Since the 1987 Brundtland Report, which put sustainability on the business map, the Rio Conference in 1992 and its famous declaration, and the concept of a “triple bottom line” put forth by John Elkington in 1994, issues related to sustainability have expanded as a central topic in corporate boardrooms and business strategy. Along the way, sustainability ideas and concepts have morphed into the broader area of corporate responsibility (numerous terms are used to describe this: corporate citizenship, corporate social responsibility, and social responsibility).
As an important and rapidly evolving area, there is a wild-west quality to defining, executing, and measuring sustainability and CSR initiatives. Commonly identified sustainability issues include: reduction of energy use, carbon-generation, waste, etc. Some CSR norms, sustainability issues, child-labor issues, and good EHS practices have gained general acceptance—but CSR, especially, is still a very fluid area. The CSR (or SR) ISO activities (ISO 26000) might help, but it will take many years for this to fully flesh out.
In looking at how to develop sustainability and CSR strategies, a thought I’ve had for some time has been to examine these issues through the lens of what economist call “externalities.” An externality, using lay terms, can be thought of as impacts that a business has on others that it does not have to pay for or take into account in its decision-making or market pricing. The development of governmental regulations is classically tied to the control of externalities.
A timely article in the April 2010 Harvard Business Review by Meyer and Kirby, titled “Leadership in the Age of Transparency” shows how organizations can gain leverage by embracing externalities as an organizing principle. The authors present a simple three-step model with buckets they call: (1) Scale, (2) Sensors, and (3) Sensibilities. The “Fog of CSR” as Meyer and Kirby coin it, leads to well-intended efforts missing the mark. Michael Porter, in an HBR article (November, 2008), makes a similar case, but from a strategy perspective. Meyer and Kirby write:
“Companies engage in an incoherent jumble of activities under the banners of corporate social responsibility, sustainability, giving back, going green, and philanthropy. If your executive team is like most, you need to sort all of this out and an externalities framework can help. By focusing on your company’s own footprint—the problems of the world that really exist can be laid at your doorstep—you can establish priorities, set measurable goals, and take actions that are defensible to all stakeholders as proper and coherent. Among these stakeholders are, of course, your own people, who long for a sense of confidence that their organization is wielding its considerable power for the good.” (p. 43–44)
A company’s externalities are intimately linked to risk management. The ISO standard on Risk Management (ISO 31000) addresses this link and provides companies with a framework suggested by Meyer and Kirby.
While these topics are outside of what most EHS professionals think about on a regular basis, there are important links here to the EHS department. Certainly in departments that have accountabilities for sustainability and CSR activities, the links can be seen. Possibly less obvious are potential weaknesses in the EHS function or department that in themselves create external or internal externalities not currently distinguished.
© Redinger EHS, Inc. (2010)