4-6 pages double-spaced Business Ethic Paper!!!

Pragmatic Sustainability: Translating Environmental Ethics into Competitive Advantage Author(s): Jeffrey G. York Source: Journal of Business Ethics, Vol. 85, Supplement 1: 14th Annual Vincentian International Conference on Justice for the Poor: A Global Business Ethics (2009), pp. 97-109 Published by: Springer Stable URL: http://www.jstor.org/stable/40294824 . Accessed: 12/09/2013 01:57

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Journal of Business Ethics (2009) 85:97-109 © Springer 2008 DOI 10.1007A10551-008-9950-6

Pragmatic Sustainability: Translating Environmental Ethics into Competitive Advantage Jeffrey G. York

ABSTRACT. In this article, I propose a business para- digm that allows and enables the integration of environ- mental ethics into business decisions while creating a

competitive advantage through the use of an ethical framework based on classical American pragmatism. Environmental ethics could be useful as an alternative

paradigm for business ethics by offering new perspectives and methodologies to grant consideration of the natural environment. An approach based on classical American

pragmatism provides a superior framework for businesses

by focusing on experimentation and innovation, driving a

long-term focus, and providing actionable clarity. Under a pragmatic approach to ethics, the choice for sustain-

ability becomes self-evident for business performance and moral reasons.

KEY WORDS: pragmaticism, sustainability, environ- mental, business ethics, competitive advantage

Introduction

You are a Senior Manager in charge of plant quality and productivity for a publicly-traded international

paper company, Titan Paper. Titan produces 45% of

the paper stock used in the United States for a variety of purposes, including milk and orange juice cartons, cereal boxes, and other packaged consumer goods. You are in the midst of your annual bud- geting process for next year's plant improvements, and a particular plant is causing you a dilemma. The plant operates at an annual profit of $180 million per year, employs 1,245 local residents, and produces 25% of Titan's annual production. The bad news is that the plant also produces dioxin, a known car- cinogen, through its paper bleaching process. Dioxin is deposited in the local river in amounts below federal and state limits. However, in a small com- munity downstream, there have been 167 reports of cancer in a population of 1,025 over the past 5 years. This has drawn the attention of environmental groups and multiple protests have ensued. Titan has developed a technology known as bleach filtration recycling (BFR) that would reduce the total effluent by 85% and eliminate all dioxin outflow. However, BFR has never been implemented, and estimates for the cost of the test pilot run to $70 million with an annual reduction of operating costs of only $5 million. The BFR pilot proposal is not supported by your manager or shareholders in general. What should you do?

Overview of argument

The fictionalized case above is loosely based on the book Troubled Waters: Champion International and the Pigeon River Controversy (Bartlett, 1995). For the sake of brevity, I have condensed the facts of the case, but it illustrates the trade-offs and difficult decisions faced by business managers every day. It is difficult at this point for anybody, even middle-managers faced

Jeffrey G. York is a research assistant at the Batten Institute at the University of Virginia's Darden School of Business and is a Ph.D. candidate in Entrepreneurship, Business Ethics and

Strategy. He holds a bachelor's degree in Journalism from the

University of Georgia and an MBA from the University of Tennessee, where he focused on new venture analysis. His work is focused on studying the nexus of environmental

opportunities with entrepreneurial solutions. Jeffrey's past work experience includes consulting for business incubators, management in a Fortune 500 corporation, and leading the startup of a Whitewater rafting company.

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98 Jeffrey G. York

with a litany of issues to deal with on a daily basis, to

deny the looming impact of environmental issues on our society and in business. Economic development is often cited as the cause of many of the environ- mental issues our society faces, including global warming, ozone decline, nuclear radiation, industrial

toxins, and widespread air and water pollution (Shrivastava, 2000; United Nations, 1999, 2004). In recent years, environmental awareness has increased at every level of society; however, in business set-

tings, the perception persists that there is always a trade-off to be made between profits and the envi- ronment (Porter and van der Linde, 1995). Business leaders often express the desire to "do the right thing," but offer a laundry list of reasons their hands are tied:

• "Our customers simply don't buy green products."

• "It has to be profitable first; we don't green for the sake of green."

• "If our shareholders actually cared about these issues, there would be more focus on them."

• "We've tried green products, but they sim-

ply weren't purchased." • "Adopting this approach puts us at a com-

petitive disadvantage."

These were just a few of the comments heard at a recent roundtable on sustainable chemistry from senior managers from Fortune 500 companies. It is

easy for the environmentalist to complain that business people simply don't get it, or that business

managers are shallow, short-sighted, or even worse, unethical. The actions of deep ecology-based social

groups such as Earth First! and the Earth Liberation Front (ELF) and riots during the 1999 World Trade

Organization in Seattle have demonstrated that it will no longer be enough for corporations to operate within the legal boundaries of environmental regu- lation; they will be expected to proactively address their ecological footprint. Unfortunately, these confrontations simply push business people and environmentalists into the tired old circle of "envi- ronment versus business" and perpetuate myths on both sides. Ethical theories often reinforce the business versus environment story, perpetuating separation between economic and environmental

goods (Alexander, 2007). This unnecessary conflict

keeps us from moving forward with a better

understanding of environmental problems, and makes solutions seem unobtainable.

What if the issue is not so much that business

people don't care about the impact of their actions on the environment, but that the arguments from those best informed on these issues are framing the discussion in a language that business cannot even understand? Could we move to a framework that would help managers take the environment into account when making business decisions?

The argument for the intrinsic value of nature in and of itself often falls on deaf ears in a business

setting. Although more and more businesses are

adapting a values based model and expanding their view to include all stakeholders, not simply share-

holders, the reality for the people who actually make the day-to-day decisions in the corporate world is that

they operate within the paradigm of shareholder pri- macy; if a decision does not directly create shareholder

value, it will simply not be made. While many man-

agers intuitively understand and sympathize with the environmental movement, deontological arguments for the sanctity of wilderness or non-anthropocentric arguments for the rights of animals are not only inef- fective in changing the behavior of businesses, but are also not understood in the decision-making context. We might as well walk into an Earth First! rally and discuss discounted cash flow analysis or lean opera- tions management. Although these worlds may con-

verge some day, according to the best data we have on the environmental crisis, we simply may not have the time to wait.

So, how can the discussion of environmental issues best be had with business leaders? I argue that

environmentalists, regulators, ethicists, and business leaders who seek to provoke change within existing corporations can best frame their arguments using classical American pragmatism as the guiding ethical framework. When I refer to pragmatism in this

paper, I am referring to the philosophical stance

represented by the work of John Dewey, William

James, and Charles Peirce; I will rely on Rosenthal's

argument that the writings of these philosophers, as well as C. I. Lewis and G. H. Mead, can be understood as a system of thought and ethics

(Rosenthal, 1986), while I will use specific writings

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Translating Environmental Ethics into Competitive Advantage 99

from James, Peirce, and Dewey to support specific arguments. For the sake of simplicity, I will refer to the overarching ideology common to these writers as simply "pragmatism" and identify the specific writer when exploring a particular concept. Another term I will use in this paper that has been the source of much confusion and controversy is "sustainablity" (van Marrewijk, 2003). For the purpose of this paper, a sustainable decision is one which will "meet the needs of the present without compromising the ability of future generations to meet their own needs" as defined by the World Commission on Environment and Development (WCED), an inde- pendent body established by the United Nations (WCED, 1987). Although we could debate the

meaning of this term for pages, I will not do so in this paper; suffice it to say I view decisions and views that promote sustainability to also be positive for the natural environment.

The goal of this paper is to outline a business

paradigm that allows and enables the integration of environmental ethics into business decisions while creating competitive advantage through the use of a decision-making framework based on pragmatism. My argument will proceed as follows:

1. By integrating consideration of the natural environment, businesses can create superior performance. Multiple examples are now available to demonstrate this pattern. How- ever, the basis for environmentally beneficial decisions can be very different, and is often not based on principle driven ethics, but rather on regulation or consumer-based eco- nomic pressure.

2. Environmental ethics as a field of philosophy can offer a new paradigm for business ethics as a field and business practitioners by offering new perspectives and methodologies to grant consideration of the natural environment. A

pragmatic approach provides a superior framework for businesses by offering the fol- lowing ideas:

• Pragmatism focuses on experimentation and innovation - The key to unlocking the mys- tery of profitable sustainability lies in innova- tion. Pragmatism proposes a perspective that remains continuously open to experimentation

and new ideas. While not degenerating into relativism, a pragmatic approach to environ- mental issues can break down stereotypical thought patterns and open the door for new ideas.

• Pragmatic morality encompasses an approach to problem solving that considers both means and ends, ensuring a long-term focus - Cor- porations are focused on outcomes; they are driven by, founded on, and focused around the consequences, primarily financial, of the decisions they make. By introducing environ- mental decision making within a framework that considers the consequences of a decision from an empirical and character-developing perspective, we are already much closer to speaking the everyday language of business.

• Pragmatism is clear, actionable, and evolu- tionary. Pragmatism, as a philosophical frame- work, can provide refreshing clarity and the ability to clearly take action. For any framework to operate in the difficult and murky intersection between business and the environment, it must at least be understand- able to allow movement toward easy imple- mentation. A pragmatic approach will make the choice for sustainability self-evident; it requires no complex or difficult arguments.

Theoretical development

Competitive advantage through environmental actions

From the blooming of concerns about pollution during the 1960s, business leaders have to a large extent viewed "dealing with" the natural environ- ment as a cost of doing business, an externality of production (Porter and van der Linde, 1995). Sel- dom, if ever, were environmental issues viewed as an opportunity to expand and grow a business, to think about innovation in an entirely new way, or to dif- ferentiate a company in the minds of consumers. In the past 10-15 years, the tide has started to shift. No longer are the examples of environmental consider- ations in business confined to the cliched Ben & Jerry's and Body Shops of the world (although,

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100 Jeffrey G. York

clearly, there is still a place and always will be for

start-ups incorporating the environment into their

values.) We have seen a global shift in awareness of environmental impact among some of the largest corporations who are creating true, measurable

competitive advantage by addressing environmental

issues, both through cost savings and increased revenue.

For example, 3M is a global, publicly traded cor-

poration that produces a wide array of industrial and consumer products. In 2004, the company had a net income of $2.99 billion, employed 67,071 people in 60 countries, and began celebrations for the thirtieth

anniversary of its Pollution Prevention Pays (3P) program (3M, 2004). From 1975 to 1989, 3M saved over $500 million through this program, while pre- venting 500,000 tons of pollution (Shrivastava, 1995); today, the company puts its total cost savings at $1 billion and pollution prevention at 2.2 billion pounds (3M, 2004). As demonstrated by a split-adjusted stock

price increase from $1.96 to $77.86 over the past 30 years, this commitment does not appear to have inhibited 3M's competitiveness; in fact, CEO W.

James McNerny cites "a combination of solid top- line growth combined with continued improvement in operational efficiency," which has been driven to a

large extent by the 3P program (3M, 2004). While 3M has had a longtime commitment to

sustainability, the commitment has been powered primarily by economic, not ethical drivers. Every 3P

project must demonstrate significant cost savings, and the company maintains a fanatical focus on

operational efficiency through its six-Sigma program as well. While savings have driven 3M's ecological success story, other companies are driven by potential profits.

Proctor and Gamble, another large mainstream

company, which operates in 53 countries and

employs over 106,000, has made environmentalism a more recent aspect of its strategy. The foundation of the P&G story is not around cost savings, although those have surely been realized. As a company that knows its products are in nearly every home in America and around the world, P&G has quickly responded to customers' desires for more environ-

mentally safe packaging and products (Shrivastava, 2000). This initial action has led to a company-wide program, Total Quality Environmental Management (TQEM).

Another driver can be the vision of a charismatic

leader, who has made the environment a part of

their, and thus, the company's, mission. Patagonia, a

privately held outdoor clothing and equipment company, was founded in 1970 by Yvon Chouinard, an avid mountain climber and surfer who began the

company making and selling pitons, the pins used by climbers to secure their ropes. The company evolved over time to a clothing line targeted at a variety of outdoor enthusiasts. Chouinard maintains a strong personal commitment to sustainable practices (he lives in a house made entirely of re-claimed mate-

rials) and has led his company down a similar path. Patagonia differentiated itself when in 1994 they shifted to all organic cotton, becoming the only clothing manufacturer of their size and distribution to do so. Through this and a variety of other envi- ronmental initiatives, the company has maintained a commitment to reducing its natural footprint, not for cost reduction or preferential marketing (which they do reap the benefits of), but because of the culture that has grown around their founder's love for and commitment to the natural environment.

While these examples are exciting and demon- strate the power of ecological consideration as part of business strategy, the drivers are quite different. At

3M, the value of innovation and the view that the

company exists to solve problems leads to the con- sideration of the environment as a way to further that mission. At P&G, sustainable packaging is driven by consumer demand, and at Patagonia, the culture is based around environmentalism. Each

company is responding to different external

problems through different means and adapting in different ways. We need not worry so much about

why these companies chose their individual paths, but how other businesses can make the choice to

pursue sustainability despite a wide variety of

products, cultures, and values. Environmental ethics has offered a path within the realms of philosophy; the question now is how this philosophical stance can best be extended to the business realm.

Environmental ethics and business

Since the publication of Aldo Leopold's A Sand

County Almanac in 1949, and arguably before, a rich sub-field of ethical studies termed "environmental

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Translating Environmental Ethics into Competitive Advantage 101

ethics" has emerged. The overriding project of the sub-field has been to somehow extend the tradi- tional anthropocentric field of ethics to provide moral standing to non-human entities including animals, plants, and ecosystems. The various frame- works of environmental ethics have provided an

array of approaches to this project, which include the extension of existing ethical frameworks such as Bentham's utilitarianism (including, of course, his allusions to the rights of animals), or Kant's cate-

gorical imperative. Other examples are based on virtue ethics focused on sustainable decisions and the

emergence of environmental pragmatism (Gurdorf and Hutchingson, 2003). I will examine each of these

approaches to environmental ethics, and show why pragmatism offers the clearest approach for dealing with business decisions.

Many environmental ethicists have taken the foundational approach of either utilitarianism or

deontology and extended these traditional ethics to include the consideration of non-human species. The animal liberation movement is a well-known extension of the utilitarian argument that takes Bentham's statement of "The question is not, Can

they reason? nor Can they talk? But Can they suffer?" as its rallying cry (Bentham, 1789, 1982). Through this extension, equal rights are granted to all sentient creatures as part of the utilitarian calculus of the greatest happiness for the greatest number; the

argument is that we must avoid "speciesism" by bringing the pain and suffering into our realm of moral concern (Singer, 2001). While this could be a useful framework for consideration of business issues on the margin, such as animal testing or food pro- duction, the extension does not go far enough to be

truly relevant to most managers. This version of utilitarian thinking can also be used to justify large scale environmental degradation. For example, the increased numbers of snow geese in recent years has led to widespread damage to private property such as

golf courses, farms, and other ventures, as well as

actively destroyed wetland habitats (Johnson, 1997). Under the non-anthropocentric extension of utili-

tarianism, we make the individual suffering of geese our primary concern, leading to a poor outcome for

private industry, the ecosystem, and ironically, the

geese themselves. From a managerial perspective, similar issues arise

with the extension of "rights" to non-human

entities in the form of extending Kant's categorical imperative. The Kantian argument that we must treat all members of humanity as ends rather than means (Kant, 1785, 1997) is extended in several environmental ethics to include "rights" for animals, plants, and ecosystems (Gurdorf and Hutchingson, 2003). This concept is taken to its logical extension

by Holmes Rolston III when he states that Earth, and the ecosystems inherent in it, are not only worthy of duty and objective value, but are the ultimate object duty "short of God, if God exists"

(Rolston, 2002). While the duty we humans have to the larger environment is an admirable maxim, from a business standpoint, it is difficult at best to inter- nalize this paradigm within a specific business strat-

egy. An environmental ethic based on principles of intrinsic value is difficult for any manager to com-

prehend, much less to act upon. While the deon-

tological argument resonates with environmentalists, conservationists, and others who have a core emo- tional attachment to the value of natural objects in- and-of themselves, such an ethic can lead to a moral

quagmire for the business manager. This valuation of "wild and pristine" wilderness can smack of elitism and disconnectedness from the environmental

problems prevalent in the actual setting of business, large metropolitan areas (Light, 2001). Also, by placing environmental resources as "beyond value" and as meta-ethical principles outside the realm of financial consideration, a deontological approach to environmental ethics can itself be in direct opposi- tion to the world of business, because it constrains

strategies by non-goal related criteria; while this is fine for an ethical stance, it does not leave us much to work with while integrating environmental issues into the fabric of business planning.

While utilitarianism focuses on the consequences for the involved parties and deontology focuses on the inherent principle upon which an act is com- mitted, virtue ethics is primarily concerned with the actor's moral development. Virtue ethics is tradi-

tionally related to the Aristotelian concept of human character being formed by habits, and evaluates these habits according to their tendency to move the actor toward his telos or purpose (Aristotle, c. 330 B.C., 1999). For the purpose of environmental ethics, the

preservation of the environment must become one of the "virtues" or habits that lead humans to

achieving a state of eudaimonia (happiness and

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102 Jeffrey G. York

fulfillment). In other words, humans must develop a character that leads to good environmental decisions. The extension of virtue ethics to encompass the environment seems to be most readily accomplished by including care for the natural environment within the virtues loyalty and benevolence (Welchman, 1999). It seems that following the linkages necessary, from traditional virtue ethics all the way through to

specific issues concerning nature, or at least recon- structed to be concerning nature, would be a diffi- cult framework for business decisions. All decisions would be based on the principles of "character" and the development of virtuous character with regard to the environment. Again, while admirable from a theoretical standpoint, it is difficult to see how an environmental virtue ethics framework alone would be effectively applied in a business setting to envi- ronmental decisions. Certainly, the development of one's character should be considered, and is within a

pragmatic system; however, in issues as complex as the choices managers face in environmental issues, reducing the question to one of character would seem a vast oversimplification.

All of the environmental ethics perspectives dis- cussed thus far are based on the extension of an

existing ethic to non-humans. In our quest for a new

paradigm, perhaps the most interesting perspective is offered from eco-centrism and deep ecology. Real-

izing the inherent difficulty of extending an

anthropocentric model, some environmental ethi- cists have taken a new path, and based their ethic around the belief that humans are nothing more than the components of their relationship with nature.

Deep ecologists view the earth as a living system, which we have no right to inflict harm upon. This nexus view, as we shall see, comes very close to the views of pragmatism regarding the individual and the

community. However, it seems unlikely that busi- ness practitioners, no matter how open-minded, will rush to embrace the concept that humans are

meaningless other than their role in supporting the

larger ecosystem; the obvious end conclusion is that all business activities are immoral and should cease. How then can we merge the fields of environmental ethics into the decision framework within which business operates? Perhaps, we should turn to envi- ronmental pragmatism, defined by environmental ethicists as "the open-ended inquiry into the real life

problems of humanity's relationship with the envi- ronment" (Light, 1999).

The classical American pragmatic framework will is an effective tool in bringing environmental con- sideration to bear in the realm of business decisions. The use of pragmatic decision making would

inherently lead to the consideration of ecological issues within the decision-making process while

fostering competitive advantage. Through the

implementation of pragmatic moral principles, managers can create better outcomes for their com-

pany and the environment in which it operates. In order to make this nexus clear, I will relate prag- matism to the strategic decision-making process, and demonstrate exactly how the relationship would

improve both the deliberation and the outcomes. It will be helpful to offer a brief overview on my assumptions around the business decision process.

Making business decisions: the strategic planning process

Any choice that has a significant impact on a business and the world around it can be seen as a strategic choice. Strategic choices are those made to help the firm achieve its defined purpose, according to the values it wants to perpetuate. As such, strategy is not a simple matter of what tactics to employ, but a

question of how the firm will develop and maintain

competitive advantage (Clawson, 2003; Porter and

Kramer, 2006; Porter and van der Linde, 1995). For the purpose of this paper, we will simplify compet- itive advantage to be derived from two sources.

Competitive advantage can be gained from either differentiated cost savings, in other words, the ability to produce the same goods at a reduced cost relative to the competition, or from increased revenue attained by access to new markets, or preferential treatment by current customers.

Making the business case for investments, partic- ularly ones that alter conventional strategy, always combines financial arguments with strategic ratio- nales. Positioning a company for future growth requires adapting financial models. In other words, once models are built, the company's strategy staff works with the finance managers to adapt them to desired future strategic outcomes. Imaginative strategic thinking about creating future market

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Translating Environmental Ethics into Competitive Advantage 103

dominance, with a clear understanding of risks and financial downsides, leads to market differentiation and new market creation.

When managers are faced with decisions that include an element of environmental impact (i.e., to

expand R&D in compostable materials, ensure that

products meet or exceed regulatory requirements, and define standards for environmental improve- ment), they will intuitively utilize financial measures to determine success. Given this reality, we must seek to define environmental questions in a manner that allows for the consideration of these factors within a business context. As we continue to treat environmental goods (clean air, water, timber, etc.) as common goods, they cannot be factored into the

equation of a business decision other than from a moral perspective. Unfortunately, the moral per- spective of business can be very different as busi- nesses are not individuals but large organizations within which multiple individuals make decisions with environmental impacts every day. This is why pragmatic deliberation is the appropriate paradigm for business decisions which include environmental considerations.

Pragmatic strategic planning

The pragmatic approach allows us to shed the

weight of utilitarian or deontological principles and rather focus directly on the task at hand. Pragmatism argues against the concept of ideology on immov- able principles, but rather embraces an approach of

multi-perspective pluralism, which allows the inte-

gration and valuation of multiple perspectives. These

perspectives are driven by the cultural inheritance of the actor, the other members of the community, and

experiences from which they have established prin- ciples. The moral role of each individual is to begin with the societal norms "embedded as they are in institutions and in the habits of life" as a hypothesis for testing, not to assume "they are imbedded in the nature of things" (Dewey, 1934, 1998). In deciding which perspectives to value, workability is the main criteria; we should begin with our current values, but continuously question whether these ideas help us in moving toward our stated goals (Rosenthal and Bucholz, 2000).

The pragmatic approach to decision making involves a process of constantly evaluating and

evolving our personal perspective and seeking to ensure accommodation of the broader community's perspective. Pragmatism does not embrace moral

relativity and simply says "anything goes" from an ethical perspective; rather, it is focused on main-

taining and building upon our historical knowledge while constantly questioning our assumptions and beliefs in light of new information. Figure 1 illustrates this process.1

Dewey described this process as a reflective

thought in which "active, persistent, and careful consideration of any belief or supposed form of

knowledge in the light of the grounds that support it, and the further conclusions to which it tends," is used in the process of making any decision

(Dewey, 1910, 1997). Pragmatism does not give us an immovable set of principles to fall back on when

making decisions; it requires us to engage in careful and sincere deliberation when making decisions. It will not tell us what to think, but how to think.

Figure 1. Pragmatic process of reflective thought.

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104 Jeffrey G. York

A common objection to this form of decision

making is that it is no ethic at all; we are simply deciding to do what we want to do. This is a mis-

understanding of the pragmatic decision-making process, and is based on the objector's belief that there is a separate "truth" or "principle" outside of our existence. It must be remembered that prag- matism rejects this concept. As James wrote, the truth is nothing more than the concept that:

. . . Ideas (which themselves are but part of our expe- rience) become true just in so far as they help us to get into satisfactory relation with other parts of our experience ... Any idea upon which we can ride ... any idea that will carry us prosperously from any one part of our experience to any other part, linking things satisfactorily, working securely, simplifying, saving labor; is true for just so much, true in so far forth, true instrumentally (James, 1896, 1997).

From a pragmatist perspective, the moral point of decision making is twofold:

1. Make the choice that gives us the optimal chances of valuable (promoting harmonious decisions by accommodating multiple per- spectives) experiences in the future, and

2. Make the choice that aligns with the person we want to become (Rosenthal and Bucholz, 2000).

Thus, a pragmatically moral decision cannot be based on a single principle, no matter how grand it

may be; it is based on the imaginative grasp of the possibilities and deep sensitivity to the nexus of past and future relationships that surround an issue. As decisions are made, habits are formed producing a character or the type of person we become. Peirce described the function of thought as "to produce habits of action; and that whatever purpose there is connected with a thought, but irrelevant to its purpose, is an accretion to it, but has not part of it" (Peirce, 1878, 1997). In other words, while we should engage in wide consideration of perspectives and consequences, the point is always to define our ability to act. The question now facing us is how then the elements of pragmatic ethics encourage the ability of business decision makers to include envi- ronmental issues within their decision.

Experimentation and innovation A unifying concept of pragmatist writing is a relentless focus on experimentation (Rosenthal and Bucholz, 2000). Only by constantly challenging our

assumptions and trying different ideas can we arrive at the optimum answer. For the pragmatist, the

morality of a decision does not exist in a separate reality from the decision; the morality comes to exist

through the decision-making process. By embrac-

ing this value of experimentation, business man-

agers could treat decisions in an entirely different manner.

For decisions to pursue the sustainable path of business development to take place within an existing firm, there must be an atmosphere of openness to

experimentation (van Marrewijk, 2003), especially if there is any hope of garnering competitive advantage. By definition, competitive advantage will

only emerge from activities that differentiate a firm, hence, they will not be what everyone else is doing. When focusing on environmental issues, the built-in false dichotomy between profits and sustainability makes this gap even larger. Therefore, the openness to new ideas that is fundamental to the pragmatic approach is absolutely essential for a business to

pursue a greener path. What does this look like within a business? We

need look no further than our familiar example of 3M. Two of the company's values: "Innovation; 'Though Shalt not kill a new product idea'" and

"Respect for individual initiative" (Collins and Porras, 1994) offer a clear implementation. When a business environment is founded around, and

performance is measured by, innovation, true

imaginative thought can exist.

Pragmatic decision making, as described above, includes the process of utilizing the imagination and emotion in the process. By encouraging managers to

expand their decision-making capacity beyond a shallow version of rationality, this mode of decision

making can open up the practitioner to a new realm of unconsidered possibilities, a deeper, and more

truly rational way to solve problems. Through the

process of examining current principles, opening ourselves to new ideas, and then accepting or

rejecting those concepts, the process of decision

making is more considerate and comprehensive.

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Translating Environmental Ethics into Competitive Advantage 105

In addition, by adopting a pragmatic approach to environmental decisions, business practitioners would

open themselves to alliances and partnerships with a wide array of stakeholder groups. Although it is un-

likely that business leaders, conservationists, and deep ecologists will ever come to agreement on the first

principles of environmental value judgments, they may very well agree to a specific goal. This sharing of a common goal is what allows businesses to progress and to make meaningful decisions which consider environmental impacts (Stead and Stead, 2000).

Means and ends considered

The pragmatic perspective does not lock the deci- sion maker into a specified "truth" forever defined in principles that must not change. The very foun- dation of pragmatic thought was based heavily around moving out of the paradigm of the utilitar- ianism versus deontology. In the process of making a

morally correct decision, the pragmatist will be

encouraged to consider and carefully weigh both the

reasoning, empirically grounded in reality, and be-

liefs, driven by the community (including the actor) driving her decision as well as the possible conse-

quences. Dewey described this as "Genesis and ends are of equal importance, but their import is that of terms of boundaries which delimit a history, thereby rendering it capable of description" (Dewey, 1940, 1998). Through equal consideration, we can tap into

something primordial and beyond what either pre- vious forms of reasoning offer us. Business decisions confront the duality between ends and means from their very nature; when considered from a traditional

framework, there is a false tension in considering the moral path against the most profitable path. In a

pragmatic framework, there is no tension because both must be carefully considered.

From a pragmatic perspective, the best outcome to a decision is the one which helps us move forward and accomplish our goals while becoming what we intend to be. According to James, decisions are best made by expanding the set of "living options" as wide as possible when "the stake is significant" and when we cannot reverse our mistakes (James, 1896, 1997). This perspective could be extremely useful for inspiring sustainable decision making; by the nature of the issues we are dealing with, they are focused on future consequences of decisions made

today on the environment. Because we are dealing

with the future, there can be no proof of what will

happen until the events have actually transpired. Combine this with the disagreement among scientists around issues such as global warming and resource

depletion, and you have a situation that is at best

confusing to a business practitioner and not intrinsically motivational for expanding their realm of concern.

Pragmatism cuts the knot of unknowable futures

by allowing us to refine our beliefs as needed to deal with the situation at hand. James must be quoted at

length on this cornerstone of pragmatic thought:

Our passional nature not only lau fully may, but must, decide an option between propositions, whenever it is a genuine option that cannot by its nature be decided on intellectual grounds; for to say, under such circumstances, "Do not decide, but leave the question open,

" is itself a passional decision-just like yes and no, - and is attended with the same risk of losing the truth.

There are, then, cases where a fact cannot come to be at all unless a preliminary faith exists in its coming. And where faith in a fact can help create a fact, that would be an insane logic which should say that faith running ahead of scientific evidence is the "lowest kind of immoral- ity" into which a thinking being can fall.

In truths dependent on our action, then, faith based on desire is certainly a lawful and possibly and indispens- able thing. (James, 1896, 1997, p. 77-87, emphasis in original)

Pragmatic decision making focuses on the consid- eration of currently known "facts" and the future

consequences they may have. It is not essential that business people wait on the sidelines for the debate around climate change to be settled, for new legisla- tion to be passed, and for technology to provide solutions. Managers can choose to believe that the environmental crisis is an issue worthy of consider- ation and begin creating innovation today. Even in the case where the decision maker doesn't morally believe that the environment is worthy of consideration, the fact of looming legislation, increasing concern among consumers, and rising costs of factors of production can lead to an environmentally friendly decision. If it can be demonstrated that believing the environmental crisis is real enables better decision making and allows a

company to evolve into what it seeks to be, it is en-

ough to satisfy the requirements of the pragmatic environmental ethicist, and it is enough to satisfy most

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106 Jeffrey G. York

business practitioners. By ignoring the possibility of environmental degradation, business leaders are sim-

ply making decisions without including relevant information, which is a surefire recipe for competitive destruction (Freeman et al., 1999).

Clarity and actionability

Descriptions of classical American pragmatic thought can be a bit difficult and complex, but in imple- mentation, a pragmatic ethic regarding the envi- ronment can be clear and actionable for managers. Pragmatic sustainability simply requires the princi- ples of careful, collaborative consideration of the elements of any decision, including the natural environment. To a large extent, the adoption of

pragmatism is asking ourselves to simply accept the

way we think and to embrace our own intuitive

process of decision making (Menand, 1997). Business decisions must deal with consequences; as

discussed previously, businesses only exist to achieve their stated goals. These may include perpetuation of the firm, delivering shareholder value, or ensuring consideration of all stakeholders. Regardless of the

particular focus of the business, the financial impact of a decision will be considered. Rather than shunting financial impacts to the side and relying on ideals that must be adhered to, a pragmatic sustainability ethic would allow businesses to continue to include the estimation of financial impacts within consideration of environmental choices. Although many environ- mentalists will argue that environmental goods are

beyond value and thus cannot be part of cost-benefit

analysis, this argument, when applied in a business

setting, ignores the fundamental reality of corporate operations. A pragmatic approach allows not only the current methodology of financial considerations to continue, but by casting a wider net for information and utilizing the imaginative and emotional capabili- ties of decision makers, could breathe fresh air into the traditional financial measures framework.

Let us consider a traditional financial measure for corporate strategic decisions, Economic Value Added (EVA).2

EVA is a commonly used method to report on value created during a given time period (quarterly, annually, etc.) and is typically used as a "top down" measure of the entire company's performance (Harris, 1997). The equation is EVA = (ROIC-

WACC) X invested capital. ROIC stands for return on invested capital and WACC refers to weighted average cost of capital.

Three levers in this formula that can be used to

analyze investment in sustainable business choices are:

1. Increased ROIC - Driven up by increased revenues from sales or reduced costs from

improvements to your operations. 2. Decreased WACC - Driven down by de-

creased risk in the eyes of lenders. 3. Increased Capital Availability

- Expanded sources of capital availability through a widened pool of funding availability.

How would a pragmatic approach to consider- ation of EVA differ from the traditional business

approach? Without the pragmatic environmental

framework, the consideration of environmental

goods is completely left out. Precisely, because clean

air, fresh water, renewable resources, and a sustain- able environment are "priceless" resources, they are also considered valueless resources within a financial calculation. However, by adopting a pragmatic environmental approach, the sphere of consideration will become inherently more creative and

acknowledge the complexity of the decision process. Looking simply at the components of EVA, we can draw examples of how a pragmatic consideration of environmental issues could reveal value that was

previously left on the table while leading to a more sustainable decision.

Pragmatic sustainability EVA

By employing the broader powers of her imagina- tion and carefully reflecting on the broader impli- cation of her EVA calculation, the manager practicing pragmatic sustainability could find hidden sources of value:

• Differentiated Cost Savings: The ability to pro- duce the same product as your competition at a lower cost. Willard (Willard, 2002) has

provided a useful framework for considering the cost/benefit of sustainability, including, but not limited to:

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Translating Environmental Ethics into Competitive Advantage 107

a. Reduced Operating & Manufacturing Ex-

penses - Derived from reuse, waste reduc- tion, and reduced resource consumption (water, electricity, packaging, etc.).

b. Risk Reduction - Includes legal, regulatory, and social risks from environmental and health issues.

c. Decreased Employee Expense - Increased pro- ductivity and retention, reduced recruiting expenses because employees feel they work at a

"good" company that aligns with their values.

• Increased Revenue and Market Share: Obtained

through differentiation and preferred access to markets inaccessible to competitors. These

may include, but are not limited to:

a. Access to Markets - Access to previously, or soon to be, inaccessible markets can be

improved through environmentally friendly products.

b. Preferential Purchasing - Current customers

may be retained through passing the cost sav-

ings generated in production through the

supply chain. c. Increased Innovation - Pragmatic Sustainabil-

ity thinking can serve as an impetus for inno- vation; the company that figures out how to

comply, and even be in advance of, regula- tion better, faster, and cheaper will have a

competitive advantage.

By taking a truly pragmatic financial approach, not the constricted view we sometimes identify as

"pragmatic," we can see the possibilities that emerge in the most concrete and consequential financial calculations. As pragmatism embraces evolution, a

pragmatic ethic would allow for the incorporation of

expanded consideration of the natural environment across all business operations. Can we imagine what

possibilities might come to exist in the realms of

strategy, marketing, and operations, and what future this might create? The opportunity for creating competitive advantage is there for firms that move

quickly to outpace rivals and the regulatory envi- ronment to create lasting, values-based relationships within their supply chain and customers. The pos- sible movement and my overall argument are sum- marized in Figure 2.

Figure 2. Potential movement to create competitive advantage.

Decision time at Titan

Let's return to the situation of Titan Paper Com-

pany. As you will recall, as a Senior Manager, you are making the decision to attempt a pilot of BFR, a

system that will significantly reduce the environ- mental degradation caused by one of your most

profitable plants. Unfortunately, the project is a financial loser. Or, is it?

Let's say that in the months since you initially realized the predicament you were in, Titan has rolled out new set of values:

• Innovation is our life, thus,

• We are always willing to be open and chal-

lenge the status quo. • We make the best decision possible through

careful consideration. • We deal in reality and the best information

available. • Every situation is unique and requires that

we take in all perspectives.

Because you want to do well and be promoted, you have done your best to take these values to heart. Looking at the BFR situation, a new set of

questions start to emerge in your mind. Is there a

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108 Jeffrey G. York

way of demonstrating the profitability of BFR be- sides the cost savings within the plant's operations? What about the litigation Titan could avoid, the

potential recreational use of the river, the ability to avoid a "fire drill" when new regulations (as they invariably do) come around? Could Titan garner favorable press and turn the entire PR nightmare around? What value might that have? What kind of a future would be created if BFR actually works? Could Titan license the technology? Does any of it

really matter; should we just do BFR because in this

situation, profits are not the only way to make the choice?

There are a hundred other questions that could be

asked; the point is that the decision-making envi- ronment can be altered by implementing a set of

pragmatic values, a simple, small set at that. By the

way, did you notice that none of these values even mentioned the environment? In the spirit of

pragmatic inquiry, I'll leave the final decision on BFR open. Hopefully, the new possibilities opened are enough to move the conversation forward, and move businesses toward pragmatic sustainability.

Notes

lrThe author would like to thank John Mcvea for his explanation of this process during a seminar on

Dewey in 2005. 2Portions of the following section previously

appeared in Archer et al. (2008).

Acknowledgment

The author would like to gratefully acknowledge help- ful comments received on an earlier draft of this paper by Willis Jenkins, Pat Werhane, and Stasi York and the

support of the Batten Institute at the Darden Graduate School of Business in conducting this research.

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Darden Graduate School of Business,

University of Virginia, Charlottesville, VA, U.S.A.

E-mail: [email protected]

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