapters 8 & 9.

Reading 6 R. Gray (2010) Is accounting for sustainability actually accounting for sustainability … and how would we

know? An exploration of narratives of organisations and the planet, Accounting, Organizations and Society 35, pp. 47–62

t Key terms (Definitions provided in the glossary to your text on pages 453–460) • Sustainability reporting • Global Reporting Initiative (GRI) • Environmental financial accounting • Environmental management accounting

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Environmental accounting As you read through Chapter 8 of the text you will note that ‘best practice’ sustainability accounting (which is expressed in the sustainability accounting guidelines which form the GRI) has evolved over the past 25 years beginning with the social accounting movement in the 1970s, the environmental accounting movement in the 1980s, and triple bottom line reporting in the 1990s.

An ongoing debate within the accounting profession is whether financial and management accounting principles and techniques generate useful information when applied to sustainability events. Critics suggest that accounting is too strongly committed to economic outcomes to be capable of providing a balanced report of multidimensional sustainability performance. The contrary argument is that managing for sustainability requires an accurate performance measurement system, and that accounting which has evolved over 400 years and professional accountants provide critical experience in the task of performance measurement.

Your next reading tracks the development of environmental accounting using the familiar accounting terminology of assets and expenses whilst focusing on disclosures to external stakeholders.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 219–229.

Environmental management accounting Accounting consists of the two distinct schools – financial accounting which is concerned with reporting to external stakeholders, and management accounting which focuses on providing information to internal stakeholders. Similarly, environmental accounting evolved into quite separate financial and management accounting branches, with environmental financial accounting being the forerunner.

Your next reading examines environmental management accounting which focuses on producing relevant environmental accounting information for internal decision making by management.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 229–235.

Global Reporting Initiative The GRI represents state-of-the-art sustainability reporting. Your next reading summarises the development, purpose and content of GRI reports. Also note the section on the quality of sustainability reports. Lack of quality is a major problem as many sustainability performance indicators defy precise measurement or even a consistent understanding amongst sustainability accountants as to how each metric should be calculated.

There is some equivalence here with financial accounting ratios which can be calculated with many different formulae. However the base line data required to produce sustainability performance indicators (for example pollution, resource consumption, environmental regulation non-compliance, human rights violations, safety hazards etc.) is very difficult to measure accurately. These issues of ambiguity and lack of quality are discussed in your reading.

Topic 6 Sustainability accounting and finance 31

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 235–248.

Critique of sustainability accounting Professor Rob Gray of the University of St Andrews in Scotland was the primary academic responsible for advancement of social accounting, environmental accounting and accounting for sustainability. More recently his articles focus on the critique of this research and to determine whether any genuine contribution towards sustainability has been made at the business level.

You might be disappointed with his answer which is effectively that all of this work has made no obvious positive contribution to achieving sustainability. This conclusion is probably a bit harsh; however we need to acknowledge that the rate of unsustainability, globally, increases every day. Within this gloomy reality it’s hard to identify any specific action which is clearly pushing humankind towards sustainability.

My view is this emphasises the complexity of sustainability and the need to pursue the multiple elements of sustainability from the individual lifestyle and consumption level right through to the global level. Rather than despair at the slow rate of progress by business, or collectively by governments at the international level, there is much we can do now with current technology.

The work of sustainable business leaders featured in the Waste equals food (2007) SBS Future Focus documentary featured in Topic 4, shows what can be done now with existing technology. As the next generation of business leaders your role is to implement these ideas!

r Reading 6 R. Gray (2010) Is accounting for sustainability actually accounting for sustainability … and how would we know? An exploration of narratives of organisations and the planet, Accounting, Organizations and Society 35, pp. 47–62.

Sustainability and finance There is a lot of reading in this unit. Some parts of the prescribed text you can treat as optional reading. Which particular parts you treat as optional depends on what assessment project you select and the specific type of business you select for your major assignment.

There are no specific assessments on sustainability and finance (Chapter 9 of the text), however if this topic is of interest to you or relevant to your assessments then you should read this material.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 249–271.

a Review question Obtain the sustainability report of a company which has applied the GRI reporting guidelines. Interpret the information contained in the report against the benchmarks of sustainability and reduced unsustainability.

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Topic 7

Marketing and consumption

Introduction This topic continues the examination of each of the main business functions in the context of sustainability. Marketing is usually associated with increasing consumption and profitability. However in this topic in both the text and the additional reading we examine social marketing and its potential for reducing the problem of over consumption. Consumer behaviour is also discussed as it is central to marketing and the objective of developing a sustainable marketing strategy.

Learning objectives • Describe the challenges of sustainable consumption • Explain sustainability marketing strategy and practice • Apply the principles of effective social marketing.

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapter 10.

Reading 7 K. Peattie & S. Peattie (2009) Social marketing: A pathway to consumption reduction? Journal of Business

Research, Volume 62 No 2, February, pp. 260–268.

t Key terms (Definitions provided in the glossary to your text on pages 453–460) • Social marketing • Greenwashing • Environmental marketing.

Sustainable consumer behaviour A major focus of this unit so far has been the redesign of products and production systems to enable the transformation to sustainable business. Acknowledging the critical link between production, consumption and marketing, this topic switches the focus from sustainable production to the link between sustainability and consumer demand and behaviour. This discussion not only includes fundamental principles of marketing and consumer behaviour, but also issues such as eco-labelling, greenwashing and opportunities created by emerging markets where consumers demand new sustainability related products to support their more sustainable lifestyles.

MNG10253 Sustainable Business Management34

Your next reading begins with a comparison of national ecological footprints which link our personal consumption decisions to the problem of unsustainability, before examining the fundamentals of sustainable consumer behaviour.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 273–291.

Sustainable marketing strategy and practice In this section the text reading provides a critique of marketing which leads to a discussion of the critical elements of a sustainable marketing strategy. This critique examines problems of encouraging excess consumption, trade-offs between short-term satisfaction of consumer wants against long-term benefits for society, and failure to include negative social and environmental impacts in decision making processes.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 291–298.

Social marketing Social marketing utilises established marketing principles and techniques to achieve positive social benefit. Examples of high profile social marketing include public health and safety campaigns such as ‘swim between the flags’, road safety advertising or ‘Clean up Australia day’.

The potential role for social marketing to contribute to the goal of sustainability is discussed in your next reading followed by an academic journal article which examines how social marketing can be used to reduce personal consumption. Given the dominant consumption oriented social paradigm in our society, the authors acknowledge the enormous challenge of selling low consumption lifestyles to the general public.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 298–313.

r Reading 7 K. Peattie & S. Peattie (2009) Social marketing: A pathway to consumption reduction? Journal of Business Research, Volume 62, Issue 2, February, pp. 260–268.

a Review question Develop an outline for a marketing strategy to promote more sustainable low consumption lifestyles.

Topic 7 Marketing and consumption 35

f Feedback The review questions are one of the options available for the Assignment 2 group projects. Solutions to review questions are posted on the online discussion forums during Week 12. You may wish to draft your own solutions to these questions to compare to the online feedback.

MNG10253 Sustainable Business Management36

Topic 8

Sustainable production

Introduction Production is the critical phase of the economic process from a sustainability perspective given the level of pollution and resource depletion which occurs in order to get the product or service to the point of consumption. The sustainable business models introduced in Topic 4 provide a set of new design criteria for transforming economic production systems into sustainable systems.

However the implementation of biomimetic design principles and the transformation of an entire global economy is a very long term process. If we prioritised achieving a global sustainable society as the highest priority it would still take 20–30 years to replace energy, transport, mining, agricultural and manufacturing economic infrastructure with sustainable systems.

This topic focuses on immediate (short-term) benefits which can be achieved through implementing an eco- efficiency strategy. As you will see there are many improvements which business can implement immediately to begin the process of transformation to sustainability. Product design issues are revisited via a discussion of lifecycle assessment and ‘design for the environment’.

The additional reading is a short rationale for ‘de-growth’ providing an important counterpoint to our attachment to continuing volume oriented economic growth. Many of your recommendations for transformation to sustainability will be ‘eco-efficient’ in nature, so you will again see an important major assignment planning activity at the end of this topic.

Learning objectives • Describe successful strategies for implementing eco-efficiency in a business • Explain the potential contribution of life cycle analysis to sustainable production • Examine the impact of production activities on the objective of sustainability • Distinguish eco-efficiency from sustainability.

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapter 11.

Reading 8 F. Schneider, J. Martinez-Alier & G. Kallis (2011) Sustainable Degrowth, Journal of Industrial Ecology,

Volume 15, Number 5, 654–656.

t Key terms (Definitions provided in the glossary to your text on pages 453–460) • Eco-efficiency • Dematerialisation • Life cycle assessment (LCA)

MNG10253 Sustainable Business Management38

Regulating the environmental impact of production In Topic 3 we identified three general policy tools available to governments to manage the economy towards sustainability. These three tools are legislative, distributional or market oriented. An example of each using the example of carbon mitigation would be: 1. Environmental regulations placing restrictions on the emission of greenhouse gases (GHG)

(legislative) 2. Increased payments to low income earners to compensate for rises in electricity prices from a new

carbon tax (distributional) 3. Establishing a market to trade permits which grant the owner the legal right to emit a specified level of

GHGs (market oriented).

The challenge of sustainability is such that policies spread across the entire range of options are required. These policies need to be rational, co-ordinated and significant and not driven by short-term consumption desires or political expediency.

Your next reading focuses on environmental protection legislation as well as energy efficiency and GHG reporting requirements.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 315–324.

Eco-efficiency One of the four main principles of natural capitalism was dematerialisation, which can be described as ‘doing more with less’, where ‘more’ is production outputs and ‘less’ refers to natural resource inputs.

In your next reading the similar concept of eco-efficiency is discussed and you will see it is also described as doing more with less. The promoters of natural capitalism (Lovins, Hawken and Hunter Lovins) developed the concept of dematerialisation from their observation of the chronically inefficient use of natural resource inputs in US manufacturing. They talk of ‘factor 10’ improvements; which is reducing consumption of a natural resource input by 90% and then continually working to improve this already impressive outcome.

Such radical improvement is only possible if the basic assumption of extreme inefficiency is true. The idea that production systems that have their design roots in the mid-18th century industrial revolution are extremely inefficient is plausible, although change occurs more slowly than natural capitalists suggest.

Eco-efficiency is usually associated with continuing small incremental improvements in resource use efficiency. For example if you look at most sustainability reports produced by large companies you will see small improvements in many of the metrics such as water consumption per unit of output, GHG emissions relative to sales, energy consumption etc. This is eco-efficiency.

Most importantly, eco-efficiency is not sustainability. It could be a stepping stone to sustainability, or it may be a distraction whereby we think we are making progress but really the improvements are too small to actually enable the rate of unsustainability to decline.

Your next reading provides a structured approach to implementing an eco-efficiency strategy.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 325–332.

Topic 8 Sustainable production 39

Life cycle assessment Life cycle assessment (LCA) estimates environmental impact over the entire life of a product, service or process from the mining of raw materials (the ‘cradle’) to final disposal of the finished product (the ‘grave’). A complete LCA is incredibly detailed and requires enormous investment of time and money; so much in fact that very few complete LCAs are prepared.

Like rock music, there are some classics from the 1970s which compare the environmental impact over the entire life cycle of plastic versus paper bags or cloth versus disposable nappies. What was the result? Well it all depends on what your environmental priorities are!

For example with the nappy debate is the priority to minimise water consumption (if so choose disposable) or minimise solid waste output (go reusable cloth)? There are numerous assumptions that need to be made to enable quantitative assessment of each environmental impact along the production chain.

This may seem to paint a gloomy picture of the potential benefits of LCA. Whilst a complete assessment is expensive there are other ways of applying LCA principles in a more time-efficient manner. For example when you prepared your input-output chart for your major assignment that was an important initial step in the LCA process which forced you to consider major resource consumption and waste outputs at each stage of the production cycle.

Life cycle thinking (also referred to as life cycle management) is the process of taking responsibility for upstream and downstream environmental impacts and making a contribution to reducing unsustainable economic activity right through the entire supply chain. It’s a method of applying life cycle principles without the enormous time and cost of preparing a full assessment.

Your next reading from the text discusses LCA and this is followed by a short extract from the Journal of Industrial Ecology concerning the importance of changing our singular focus on economic growth to a more sustainable level of production and consumption.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 333–341.

r Reading 8 F. Schneider, J. Martinez-Alier & G. Kallis (2011) Sustainable Degrowth, Journal of Industrial Ecology, Volume 15, Number 5, 654–656.

r Review question Distinguish life cycle thinking from life cycle assessment and discuss their potential contribution to sustainable production.

a Major assignment planning activity Many of your recommendations for transforming your business segment will reflect eco- efficiency rather than sustainability. For example you should have some ideas for reducing electricity consumption. Eco-efficiency improvements are important and may represent a stepping stone to sustainability.

Ensure you fully understand the distinction between eco-efficiency and sustainability and that your extensive list of recommendations covers both objectives.

MNG10253 Sustainable Business Management40

f Feedback The review questions are one of the options available for the Assignment 2 group projects. Solutions to review questions are posted on the online discussion forums during Week 12. You may wish to draft your own solutions to these questions to compare to the online feedback.

Topic 9

Strategy & HRM

Introduction Topic 9 examines organisational strategy, distinguishing different levels of strategy and different degrees of change (reformist versus transformational) required to achieve global sustainability. Regulatory versus voluntary codes for influencing corporate conduct are also considered.

This topic also discusses the importance of human resources in any change process and specifically for change towards sustainability. The additional reading discusses the role of multiple stakeholders in the sustainability change process and emphasises the need for business to co-evolve with broader segments of society to achieve the highest level of innovation required for sustainability.

Learning objectives • Explain the importance of human resource management to sustainable business • Link business strategy to sustainability • Critique different strategic approaches to sustainable business.

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapters 7 & 12.

Reading 9 D. Loorbach, J. van Bakel, G. Whiteman & J. Rotmans (2010) Business strategies for transitions towards

sustainable systems, Business Strategy and the Environment, Volume 19, Issue 2, pages 133–146.

t Key terms (Definitions provided in the glossary to your text on pages 453–460) • Strategy • Transformational approach • Reformist approach.

MNG10253 Sustainable Business Management42

Business strategy in a sustainable world Your first reading in this topic discusses organisational strategy and links this to the objective of sustainability. If you have already studied strategic management you may choose to skim through this material focusing on the connection between strategy and sustainability.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 188–197.

Strategic phases of sustainable business Some business organisations choose sustainability as their source of competitive advantage. These organisations are described in your next reading as having a ‘visionary strategy’ possessing an ideological commitment to sustainability.

Your next reading examines the application of alternative types of business strategy to organisations with differing levels of commitment to the pursuit of sustainability.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 198–218.

The additional reading examines the pursuit of a sustainability strategy within the multi-stakeholder system in which the organisation operates. The authors conclude that the required level of change and innovation required for progress towards sustainability is too complex to be achieved by single organisations and is best supported by co-operation between organisations and networks of stakeholders.

r Reading 9 D. Loorbach, J. van Bakel, G. Whiteman & J. Rotmans (2010) Business strategies for transitions towards sustainable systems, Business Strategy and the Environment, Volume 19, Issue 2, pages 133–146.

The human component of organisational change to sustainability Everything in business only occurs from the conscious efforts of people. Widespread successful change towards sustainability needs to be implemented by management and supported by staff and stakeholders. This human commitment must be authentic and long term.

This next reading will be of particular interest to students studying the human resource management major, or others with a people management orientation. As there are no direct assessments on this topic you may treat this reading as optional.

Topic 9 Strategy & HRM 43

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 343–366.

a Review question Select a large corporation which has a clearly stated sustainability vision. Discuss whether this vision is achievable in the short or long term.

f Feedback The review questions are one of the options available for the Assignment 2 group projects. Solutions to review questions are posted on the online discussion forums during Week 12. You may wish to draft your own solutions to these questions to compare to the online feedback.

MNG10253 Sustainable Business Management44

Topic 10

Global development & social business

Introduction This topic examines the cultural and social dimensions of sustainability in considerably more depth than in previous topics. The models of sustainable business presented in this unit are rooted in the Western technocentric view of the world and strongly influenced by the North American business practitioners responsible for their development. Consider for example the new technology focus of Amory Lovins from the Rocky Mountain Institute, where sustainability problems are solved using an innovative mix of new energy and transport technologies.

However there are other cultural views of the world, for example Eastern and Indigenous. In this topic we explore the relevance of these other cultures and the contribution they can make to the search for sustainability. We also examine the social business movement and witness the incredible potential business provides for social transformation where impoverished people are given the tools and support required to build the capacity for self-reliance and freedom from welfare dependence.

This topic includes a reading on social entrepreneurship which uses the tools of business to achieve positive social change and your final major assignment planning activity.

Learning objectives • Discuss how cultural differences influence sustainable business • Explain the role of business in achieving positive social impacts • Examine the distinguishing features of a social entrepreneur.

Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and

practice, John Wiley & Sons, Milton, Chapters 14 & 15.

Reading 10 S. Trevis Certo & Toyah Miller (2008) Social entrepreneurship: Key issues and concepts. Business

Horizons, vol. 51, issue 4, pages 267–271.

t Key terms (Definitions provided in the glossary to your text on pages 453–460) • Social business • Social activism • Social entrepreneurship • Microfinance • Fairtrade • Bottom-of-Pyramid.

MNG10253 Sustainable Business Management46

Governing for global sustainability Whilst this unit is focused at the level of the firm, we’ve discussed previously how sustainability is a multilevel objective requiring action at all levels from individual, household, community, organisational, national to global levels. Each of us as individuals is responsible for the impacts of our personal consumption and lifestyle decisions. Business owners and managers are responsible for organisational impacts and communities and councils are responsible for taking action which is consistent with the transformation to sustainability within their specific regions.

Who is responsible for achieving sustainability globally and how can we ensure that decisions made at other levels do not compromise this objective? Although we do have numerous international forums where many nations are represented, most decision makers approach global problems from the perspective of what is best for their own country’s national interest. This is a significant political barrier to achieving the required level of global co-operative effort needed for sustainability.

Your next reading discusses issues of global governance and the role of multinational corporations in a sustainable global society.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 397–409.

Culture and sustainability Your next reading examines the importance of cultural difference to sustainability. It’s quite possible that countries such as China will find their own unique approach to sustainable business practice influenced by their Confucian and Daoist philosophical views. Indigenous and traditional communities and their interconnection to global society are also examined in this reading, leading to a discussion of social business in the following section.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 409–426

Social business Social business organisations take on many forms. They may be formed out of partnerships between multinational corporations (MNCs) and charitable non-government organisations (NGOs) (for example see the Grameen Danone Foods case in your next reading), they are often organisations formed for one social purpose only (refer to The Song Room case), or they could be a small segment of an MNC looking to expand their corporate social responsibility activities (the Westpac case).

Your next reading provides a brief history and some examples of social business organisations.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 427–434.

Topic 10 Global development & social business 47

Social entrepreneurship Social entrepreneurs fix social problems using the tools of business. Your next two readings describe this growing area of business using examples from Australia and internationally. If you are interested in further researching social entrepreneurship there are extremely useful resources provided online such as Ashoka, Social Traders and many more. Details are listed on pages 447–448 of your text.

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 434–441

r Reading 10 S. Trevis Certo & Toyah Miller (2008) Social entrepreneurship: Key issues and concepts. Business Horizons, vol. 51, issue 4, pages 267–271.

Fairtrade and bottom of pyramid To conclude your prescribed reading in this unit we examine two other forms of social business; the Fairtrade and bottom-of-pyramid business models. Note the critique by Karnani (on page 446 of your text) of the bottom-of-pyramid business model, as the win-win promise of earning increased profits and simultaneously alleviating poverty may be nothing but a mirage!

r Textbook G. Moscardo, G. Lamberton & G. Wells et al. (2013) Sustainability in Australian business: principles and practice, John Wiley & Sons, Milton, pp. 441–452

a Major assignment planning activity At this stage you will understand that sustainability is much more than looking after the environment. We know that traditionally, business prioritises economic outcomes, and that this behaviour is still the dominant paradigm. Some progress has been made towards motivating business decision makers to consider environmental impacts. In many ways the social component of sustainability is the most neglected dimension.

The business segment which you are transforming into a sustainable business must be more than economically viable in the long term and environmentally benign. It must make people better off. Your major assignment must contain a series of recommendations on how this will be achieved. You will consider the vast array of possible social impacts from charitable activities to occupational health and safety measures to human rights issues. Your recommendations must be directly relevant to your specific business and the industry in which it operates.

a Review question Identify a social problem with which you are familiar and outline the design of a social business to fix this problem.

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f Feedback The review questions are one of the options available for the Assignment 2 group projects. Solutions to review questions are posted on the online discussion forums during Week 12. You may wish to draft your own solutions to these questions to compare to the online feedback.

MNG10253 Sustainable Business Management
Unit introduction
Topic 1
Business, society & stakeholders

Introduction
Sustainability
Sustainability and business
Supporting the transformation to sustainability
Role of stakeholders
References

Topic 2
Ethics, CSR & governance

Introduction
An ethical business
Corporate governance
Corporate social responsibility

Topic 3
Sustainable economics

Introduction
Sustainable economic development
Sustainable development policy tools
Sustainable development indicators

Topic 4
Sustainable business models

Introduction
Industrial ecology
Biomimicry
Natural capitalism
Cradle to cradle design & the Natural Step
A general model of sustainable business

Topic 5
Carbon management

Introduction
Climate change
Carbon management tools
Climate management

Topic 6
Sustainability accounting and finance

Introduction
Environmental accounting
Environmental management accounting
Global Reporting Initiative
Critique of sustainability accounting
Sustainability and finance

Topic 7
Marketing and consumption

Introduction
Sustainable consumer behaviour
Sustainable marketing strategy and practice
Social marketing

Topic 8
Sustainable production

Introduction
Regulating the environmental impact of production
Eco-efficiency
Life cycle assessment

Topic 9
Strategy & HRM

Introduction
Business strategy in a sustainable world
Strategic phases of sustainable business
The human component of organisational change to sustainability

Topic 10
Global development & social business

Introduction
Governing for global sustainability
Culture and sustainability
Social business
Social entrepreneurship
Fairtrade and bottom of pyramid