Topic 7: Sustainable business (c): The compliance approach and the efficiency approach to sustainable business.

Introduction:

In topic 6 we considered what it means for a business to be a sustainable business, and how sustainability principles can be incorporated into organisational strategy.

In this topic 7, and also in topic 8, we look at some specific approaches to how businesses pursue sustainability agendas and critique these approaches to consider their merits and weaknesses.

 

Learning objectives:

  1. Understand the different ways in which organisational strategy is conceived.
  2. Understand and critique the main features of a compliance approach and an efficiency approach to sustainable business.

 

Discussion:

Although, as discussed in topic 6, strategy is often seen as applying at four levels in an organisation, what strategy is, and how it plays out in the organisational context, is not so easy to define. In simple terms, strategy is concerned with how an organisation goes about conducting its activities and achieving its goals, but beyond this general claim, the concept has many facets. Mintzberg (2003) for example presents five different ways in which strategy can be conceived;

  • As a plan: where some sort of consciously intended course of action is taken to deal with a situation to steer an organisation in a particular direction – this is probably how we most commonly think of strategy.
  • As a ploy: where a strategy can be seen as a specific manoeuvre to outwit a competitor (for example, a company threatening to expand production to discourage a competitor – the strategy is to threaten the competitor so they do not take a particular action, not to actually expand production: as such, the manoeuvre is a specific ploy). This contrasts to strategy as a more comprehensive and broader plan.
  • As a pattern: which focuses on actual behaviour whether that behaviour was intended (that is, was a deliberate plan) or simply came about from the many decisions and actions that go on within an organisation (that is, is the pattern of behaviour that emerged from day to day activities without any overriding deliberate plan in mind).
  • As a position: which has to do with where an organisation positions itself in the market place, through its particular ‘niche’ by way of product or service offerings. This positioning can be achieved through any or all of the plan, ploy and pattern strategy forms where, for example, an organisation may deliberately seek to position itself in a market space that has little direct competition in order to secure above average profits for as long as that niche can be sustained.
  • As a perspective: which has to do with an organisation’s culture and way of doing things: it is a shared view within the organisation of what the organisation stands for and the way it goes about its business.

According to Mintzberg all of these different ways of viewing strategy are active within different organisations to various degrees and all play their part in determining how organisations function.

In this topic 7, we use the phases model introduced in topic 6 as a basis for considering the patterns of strategic behaviour that are evident in firms from a sustainable business perspective, regardless of whether these patterns are the result of a specific strategic plan, or have simply emerged in some way through any blend of the strategy forms Mintzberg identifies.

The phases model categorises organisational sustainability strategies into six phases based on both ecological and human wellbeing sustainability objectives as follows:

  • Rejection: The rejection strategy displays an exploitative view of society, employees, and Nature. Profit is all that matters. Sustainability pressures are actively rejected.
  • Non-responsiveness: This strategy is grounded more in an ignorance of issues concerning sustainability. Community and environmental issues are ignored where possible. Sustainability focused actions are seen as an unnecessary cost.
  • Compliance: This strategy focuses on risk reduction from failing to meet minimum standards. Attention is given to sustainability issues that have the greatest litigation risk. Tighter regulations on environmental or social issue are mostly opposed, with any calls for action by business framed within a voluntary self-regulated approach.
  • Efficiency: The efficiency strategy displays an increased awareness of sustainability practices. The focus is on efficiency and the resulting cost saving benefits to business.
  • Strategic proactivity: For the strategic proactivity strategy, sustainability becomes part of core strategy. The focus is on gaining competitive advantage and long term profitability from sustainability initiatives.
  • Sustaining corporation: For this strategy, sustainability values are fully internalised. The firm actively pursues ecological renewal, social equity, and human welfare at the firm, industry, social and political levels. People and Nature are valued for their own sake.

Dunphy et al propose that a firm can be in different strategic phases based on its ecological and human sustainability initiatives and, for both ecological and human issues, any one firm can exhibit characteristics of different strategic phases although one phase is likely to appear as dominant. Further, the strategic phases do not represent a linear progression where a firm might start at rejection and gradually work its way up to be a sustaining corporation. Rather, the strategic phases are seen as distinct positions and firms may move from one position to another (both forwards and backwards) depending on decision made and actions taken within the firm over time.

The first two phases, rejection and non-responsiveness, are not so much ones based on a firm’s sustainable business initiatives: they are instead ways in which a firm is not addressing these issues. We will therefore focus only on the last four strategic phases, compliance, efficiency, strategic proactivity, and the sustaining corporation.

 

Compliance phase

Here’s a summary of how Dunphy et al (2003) describe the compliance phase:

Human sustainability

Ecological sustainability

Financial and technological factors still dominate business strategies but senior management views the firm as a 'decent employer'.
The emphasis is on compliance with legal requirements in industrial relations, safety, workplace standards and so on.
Human resource functions such as training, IR, organization development, total quality management (TQM) are instituted but there is little integration between them.
Basically the organization pursues a policy of benevolent paternalism with the expectation of employee loyalty in response.
Community concerns are addressed only when the company faces risk of prosecution or where negative publicity may have a damaging impact on the company's financial bottom line.
Compliance is undertaken mainly as a risk-reduction exercise.

Financial and technological factors still dominate business strategies but senior management seeks to comply with environmental laws and to minimize the firm's potential liabilities from actions that might have an adverse impact on the environment.
The most obvious environmental abuses are eliminated, particularly those which could lead to litigation or strong community action directed against the firm.
Other environmental issues, which are unlikely to attract litigation or strong community action, are ignored.

 

A compliance approach to sustainable business is fundamentally a risk management strategy. The core objective is to minimise a firm’s potential liabilities from any action it might take that impact on the environment or on the wellbeing of its employees or members of the boarder society on whom the firm might impact. Other activities that are unlikely to expose a firm to material risk of action against it are mostly ignored.

What types of risks are of importance here? We can think of risk in two main ways. First is the everyday use which has a somewhat imprecise meaning along the lines of 'something might happen, mostly something bad, but it is an unknown possibility' (say, the risk that your boss will find out that you were at the cricket on your supposed sick day off work). Then there is the more technical use which is based on firmer statistical measurement of the probability that something might happen (say, the risk of respiratory diseases associated with smoking which can be quantified in statistical terms). In the context of a compliance approach to sustainable business, both of these two views of risk are relevant, but the important question for current purposes is risks to whom?

Often, when looking at risk in an organisational setting, we think of risks to the firm: that is, things that may impact on the firm which may cause it some form of harm, mostly by way of reputation or financial loss, or both. But in the sustainable business context, of at least equal and probably of greater importance are risks of harm to others, to human wellbeing and to ecological wellbeing. Sometimes these two harms (that is, harms to the business and harms to other parties: human and non-human) are linked but they also may not be. One of the concerns about business activity which is seen as a major driver of unsustainable practices is the ability of a firm to externalise risks and harms and to limit its own exposure to the consequences of harms it might cause.

Although when thinking of compliance, the first thing that comes to mind is compliance with the law, a broader view of compliance is “doing what you are required or expected to do” (Dunphy, Griffiths & Benn 2003, p. 93), which sees compliance in terms of not only laws but of other areas such as voluntary codes of conduct, and social norms and expectations. A discussion on these three dimensions – regulation, voluntary codes, and social norms – now follows.

 

Regulation

Regulatory compliance is concerned with obeying the law and limiting the risks of harmful consequences to the firm that might result from breaching the law: fines, imprisonment, loss of licences that might be needed in order to operate (such as a financial services licence, or a liquor licence), or even media exposure of regulatory breach, together with the negative impacts this might have on a firm’s reputation. Although there is a clear need for a firm to comply with regulations in order to progress its sustainable business agenda, regulatory compliance, as it is conceived within this compliance strategy, is quite limited in its effectiveness: it is necessary but not sufficient for a business to be a sustainable business.

One reason for this limited effectiveness is that, for the compliance strategy a firm is said to adopt a general orientation to resist stronger regulation and instead advocate voluntary action to address sustainability issues. However, it is well known from formal academic research that regulation is one of the most, if not the most, important drivers for businesses to change and adopt sustainability strategies. Here’s how one author put it:

"As a bottom line, it is regulation itself …. or the threat of regulation that is the most powerful inducement to industry to negotiate credible environmental partnerships, either with the government of with environmental groups or with both. It is bargaining 'in the shadow of the law' that has achieved the best results”. (Gunningham 2002, p. 10).

This regulatory drive for firms to act in more sustainable ways can come in three main ways:

(a) actual regulations that are put in place:

(b) the threat of regulation (for example, calls for industry controls on the marketing of unhealthy foods with a threat of regulation if this is not done): and

(c) the expectation of regulation or stronger regulation (for example, the expectation of regulation, and increasingly stronger regulation, on carbon emissions).

An alternate view to this call for minimal regulation and voluntary action is proposed by Porter and van der Linde (1995) who, in a controversial article, call for stronger regulation to promote sustainability initiatives (in this case, focused on environmental issues) and to improve the competitiveness for firms, industries, and a nation’s business sector in general. This view of Porter and van der Linde is consistent with how we described the core features of a sustainable business in topic 6, where we referred to the role such a business plays in “promot[ing] positive sustainability policies on the part of governments”.

Another problem with a focus on regulatory compliance (which is to a degree picked up by other compliance issues of voluntary codes and social expectations which are discussed below, although as will be shown, these have their own set of problems) is that regulations are generally reactive: that is, regulations are made based on problems that have occurred, not predictive of problems that may occur:

"It is an unfortunate truth that a major incident is often the best stimulant for policy change, both in government and business. Too often policy is as good as the latest disaster was bad" (Winsemius & Guntram 2002, p. 111).

The final point we will cover here is that it is simply not possible to regulate everything. Ultimately, sustainability is a moral issue, one concerned with issues of justice within and across generations (note the link here with the ethics and justice topics we covered earlier). Rushton (2002) makes this point:

"I am very much of the view that ethics and values are at the foundation of sustainability. Successful global businesses will be those that integrate sustainable development, including social responsibility, into their business strategies. As the Brundtland Commission reported in 1987, ‘human survival and well-being could depend on the success in elevating sustainable development to a global ethic’" (p. 3).

In this sense, compliance with the law can be seen as merely a starting point for progressing sustainability principles within a firm as opposed to being a comprehensive strategy in its own right.

 

Voluntary codes of conduct

Voluntary codes of conduct are mostly industry based codes to which firms in that industry (or individual practitioners in some cases) agree to be bound. Often these codes require compulsory agreement to adhere to them in order to become a member of an industry association. The codes themselves are however, voluntary in the sense that they are established by the industry not by government regulation.

Voluntary codes of conduct have the potential to be a forceful tool in progressing sustainability principles in the business sector, especially in the light of the discussion we have had so far on the limitations of regulation in achieving this end. Whether these codes can achieve this outcome is of course another question and critics argue that these codes can, instead of advancing sustainability outcomes, thwart them (King & Lenox 2000; Barraclough & Morrow 2008; Landman 2008). There are a number of reasons for this view, some of the main ones being as follows:

(a) Voluntary codes are often used as a mechanism for warding off more stringent government regulation.
In this view, industry is seen to, in effect, put in place a voluntary code, designed by its own members suited to its own purposes, and uses this to demonstrate to government that regulation is not needed as the industry is addressing its own issues through its own internal processes. Further, having a voluntary code in place can give an industry group a seat at the negotiating table when regulations are being developed, providing the opportunity to dilute the impact of any regulations that might eventuate. Here is how one author describes this issue:

“Cigarette companies were among the first to understand the value of voluntary behavior codes in staving off more serious government regulation of their activities. This is as a result of the codes themselves acting as a block to government regulation, or the perceived credibility of industry bodies in having codes gives them a seat at legislative negotiations to help water down the strength of any regulations that might come into force” (Landman 2008).

(b) Voluntary codes can be used mostly as a means to improve the public image of an industry rather than to drive fundamental industry change to improve an industry’s social and ecological performance. Barraclough & Morrow (2008) make this point when commenting on the chemical industry’s ‘Responsible Care’ program, noting:

internal documents show[ed] the campaign was fundamentally designed to improve its [the chemical industry’s] poor public image (second only to that of the tobacco industry) in order ‘to complement its policy goals of countering stricter regulations’” (p. 1786).

(c) There is a question of who monitors behaviour. The concern is that rather than the industry actively enforcing its code, the only monitoring of industry activity is by the public. Before anything is done by way of code enforcement, a public complaint is needed. This can mean that unless someone outside the industry acts as a watchdog, then violations of codes can continue with no action being taken. This problem is of even greater concern when firms are operating in countries with little public capacity to conduct this type of monitoring. As Landman (2008) notes:

“Few ordinary citizens, though, have the time or knowledge to monitor advertising and behavior for compliance with corporate codes, especially in less developed countries such as Malawi, Mauritius and Nigeria, where BAT [British American Tobacco] violated its own codes”.

(d) Who enforces the code and what penalties apply for breaches? Enforcement is mostly in the hands of the industry itself and critics claim that penalties are either not applied or, if they are, their impact on the violating firm is so minor as to be of little or no incentive to cease code breaches.

(e) By having a code of conduct in place, firms within an industry can use the code as a justification for their behaviour, turning the code into a defence shield claiming that ‘our firm was acting in full accordance with the industry code of conduct’. The point is that as industry codes are developed by industry for industry, it is quite possible that they only cover the issues the industry wants to address, not necessarily the broader set of social and ecological issues that firms in the industry need to confront. The code can then become a justification for not acting in ways consistent with sustainable business objectives, rather than a force driving such actions.

In summary, voluntary codes of conduct have the potential to drive significant progress in how the business sector contributes positively to the achievement of a sustainable world. However, unless issues such as those highlighted above are addressed, they can act as a barrier to progress rather than as a facilitator. We noted in topic 6 that a sustainable business should act to progress broader sustainability outcomes: that is, to “exert influence on the key participants in the industry and in society in general to pursue human welfare, equitable and just social practices and the fulfilment of human potential of all”. Being an advocate for strong and purposeful industry codes is one way in which a firm can influence the industry in which it participates to address sustainability issues.

 

Social expectations

The risks from social pressure come from the extent to which a firm’s public image – and from that, its reputation, product/service sales, and resulting financial performance – is impaired due to public reaction to behaviours of a firm that do not meet societal expectations. Exposure of a firm’s actions that may fail to meet public expectations can come from many sources: the general public, the press, activists groups, or even a competitor seeking to discredit a firm’s actions in order to gain an advantage in the market place.

Activism by non-government organisations (NGOs) is a particularly potent force on businesses to improve their performance in areas of ecological and human welfare. These NGOs range from well established global groups such as Greenpeace, the World Wildlife Fund (WWF), and Amnesty International, to small groups that focus on issues specific to the local community.

Activism doesn't need to actually be directed at a particular firm: just the threat of it is often enough to force firms to change. In addition, a firm may be targeted by activist groups for its association with another firm that is the primary target. For example, in 2007, Woolworths Australia was criticised for selling toilet paper which it claimed, without adequate grounding, was ‘environmentally, socially, and economically responsible’. A 2007 ABC news article (Alberici 2007), commented that:

[the] ABC Radio's PM program has found at least two reports, plus an independent audit of the Indonesian company that supplies the pulp to Woolworths, that completely discredit that claim”.

The pulp supplier in question, Asian Pulp & Paper (APP) is cited in the article as having a well documented track record of environmentally damaging practices (clearing of virgin rainforest) and human rights abuses.

A key point here is that, regardless of the legality or otherwise of APP’s actions in the countries in which it operates, pressure placed on Woolworths by various activists groups and the ABC radio and news services resulted in a significant risk to Woolworths’ reputation and a need for it to take action to change its behaviour. Was Woolworths the primary target of the activists groups involved in the case? Partly yes. However, APP has been a long standing target of NGOs such as Greenpeace and the WWF. In this sense, taking action against firms such as Woolworths which have a high sensitivity to adverse public sentiment is an effective way to drive change deeper into the supply chains in which these firms operate.

The other example of social pressure issues we will address here has to do with practices that may be legal or even accepted as social norms in one country (say, a less developed country) but fall far short of what we might expect in our own home country. This is an important topic and one that is becoming increasing relevant as firms deepen their supply chains across the globe, and outsource materials supply, manufacturing, and services to countries far removed from where final goods and services are consumed. Is it right, for example, for a firm to move its manufacturing processes offshore (say, from Australia to a less developed country in Asia of Africa) and, in doing so, take advantage of environmental laws that are less onerous, and of laws governing workers that allow the firm to treat workers by way of pay and employment conditions that would be totally unacceptable here in Australia? There are many arguments surrounding these issues. The point for our current discussion however, is that firms who engage in this type of value chain behaviour face the prospect of having their activities (including those of their value chain participants) publically exposed, with possible negative consequences to the firm. Further, it raises many social justice questions that we touched on earlier in topic 4.

 

Conclusion

As is evident from the discussion above, a compliance strategy is important for any firm in order for it to progress its sustainable business agenda. This strategy, however, requires no foundation of sustainability issues within the business at any strategy level: it can be implemented as merely a risk control approach that may have little consequence to the bigger sustainability issues the firm, and society in general, needs to confront.  Further, firms that stay focused only on the compliance approach expose themselves to the risk of missing out on important trends and opportunities that more comprehensive sustainable business strategies may offer.

 

Efficiency phase

Here’s a summary of how Dunphy et al (2003) describe the efficiency phase:

Human sustainability

Ecological sustainability

There is a systematic attempt to integrate human resource functions into a coherent HR system to reduce costs and increase efficiency.
People are viewed as a significant source of expenditure to be used as productively as possible. Technical and supervisory training is augmented with human relations (interpersonal skills) training.
The organization may institute programmes of teamwork around significant business functions and generally pursues a value adding rather than an exclusively cost reduction strategy.
There is careful calculation of cost—benefit ratios for human resource expenditure to ensure that efficiencies are achieved.
Community projects are undertaken where funds are available and where a cost benefit to the company can be demonstrated.

Poor environmental practice is seen as an important source of avoidable cost.
Ecological issues that generate costs are systematically reviewed in an attempt to reduce costs and increase efficiencies by eliminating waste and by reviewing the procurement, production and distribution process.
There may be active involvement in some systematic approach such as Total Quality Environmental Management (ISO 14001).
Environmental issues are ignored if they are not seen as generating avoidable costs or increasing efficiencies.

 

The basic idea behind the efficiency approach to sustainable business is that, by using resources more efficiently, and by reducing waste and pollutants, both the environment and the firm win: the environment benefits from less resource use and waste discharge, and the firm from a reduction in costs which flow through to improved financial performance.

Efficiency is a strong theme in the sustainable business literature, although discussions of the efficiency approach are mostly centred on ecological issues and we will stay focused on these issues in this current discussion. The main approaches to efficiency as a sustainable business strategy are picked up in the concepts of eco-efficiency and industrial ecology, and these are discussed in the readings for this topic. The Interface case study also provides a good example of how efficiency in resource use is important in providing a means for a firm to reduce its ecological impact and improve its bottom line.

Rather than repeating what is contained in the readings and case study on the benefits of the efficiency approach, our focus in this current discussion will be on considering if efficiency is a credible strategy for business in helping to achieve a sustainable world and if not, what else might be needed.

Efficiency in the context of the efficiency strategy covers two main issues. First is efficiency in the productivity of renewable natural resources: that is, we get more output from the resource base (like getting higher interest on money invested in a bank account). We will call this productivity efficiency (this is also referred to as optimisation efficiency or maximum sustainable yield in resource productivity). Note that we can also talk in terms of efficiency in terms of the efficient extraction of non-renewable resources (such as oil, minerals, coal etc – such as maximising the extraction of the target resource per unit of energy input) but for the purposes of this discussion we will stay focused on renewable natural resources as ultimately it is these resources that determine the sustainability or otherwise of life on Earth.

The second form of efficiency has to do with efficiency in the production and consumption process: a reduction in resource, waste and pollutants as products and services are made, delivered, and consumed. We will call this production efficiency (this is also referred to as technical efficiency). Examples include using less energy per unit of production, reducing waste in the production process by using resource inputs more efficiently, reducing pollutant output, recycling, reducing packaging, and so on.

So, despite the apparent benefits of the efficiency approach and the win-win claims it makes, will it help move society towards a more sustainable world outcome? There are a number of reasons to suggest that, on its own, it may not do so.

 

Productivity efficiency

The first issue has to do with productivity efficiency. Applying new technologies to increase the productivity of the Earth's natural resource base is an important part of the reformist agenda we spoke of earlier and includes things such as the use of modern industrialised agricultural practices, genetic engineering of plant and animal species, intensive livestock farming, and so on. Debates continue as to whether these technologies as they have developed to date genuinely have increased resource productivity in a way that can be sustained into the longer term. Some claim that this is clearly true while others are far from convinced and propose that this is only apparent if all negative externalities (use of fossil fuels, chemical and fertiliser pollution, long term soil degradation, biodiversity loss, displacement of people from their lands, destruction of cultures, etc.) are excluded from the analysis (for an example of this alternate view, see Shiva (2005)). But beyond this debate is the important issue of ecosystem resilience.

From a sustainability perspective, productivity efficiency must be linked to resilience. Resilience, in this context, is of two kinds: engineering resilience and ecological (or socio-ecological) resilience (Holling 1996; Peterson, Allen & Holling 1998; Walker & Salt 2006) (socio-ecological is the term we will use here for this second form of resilience). Engineering resilience has to do with the ability of a system to bounce back to its pre-disturbance state following some from of disturbance: for example, a personal illness and our ability to overcome it and get back to normal health, or a global financial crisis and the ability of the economic system to return to an upward growth path. Socio-ecological resilience on the other hand has to do with the ability of a system to continue to function despite exposure to disturbance. An example might be the ability of our society to remain cohesive, caring, and peaceful rather than possibly fall into a state of anarchy and violence in the light of the emerging implications of global warming (such as sea level rises, food shortages, and competition for resources). It is the socio-ecological form of resilience that is of key importance for a sustainable world: it has to do with continuing to meet the wellbeing+justice sustainable world criteria regardless of what disturbance and change might occur to ecological and social systems over time. In this sense, the concepts of a sustainable world and socio-ecological resilience are inseparable (Holling 1996; Walker & Salt 2006).

The key point here is that in the sustainable world context, an approach that seeks to maximise natural resource productivity to underpin continued economic growth as a means of achieving human wellbeing (as is the agenda of the reformist sustainable world approach) undermines the resilience of the very system on which it depends. This occurs for many reasons including (Meadows, Randers & Meadows 2004; Walker & Salt 2006):

(a) the removal of spare capacity as all natural resources are pulled into the field of production maximisation:

(b) the imposition of change at a faster rate than ecosystem feedback mechanisms can provide information concerning the consequences of this change: and

(c) in general, pushing ecosystems close to or beyond tipping points without society necessarily even knowing this may be happening and with, more often than not, very undesirable consequences.

 

Production efficiency

The second issue we will cover here is the claimed win-win that can come from more efficient use of resource inputs in the production process. If we assume a win for the firm, is there really a corresponding win for the environment and for a sustainable world?

Efficiency gains have long been recognised as a key means by which firms improve productivity, reduce costs, and increase wealth (Gould, Pellow & Schnaiberg 2008). In fact, this is why efficiency gains are so greatly prized by business. It has also been known for a long time that production based gains in resource efficiency lead to an increase in output and resulting consumption that can negate some or all of the resource use gains (rebound), or result in greater overall resource use (backfire) (Polimeni et al. 2009). Termed the Jevons paradox after the economist William Stanley Jevons, the extent of rebound or backfire in respect of gains in resource use efficiency varies from case to case however it is a well understood and recognised phenomenon (Polimeni et al. 2009). A quick thought experiment can help understand how this works.

Assume for a moment that you run a large manufacturing business. You hire an efficiency expert who shows that you can reduce your resource use per unit of production by 10% within 12 months resulting in a net improvement to your firm's bottom line profit of $1m per year. You enthusiastically put the plan into action and the following year, the $1m shows on the bottom line results. So what happens to the $1m? Well, it could stay in the firm as retained profits and be applied to ramping-up production and marketing efforts, possibly coupled with a cost reduction to consumers, with a result of higher overall sales. In this case efficiency gains are spent through increased sales and consumption. You could instead distribute the $1m to shareholders as an increased dividend but what would they do with the extra money? Most likely, they would spend it on some form of consumption. Maybe you decide to apply the $1m to paying your employees more. So what would they do with the money? Probably spend it just as the shareholders might. The point is that somehow, at some point in the economic system, increased efficiency of resource use that also creates increased wealth – a feature of the win-win argument – ultimately finds its way into increased consumption that negates to varying degrees the resource use gains that at first seemed to have been created. These consumption increases may be: (a) direct, where a firm increases sales based on the efficiency gains it has received: or (b) indirect, as the increased wealth the efficiency gains delivered filters its way through the economy via increased dividends, through increased wages, or through increased tax revenues and resulting government expenditures.

The other problem with the production efficiency approach to sustainable business that we will discuss here is that, initially, firms quite often find easy gains: ‘picking the low hanging fruit’, as it is often termed. After this, improvements in efficiency and achievement of a win-win become increasingly harder and the costs of efficiency improvements become increasing higher per unit of progress. This poses some substantial challenges for industry in making needed improvements in resource use and waste reduction/elimination, especially if coupled with a general opposition to regulation and reliance on voluntary initiatives as we discussed in the compliance section (above).

 

Conclusion

Baumgartner (2009) suggests that, in order for the efficiency strategy to be effective, it needs to find a base in a firm’s values and be part of corporate philosophy. In this respect, some commitment to sustainability principles would be expected to be found in enterprise strategy statements (especially in the firm’s statement of core values).

The efficiency strategy is, however, fundamentally an internal process strategy: it is one where the firm focuses its sustainability efforts on innovative processes, technology, and monitoring and reporting systems (these reside in the business and functional strategy levels) to maximise efficiency gains with a resulting improvement in the firm’s bottom line (Baumgartner, R, J. & Ebner 2010). As such it is, on its own, a strategy that does not address the broader set of issues that businesses need to confront in order for them to become sustainable businesses.

Despite the criticisms that have been made in our discussion of the efficiency strategy, using resources efficiently – especially in the production, distribution, and consumption process – is clearly important and is something that all businesses need to aggressively pursue if we are to transition to a sustainable world. The problem is that unless this is coupled with a means to prevent efficiency gains being spent on more resource-consuming production and consumption that negates the gains achieved, then we may be deluding ourselves into thinking that progress is being made.

 

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