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Business Ethics and CorporateSocial Responsibility

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Edited By Paola Ochoa, Maria-Teresa Lepeley, Peter Essens Chapter 5 Safety and Employee Health and Wellbeing By Daniela M. Andrei, Paola Ochoa, Mark A. Griffin 18 pages

Kindness in Leadership Edited By Gay Haskins, Michael Thomas, Lalit Johri Chapter 2 Kindness in Leadership at Work By Gay Haskins, Mike Thomas 22 pages

Organizational Change for CorporateSustainability By Suzanne Benn, Melissa Edwards, Tim Williams Chapter 1 Setting the Agenda for Corporate Sustainability By Suzanne Benn, Melissa Edwards, Tim Williams 31 pages

Responsible Leadership By Mark Moody-Stuart Chapter 8 Corruption: The Biggest Market Failure of All By Mark Moody-Stuart 30 pages

Shaping Sustainable Change Edited By Leda Stott Chapter 5 Embedding Ethical and Principled Partnering Approaches By Julie Mundy 20 pages

The Sustainable Enterprise Fieldbook:Building New Bridges, Second Edition Edited By Jeana Wirtenberg, Linda M. Kelley, David Lipsky, William G. Russell Chapter 3 Sustainability-Aligned Strategies: Smart Enterprise Strategies to Progress Along A Bridge to Thriving By William G. Russell, Joel Harmon 54 pages

The Wellbeing PurposeBy Richard Hardyment Chapter 4 Source: Supply Chain Satisfaction By Richard Hardyment 17 pages

Wellbeing for Sustainability in the GlobalWorkplace

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2KINDNESS IN LEADERSHIP AT WORK

Gay Haskins and Mike Thomas

In order for companies to improve, the people of the organizationhave to become smarter and more resourceful and work togethermore effectively over time. For this to work, people actually have tocare about their work, the company, and one another. This requiresthe expert orchestration of a kind leader.(William Baker & Michael O’Malley, Leading with Kindness, 2008: 21)

Introduction

In 2008, Dr Willian Baker, President Emeritus of Educational BroadcastingCorporation and Dr Michael O’Malley, Executive Editor for Business,Economics and Law at Yale University Press published a thought-provokingand practical book, Leading with Kindness: How Good People Consistently GetSuperior Results (Baker & O’Malley 2008). This was certainly one of the firstmanagement books to point to kindness as a sign of organisational strengthand as a key characteristic of excellence in leadership.Nonetheless, many people we have talked with, perceive kindness to be

lacking in their work environment. “There was never much kindness when Iworked in the hospitality sector,” said one of our friends, “Work long hours andget paid – and don’t expect much else! It was a tough regime to work in.” A seniormanager in a well-known high-technology company could hardly wait toretire: “It’s all about cost-cutting and short-term results,” he said. Society,

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particularly in the western world, seems highly focussed on competitiveindividualism, freedom and independence. In free-market capitalism, thereis no place for the kind-hearted (Phillips & Taylor 2009).Professor Raj Sisodia of Babson College in Boston is particularly critical

of the state of business in the United States. He writes: “Business has becomedehumanized and impersonal. Human beings are treated as functions or objects, asinterchangeable and disposable as machine parts….The vast majority of people aredispirited and uninspired at work. They feel disrespected, not listened to, anddevalued” (Sisodia quoted in Worline & Dutton 2017: ix).Others are more optimistic and point to signs of change. Over the last 25

years, there has been an increasing articulation of the importance of emo-tional intelligence, mindfulness and compassion and their positive role inorganisations. They are seen to be important in alleviating stress andencouraging greater awareness of emotions, feelings and well-being. Attri-butes like collaboration, teamwork, and interpersonal relations are alsoincreasingly seen to contribute positively to performance. There has beenlittle mention, however, of the specific importance of kindness to organi-sational functionality.There has also been a sharp rise in the number of social enterprises, fre-

quently with a double or triple bottom line objective of sustainable financialperformance, positive social impact and positive environmental impact.Movements like Conscious Capitalism and Inclusive Capitalism haveemerged, calling for greater awareness of values and the higher purpose ofbusiness and a capitalism that is more equitable, sustainable and inclusive.(For more detailed information, see Chapter 9.)We move forward in this chapter, therefore, to an initial consideration of

kindness as an organisational value and how it can be exemplified. It isbased primarily on research and our own experience, rather than surveys orfocussed discussions, the approach taken in the four chapters that follow.We want to throw some light on the types of organisation which do placean emphasis on kindness and some of the traits that the leaders of kindorganisations exemplify. We will also provide some initial evidence of theimpact of kindness on organisational functionality, operations and perfor-mance. Our intention is not to provide definitive answers but to offer somebackground on organisational kindness which will be explored further inthe chapters that follow. In this chapter, we shall:

� Look at some organisations that have compassion, empathy and/orkindness as a core value or that exemplify kindness;

Kindness in leadership at work 27

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� Consider what it means to be a kind leader at work as well as what akind leader is not;

� Examine the costs of leading with kindness;� Discuss the benefits that kindness might bring to the workplace, its

culture, functionality and performance.

Kindness as an organisational value

Just over 20 years ago, the well-known business writer Jim Collins andStanford Professor Jerry Porras authored a paper in the Harvard BusinessReview, called “Building your Company’s Vision.” They described corevalues as, “A small set of timeless guiding principles.” Values strongly comple-ment the purpose of the organisation, endure over time and can be descri-bed in behavioural terms (Collins & Porras 1996). In this section, we willlook at six UK and US organisations (two from the public sector and fourfrom the private sector) that formally emphasise kindness or compassion as acore value or that were set up for kind purposes.

University of Central Lancashire: kindness as a quality and an act

We begin with a live case of Mike’s own experience as Vice Chancellor atthe University of Central Lancashire (UCLAN) in Preston, UK. Foundedin 1828, Central Lancashire is one of the UK’s largest universities, with astudent and staff population approaching 38,000.At UCLAN, kindness as both a quality and an act has been embodied in

the university values, its People Plan and within the Senior Executive Teamweekly meetings. In 2016, following extensive discussion and debate, theUniversity adopted five values which support the organisational culture andprovide guidance for its activities. These are:

� Common sense: we are empowered to use judgement to do the rightthing.

� Compassion: we treat students, staff and the wider community withconsideration, care and honesty.

� Teamwork: we think and act together, valuing collective as highly asindividual achievements.

� Attention to detail (attentiveness): we take personal and profes-sional pride in the quality of our work.

� Trust: we rely on each other, showing respect and integrity in all ofour activities.

28 Gay Haskins and Mike Thomas

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The contours of kindness can be seen in trust, compassion and teamworkwhilst the pragmatic application of kindness can be seen in the emphasis oncommon sense and attentiveness. In the context of kindness, the emphasis ison ‘common’ sense, using one’s thinking and reflection to bring peopletogether and agree. The word ‘common’ is not to do with its frequency,but to do with its sense of commonality, working together for the commongood. Attentiveness is focussed on empathy, emotional intelligence and self-awareness of one’s own professional role to care for and help others.The University has a reputation for being friendly and welcoming and, in

the most recent staff survey (2017) carried out by an independent externalorganisation, 92 per cent of staff stated that they are happy in their workand nearly 90 per cent said they are happy in the organisation. During theperiod of embedding the values, the University has risen in all league tablesand in 2017 was viewed as one of the most improved universities and the 5th

highest riser by The Guardian: positive results both internally and externally.However applying such values within the organisational activities has not

been easy. The University has adopted compassion as a core value ratherthan kindness because early consultation indicated that some managersperceived the word kindness as associated with weakness or a lack of reso-lution. Putting forward kindness was a risk for some and compassion, eventhough it is a kindness attribute, was seen as an acceptable first step in theUniversity journey towards a more relational leadership approach.Getting different constituents within the University to agree on defini-

tions was also challenging. Human Resources, Trade Unions, the StudentUnion, academic leaders and academic experts in ethics, management, psy-chology, health, business, science and the arts had to thrash out a form ofwords that have real practical and applied meaning. And all within a cultureof retaining focus as core activities and on students and following majorstructural change. Applying kindness requires resilience, patience andpragmatism.An example of how the University of Central Lancashire’s team acted to

demonstrate true kindness was their response to helping staff and studentsfrom the American University of the Caribbean, (AUC) who had experi-enced the impact of Hurricane Irma in September 2017 which devastatedthe Island of St Maarten where they were based. Hearing of the damagedone and the risk to ongoing medical education, the University proposedto bring nearly 700 students and staff with their families to Preston, Lanca-shire so they could continue their medical studies uninterrupted whilst theisland was repaired. The logistics and organisational challenge were huge


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but the situation was made manageable as staff drew together (manyvolunteering to help across disciplines and specialisms) so AUC colleaguesand students could access accommodation, schools, timetables, learningresources, health registration and many other requirements. Preston City,civic groups, the private sector and government agencies also joined in anda real sense of focused support, teamwork, compassion and kindness inaction was demonstrated across the university and the local community.The whole transfer was completed in just nine days. The impact on theUniversity of Central Lancashire staff and student morale as they put theUniversity values into effect has been hugely positive and a real sense oflifelong friendships and long-term collaboration has been planted betweenthe AUC and UCLAN.

University College London Hospitals (UCLH): putting the value ofkindness into practice

University College London Hospitals NHS Foundation Trust (UCLH) isone of the largest NHS trusts in the United Kingdom, committed to“delivering top-quality patient care, excellent education and world classresearch” (www.uclh.nhs.uk). When you enter the huge atrium on themain site, you will see the values of UCLH emblazoned all over the walls:Safety; Kindness; Teamwork; Improving. (See Figure 2.1.) The valueswere launched in 2012 following consultation with over 1,500 staff andpatients and the aim is to ensure that all UCLH hospitals live to the samephilosophy. In 2017, newly appointed CEO, Marcel Levi, summarised theirimportance as follows: “By living our values we can help ensure that UCLH is afantastic place both to work and be treated.”

FIGURE 2.1 The Values of University College London HospitalsSource: Photograph taken at UCLH’s main site in 2017.


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http://www.uclh.nhs.uk

A short and easy to remember statement goes alongside each value:

� We put your safety and well-being above everything� We offer you kindness that we would want for a loved one� We achieve through teamwork� We strive to keep improving.

The expectations required to put the value of kindness into practice areshown in Figure 2.2.It can be seen that several of the actions shown in Figure 2.2 are specific

to the healthcare sector and very much based on actions towards patients:those in the boxes called “Protect your dignity,” for instance. These read (inthe column “Love to see”): “creates an environment of privacy and dignity and isan active advocate for the vulnerable, both patients and colleagues.” However, other

FIGURE 2.2 Putting the value of kindness into practice at University College LondonHospitals

We offer you the kindness we would want for a loved one

Love to see Expect to see Don’t want to see

Respectindividuals

Overcomes constraintsto meet individuals’needs; always maintainssensitivity and patience.

Thinks the best ofpeople. Treats people asvalued individuals; isopen to different viewsand ways of doingthings.

Is insensitive to theneeds/preferencesof others; makesinappropriategeneralisations aboutother people; isdismissive of differentviews/cultures.

Friendlyandcourteous

Remembers people’snames, faces or factsto ‘personalise’ service;makes others feel specialand individual.Intervenes when othersdo not do this.

Makes eye contact,smiles if appropriate;always introducesthemselves and theirrole and asks permission.

Ignores or avoidspeople; demonstratesrude, aggressive orimpolite behaviour; isinappropriately distantor over-familiar.

Attentiveand helpful

Goes the extra mile,putting themselves outfor the benefit of others.

Keeps eyes open forpeople who need helpand takes action to helpthem or to findsomeone else who can.

Avoids patients orcolleagues who needhelp.

Protect yourdignity

Creates an environmentof privacy and dignityand is an active advocatefor the vulnerable, bothpatients and colleagues.

Demonstrates awarenessof vulnerability; protectsprivacy; and treats othersas equals. Interveneswhen others do not.

Demonstratesthoughtlessness or alack of awareness ofothers’ needs andfeelings.

Source: UCLH www.uclh.nhs.uk (20 October 2017).


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suggested acts of kindness could resonate in many other types of organisa-tions. These include: “Remembers people’s names, faces or facts to ‘personalise’service; makes others feel special and individual; goes the extra mile, puttingthemselves out for the benefit of others.”Figure 2.2 also points out a number of negative behaviours: these are

listed in the column “Don’t want to see.” They include behaviours likeinsensitivity to the needs/preferences of others, being dismissive of the viewsof others and being rude, aggressive and impolite. It is important tounderstand what an organisation that aspires to be kind should and shouldnot do.As a fairly frequent visitor/patient at UCLH, Gay can attest to seeing the

value of kindness in action on numerous occasions. Little things seem tohappen there: staff show you the way to a section of the hospital; a handtherapist spends lots of time explaining the procedure required to heal aminor injury; an oncologist is the embodiment of kindness.But perhaps kindness should be expected as a core value for hospitals and

their staff? Among London hospitals, kindness is also a core value at thehospitals administered through Imperial College Healthcare and St George’sUniversity Hospitals, while compassion is a core value of The RoyalMarsden and Wellington Hospitals. Similarly top US hospitals, the MayoClinic and Massachusetts General Hospital both have compassion as a corevalue. A number of empathy training programmes have been developedfor hospital staff, reflecting the importance the medical profession is placingon empathy, compassion and kindness. (Further details of these are given inChapter 9.) It makes sense for kindness and compassion to be valued insectors like education and healthcare. (See also Chapters 3 and 9.)It is less easy to find examples of kindness and compassion as core values

in the private sector or of organisations that were founded with kind actionat their core. But they do exist.As we have already mentioned, a number of social enterprises have been

established solely for the purpose of societal betterment: in the UK, socialenterprises are growing fast, with close to half five years old or less. In 2015,50 per cent reported a surplus, almost all of which is used to further socialor environmental goals (www.socialenterprise.org.uk). Several Asian socialenterprises like the Aravind Eye Hospitals, Grameen Bank, and BarefootCollege are now legendary and admired around the world. We start ourexploration by looking at a company that was founded for good – as an actof kindness to the underprivileged – and that has now been in business forover 170 years.


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http://www.socialenterprise.org.uk

Nationwide Building Society: a company built for good

The Southern Co-operative Permanent Building Society (SCPBS) wasformed in 1884, initially to provide the members of the co-operativemovement the opportunity to purchase homes. To begin with, the Societybuilt the houses, but soon changed its direction to lend money to membersto build their own, or to purchase existing properties. Through rapidexpansion and strategic planning, SCPBS grew to become a major compe-titor. It was renamed the Nationwide Building Society by a members’ votein 1970 and is now the world’s largest mutual financial institution, stillowned and run for the benefit of its members. It is the UK’s second largestmortgage provider and one of the UK’s largest savings providers and hasperformed well, even following the financial crises of 2008/9.In 2016, poet Jo Bell was commissioned to write a poem about the his-

tory of Nationwide for an advertising campaign that the company waslaunching. She had expected “the usual patter – ‘We are passionate aboutfinancial products etc. Instead, I found myself talking to people who really believe inthe company” (www.writeoutloud.net 2017). Her poem, “Building theBuilding Society” begins with a description of London in 1884, a city wherefortune favours the fortunate. In the second part of the poem she focusseson the words of Charles Cooper, a life-long advocate for the co-operativemovement, who proposed the initial founding of a building society inLondon, became its first secretary and then in 1886, became director.

Mr Cooper says. Put sixpence in the tin and start to climb. We all have ashare. We all get a vote. We’re in the same boat. Stand together andbuild; a nation of helpers, a nation of houses with hopers inside. Thecurrency of kindness: Nationwide.

(Bell 2007)

Charles Cooper proposed the idea of the building society out of a socialneed to offer ordinary people the chance to save or own property. Itoffered a “currency of kindness.” This still resonates today. In an interviewfor the Spring 2017 edition of the Journal of the UK Building SocietiesAssociation, Nationwide CEO Joe Garner said: “For more than one hundredyears Nationwide has been driven by the principles of mutuality, care and security,At their best, building societies make a difference to our members’ and colleagueslives…and help improve the living conditions of what our founders called the‘industrious classes’” (Garner 2017).


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http://www.writeoutloud.net2017

The John Lewis Partnership: pulling together forcommon advantage

Our second private sector example is an established and admired UKdepartment store, owned by its employees. With annual gross sales of over£11 billion, The John Lewis Partnership belongs to its 86,700 employeepartners and owns 48 John Lewis department stores and 383 WaitroseSupermarkets across the UK. The Partnership was formed in 1950 by JohnSpendan Lewis, son of the founder John Lewis. Spendan Lewis joined thecompany in 1914 and was put in charge of his father’s second shop, PeterJones in Sloane Square. He soon realised that the salaries of himself, hisbrother and his father were the same amount as the combined salaries ofeveryone employed in the John Lewis stores. In a video clip made towardsthe end of his life, he recalled the establishment of the Partnership as:

An experiment…with an idea for a better way of managing business sothat instead of the many being exploited by the few, there would begenuine partnership for all, managers and managed alike all pullingtogether for their Common Advantage. General change this waywould I believe give us a vast increase of production and a muchhealthier, happier world. Experiments like these are very much needed.To help in one of them can be a very good use of one’s life. I hopethat as the years pass, you will feel this more and more.

(BBC 2014)

Since its foundation, the John Lewis Partnership has generally performedwell, with profits growing steadily in the 15 year period between 1999/2000 and 2014/2105, from £194.7 million to £342.7 million. In January2017, the Partnership recorded gross sales up by 3.2 per cent and profitbefore Partnership bonus, tax and exceptional items up by 21.2 per cent.Employee benefits are many and include: the Partnership annual bonusscheme, a non-contributory, final salary pension scheme, product discounts,generous holiday allowances (six weeks for all Partners after ten years’service), life assurance, subsidised dining facilities, holiday and leisure facil-ities, subsidised clubs, societies and tickets for theatre, opera and music,volunteering secondments for up to six months, education subsidies andbursaries for the pursuit of excellence (see www.johnlewispartnership.co.uk). The Partnership has become the standard by which other businesses aremeasured. It is known for its kindness and generosity to its employees.


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http://www.johnlewispartnership.co.uk

http://www.johnlewispartnership.co.uk

There are signs, however, that top management salaries at the Partnershipmight not now meet with the approval of its founder. In Spendan Lewis’time, top management salaries were fixed at four times the average wage ofa man in London with four children. Today, the Chairman receives a sig-nificantly higher differential in pay, although still far less than the differ-entials in many other major UK firms (Burgess 2017). We will return to thequestion of fair pay in Chapter 8.

Agency H5, Chicago: always lead with kindness

We turn now to a mid-sized company and focus on Kathleen KenehanHenson, who founded Henson Consulting (now Agency H5) in 2001. Sincethat time, this boutique PR agency has grown to be a mid-sized companywith some 50 ‘team members.’ It has received numerous accolades andfeatures some major US brands among its clients. Kindness is the company’sfirst and foremost core value and an important feature of its culture, bothinternally among colleagues and externally with clients and contacts.

Agency H5 has worked to cultivate a unique culture propelled bykindness, and we demonstrate that in the way we treat our clients,media contacts, industry colleagues and each other, which isn’t always acommon business practice today.

(www.agencyh5.com)

Kathleen Kenehan Henson describes herself as a leader who has “alwaysled by kindness” as her secret for success. She has said that kindness makes herbusiness associates feel a “sense of trust and comfort” and will also “benefit thebottom line.” Clients, she contends, are impressed that kindness is the firm’stop core value, particularly in an industry sector that is known to be tough,fast-paced and not known for its kindness. She advocates the following fivepolicies and actions in support of kindness.

Hire the Person, not the Position….The individuals who exhibit akind, genuine, happy personality are the ones who usually have thelongest tenure.Practice Gratitude in All Situations….It’s sure easy to be thankful

and nice when the good stuff happens at work, but it’s just as impor-tant to be thankful and kind when a bad situation hits you squarely onthe jaw.


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http://www.agencyh5.com

Stop Trying to Control Everything….I’ve come to realise that I amnot in control of 90 per cent of what happens in my work day. I canonly control how I react and respond.Be Your Authentic Self….I’ve seen first-hand that the seeds of

kindness you plant in the past will often bloom when you least expect it.Practice Kindness Everywhere….Optimism and a grateful heart are

actually quite contagious.(Kenehan Henson 2017)

Agency H5 has kindness both in its values and its policies. This makes itrather unusual in comparison to many other organisations. It is possible thatthe ability to exemplify kindness both internally and in the eyes of its cus-tomers has something to do with its size. In Chapter 6, we focus on Inde-pendent Owner Managed Businesses. We suggest in that chapter that the‘smallness’ of the majority of such businesses creates the opportunity forwider and more intimate understanding of personal circumstance andcharacter of employees, and therefore the possibility of kindness, comparedwith larger firms.Kathleen Kenehan Henson’s story of a company ‘founded on kindness’

provides the Epilogue to this book.

Kindness and Compassion: on the agenda at LinkedIn

Our final example is LinkedIn. In the USA, compassionate managementseems to be on the agenda of some of the best-known high-tech compa-nies. The annual Wisdom 2.0 conference each February in San Franciscobrings together over 2,500 people from around the world to discuss challengesrelated to living connected through technology in ways that are beneficialto well-being, work and building a better world (www.wisdom2summit.com). The topic of Compassion has featured quite frequently at the eventsand high-tech leaders like eBay founder Pierre Omidyar, Karen May, VP ofTalent at Google, and LinkedIn CEO Jeff Weiner have all attended.In 2013, Jeff Weiner informed the conference that he had made the

practice of compassionate management a core value at LinkedIn. He saidthat showing compassion to an employee and spending time with thempaid off: in that person’s greater efficiency, productivity and effectiveness(Fryer 18/09/2013). This followed a blog that he had posted on LinkedInin 2012 called ‘Managing Compassionately.’ He wrote: “Of all the manage-ment principles I have adopted over the years, either through direct experience or


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learning from others, there is one I aspire to live by more than any other….Theprinciple is managing compassionately” (Weiner 2012).Jeff Weiner’s short article, which is strongly recommended reading, goes

on to discuss the meaning of compassion as both being in the shoes of asufferer and doing everything you can to alleviate their suffering. He thenwrites about the fact that compassion can and should be taught, not only inschools but also in adult learning. At the end of January 2017, he issued hisown LinkedIn Learning course, On Compassionate Management, emphasisingthe links between compassionate behaviour and achieving results.

I think that one of the most important drivers of long-term valuewithin an organization is the speed and quality of its decision making.When you cultivate trust, when you cultivate compassionate manage-ment, you put yourself and your team in a position where you can bemaking high quality decisions faster.

(Weiner cited in Staples 2017)

Attributes of the kind leader at work

What then are the attributes that a kind leader should exemplify? LinkedIn’sJeff Weiner stresses compassion and empathy, the importance of puttingyourself in the shoes of other people. Kathleen Kenehan Henson, has anumber of practical suggestions including being authentic, showing grati-tude, not trying to control everything and consistently practicing kindness.

Baker and O’Malley’s six ingredients of kindness

In their book, Leading with Kindness, cited at the opening to this chapter,William Baker and Michael O’Malley see kindness as closely linked to abasic connection among people engaged in meaningful, reciprocal rela-tionships. These relations, they suggest are cultivated by six ‘virtues’, whichcan be viewed as the ‘ingredients’ of kindness within the workplacecontext.

� Compassion: “because it provides employees with that extra amount ofstrength they need to perform, whether it’s overcoming personalproblems, trouble at home, or job-specific challenges.”

� Integrity: “People with integrity reliably, consistently, and predictablyact on a set of values that ensures safety in interpersonal encounters.


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They keep promises and confidences, remain forthright and non-evasive, and are un-biased and even-handed”

� Gratitude: “To appreciate is to recognise that you are not alone in thisworld and that there are many things of value beyond one’s self.”

� Authenticity: “When leaders… give authenticity a central place inleadership, they understand what distinguishes genuine leaders fromforgers.”

� Humility: “The value of humility to leadership… owes to the‘groundedness’ of the people who have it…. It’s what keeps themdown-to-earth.”

� Humor: “a sense of humor has been related to interpersonal compe-tencies such as warmth, ability to listen, flexible thinking and perspective-taking, openness, maturity and kindness.”

(Baker & O’Malley 2008: Chapter 2, 41–71)

The idea of ‘ingredients’ of kindness is intriguing and parallels that of‘contours’ of kindness outlined in Chapter 1. It suggests that there is a rangeof attributes that the kind leader exemplifies and for Baker and O’Malley,“These are not optional character traits, that are simply nice to have, but arerequired if you want to be an effective leader” (Baker & O’Malley 2008:Chapter 2, 41).It will be noted that a number of the ‘virtues’ above (for instance, com-

passion, gratitude, authenticity) have been mentioned by Kathleen Kene-chan Henson and Jeff Weiner. Compassion must also have played a big rolein the decisions that Charles Cooper and Spendan Lewis took when settingup their companies. A number (perhaps particularly compassion, gratitude,humility and humour) are also characteristics of the servant leadershipapproach which combines a motivation to lead with a motivation to serve.

The servant leadership approach: putting others first

The phrase ‘servant leadership’ was coined by Robert Greenleaf in an essaypublished in 1970. He wrote that servant leaders are ‘servant first’ andbehave differently from those who are ‘leader first.’ He wrote:

The difference manifests itself in the care taken by the servant-first tomake sure that other people’s highest priority needs are being served….A servant leader focuses primarily on the growth and well-being ofpeople and the communities to which they belong….The servant


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leader shares power, puts the needs of others first and helps peopledevelop and perform as highly as possible.

(Greenleaf 1970: 6)

Professors Dirk Van Dierendonck and Kathleen Patterson (2015) suggestthat the servant leadership approach provides leaders with a perspective oforganisational virtues and may encourage more effective and meaningfulworking relations, providing a strong sense of organisational communityand enhancing performance. They see compassion as value-laden with thekind leader demonstrating humility, gratitude, forgiveness, empowermentand altruism. This appears to provide leaders with more authority thanthe charismatic, authoritarian or heroic models of leadership. This is becausestaff ascribe moral intelligence to a kind leader and perceive them as moreauthentic and more able to provide direction.This conclusion is supported by earlier research findings that kind and

compassionate leaders provided stronger organisational vision, had morecredibility, were trusted more by others and had higher levels of influencingskills (Farling, Stone & Winston 1999). Leaders who exhibit kindnessappear to be more motivated to put the needs and interests of others aheadof their own and also have a higher sense of civic responsibilities, seeingthemselves as stewards orientated to spend their time as leaders to serve forthe benefit of the community (Barbuto & Wheeler 2006). However, it takescourage to be kind.

Have courage: be kind

“Have Courage: Be Kind,” says Cinderella’s mother to Cinderella in KennethBranagh’s 2015 film. That mantra has now become well known to manychildren and adults around the world. It is also thought to apply to leadingwith kindness.Clinical psychologist, Neil Rothwell (2014) suggests that kindness takes

courage, a courage that is productive and is for the best of the many ratherthan the loudest or those in the front of the queue. The psychotherapistCarl Rogers (1996) alludes to courage and kindness in his person-centredapproach with its emphasis on warmth, genuineness and empathy. Professorof Organisational Behaviour Peter Frost (2016) also emphasises courage andappears to support Cardinal John Henry Newman’s (1856) view of moralresponsibility by stating that compassion goes beyond technical skill orknowledge and also requires compassionate love, a readiness to connect


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with others and the demonstration of kindness. This can, however, drainour energy, so courage has to be accompanied with resilience and staminaotherwise ‘burnout’ will occur.In addition, as was stressed in many conversations we have held about

kindness, it is important for the kind leader to have the courage to bestraightforward in dealing with those he/she works with, which sometimesmeans having difficult conversations. As will be indicated in a number ofother chapters of this book, tough love can sometimes be required. Thisleads us into a consideration of what a kind leader is not.

What a kind leader is not

One of the most valuable sections of the book, Leading with Kindness is theone entitled, ‘What Kindness is Not’ (Baker & O’Malley 2008: 17–20).Firstly, they say we should not see kindness in a vacuum: leaders exhibitmany qualities besides kindness. It is possible to be hard-nosed and kind,analytical and kind and even cantankerous and kind!Secondly, they underline that “Kind Leaders Aren’t Sissies.” Sometimes,

when we think of kind people, we think of people who are overly kind.But for Baker & O’Malley, the kind leader is not a ‘sucker’ or ‘pushover.’They suggest that kindness has an optimal level that makes it a virtue ratherthan a vice.As frequently mentioned in our interviews and discussions on kindness, it

is vital for the kind leader to be honest, forthright and clear, especially wheninvolved in challenging discussions with colleagues. Tough love can be thebest approach. Hamlet famously said, “I must be cruel, only to be kind…”

(Shakespeare 1601). We may not all agree with Hamlet’s use of the word‘cruelty.’ However, as shown in Chapter 7, ‘Kindness in sports performanceand leadership,’ kindness does require mental toughness.Certainly, the kind leader is not a person who turns a blind eye to or

condones ill behaviour. Research carried out in 2011 found that over halfof US employees had experience of rudeness at work in 2011 compared toa quarter in 2008 in an earlier study (Porath, Overbeck & Pearson 2008;Porath and Pearson 2012). They found that rudeness made the recipientfeel less valued and powerless whilst those that were rude or uncivil ele-vated such behaviours as aspirational for the achievement of career goals,power and authority over others. Conversely, research carried out fouryears later found that when a person demonstrated civility and respect for


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others they were sought out by colleagues for advice. This, in turn,increased their individual performance. Incivility, on the other hand,decreased individual and organisational performance and spread rapidlyamongst the workforce with negative impact (Porath, Gerbasi & Schorch2015). The kind leader therefore, confronts incivility and rudeness andconsistently seeks to build and exemplify a culture of civility, decency andrespect.This is not a call for micro-management. As we have seen in the earlier

advice from Kathleen Kenehan Henson, CEO of Agency H5, the kindleader does not try to control everything. He/she encourages others to takepersonal responsibility for their work and gives them the space to do so. Akind leader is not a control freak.

The costs of being a kind leader

We wrote in an earlier section that kindness requires courage, resilience andstamina. Being a kind leader is not an easy option. It involves valuing othersat a fundamental level, not just as a colleague or employee but for who theyare as a person in their own right. Empowerment means giving otherschoice and responsibility and being emotionally engaged means having adegree of empathetic skills, emotional intelligence, compassion and wisdomin order to listen and understand effectively.Being open and receptive brings its own challenges for the leader as well.

These can include being overloaded with the concerns of others, beingmanipulated by those who are self-serving and allowing others to see whenmistakes or errors occur. ‘Beat Generosity Burnout’ was the cover story ofthe January 2017 Harvard Business Review. Kind leaders need to learn tomanage their time and create space for themselves.Acts of kindness can be at a cost to the individual carrying out the action:

that cost can be psychological, emotional, physical or material (or a mixtureof one or more). Kindness is not necessarily in and by itself rewarding, norabout achieving a level of self-gratification through feeling good by doinggood (Armstrong 2015). There is also a perceived negativity in acts ofkindness for personal gain. Professor Kim Cameron (2011) has drawn onAristotle’s teaching that virtue is an end in itself rather than a means. Hesuggests that if virtuous behaviours are demonstrated within an organisationfor personal ends (for instance, to increase influence or to enhance pro-ductivity), they cease to be virtuous. Instead, they are manipulative, instru-mental behaviours. Virtuousness and true kindness, on the other hand, are


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directed towards societal or social betterment that extends beyond advantageto the individual (Ibid.).

The benefits of kindness in leadership

Kim Cameron and colleagues at the Ross School of Business have devotedmany years to the study of positivity and compassion in organisations. (Formore about Positive Leadership, see Chapter 9.) Their research suggests thathaving compassion as part of the values of an organisation makes a mea-surable positive difference to productivity and financial performance. Intheir 2017 book, Awakening Compassion at Work, Monica Worline and JaneDutton provide two specific examples to illustrate this finding.

In a study of eighteen organizations that had recently engaged indownsizing, the extent to which employees characterised their organi-zations as more virtuous was correlated with higher profitability,greater productivity, and enhanced customer retention.Another study examined performance over two years across forty

business units in the financial services industry. It found that, whencompassion was part of the values of the business units as rated by themembers, the compassionate units exhibited better financial perfor-mance, executives perceived the compassionate unit as more effective,and those units realized higher employee and customer retention.

(Worline & Dutton 2017: 14, 15)

Further examples of the positive effect of compassion can be found onthe website www.thecompassionlab.com. Initiated through the RossSchool, the Compassion Lab is a group of organisational researchers whostrive to create a new vision of organisation as sites for the development andexpression of compassion, human growth and the development of humanstrengths.Compassion and kindness can also have a strong impact on employee

motivation. Ashridge Business School’s Amy Armstrong (2015) found thatin a business or organisational environment, compassionate staff were hap-pier, more engaged with work, more willing and able to foster teamworkand kept customers longer and better satisfied with the service (Armstrong2015). Management Professors Sigal Barsade and Olivia O’Neill (2016)showed that employees who were kind gained extra performance motiva-tion from working in an organisation which shared their values.


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http://www.thecompassionlab.com

Interestingly families and close relatives of workers in a more compassionateand kind organisation also displayed more loyalty and commitment to theemploying organisation, indicating that kindness can have a beneficialimpact beyond the immediate work environment.Dr Emma Seppala, Science Director of Stanford’s Centre for Compassion

and Altruism Research & Education has found that compassionate leader-ship breeds trust and innovation. “Trust is a crucial aspect of our lives because itmakes us feel safe….We prefer leaders who are warm to those who project toughcharacteristics…observing kind behaviour significantly reduces our brain’s stressreactivity….In turn, trust increases a spirit of innovation” (Seppala 2016).For the individual leader, kindness has been shown to have a positive

energising effect, on both the kind individual and the recipient. Psycholo-gists Abraham Maslow (1971), Barbara Fredrickson (2009), and Sara Algoeand Jonathan Haight (2009) all observed that when individuals carry outacts of virtuous kindness, they appear to instigate feelings of compassion.This creates improved interpersonal relationships and reinforces good deedsthat drive and further reinforce more kindness behaviours. ResearchersNicholas Christakis and James Fowler (2014) have shown that kindness canbe contagious (www.kindness-is-contagious.com).When others see acts of kindness in leaders that they perceive as

authentic, they undergo a complex series of emotional responses which canbe summarised as increasing feelings of loyalty towards the leader andcommitment to their objectives. Collectively loyalty and commitment canbe seen as respect, defined by Professor Therese Lysaught (2004) as regard-ing another person highly, valuing their individuality and uniqueness,considering their feelings and attending to their needs and well-being.

Conclusions

Among organisations that have kindness and compassion as a core value, thehealthcare and education sectors are particularly frequently represented.This is evidenced through a focus on kindness to service users: patients,their families and friends in hospitals and to children and students in edu-cational institutions. “We offer you the kindness that we would want for a lovedone,” is the aim at the University College London Hospitals. Kindness andcompassion can also be exemplified in kindness to staff and the widercommunity. At the University of Central Lancashire for instance, the valueof ‘compassion’ involves treating students, staff and the wider communitywith consideration, care and honesty.


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http://www.kindness-is-contagious.com

The example of the Nationwide Building Society shows that organisa-tions that are set up for kind purposes can survive and prosper. In the caseof Nationwide this means a service for the common good, giving theopportunity for ordinary people to save or own property and trading in‘the currency of kindness.’ This is also exemplified in a growing number ofsocial enterprises, particularly, but not only, in developing countries.A strong commitment to the well-being of employees can also be highly

beneficial with the founding and development of the John Lewis Partner-ship as a “partnership for all” a case in point. In this famous retailing busi-ness, the objective of service to employees has combined with service tocustomers to lead to sustained financial performance. The Partnership hasbeen described as a “model for economic and social reform” (Hill 2012).It is worthy of note that new young companies like Agency H5 and

LinkedIn are emphasising the importance of kindness and compassion andits positive impact on clients (Agency H5) and decision-making(LinkedIn).Academic research also suggests that a kind leadership approach can

benefit an organisation. Compassion, kindness and virtuousness can con-tribute positively to productivity, innovation and financial performance.Customers appreciate organisations that will go the extra mile: these orga-nisations stand out. Employees appear to enjoy working in kind organisa-tions and feel respect and loyalty to kind leaders. Their motivation has beenshown to increase, alongside their ability to foster teamwork. This canextend beyond the immediate work environment to the families and closerelatives of workers. Kindness does appear to provide the building blocksfor the type of company called for by William Baker and Michael O’Malleyat the beginning of this chapter, an organisation in which “people care abouttheir work, the company and one another.”A number of “ingredients” or character traits are believed to make up the

kind leader. In this chapter, altruism, authenticity, compassion, courage,forgiveness, generosity, gratitude, humility, humour, integrity, puttingothers first, resilience and warmth have been mentioned. These parallelwhat we have called “the contours of kindness” in Chapter 1.It is important to understand what kindness is not. Kathleen Kenehan

Henson of Agency H5 stresses that kindness is not about control. Onthe other hand, it is not about being a pushover. It requires an ability to bestraightforward in dealing with others, to hold difficult conversations, tonot condone rudeness and to face up to difficult decisions. Resilience isneeded.


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Being a kind leader also requires balance. A doctor, for instance, needs todemonstrate both a knowledge of medicine and kindness towards the suf-fering of his/her patient. As Vice Chancellor of a university, Mike Thomashas to balance trust, teamwork and compassion (which may be perceived bysome as ‘soft’ values) with the pragmatism of common sense and attentionto detail.A kind leader also needs to take care not to become overloaded with the

concerns of others. Kind leaders need to learn to manage their time andcreate space for themselves. On the other hand, kindness has been shown tohave a positive energising effect, create improved interpersonal relations,increase commitment and to be contagious! Acts of kindness, it seems, canimprove interpersonal relations, drive others to good deeds and reinforcefurther kindness behaviours.In the three chapters that follow, we shall offer further insights into what

kindness is and how it is exemplified. All are based on interviews or surveyquestionnaires: Chapter 3, focussing on the UK private and public sectors,throws more light on the meaning of kindness and experiences of how it isseen in action. Chapter 4 provides a global perspective and gives additionalinsights into kindness-based behaviours, the contexts that influence kindnessand the impact of kindness in leadership. Chapter 5 is based on theexperiences of women leaders of kindness in their lives and at work.

Food for thought

1. From your own experiences, do you feel that kind and com-passionate leaders make their organisations better places towork for? Why do you hold that view? What evidence do youhave to support your view?

2. Do you see kindness as an organisational strength, or can it bea weakness?

3. Think of a kind leader you have known. What were the keycharacteristics and behaviours that he/she exemplified?

References

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Baker, W.F. & O’Malley, M. (2008) Leading with Kindness: How Good People Consistently GetSuperior Results. AMACOM.


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Fredrickson, B.L. (2009) Positivity. New York: Crown.Frost, P.J. (2016) ‘Why Compassion Counts!’ Journal of Management Inquiry 20(4): 395–401.Fryer, B. (2013) ‘The Rise of Compassionate Management (Finally)’ 18 September. www.

hbr.org/2013/09/the-rise-of-compassionate-management-finally.Garner, J. (2017) ‘Building society, Nationwide.’ Interview in Society Matters, Nationwide

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www.nbcnews.com/better/careers/one-ceo-s-secret-success-always-lead-kindness-n728771.Hill, A. (2012) ‘A Rather Civil Partnership.’ Financial Times. 20 January. www.ft.com/con

tent/30ca497e-438a-11e1-9f28-00144feab49a.Lysaught, M.T. (2004) ‘Respect: Or, How Respect for Persons becomes Respect for

Autonomy.’ Journal of Medicine and Philosophy 29(6): 665–680.Maslow, A. (1971) The Farther Reaches of Human Nature. New York: Viking.Newman, J.H. (1856) The Office and Work of Universities. Longman, Brown, Green and

Longmans.Phillips, A. & Taylor, B. (2009) On Kindness, London: Penguin Books.Porath, C.L., Gerbasi, A. & Schorch, L. (2015) ‘The Effects of Civility on Advice, Leader-

ship and Performance.’ Journal of Applied Psychology 100(5): 1527–1541.Porath, C.L. & Pearson, C.M. (2012) ‘Emotional and Behavioural Responses to Workplace

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Porath, C.L., Overbeck, J.R. & Pearson, C.M. (2008) ‘Picking up the Gauntlet: HowIndividuals Respond to Status Challenges.’ Journal of Applied Social Psychology 38: 1945–1980 http://dx.doi.orig/10.1111/j.1559-1816.2008.00375.x.

Rogers, C. (1996) A Way of Being. Boston: Houghton Mifflin.Rothwell, N. (2014) ‘Kind Leadership: How to Make a Difference Whatever your Position

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1 Setting the agenda forcorporate sustainability

� Why corporate sustainability?� Redesigning the corporation� Phase models of sustainability� Change agent roles and the phase model� Appendix 1.1: phases in the development of

corporate sustainability

Why corporate sustainability?

Since the first edition of this book was published in 2003, corporatesustainability has increasingly become integral to competitive advantageand is a contributing factor in influencing investment decisions.1 In 2017,we are confronted by an extraordinary transition into the AnthropoceneEra and recognition that human activity has breached several planetaryboundaries. Never before in the history of the world has the viability ofmuch of the life on this planet been under threat from humanity; neverbefore have so many of the world’s people experienced such materialwealth and so many others lived in abject poverty; never before have somany had such interesting and fulfilling work and so many others suchdegrading work or no work at all. If we are to live healthy, fulfillinglives on this planet in the future, we must find new, life-affirming valuesand forge new patterns of living and working together. This new editionincorporates what we see as the most influential of these newunderstandings bringing about change and the increasing urgency to doso in an Anthropocene Era. We also discuss sustainability transitions asa means of moving away from traditional business practices towards the‘ideal’ sustaining organization and innovative new business forms thatare challenging the status quo.

Our current transition into the Anthropocene Era has been brought aboutby multiple causes but one important contributing factor has been therise of the corporation. Corporations are the fundamental cells of moderneconomic life, and their phenomenal success in transforming the earth’sresources into wealth has shaped the physical and social world in which

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we live. The powerful dynamism of modern organizations hastransformed nature and society and therefore must bear responsibility forsustaining the biosphere and people’s livelihoods. The dominant modelof the corporation as a profit-maximizing, externalizing machine needsto be modified to one which is a regenerative force that contributes tothe continuing health of the planet, the survival of humans and otherspecies, the development of a just and humane society, and the creationof work that brings dignity and self-fulfilment to those undertaking it.

In this edition, we continue to highlight how ‘business as usual’ is notsustainable and, unless significantly reshaped, will continue toundermine the sustainability of society and the planet. Corporations havecontributed to the problems and they must therefore be part of thesolution. Fortunately, their transformation is already under way, drivenin part by the changing demands of modern society and also by theleadership of far-sighted and responsible people within and outsidecorporations who see the need for change. However, for thetransformation to be successful, many more change agents are neededand to transition to a sustainable economy, viable ‘business as unusual’,sustainable business models must emerge. Some of the most importantchanges in history have been created by people of vision andimagination who were not content simply to react to events but feltcompelled to envisage the possibility of a different world and to initiateaction to bring the new reality into being. They were often regarded asdeluded or heretical at the time but later were celebrated for theirforesight and courage.2 Today senior executives from large andprofitable corporations – Phillips, DuPont, Honda, GE, Marks andSpencer, Nike, Siemens, Unilever – are centralizing sustainability as acore purpose of their business. In their minds, there is no doubt that weface serious issues such as climate change, resource scarcity, vulnerableecosystems and poverty.

This depletion of the services provided by nature to humankind requiresa shift in how corporations think about and deal with sustainability.There is a compelling business case, an ethical responsibility andscientific discoveries indicating a more urgent compulsion to respond tosustainability issues. Some are responding to pressure from externalstakeholders such as industry associations, government agencies or,increasingly, from companies along their supply chains. Others areassenting to demands from internal stakeholders concerned variouslywith ethical issues of production or supply, or the savings to be achievedfrom reducing waste and an efficiency approach to resource use.

4 • Towards third wave corporations

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Importantly, we also note in this new edition of the book that manysmaller companies and entrepreneurs are driving and shaping thesustainability agenda as sustainability-oriented innovation becomesessential. And a supportive institutional infrastructure is supporting theemergence of sustaining organizations while new business models suchas the Circular and Sharing Economies are challenging the status quo.This book is written to assist change agents to drive the necessarychanges faster and farther while there is time. We discuss key issues inthe debate around corporate sustainability, advocating for proactivebusiness responses. The current crisis is too urgent to wait for consensus:we need to start out on the path towards sustainability by generating newbusiness models that enable flourishing social relationships and restorethe natural world.

Corporations are not the enemy; however, many must significantlychange the way they do business. New social and ecological realitiesrequire new responses. The crises faced by humanity can be resolvedonly by the use of concerted corporate action. Corporations areinstruments of social purpose, formed within society to accomplishuseful social objectives. If they do this, they have a right to a continuedexistence, a license to use resources and a responsibility to producesocially beneficial products and services. However, if they debase humanlife, act with contempt for the community of which they are part,plunder and pollute the planet and produce ‘bads’ as well as ‘goods’,they forfeit their right to exist. They become unsustainable because theyare unsustaining. The single-minded pursuit of short-term profitabilityfor shareholders or owners does not justify a ‘couldn’t care less’approach to people and the planet. The prevailing economic value ofunlimited and unending growth is the ideology of the cancer cell. Livingwithin the natural limits of the earth’s resources and exercisingresponsible resource stewardship is a universal requirement for all of us,individually and collectively.

As with the previous editions, this book provides a roadmap for businessorganizations moving towards sustainability. We continue thedevelopment of our framework in the form of a phase model showingthe transition between different organizational approaches tosustainability. We define key steps along the way and indicate how tomake an incremental transition from step to step or, in some cases, atransformative leap and transition between waves to achieve the aspiredsustaining corporation. As we write this in 2017, we note the major shiftsince the first edition published in 2003, with many companies movingfurther along the phase model towards higher levels of sustainability.

Setting the agenda • 5

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What was relatively unusual in 2003, is now expected of leadingcompanies as they attempt to address sustainability challenges such asclimate change and human rights issues. This is, therefore, a guidebookfor corporate change agents – executives, managers and members of theworkforce, external consultants, community activists – who aredissatisfied with the status quo in organizational life and who want toexpedite transition to this new organizational world where individualsare cherished, the community is supported, and the natural environmentis nourished as a matter of course as the organization goes about its corebusiness. Nothing less than this is worthy of our humanity, ourintelligence and our ingenuity.

The distinctive contribution of this book is that it concentrates on how to implement the changes that make organizations more sustainablethemselves and also more sustaining of the environment and society. So, this book is a practical and informed tool for creating sustainablecorporations that are part of the solution to keeping a world fit to live in.It is an invitation to you to be part of the future solution – a responsibleagent of creative change.

For those who are prepared to act with purpose and direction inreshaping the organizational world, this is perhaps the most excitingperiod in human history. Each generation faces its challenges. But thisand the next two or three generations will be decisive in determiningwhether more humans than have ever lived on this planet can create the collaborative institutional forms needed for our survival and thesurvival of those other precious life forms who share this planet with us. And beyond survival, to create innovative institutional forms toprovide us all, and those who come after us, with a quality of economic, social and cultural life that nurtures and develops our humancapabilities.

That is the challenge we deal with in this book. In meeting thischallenge, we must redesign many of our organizations andfundamentally rethink the core value proposition of business models. So, we begin here with a short discussion of the evolution of theinstitution which is the focus of our book: the corporation. Becausecorporations share so many common features and are so pervasive, we can easily assume that the corporation is an immutable social form. But it is not – it has already undergone substantial redefinitions overtime. The question we address here is how can we redesign thecorporation for human and ecological sustainability?


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Redesigning the corporation

Over the years, corporate scandals such as James Hardie, Enron andAnvil Mining have been compounded by the recognized complicity ofcorporations in major environmental disasters, such as BP with theDeepwater Horizon oil rig spill in 2010 where workers lost their livesand billions of dollars in damages awarded against BP reflected the hugeimpact on human welfare as well as on the natural environment. Thetragic effect of the earthquake and subsequent tsunami on the Fukushimanuclear plant in Japan in 2011 had been heralded by numerous reportsidentifying poor safety records at the plant and came less than four yearsafter a magnitude 6.8 quake shut the world’s biggest atomic plant, alsorun by Tokyo Electric Power Co. Stanford researchers have calculatedthat the latter incident may eventually cause anywhere from 15 to 1,300deaths and from 24 to 2,500 cases of cancer, mostly in Japan.3 Suchincidents highlighted the extent to which powerful corporate entities can write their own rules for action, regardless of the consequences forothers. As a result, there is increased public pressure for corporationsto be made more accountable. The difficulties associated with holdingorganizations accountable for compliance with legal requirements andlegitimate community expectations will be discussed in Chapter 4.

The rise of the multinational corporation and the internationalization offinancial markets has taken the power of the modern corporation to thepoint where it can represent a formidable challenge to the authority ofthe nation-state, let alone small groups of citizens. Global corporationsoperate across political boundaries and so escape overall surveillance by particular nation-states. The wealth of the largest global companiesexceeds that of most nations and this has given them unprecedentedpower. The existence of large-scale power discrepancies does not initself guarantee that the power will be used irresponsibly, but it doescreate the potential for the misuse of power. Throughout corporatehistory many corporate chieftains have used their power rapaciously and irresponsibly. For example, a coalition of oil companies and largeconstruction firms in the US planned and efficiently brought about thedemise of the US railroad system to favour the construction of a vastnetwork of interstate highways. More recently a small number ofrespected financial institutions were responsible for the irresponsiblelending practices that caused the near meltdown of the world’s financialsystem in 2008.

But of course, there are also plenty of instances of corporate leadersexercising social and environmental responsibility. In fact, there is a


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growing divide between those corporate leaders who have embraced theresponsibilities and opportunities of corporate citizenship and those who,through ignorance or design, continue to exploit natural and humanresources.

Are corporations evil?

It is a naive and simplistic view that portrays corporations as evil bytheir very nature. Almost everything we depend on in our modern worldis the product of corporations – from the food we eat, the clothes wewear, to the phones and computers we use to communicate with eachother. We cannot do without corporations. What is important, however,is that we exercise sufficient collective control over the way in whichthey operate to ensure that they support rather than destroy theecological and social fabric we depend on.

Throughout the history of corporations, there has been a continuingdebate over how the corporation should be defined, including its legalconstitution, its social responsibilities, its role in environmentalprotection and the constituency to which it is accountable. The core ofthis debate can be summarized as the argument about whether the role of the corporation is simply to create financial wealth for its owners or to contribute to the well-being of a wider range of stakeholders,including the community, the environment and future generations.

This debate has gone on for as long as ‘modern’ corporations haveexisted, and its history is too long and complex to trace here. The debatehas included, for example, fierce critiques of the legitimacy of the slavetrade; sabotage of the ‘dark satanic mills’ that blighted the lives ofworkers and devastated England’s ‘green and pleasant land’; large-scaledemonstrations against nuclear power plants; experiments in ‘industrialdemocracy’; the rise of ‘green’ political parties; organizationalinnovations such as ‘the triple bottom line’; demonstrations againstglobalization, capitalism, neoliberalism, climate change and theexploitation of human rights. Since corporations came into being, eachgeneration has engaged with and continued this debate, which hasshaped corporations as we know them today. Most recently, a criticalissue in the debate has been the relative virtues of the prevailingneoliberal economics (‘economic rationalism’) versus ‘stakeholdercapitalism’. Neoliberal economics, popularized by the economist MiltonFriedman, argues that the role of the corporation is simply to maximizeshort-term returns to shareholders, and that competition in an


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unregulated market will create optimal outcomes. The widespreadacceptance of this point of view, especially by economic advisers togovernments, has been influential in shifting considerable power fromthe public to the private sector, the ongoing privatization of governmentservices, the deregulation of major industries and markets and thecreation of international competitive ‘free trade’ markets.

Critics of this viewpoint argue that these changes have had destructiveconsequences for other societal stakeholders – employees, customers,suppliers, governments, local communities, future generations, otherspecies of planetary life and the environment. The drive for short-termprofitability is underpinned by widespread acceptance hitherto of thelogic of linear economic growth. However, increasingly powerful forcesin government and business are recognizing the dangers of imposinglinear economic growth logic on resources and ecological systems thatdo not grow in a linear fashion and we are seeing new approaches suchas the Circular Economy emerging in policy frameworks. The collapseof the 500-year-old cod-fishing industry off the coast of Newfoundlandas a result of over-fishing, for example, is regarded as the archetypalexample of how a subsistence relationship with nature can be destroyedby the onslaught of technological development at the cost, in thisinstance, of an estimated 30,000 jobs.

The nature of the modern corporation, and the philosophy of economicneoliberalism that supports it, has been strongly influenced by thesuccess of the US economy and the history of leading US corporations.The culture of modern capitalism has evolved from the experiences of a multitude of corporations developing on a continent with enormousunexploited and virtually free natural resources. For example, at the timeof European settlement, the number of bison on the North Americancontinent was estimated at between 30 and 60 million. They were themost economically valuable wild animals that ever inhabited theAmerican continent. When a halt was called to their slaughter in the late1800s, only 600 survived. The passenger pigeon, once the mostnumerous bird in North America and on the planet, did not survive theonslaught of the hunters’ guns – they were completely exterminated.4

Despite depredations of this magnitude, the size of the continent ensuredthat, for the formative two centuries of US capitalism, the torrent ofecological destruction and the increasing waste and pollution emitted inconverting resources into wealth could be absorbed by nature. Thewealth that was generated enabled the US to become the most powerfulnation on earth, with a business culture dominating the late twentieth andearly twenty-first centuries.


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As a result, most corporations today operate under accounting rules andcultural assumptions that reward them for disregarding many of thesocial and environmental consequences of their activities. They‘externalize’ many costs of ongoing operations to the community, theenvironment and future generations. Neoclassical economics, based onthe assumption of environmental abundance, still assumes that manyinputs from the natural and social environments, like air and parenting,are free goods because there are no financial charges made for them. Inaddition, the goods and services produced by the firm are given valuebut the ‘bads’ and ‘disservices’ created at the same time are often neitheridentified nor costed and charged back to the corporation. The discourseof business and economics largely defines our ecological and communityissues. Hence, in the most significant business decisions these issues areignored because they are invisible – the decision makers have no culturalcategories for them – or, if perceived, the issues are regarded asirrelevant or of marginal importance. In fact, they are of increasingimportance for the survival of life on this planet and for social justice,and they must become central to strategic decision-making. We need anew economics that redefines economic capital to include nature andpeople.5

So, we face a situation where corporate decision makers, many of whomare well-intentioned, community-minded citizens, make decisions whichcumulatively are having a catastrophic impact on the planet and on theglobal community. And they are supported in this pattern of decision-making by consumers (us) who reward them by purchasing the goodsand services that they produce. We are all captives of a culture ofcapitalism that, over 200 years, produced enormous wealth and anincreased standard of living for large numbers of people. But the costs ofcontinuing on this path, using the same methods, are now threatening todestroy our ability to use the wealth in the creation of healthy, satisfyinglives and also threatening the viability of such a life for futuregenerations. We have become, in the words of Tim Flannery, ‘futureeaters’.6 Most of us have a stake in our current culture and are threatened by any substantial critique of it. We sense that we must, atleast for the sake of our children and future generations, start to do somethings differently. But the size and the complexity of the issues aredaunting, and we are caught in a spider’s web of cultural categories thatconstrain our effective action. Change must begin with us – but wherecan we begin?


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Making a start

Wherever we are in society and the world of work, we can engage in thedebate about the social role of the corporation. All of us can contributeto a redefinition of corporations to ensure they become majorcontributors to sustainability rather than social and environmentalpredators undermining a world fit to live in. There is a huge opportunityhere to ensure that all corporations are instruments of a broader socialpurpose than the generation of short-term wealth for shareholders. Ofcourse, shareholders deserve a return on their investment. As we shallshow, in most cases this return is enhanced rather than reduced bysustainable practices. We think it is vital that corporations make profits –but not at the cost of destroying the future viability of society and theplanet. At this time, we have collectively overspent our credit card andare in danger of leaving our children with the debt.

The sustainability debate is currently being engaged in three ways: first,at the intellectual level as the immensity of current unsustainablepractices is documented and we all become aware of the considerablechallenges of changing these practices; second, at the level of corporateaction, as hundreds of thousands of members of boards of management,executives, managers, supervisors, members of the workforce, externalconsultants, non-government organizations and community groups take amultitude of actions on a daily basis that impact on issues of social andenvironmental sustainability; third, at the level of consumption, as wecollectively create the powerful patterns of financial rewards that shapethe economy. If we continue to purchase products that strew our worldwith waste and poison our environment, we cannot blame the captains ofindustry for the resulting destruction. If we are to make corporationsinstruments of renewal, the debate must be engaged at these three levels:through forging a powerful new ideology that creates a compellingvision of a future world fit to live in, implementing the practical actionsin the workplace, and altering our consumption patterns to bring thevision into being.


Like it or not the responsibility for ensuring a sustainable world fallslargely on the shoulders of the world’s enterprises, the economic enginesof the future.

(Stuart Hart, Kenan Flagler Business School)7

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A new approach to economics has developed in recent years to deal withthe fact that traditional economics has largely taken the ecological andsocial environment for granted. This approach recognizes that economicsmust take ‘natural capital’ (ecosystems) and ‘social capital’(relationships between people) into account. Neoclassical economicstreats the economy as a closed system, with negative results, such aspollution, treated as ‘externalities’ which can be ignored in economicterms. Similarly, some of the world’s most critical resources are treatedas ‘free’ inputs and accorded no value unless they acquire economicworth in the process of production. Ecological economics, by contrast,makes such externalities an integral part of the economic system.Ecological economics is a recent field of study which integratesprinciples from ecology and economics. As a result of the increasingimportance of these new approaches, economists are recognizing theimplications of ecological functioning and resilience for human welfare.For instance, biological resources such as trees and fish, and ecologicalservices such as erosion control and climate stabilization depend onmaintaining certain levels of ecosystem functioning.8

The depletion of natural and social resources and the accumulation oftoxic wastes or rising crime rates can be consequences of economicdecisions that seem ‘rational’ in traditional economic terms. But in thenew economic models their social and ecological effects are includedrather than excluded. It is fair to say that in these new models some‘rational’ decisions begin to look insane. For instance, the decision tobuild bigger, more technologically efficient fishing fleets to maximizeharvests of fish from the world’s oceans looks rational – but only on theassumption that the supply of fish is inexhaustible.

This book makes a contribution at all three levels: to the intellectualagenda for change; to the strategies for corporate action; and to changingconsumption patterns. We outline the need for sustainability, identifyingthe gap between where we are now and where we need to be, and thenwe provide a detailed discussion of the kinds of strategic actions that areneeded to carry us forward.

In accomplishing this, we outline developmental phases that lead to thefully sustainable organization, that is, an organization that is itselfsustainable because its stakeholders, including its employees, willcontinue to support it. But it is also a sustaining organization because itis sustaining the wider society and the ecological environment. To trulyobtain this ideal phase, we propose that a transition approach is required.Transitions are beyond transformational approaches as they suggest


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deliberate and intentional rejection and movement away from one stateinto another.

Since 1992, when the leaders of the world’s governments gathered inRio to endorse the principles of sustainable development, they havestruggled with the challenge of integrating the social, environmental andeconomic principles that sustainability requires. Since Rio +20 in 2012,it has become clear that key indicators such as levels of greenhouse gasemissions are not improving and that reductions in emissions from somedeveloped countries are being cancelled out by the imports of goodsfrom developing countries which do not have binding emissions targets.9

More recently the Sustainable Development Goals (SDGs) highlight theneed for transition as they shift the focus of sustainability to an‘outwards in’ dimension. This means corporations are valued asimportant drivers for achieving development goals such as providingforms of inclusive employment, minimizing waste and conserving thenatural environment. Sustaining corporations that seek transition to asustainable society will make a major contribution to ensuring that theworld progresses along this path.

Phase models of sustainability

Various authors have described the historical processes by whichcorporations have moved towards supporting ecological sustainability.10

Studies of historical stages underlying moves towards corporate socialresponsibility (or, as we refer to it here, human sustainability) are rarer.An exception is a model proposed by Austin. Austin proposed thatcorporations should develop relationships with other non-profitorganizations according to a ‘collaboration continuum’. In thiscontinuum, the relationship can develop from the philanthropic phasethrough a transactional relationship, such as sponsorship, to an integratedphase. In this stage, profit and non-profit share a common aim.11

Our interest in phase theories such as this is not primarily to develophistorical understanding, although that is useful, but more importantly tounderstand the paths corporations must travel to reach a full commitmentto a comprehensive model of sustainability that covers both human andecological issues. If we are to move corporations towards fullsustainability, we must be able to identify the stage where they are nowso that we can determine how to move forward.

Much can be learned by examining the history of moves towardssustainability in particular industries. For example, Hoffman has made


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a detailed analysis of the movement towards ecological sustainability inthe chemical industry in the US.12 He distinguishes four stages, from1962, when environmental issues were rarely discussed, to 1993, whenthe chemical industry and its key stakeholders increasingly adopted aproactive stance, viewing the environment as offering a set of strategicopportunities. In between, the chemical corporations reacted defensivelyand were met by tough governmental regulations; the initiative thenmoved from government to environmental activists. Finally, the leadingUS chemical companies absorbed what they had seen as ‘heretical’ideas, acted more responsibly, and found that the result was actuallybeneficial in business terms.

There is a great deal of overlap in models such as this, despitedifferences in the names given to the various phases and differentnumbers of phases. Clearly, any generalized phase model is a high-levelabstraction from the bewildering diversity of corporate life.Nevertheless, ideal-type models of this kind have a long history in thesciences13 and other such business stage models have emerged – withoutsuch a model it is difficult to compare and contrast individuals,organizations and communities.

In writing this book, we reviewed current models in the ecological andmanagement literature and also drew on our own organizationalexperience and research. We also reviewed the parallel but unrelatedliterature on the developmental phases of the movement towards humansustainability in corporations.14 The result is a comprehensive model ofthe developmental phases through which corporations progress towardsboth human and ecological sustainability. This model is central to theapproach to change outlined in this book; we summarize it here andexplain it in more detail in subsequent chapters.

The sustainability phase model

The phase model is designed as a tool for making meaningfulcomparisons between organizations to assess their current commitmentto and practice of behaviours relevant to two kinds of sustainability:human and ecological. The phases outline a set of distinct stepsorganizations take in progressing to sustainability. There is a progressionfrom active antagonism,15 through indifference, to a strong commitmentto actively furthering sustainability values, not only within theorganization but within industry and society as a whole.


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We can use the phases to characterize an organization’s characteristicway of treating the human and natural resources it employs. We can alsouse them to trace the historical trajectory that the organization has takenin getting to where it is and to chart possible paths forward.

The six phases we distinguish are:

1 Rejection2 Non-responsiveness3 Compliance4 Efficiency5 Strategic proactivity6 The sustaining corporation.

We do not assume that a firm necessarily progresses through the phasesstep by step on an ‘improving’ trajectory. On the contrary, anorganization may leapfrog phases, or regress by abandoning previouslyestablished sustainability practices. Significant shifts are often triggeredby changes such as the appointment of a new CEO, stakeholder pressure,new legislation, economic fluctuations or the loss of committedenthusiasts.

What are the distinguishing characteristics of each of these phases?

1 Rejection involves an attitude on the part of the corporation’sdominant elite that all resources – employees, community infrastructureand the ecological environment – are there to be exploited by the firmfor immediate economic gain. On the ecological side, managersdisregard destructive environmental impacts of the organization’sactivities and expect the community to pay the costs of any remediation.On the human side, employees are regarded simply as industrial ‘cannonfodder’: there is no commitment to developing them, and health andsafety measures are ignored or paid ‘lip-service’. There is a strong beliefthat the firm simply exists to maximize profit and any other claims bythe community are dismissed as illegitimate. The firm disregards thedestructive environmental impacts of its activities and actively opposesany attempts by governments, social advocates and ‘green’ activists toplace constraints on its activities. We refer to these organizations as‘stealthy saboteurs and freeloaders’ because their opposition eitheractively sabotages movement toward a more sustainable world or leavesany costs of initiation of innovative sustainability practices to otherorganizations or the community.16

The prevailing theme for Phase 1 Rejection is: exploit resources formaintaining short-term financial gain.


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2 Non-responsiveness usually results from lack of awareness orignorance rather than from active opposition to a corporate ethic broader than financial gain. Many of the corporations in this categoryembody the culture of the past century, concentrating on ‘business asusual’, operating in conventional ways that do not incorporatesustainability issues into corporate decision-making. The firm’s humanresource strategies, if they exist, are focused mainly on creating andmaintaining a compliant workforce. Community issues are ignoredwhere possible and the environmental consequences of the firm’sactivities are taken for granted and, if negative, disregarded.

We refer to these organizations as the ‘bunker wombats’, as, likewombats, they prefer to avoid the light of day and hunker down in theirdark bunkers away from where the action is taking place. The prevailingtheme of Phase 2 Non-Responsiveness is: business as usual.

3 Compliance focuses on reducing the risk of sanctions for failing tomeet minimum standards as an employer or producer. In organizations at this stage, the dominant elite emphasizes being a ‘decent employerand corporate citizen’ by ensuring a safe, healthy workplace andavoiding environmental abuses that could lead to litigation or strongcommunity action directed towards the firm. However, there is usuallylittle integration between human resource and environmental functions.The organization may see itself as a responsible corporate citizenbecause it supports charitable community ventures which are usuallyirrelevant to its core business activities. But they are primarily reactiveto growing legal requirements and community expectations for moresustainable practices. A recent shift has seen the development of co-regulatory practices. Instead of the traditional ‘command and control’ approach of governmental regulation, industry, NGOs andgovernments are collaborating to develop new systems of voluntarycompliance. This shift represents a transition from compliance towardslater phases.

We refer to these organizations as ‘reactive minimalists’, as they accept the demands of the environment to move toward more sustainable practices but limit their responses to what is required.Compliance is primarily a risk-minimization strategy designed to helpthe organization avoid fines for non-compliance with governmentallegislation and regulation, reputational damage caused by communityactivism directed at exposing non-compliance to communityexpectations, and the associated costs of time, energy and money incoping with antagonistic regulators and community groups.


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Compliance adds value by providing easier access to finance, improvedrelationships with regulators, and the basis for a positive reputation as a good corporate citizen.

The central theme of Phase 3 Compliance is: avoid risk.

4 Efficiency reflects a growing awareness on the part of the dominantelite in the corporation that there are real advantages to be gained byproactively instituting sustainable practices. In particular, humanresource and environmental policies and practices are used to reducecosts and increase efficiency. There is, for example, a growingawareness in many firms that what is defined as ‘waste’ derived from theproduction process may be a valuable resource to another firm. (Forexample, the spent hops from a brewery may be valuable as cattle feedand therefore sold rather than dumped.) Similarly, investment in trainingmay involve expense but results in compensating added value, throughincreased quality of products and services. While moves towardssustainability may involve additional expense, they can also havesignificant payoffs in terms of generating income directly or indirectly.This is the beginning of the process of incorporating sustainability as anintegral part of the business.

Value is added through significant cost reductions, particularly throughthe elimination or reuse of what was formerly viewed as waste,increased employee productivity, involvement and engagement, betterteamwork and lateral communication. There are not only cost savingsfrom elimination of waste of physical resources, such as water, energy,heat and materials, but also through formerly wasted human potentialstemming from unutilized people, turnover of important skills,absenteeism, lack of motivation, engagement and commitment, internalconflict, destructive political processes and obsolescent and unintegratedwork systems.

We refer to these organizations as ‘industrious stewards’ because of thefundamental shift of attitude to supporting continuous improvement ineliminating waste and making maximum use of scarce and costlyresources.

The central theme of Phase 4 Efficiency is: do more with less.

5 Strategic proactivity moves the firm further along the sustainabilitypath by making sustainability an important part of the firm’s businessstrategy. The focus is on innovation. The firm’s strategic elite viewsustainability as providing a potential competitive advantage andcreating shared value with and for a broader set of societal stakeholders.


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Consequently, they position the organization as a leader in sustainablebusiness practices: with advanced human resource strategies that helpmake the organization an ‘employer of choice’, with ‘corporatecitizenship’ initiatives that build stakeholder support, and withinnovative, quality products that are environmentally safe and healthy.The commitment to sustainability is strongly interrelated with the questfor maximizing longer-term corporate profitability and embedded withinthe practices, policies and processes of the organization. That is, it ismotivated by intelligent corporate self-interest.

The commitment to eliminating waste that is the focus in the Efficiencystage is continued but the concept of waste is significantly enlarged andredefined. What is now recognized more clearly is the waste that occursfrom unrealized or missed strategic opportunities: in particular, lostrevenue and market share through lack of innovation, neglect of theadvantages of up-skilling the workforce, failure to enter emergingmarkets and to develop high value-added products which gain and securemarket leadership, and too slow divestment of obsolescent operations.

We refer to these organizations as ‘proactive strategists’ because theysee sustainability as integral to business strategy and actively pursue itsbusiness advantages. Climate change, transition to a carbon-neutraleconomy and contributing to the sustainable development goals are seen,not as threats to be resisted, but as a source of business opportunity. Thecentral theme of Phase 5 Strategic Proactivity is: lead in value-addingand innovation.

6 The sustaining corporation. In this final phase, senior executives andthe majority of the members of the organization have stronglyinternalized the purpose of working for a sustainable world. With eachadvance toward this objective, the business environment supports thedeveloping strategy of the organization, and the organization itself isactively redefining its environment.

If it is a ‘for profit’ company, the organization still pursues thetraditional business objective of providing an excellent return toinvestors, but voluntarily goes beyond this by actively promotingecological sustainability values and practices in the industry and societygenerally. Its fundamental commitment is to facilitate the emergence of asociety that supports the ecological viability of the planet and its species,and contributes to just, equitable social practices and human fulfilment.

To achieve this, the organization actively participates in working withgovernments and communities to change ‘the rules of the game’, that is,public policy formulation that contributes to creating a more sustainable


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world. It cooperates with other organizations in its supply chain toensure that the whole production process is fully sustainable. It not onlybuilds human and relational capital within its own organization but alsoactively seeks to transfer best practice to other related organizations. It supports the dematerialization of production wherever possible,remanufacturing and recycling of resources, and the growth of theknowledge-based economy. It models ecological and social sustainabilitybest practice and supports and publicizes best practice elsewhere. Itactively works to influence capital markets to support long-term valueadding. It participates in international agreements and seeks externalindependent auditing of progress towards its sustainability goals.

These organizations have developed the capability to create a businessmodel that provides ongoing and continuing financial viability. Suchorganizations are either niche specialists in growing markets or havediversified to an extent that ensures continuity of performance for thewhole organization. There is ongoing and integrated knowledge capture,storage and dissemination of the ways the organization ensures growthand viability. Continuity of performance is achieved by means of reliableand diverse sources of finance and human capital. Stakeholderinvolvement is ongoing, and engagement is a strong and accepted aspectof the culture. There is an integrated approach to coordinating strategiesin the three main streams of sustainability: economic, social andecological. All key members of the supply chain are involved in well-coordinated sustainability practices, including a focused effort toimprove the sustainable behaviour of customers and consumers. Toachieve continuity in sustainable performance, effective changemanagement becomes an ongoing and effective ‘built-in’ capability.

The organization is seen as exercising leadership for the globalsustainability movement; its reputation is enhanced and it continues tobuild reputation and stakeholder support and involvement. Consequently,its ‘license to operate’ is continually endorsed. If it is a for-profitorganization, its share value increases and it increasingly attracts andretains the most talented and highly motivated employees available.Sustainability is an integral element of the cultural DNA.

Waste is reinterpreted. Any operations that divert the organization fromthe sustainability goal for the organization and society are consideredwasteful. This includes products, services and processes that do notsupport or that actually undermine the organization’s achievements andreputation as a sustainability leader. Products are designed for durabilityand repair, and for easy disassembly and reuse at the end of their productlife. Failure to align corporate talent with the goal of sustainability or


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loss of talent needed to pursue that goal is regarded as waste. Theoverarching aim is to build a constructive culture that encouragesopenness, debate, innovation, and the participation of organizationalmembers and key stakeholder groups.

We refer to these organizations as ‘transforming futurists’ because theyare not only concerned with the ongoing transformation of their ownorganizations to align with the requirements of a more sustainable world,but they are also actively involved in transforming the larger economyand society in the same direction.

The central theme of the Sustaining Corporation phase is: transformourselves: lead in creating a sustainable world.

For the sake of simplicity of presentation these are generic categoricaldescriptions that assume consistency in an organization’s sustainabilitystance across the human and ecological areas. This is anoversimplification. In reality an organization can have quite differentapproaches in each area. The organization as a whole, for instance, mayhave relatively enlightened human resource and social responsibilitystrategies that place it in Phase 5 for human sustainability (HS5), yet besimultaneously pursuing an unsustainable ecological strategy and so bein Phase 2 in ecological sustainability (ES2). For example, a miningcompany may invest strongly in the training and development of itsemployees and subcontractors and also in local community development(HS5), but it may operate environmentally polluting mining operations(ES2).

A fuller version of the model, which allows for differences of this kind,is given in the appendix at the end of this chapter. We suggest that, onfinishing this chapter, you skim-read this and identify where theorganization you are involved in would be appropriately placed on thesetwo important dimensions. As we mentioned above, we shall be dealingwith each of these phases in much more detail later in the book and youcan check out the specific implications of our argument for yourparticular organizational situation.

We have categorized the phases of sustainability according to threewaves. These waves are set out in relation to the six phases of our phasemodel in Figure 1.1.17

Figure 1.1, modified from Kemp, Stark and Tantrum’s diagrammaticversion of our original phase model, shows an ‘ideal type’ model of thephases through which an organization moves. The phases of our modelare shown in the top line of arrows. The diagram shows (above the


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arrows) how the various phases fit into each of the ‘waves’ of corporatechange. (The first wave, for example, is made up of organizations still inthe phases of rejection and non-responsiveness.) Each wave represents amore distinct transition away from one approach to another. The secondline provides a single word which characterizes the predominantattitudinal focus of senior executives at each phase. So, for example, inthe rejection phase senior executives are focused on rejection of therelevance of sustainability attitudes to their business, while, by contrast,at the strategic proactivity phase their predominant focus is on achievingstrategic advantage. The bullet points summarize some keycharacteristics of organizations at each phase – more detail is given inthe relevant chapters in this book. Finally, the arrows at the foot of thediagram show how each phase affects the value of the organization.Rejection of sustainability, for example, actually destroys the value ofthe firm, as it increases risk; non-responsiveness limits value;compliance conserves value by reducing risk; and efficiency andstrategic proactivity create value; finally, the sustaining corporationrepresents a transformation of the corporation into a truly sustainablebusiness that is adding value for the business itself and also adding valuefor society as a whole and for the environment.

Change agent roles and the phase model

To guide your path through the book, we give below a brief overview of the contents of each chapter. You may wish to read the chapters in alinear fashion or identify where you think your organization lies on thepath to sustainability and leap ahead to read that first. This chapteroutline will help you to decide which way to go. However, we dosuggest that you start by reading Chapter 2, ‘The drivers of change’.Chapter 2 sets out some of the reasons for the shift to sustainability,including work from leading earth scientists that reinforces the need fora transformation in the way humans inhabit the planet and from socialscientists that emphasizes the growing inequity within some nations andthe negative impact this has on society as a whole. We describe theshifts in global governance, such as the 17 Sustainable DevelopmentGoals, that are pressuring companies to respond.

Chapter 2 is designed to provide a basis for understanding the context ofpolitical and social forces in which our action is a small but potentiallypowerful part. If we understand the major forces that are transformingthe world, we can align our energy with those forces already movingsociety in the direction we support. In this way, even small actions may


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be amplified to create transformational change, rather than beingneutralized and dissipated by countervailing forces. In Chapter 2 wehighlight some of the major shifts that have occurred in the appreciationof the importance of sustainability and intangible value by individualorganizations and across industry sectors since our first edition.

The remaining chapters then discuss the means for change and the majorsteps organizations typically take as they move beyond the phases ofrejection and non-responsiveness. Organizations in the first two phasesare what we refer to as ‘first wave corporations’, in contrast to what wehave termed the more progressive and forward-thinking ‘second’ and‘third wave’ organizations. Their attitudes of antagonism or indifferenceto the compelling need to create a more sustainable world reflect thelingering persistence of ‘business as usual’, a collapsing corporatemodel. In this ‘first wave’ model, the corporation simply exists to exploithuman and natural resources for profit, regardless of the impact of thison the current world or the world of the future.

Chapter 3 deals with phase 3 of our sustainability development model –compliance. In this phase, organizations seek to minimize the risk ofignoring the increasing demand from governments, communities andactivist organizations, for environmental protection and social justice.The chapter outlines the issues to be addressed at this stage in complyingwith relevant environmental and social legislation and in meeting thedemands of key stakeholders. It places particular emphasis on the values,culture and learning characteristics that can enable organizations to movetowards and beyond compliance. This chapter highlights the myriad ofvoluntary initiatives beyond government regulation and the benefits forthe corporation in adopting this ‘compliance plus’ approach. That is,voluntarily exceeding legislative requirements and stakeholderexpectations by playing a more proactive role in launching furthersustainability initiatives.

This sets the scene for Chapter 4, ‘Achieving sustainable operationalefficiencies’, which deals with phase 4 of our model, efficiency. In thisstage, organizations start to reap the positive rewards of concerted actionon environmental and social issues. Chapter 4 discusses the nature ofefficiency, enlarging the concept well beyond cost-cutting exercises. Inparticular, it shows how the sustainability perspective creates a newmindset that can reveal three successive and cumulative cycles ofefficiency-orientated measures. Each of these cycles brings importantbusiness benefits as well as contributing to the well-being of thecommunity and the natural environment. At this point organizationsoften discover how wasteful many of the traditional production or


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service processes are that they have used. Redesign of products,production flows and service systems generates significant returns. Forexample, recycling carpets (Interface) or remanufacturing office-machinecomponents (Xerox; Fuji-Xerox) can save millions of dollars as well asbenefiting the community and environment by eliminating toxic wastefrom landfill. From such eco-innovation, new business models aregenerated.

Chapter 5, ‘Sustainability: the strategic advantage’, moves on to Phase 5:Strategic Proactivity. At this phase, sustainability becomes important inthe organization’s strategic repositioning, and we highlight a marked riseof sustainability as a strategic priority for executives and boards since2003. New competitive advantages can be gained, for example, bymoving into rapidly expanding markets for alternative energy (orbecoming involved in projects designed to help regenerate communities).Strategic proactivity is an exercise in enlightened self-interest on the partof the corporation. We track changes in management thinking andpractice linked to heighted interest from investors and strategyconsultants and academics, and exemplified by the shared value concept.We discuss the practical challenge of integrating sustainability into corebusiness strategy.

Chapters 3, 4 and 5 deal with what we regard as ‘second wavecorporations’. Second wave corporations represent the dominant businessideology in today’s world, particularly the world of large corporations.Second wave corporations at least accept the rhetoric of adopting a viewof enlightened self-interest, that is, promising policies that bring widerbenefits than short-term financial returns to shareholders. Second wavecorporations often fall short of these ideals for various reasons which weshall discuss later.

The characteristics of our ideal organization of the future – thesustaining corporation – are discussed in Chapter 6. Sustainingcorporations represent the third wave – the regenerative organizations of the future that act as constituent cells in a complex and fully self-renewing world. This means a move beyond enlightened self-interest toa reinterpretation of the nature of the corporation itself. In the transitionto the third wave, the organization is redefined as an integral, self-renewing element of the whole society in its ecological context, whichalso actively seeks to sustain and renew the context in which it operates.

What we are seeking in this book is to assist the transition of first wavecorporations into second wave corporations, to find ways to turn therhetoric of second wave corporations into the reality of realistic action


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and, where possible, to support more second wave organizations totransition into third wave organizations that are truly sustainable andsustaining. The final part of the book takes up this matter ofimplementing such change. Corporate change is a theme that permeatesthe entire book, but in Part IV we concentrate on defining pathwaystowards sustainability, that is, on making corporate change that movesorganizations towards sustainability.

In Chapter 7 we discuss incremental and transformational approachesand add insights from alternative change perspectives. Someorganizations may make smaller incremental changes over time,systematically building on past successes, while others may makewidespread, rapid and quite radical alterations. Changes might focus onthe business they are in, the way they do business, their structure, theircorporate culture (or all of these). Chapter 7 outlines and integratesincremental and transformational change. It includes new material onalternative change approaches such as sensensemaking, complexity andemergence that consider the political and cultural context of changewithin the ‘soft-wiring’ of the organization.

Finally, Chapter 8 takes up the issue of how corporate change can beled. We relate specific approaches to leadership to different phases of thephase model and discuss how a variety of change agents, occupyingdifferent kinds of roles and acting individually or collectively, can createthe momentum needed to create more sustainable organizations.Potential change agents include those who work in corporations andthose outside who wish to influence them. Internal change agents areboard members, CEOs, executives, managers, supervisors, professionalsin staff roles and other members of the workforce. External changeagents include politicians and bureaucrats, investors, consultants,suppliers and subcontractors, financial analysts, social and ecologicalactivists and other key stakeholders such as community groups,regulators and consumers.

The way these change agents exert influence varies, but all havesignificant individual and collective roles. For example, executives mayexert influence through the exercise of authority, through interpersonalinfluence in informal networks, or through ensuring that theirorganization markets only sustainable products. Consumers may help todramatize a key environmental issue or organize a boycott of companygoods if they do not meet acceptable environmental standards. Allemployees can be change agents for sustainability, and leadership mustbe inclusive to increase the innovative capacity of the organization.


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Concerted action between internal and external change agents can beparticularly powerful in bringing about significant change, and we shallbe illustrating how this can be orchestrated. The most powerful force forshaping the sustainable corporation of the future will be the collaborativeinitiatives of a variety of change agents.

We hope that you now have an understanding of the exciting task wehave set ourselves in this book and have begun to see where you cancontribute to the significant social shift on which our collective futuredepends. The rest of the book will help you to deepen yourunderstanding of your potential role and maximize your influence in thischange process. All of us can exercise leadership where we are. If youalready are or wish to be a leader in creating this new social reality, thesustainable and sustaining organization, we dedicate this book to you.You will find it useful in the challenging task that lies ahead.


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Appendix 1.1: phases in the development ofcorporate sustainability

Human sustainability(HS1)

Employees and subcontractors areregarded as a resource to be exploited.Health and safety features are ignored orpaid ‘lip service’. Disadvantagesstemming from ethnicity, gender, socialclass, intellectual ability and languageproficiency are systematically exploitedto advantage the organization andfurther disadvantage employees andsubcontractors. Force, threats of forceand abuse are used to maintaincompliance and workforce subjection.Managers and owners deny any role thathuman slavery might play in globalsupply chains. Training costs are kept toa minimum necessary to operate thebusiness; expenditure on personal andprofessional development is avoided.The organization does not takeresponsibility for the health, welfare andfuture career prospects of its employeesnor for the community of which it is apart. Community concerns are rejectedoutright.

Ecological sustainability(ES1)

The environment is regarded as a ‘freegood’ to be exploited. Owners/managersare hostile to environmental activistsand to pressures from government, othercorporations, or community groupsaimed at achieving ecologicalsustainability. Pro-environmental actionis seen as a threat to the organization.Managers may actively organize againstany recognition that climate change is aresult of human behaviour and supportpolitical action in favour of the fossilfuel industry. Physical resourceextraction and production processes areused which directly destroy futureproductive capacity and/or damage theecosystem. Polluting by-products aredischarged into the biosphere, causingdamage and threatening livingprocesses. The organization does nottake responsibility for the environmentalimpact of its ongoing operations nordoes it modify its operations to lessenfuture ecological degradation.

Phase 1: rejection

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Financial and technological factorsdominate business strategies to theexclusion of most aspects of humanresource management. ‘Industrialrelations’ (IR) or ‘employee relations’(ER) strategies dominate the humanagenda, with ‘labour’ viewed as a costto be minimized. Apart from costminimization, IR/ER strategies aredirected at developing a compliantworkforce responsive to managerialcontrol. The training agenda, if there isone, centres on technical andsupervisory training. Broader humanresource strategies and policies areignored, as are issues of wider socialresponsibility and community concernsuch as human rights.


The ecological environment is notconsidered to be a relevant factor instrategic or operational decisions.Financial and technological factorsdominate business strategies to theexclusion of environmental concerns.Traditional approaches to efficiencydominate the production process and theenvironment is taken for granted.Environmental resources which are freeor subsidized (air, water and so on) arewasted and little regard is given toenvironmental degradation resultingfrom the organization’s activities.Environmental risks, costs, opportunitiesand imperatives are seen as irrelevant orare not perceived at all.


Phase 2: non-responsiveness


Financial and technological factors stilldominate business strategies but seniormanagement views the firm as a ‘decentemployer’. The emphasis is oncompliance with legal requirements inindustrial relations, safety, workplacestandards and so on. Human resourcefunctions such as training, IR,


Financial and technological factors stilldominate business strategies but seniormanagement seeks to comply withenvironmental laws and to minimize thefirm’s potential liabilities from actionsthat might have an adverse impact onthe environment. Companies participatein new forms of governance such as

Phase 3: compliance

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There is a systematic attempt tointegrate human resource functions intoa coherent HR system to reduce costsand increase efficiency. People areviewed as a significant source ofexpenditure to be used as productivelyas possible. Technical and supervisorytraining is augmented with humanrelations (interpersonal skills) training.The organization may instituteprogrammes of teamwork aroundsignificant business functions andgenerally pursues a value-adding ratherthan an exclusively cost-reductionstrategy. There is careful calculation of


Poor environmental practice is seen as animportant source of avoidable cost.Ecological issues that generate costs aresystematically reviewed in an attempt toreduce costs and increase efficiencies byeliminating waste and by reviewing theprocurement, production and distributionprocess. There may be active involve -ment in some systematic approach suchas Total Quality EnvironmentalManagement (ISO 14001). Innovationsthat lead to environmental issues aretaken up, but only if they are seen asreducing or eliminating avoidable costsor increasing efficiencies.

organization development, total qualitymanagement (TQM) are instituted butthere is little integration between them.Basically, the organization pursues apolicy of benevolent paternalism withthe expectation of employee loyalty inresponse. Community concerns areaddressed only when the company facesthe risk of prosecution or wherenegative publicity may have a damagingimpact on the company’s financialbottom line. Compliance is undertakenmainly as a risk-reduction exercise.Companies place an increased emphasison sustainability reporting butmonitoring of behaviour along supplychains is routine and little is done interms of third-party verification.

partnerships with government agenciesand NGOs, which assist in most obviousenvironmental abuses being eliminated,particularly those which could lead tolitigation or strong community actiondirected against the firm. Otherenvironmental issues, which are unlikelyto attract litigation or strong communityaction, are ignored.

Phase 4: efficiency

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cost–benefit ratios for human resourceexpenditure to ensure that efficienciesare achieved. Companies ensure thatthey have the requisite mix of skills toaddress goals and achieve businesstargets. Community projects areundertaken where funds are availableand where a cost benefit to the companycan be demonstrated.


The workforce skills mix and diversityare seen as integral and vitally importantaspects of corporate and businessstrategies. Intellectual and social capitalare used to develop strategic advantagethrough innovation in products/services.Programmes are instituted to recruit thebest talent to the organization and todevelop high levels of competence inindividuals and groups. In addition,skills are systematized to form the basisof corporate competences so that theorganization is less vulnerable to theloss of key individuals. Emphasis isplaced on product and serviceinnovation and speed of response toemerging market demands. Flexibleworkplace practices are strong featuresof workplace culture and contribute tothe workforce leading more balancedlives. Communities affected by theorganization’s operations are taken intoaccount and initiatives to address


Proactive environmental strategiessupporting ecological sustainability areseen as a source of strategic businessopportunities providing competitiveadvantage. Product redesign is used toreduce material throughput and to usematerials that can be recycled. Newproducts and processes are developedthat substitute for or displace existingenvironmentally damaging products andprocesses or satisfy emergingcommunity needs around sustainableissues (reforestation; treatment of toxicwaste). The organization seekscompetitive leadership throughspearheading environmentally friendlyproducts and processes.

Phase 5: strategic proactivity

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adverse impacts on communities areintegrated into corporate strategy.Furthermore, the corporation views itselfas a member of the community and as aresult contributes to communitybetterment by offering sponsorship oremployee time to participate in projectsaimed at promoting communitycohesion and well-being.


The organization accepts responsibilityfor contributing to the process ofrenewing and developing progressivehuman knowledge and skills formationin the community and society generally,and is a strong promoter of equalopportunity, workplace diversity andinclusion, a sustainability mindset, andwell-being and work–life balance asworkplace principles. It adopts a strongand clearly defined corporate ethicalposition based on multiple stakeholderperspectives and seeks to exert influenceon the key participants in the industryand in society in general to pursuehuman welfare, equitable and just socialpractices and fulfilment of the humanpotential of all. People are seen asvaluable in their own right.


The organization becomes an activepromoter of ecological sustainabilityvalues and seeks to influence keyindustry stakeholders and society ingeneral. The core environmental purposeof the organization is to restore orregenerate the biosphere. Environmentalbest practice is espoused and enactedbecause it is the responsible thing to do.The organization tries to assist society to be ecologically sustainable and usesits entire range of products and servicesto this end. The organization is preparedto use its influence to promote positivesustainability policies on the part of governments, the restructuring ofmarkets and the development ofcommunity values to facilitate theemergence of a sustainable society.Nature is valued for its own sake.

Phase 6: the sustaining corporation

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Notes

1 D. Kiron, N. Kruschwitz, K. Haanaes and L. von Streng Velken,‘Sustainability nears a tipping point’, MIT Sloan Management Review, 2012,53 (2), 69–74; G. Unruh, D. Kiron, N. Kruschwitz, M. Reeves, H. Rubel andA.M zum Felde, ‘Investing for a sustainable future’, MIT Sloan ManagementReview, 2016, 57 (4), 1–29.

2 D. Dunphy and A. Griffiths, The Sustainable Corporation: OrganizationalRenewal in Australia, Sydney: Allen and Unwin, 1998.

3 Stanford University, ‘Global health impacts of the Fukushima nucleardisaster’, Science Daily, atwww.sciencedaily.com/releases/2012/07/120717084900.htm (accessed 5 April 2013).

4 T. Flannery, ‘The lonesome prairie’, Good Weekend, Saturday Herald,Sydney, 3 March 2001, 35–41; T. Flannery, The Eternal Frontier: AnEcological History of North America and its Peoples, Melbourne: TextPublishing Company, 2001.

5 P. Hawken, A. Lovins and H. Lovins, Natural Capitalism: Creating the Next Industrial Revolution, London: Earthscan, 1999.

6 T. F. Flannery, The Future Eaters: An Ecological History of theAustralasian Lands and People, Port Melbourne: Reed Books, 1994.

7 S. Hart, ‘Beyond greening: strategies for a sustainable world’, HarvardBusiness Review, January–February 1997, 67–76. This quote p. 76.

8 R. Costanza, R. d’Arge, R. De Groot, S. Farber, M. Grasso, B. Hannon, K. Limburg and M. Van den Belt, ‘The value of the world’s ecosystemservices and natural capital’, Nature, 1997, 387 (6630), 253–60.

9 C. Duncan, ‘Has the Kyoto Protocol Made any Difference to CarbonEmissions?’, at www.guardian.co.uk/environment/blog/2012/nov/26/kyoto-protocol-carbon-emissions (accessed 5 April 2013).

10 C. B. Hunt and E. R. Auster, ‘Proactive environmental management:avoiding the toxic trap’, Sloan Management Review, 1990, 31 (2), 7–18.

11 J. Austin, ‘Strategic collaboration between nonprofits and businesses’,Nonprofit and Voluntary Sector Quarterly, 2000, 29 (1), 69–97.

12 A. J. Hoffman, ‘Institutional evolution and change: Environmentalism andthe US chemical industry’, Academy of Management Journal, 1999, 42 (4),351–7.

13 For a discussion and analysis of the stage model approach, see A. Kolk andA. Mauser, ‘The evolution of environmental management: from stagemodels to performance evaluation’, Business, Strategy and the Environment,2002, 11, 14–31.

14 D. Dunphy and A. Griffiths, The Sustainable Corporation, Sydney: Allenand Unwin, 1998.

15 We do not imply here, of course, that all organizations start the journey froma position of active antagonism to sustainability. Some organizations are


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http://www.sciencedaily.com/releases/2012/07/120717084900.htm

http://www.guardian.co.uk/environment/blog/2012/nov/26/kyoto-protocol-carbon-emissions

http://www.guardian.co.uk/environment/blog/2012/nov/26/kyoto-protocol-carbon-emissions

actually founded on strong ethical commitments (Phase 6) – they are,however, the exception, rather than the rule.

16 See S. Benn, D. Dunphy and B. Perrott, Cases in Corporate Sustainabilityand Change: A Multidisciplinary Approach, Prahan, Australia: TildeUniversity Press, 2011.

17 Our original phase model has been represented diagrammatically in V. Kemp, A. Stark and J. Tantrum, To Whose Profit: Evolution, London:WWF-UK, 2004. We have modified this diagram.


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Chapter 8

Corruption: The biggest market failure of all

It is often said that climate change is the result of the biggest market fail-ure of all time. I would argue that corruption is in fact an even greater distortion of markets and to date has done much more economic dam-age than climate change. Corruption is a pervasive evil. While some would say that so-called facilitation payments, small payments that encourage officials to do something that is their duty, are not damaging, I would disagree. This is merely the most common form of a very infec-tious disease that slides readily into making a payment to encourage an official to neglect his or her duty. However, it is true that the major damage comes not from facilitation, but from the award of contracts on the basis of corruption. In those cases, not only is the price of purchase inflated by kickbacks, but also the product or service delivered is often useless or in a location designed purely to win political favours.

A key question—have you ever bribed anyone yourself?

Given my opposition to corruption, I have often been asked whether I have been involved in the payment of bribes or personally paid a bribe. In 2010, I was asked this on a BBC World Service broadcast during

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responsible leadership

a discussion on corruption.1 I am pleased to say that both Shell and Anglo American both had very strong anti-bribery policies throughout my career with them. The same is true of the other companies on whose boards I have served. HSBC, Accenture, Saudi Aramco and Hermes EOS all hold unequivocal positions on corruption. On numerous occasions I have refused requests for bribes, both personally and on behalf of the companies for whom I worked. However, I have twice personally paid a bribe. I still feel guilty about it, but the circumstances illustrate what leads people to take the line of least resistance. On one occasion, I was returning by road with my family from a camping holiday in northern Nigeria, Mali and Burkina Faso. We were almost back to our home in Warri when we drove through the city of Benin. Two of our children had chicken pox and we were all hot and dirty from camping. In the city I did a left-hand turn across the traffic at traffic lights. A policeman stopped us and accused me of doing an illegal turn. No amount of argument on the niceties of the Nigerian Highway Code helped and, while most Nigerian officials are sympathetic to cases of family illness, this one insisted that chicken pox was just heat rash. In the end I agreed to buy a case of beer for the upcoming policemen’s Christmas party, and duly did so and delivered it. On parting friends with the constable, I asked him to give my regards to the local state Chief of Police, whom I knew by name. He remarked that had I said before that I knew his Chief there would have been no problem, but to me that would have been a more offensive form of corruption. You might ask why I did not report the demand for money to the Chief. Some time before, we had had a major oilfield fire and the Shell fire-fighters had been assisted by the municipal fire-fighters. As a thank-you gesture from Shell we arranged to give the fire station a collection of armchairs and a television set for their recreation room. To avoid the probability of a cash donation being diverted at higher levels, my Nige-rian colleagues and I decided that the goods should be purchased by Shell and delivered directly to the fire station, where it was received with

1 J. Melik, ‘The Dilemma of Bribes: To Pay or Not to Pay’, BBC News, 15 Decem-ber 2010, www.bbc.co.uk/news/business-11957514.

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great delight. To my horror, I later heard that the State Commissioner of Public Works had purloined the goods from the fire station and replaced them with similar but older goods. A short time later at a reception I saw the Commissioner talking to the Chief of Police. I went up to him, full of indignation. He greeted me warmly, thanked me for the generous gift to the fire station and immediately went on to say, without any shame, that as the goods were far too good for the fire crew, he had put them in his own house and replaced them with his older material. I added him to the mental list I keep of people I have met who should be in jail,2 but the Chief of Police’s attitude indicated that this was not something that was likely to happen soon. The second occasion on which I was personally involved in bribery was when my wife Judy and I were planning with my seven-year-old daughter, a Welsh friend Carole and a Malaysian colleague Ibrahim Ahmad to drive our Toyota Land Cruiser back across the Sahara from Nigeria to England. As the vehicle had been bought and heavily taxed in Nigeria, the plan was for another friend to use it to drive back from England to Nigeria. To achieve this we needed a certificate that would allow the re-import of the vehicle to Nigeria. Given the licence documents of the vehicle, this should have been a relatively simple matter. When Judy went to the relevant office in Lagos, she was approached by an agent at the door who asked if she would like him to do the paperwork for her. She declined, saying she would queue and do the work herself. The official viewed the papers and said that all was in order. He then asked where the vehicle was, and on learning that it was several hundred kilometres away in Warri, he smiled the smile of one about to play a trump card, and said that he needed to see the Toyota himself. There was no way that this would have been possible before we had to leave and so at that point Judy asked him to wait while she consulted her friend (the agent) who for about five pounds swiftly handled the processing of the paper.

2 I have another mental list, alas somewhat shorter, of those whom I have met who did subsequently go to jail.

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I still feel bad about these two breaches of my own principles. They do, however, demonstrate that even people opposed in principle to any form of corruption may succumb if the alternative seems difficult or impossible, or affects their family. In many cases, given time and persis-tence in a steadfast refusal, payment can be avoided. On one occasion, returning to a country with my family, I did not have the necessary resi-dent re-entry stamp in my passport, although I did have a letter from the ministry saying that I should be permitted to re-enter. After an hour and a half of argument, during which the immigration official had initially threatened to put me back on the plane to London, we discussed why Shell would not pay a small sum to avoid this greater expense. I filled out many forms to accompany our confiscated passports to the ministry. The official finally realised that sending our confiscated passports to the ministry would simply involve more work and bring no benefit and so he capitulated. I could have our passports back and we could tear up all the forms. The airport was nearly empty and all the other officials had gone home. We had got to know each other quite well, and as I left the officer asked me whether I still had nothing to give him. I have subse-quently regretted that I rather piously still refused. He had after all long since let Judy and the children through. We had both quite enjoyed the argument, and in the end the fault was not his personally, but the system in which he worked and which was probably routinely late in paying his salary. With hindsight, a small gift of friendship to buy himself a meal or a drink would not have done much harm. About ten years later, when my son Douglas was going to spend a year driving with three friends down through Africa to Cape Town, I gave him advice for crossing borders. Be patient, absolutely polite and respectful, and if in doubt apologise profusely for your very existence. He later told me that it was the best advice I had ever given him. He added that on days when they were going to cross a border, he always put on a clean shirt and had a shave. In this way they had crossed numerous remote borders. As he pointed out, it is just a matter of show-ing proper respect to officials doing an important job, often poorly or erratically paid.

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‘Grand corruption’ and the involvement of governments

In 1997, my eldest brother George published a book with the title Grand Corruption: The Problem of Trade and Business in Developing Countries,3 an analysis of corruption and its impact on development. The book was an expansion of an earlier 1994 paper4 that he prepared for the recently formed organisation Transparency International. George was a founding member of that organisation, which was the inspiration and passion of Peter Eigen. Peter was determined to do something about the evils of corruption in the world, which he had seen during his work with the World Bank. George had spent a lifetime working in sugar and various agro-industries in developing countries, living in the West Indies, Kenya and Fiji, and was Chairman of the UK Chapter of Trans-parency International. It was a delight to both George and me that we received awards from the Queen at the same investiture, just as some 80 years earlier in 1918 our father and uncle had both received Military Crosses from the King. I believe they were the first brothers to do so at the same investiture. George’s award was an OBE with the citation ‘for services to the fight against corruption’. Mine was for ‘services to the international oil indus-try’. I always felt that George was more deserving of the knighthood. George was particularly interested in what he called ‘grand corruption’.5 This is the most damaging form of corruption at ministe-rial or head-of-state level, which distorts entire economies and does not just inflate the cost of a project but often lumbers a country with an ineffectual and unnecessary white elephant. He pointed out that there were certain industries and types of project that were particularly prone to attracting corruption on a grand scale. First, the projects had to be

3 G.H. Moody-Stuart, Grand Corruption: Problem of Trade and Business in Developing Countries (New Delhi: World View Publications Paperback, 1997).

4 G.H. Moody-Stuart, Grand Corruption in Third World Development (Working Paper; Berlin: Transparency International, 1994).

5 Nihal Jayawickrama credits George with coining the phrase ‘grand corruption’ in A.Y. Lee-Chai and J.A. Bargh, The Use and Abuse of Power: Multiple Per-spectives on the Causes of Corruption (Philadelphia, PA: Psychology Press/Tay-lor & Francis, 2001).

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large and require a quantum of funding that would be attractive to a minister or head of state. Second, corruption was most likely in complex projects where it was difficult to make comparisons on a single element of performance. This allows for discretion in choice and hence opens the opportunity for corruptly influencing the choice. George pointed out that these conditions are perhaps most effectively met in the arms industry, where the performance of, for example, differ-ent types of aircraft is often difficult to compare on a like-for-like basis, depending on which characteristic is emphasised. Furthermore, military sales have the advantage that the analysis can be cloaked in secrecy due to ‘national security’. He might have added the condition of where there is an element of perceived national interest, such as supporting a strate-gic industry in the home country of the seller, otherwise honest people suspend their normal ethics. This is just an extension of the argument for committing unethical acts in the course of espionage for national security.6 This element was certainly a factor in the appalling behaviour of the French oil company Elf in West Africa in the 1990s,7 for which the then President Directeur General of Elf Loïk Le Floch-Prigent was later rightly convicted and sent to prison. In fact Elf, was merely being used by the Mitterrand government as an arm of French foreign policy. Not for nothing was Jean-Christophe Mitterrand, the son of President Mitterrand and his adviser on African affairs, known in West Africa as Papamadi (‘Papa m’a dit’ or ‘Daddy told me’). From judicial enquiries in the 1990s it appears that the same was also true of Agip, a part of the

6 For a detailed, thoroughly researched and depressing review of corruption in the arms industry in many countries at all levels, see A. Feinstein, The Shadow World: Inside the Global Arms Trade (London: Penguin Books, 2012).

7 Elf under Le Floch-Prigent made corrupt payments to various Francophone West African governments, interfered in internal politics and used military support, or the threat of its withdrawal, to influence government actions. See also Chapter 2. (He has since [September 2012] been deported from Côte d’Ivoire to Togo andcharged with being an accessory to fraud—the outcome is unclear.) Le Floch-Prigent is someone who is on both my lists referred to earlier in this chapter. Seealso J. Henley, ‘Gigantic Sleaze Scandal Winds up as Former Elf Oil Chiefs areJailed’, The Guardian, 13 November 2003, www.guardian.co.uk/business/2003/nov/13/france.oilandpetrol.

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Italian state enterprise ENI. And, lest one is tempted to think that this is merely something that is practised by continental European countries, we should not forget the UK’s own scandal over the suspended prosecu-tion of BAE Systems over alleged corruption in relation to sales to Saudi Arabia. I recall being appalled when a British High Commissioner to Malaysia said to a group of business people that businessmen did not mind corruption as long as the rules by which it was played were clear. I challenged him strongly on this statement both personally and on behalf of Shell. I realised, however, that at that time in the 1980s his views would have been shaped by the fact that most of his connection with business would have involved arms sales. The United States was a commendable early mover in legislation against corruption with the passage of the Foreign Corrupt Practices Act (FCPA) in 1977, stimulated by a number of overseas corruption scandals, including that of Lockheed military aircraft sales to various governments. For 20 years or more the FCPA was the only piece of national legislation covering the bribery of foreign officials. Years later, foreign bribes were still tax-deductible in some European countries. The UK was embarrassingly slow to pass the Bribery Act 2010, which puts its national legislation on a par with or in advance of the US FCPA and meets its legislative obligations under the requirements of the OECD Anti-Bribery convention of 1997 and the subsequent tightening of these requirements in 2009.8 However, even the United States is not proof against the temptations to promote national interest over transpar-ency. I am personally aware of two cases, one in Bangladesh and one in Nigeria, where the United States used diplomatic channels to overturn awards made to non-US companies after transparent bid processes. On one occasion, when in a meeting with the president of the country con-cerned I complained about the abandonment of a transparent award

8 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (see www.oecd.org/daf/anti-bribery/oecdantibriberyconvention.htm). The suite of documents covers the 1997 Con-vention, the 2009 Recommendation of the Council for Further Combating Brib-ery, and the 2009 Recommendation on the Tax Deductibility of Bribes to For-eign Public Officials.

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process, the president said that he had been pressed by a phone call from the US Secretary of State to make an award to a US company. I have no reason to believe that this was untrue as the president was clearly very uncomfortable with the situation. I have been critical of the slow progress of the UK government in introducing effective legislation covering overseas bribery and believe that the UK government does not have entirely clean hands in relation to arms sales. So when in the late 1990s I received a request to meet the then UK Trade Minister Brian Wilson I was concerned as to what subjects might be raised. I enquired within Shell as to what issues might be current and relevant, and soon became aware of a major offshore contract in Nigeria that was about to be awarded. I immediately feared pressure to award the contract to a British company. As it was neither in my power nor in line with Shell’s principles to comply, I was not looking forward to a pleasant meeting. I was favourably surprised that when the subject of the contract came up, all that the Minister asked was that the proper and transparent procedures should be followed. The Minister was well informed that the process was under consider-able pressure from elements in the Nigerian system to distort the process and I was delighted to be able to assure him that should such pressures become irresistible we would abort the whole process and accept signifi-cant delays on the project rather than accept a distorted outcome. I am happy to say that the Minister’s behaviour was impeccable.

The ingenuity of corruption and of countermeasures

Corruption comes in very many forms, and approaches to corruption are as varied as countries themselves. There is an almost infinite variety of ingenious methods. The argument put forward that in some countries corruption is simply an accepted cultural norm is flawed. To say that corruption is rife does not mean that it is accepted as legitimate by the population at large, although it may well be by the beneficiaries of the corrupt practices. When faced with the argument that in a particular country a particular form of corrupt payment was culturally acceptable,

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my brother George suggested that if a payment were to be made the details should be published in the papers. He pointed out that potential recipients who argue that payments are culturally acceptable in their country are never prepared to have details of corrupt payments made public. Such payments are generally only considered reasonable by the recipients, not by the population at large who pay the price. This ‘news-paper test’ is a useful check in cases of doubt. I recall many years ago a young Dutch engineer in Brunei who con-sidered that there was evidence of collusion in the submission of bids from a group of local Chinese contractors. He called them all in and said that he suspected collusion. He announced that he was going to re-tender the job and he expected better behaviour in future. The new bids came in at satisfactorily reduced prices. The engineer was satisfied and gained credit for his actions. I suspect that the second set of bids had also been agreed in the local coffee shop. The contractors knew that the engineer could not be corrupted with money. Instead they gave him a result that not only gave him credit in the eyes of his superiors, but also made him think that he had got the measure of the contractors and so he would hopefully reduce his vigilance in future. One effective way forward would have been to bring in additional contractors who were not part of the ring. Unfortunately, this is not always practical, so other means have to be tried. The battle against corruption equally requires ingenuity on the part of those issuing contracts. I was reminded of this particular incident when I read in the press of a legal battle that the US government had had over the construction of a new embassy building in Tokyo. The legal battle was won and the contractors guilty of col-lusion were fined. However, this was a somewhat Pyrrhic victory, as I understand that it was accepted that the contractors could agree among themselves how to allocate the fine. There are many indirect forms of corruption that can be difficult to detect. When I was responsible for operations in the Western Division of Shell’s Nigerian operations in the late 1970s we had a problem with imports through the newly built port of Warri. Shipments of oilfield goods were repeatedly held up in the port and large amounts of duty levied on them, in spite of the fact that they were mostly not dutiable. In

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addition, the taxation arrangements between Shell and the government were such that all forms of tax were aggregated and then topped up until an overall rate was reached. So it made no difference to either Shell or the government whether tax was collected as duty paid at the port or as tax in the later rounding-up process. This was explained repeatedly to the chief of customs in the port, but none the less he insisted on levy-ing millions of dollars of duty on goods coming through the port. This resulted in a large amount of administrative work all round and, much worse, delayed equipment essential for oil production. Apart from extra work and delays, the financial effect for both the government and Shell was negligible, so the intransigence of the chief of customs appeared inexplicable, unless he had found some method of diverting the pay-ments to his own advantage. I puzzled over this for a long time, but investigations showed that the payments could be tracked though the correct routes to the central authorities. This continued to puzzle me until one day I saw in the newspaper a photograph of the head of Warri Port customs receiving an award for being the officer who collected most customs duty in all of Nigeria. As essentially all of this duty came from Shell, there was no need to collect duty from anyone else, opening a potentially lucrative path for accepting payments from others to avoid duty. After all, who would investigate an officer who was so clearly highly industrious in collection of duties? I was full of admiration for the ingenuity, whether or not there was actually any malfeasance involved. Ingenuity in corruption requires ingenious countermeasures. One of the most ingenious was designed by my successor as Chairman at Shell, Phil Watts. When Phil was in Nigeria in the early 1990s during the appall-ing regime of General Sani Abacha, the arrangements for the Nigerian Liquefied Natural Gas (LNG) export scheme were being negotiated. The Nigerian LNG scheme had had a long and chequered history. It had first been mooted in the late 1960s, at the same time as the pio-neering Brunei LNG scheme. At that time I was an exploration geolo-gist working in Brunei and we were finding much of the gas offshore in neighbouring Sarawak that subsequently fed the Malaysian LNG schemes. So I watched the Brunei LNG scheme being built and come on-stream in 1972. Unfortunately, the Nigerian scheme suffered repeated

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delays, initially because of the Nigerian civil war and its aftermath, but subsequently due to disagreements over the formation and terms of the joint-venture partnership and also the availability of funds for the Nige-rian equity in the project. As with many major projects that carry risk of various sorts, LNG projects are funded partly by equity capital put up by the shareholders and partly by project financing from a consortium of banks. To con-vince the banks that the project is viable and worth lending money to, a series of complex agreements is needed: first the producer’s assurance that the reserves are there (normally with independent verification of reserves to ensure a 20- or 30-year project life); then the winning bid from the contractors who will build the actual LNG plant specifying the construction costs; then contracts for chartering or more often actually building the ships that will transport the gas to markets; and lastly long-term purchase contracts from the utility customers in Japan, Korea or Europe who will actually buy the gas. As a separate exercise, the banks have to be convinced that the shareholder equity is also available, as it is this equity that acts as a first cushion for the banks against the risks of the project. All of these contracts are negotiated in advance and on one fateful day they are all signed together. If one piece is missing, the whole financing structure will fail. The process is not unlike the traditional method of buying a house in the UK where the mortgage money is only made avail-able when all the surveys have been done, contracts exchanged, and the prospective owner’s part of the purchase price is safely in the hands of the lawyers acting for the parties. In the case of the Nigerian LNG scheme, the equity for the scheme was to come from the main partners in the scheme, Shell and the Nige-rian National Petroleum Corporation (NNPC). Although over the vari-ous incarnations for the project from the 1970s to the 1990s money for the required Nigerian share of the equity had been set aside by NNPC, the problem was that, when it came close to being needed, the special account built up from oil revenue had been found to be empty. A gener-ous interpretation would be that the funds had been applied to some

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other purpose. A less generous interpretation would be that they had been stolen. The senior officers of NNPC were well aware of this danger, particu-larly given the particularly kleptocratic nature of the Abacha regime. They had no wish to see funds they had carefully built up for the NNPC equity share misappropriated. They therefore sensibly suggested that both the NNPC equity funds and the Shell equity funds be paid into an escrow account with a reputable bank, such that the funds could only ever be released to be spent on the LNG project. This was a pretty good idea, but it had one disadvantage for Shell. If the project did not go ahead or was delayed interminably, several hundred million dollars of Shell money would be stuck, along with the Nigerian money, in the escrow account. Although by the 1990s it did really look as though the project would go ahead, there was clearly a chance that the money might be stuck irretrievably for another decade or so, given that the gestation period so far had been some 30 years. It was at this point that Phil Watts and his team came up with what I thought was a very ingenious and practical idea. The money would indeed be put by all parties into an offshore account with a reputa-ble international bank. This was called the ‘glass box’. Unlike a nor-mal escrow account when the money can only be withdrawn for the intended purpose, any of the partners could put their hand into the box and remove their share of the money. However, if this happened, the independent bank was charged with making a global press release that would name the party that had withdrawn its funds and also announce that, because of this, the entire project was cancelled. We were confident that even the most corrupt government would not dare to put a hand into the box and be publicly revealed to be the cause of the cancellation of what was a prestige national project. So we proceeded towards the exchange of contracts and the launching of what has indeed proved to be a truly successful Nigerian project, a major source of income for Nigeria and a valuable outlet for gas that would otherwise be wasted or unused. This was in 1995. Ken Saro-Wiwa and his colleagues were executed by the Abacha regime just shortly before the signature of the whole

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package of LNG-related contracts was due. The background of the unfair trial and tragic execution of Ken Saro-Wiwa and his fellow Ogonis and Shell’s involvement is covered in Chapter 11, but there was global outrage. It was clear to everyone that to sign a multi-billion-pound LNG contract with a Nigerian government-owned entity as partner almost immediately after these appalling events was almost unthinkable. All the parties involved agreed on a delay and the construction contractors were persuaded to extend the validity of their bids for some months. When General Abacha was informed of this decision he declared that, if Shell insisted on any delay at all, he would announce that by this action Shell had breached the terms of the agreement and caused the cancellation of the project. All parties would then be free to withdraw their money from the ‘glass box’. The implications were clear. If the project were delayed, a major pro-ject of benefit to Nigeria (and indeed Shell) would be cancelled and several hundred million dollars of funds from the account would be stolen by Abacha. He had found a route into the ‘glass box’. We got the World Bank to issue a statement saying that the project was highly desirable from a national development and environmental viewpoint. Furthermore, it was clear that there would be no direct income benefit to the Nigerian government for many years, by which time the govern-ment would almost certainly be a different one. Faced with a choice between on the one hand Abacha cancelling the project and stealing the money if we delayed and on the other hand Shell being pilloried for gross insensitivity if we went ahead, we decided to go ahead. The deci-sion was taken in full knowledge of the consequences. We were indeed excoriated in the press, redoubling the outrage that had initially natu-rally accompanied the execution. It is not the kind of decision that I would wish on anyone else, but I believe that in the long run it was the right one. The Nigerian LNG project is an outstanding success for Nige-rians and Nigeria, a source of justifiable national pride, a bright light in the troubled Niger Delta. The plant, largely run by Nigerians, has never failed to load a cargo of LNG on time because of a plant failure or technical problem. Ironically, one of the main gas pipelines flows unmo-lested through Ogoniland. Abacha was dead long before any Nigerian

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government reaped the benefit of the income from the plant, but future generations of Nigerians will continue to do so. I still think that the ‘glass box’ was a good and ingenious idea to foil corruption, although we were not ingenious enough to think of all possible consequences. Ingenuity is not always enough. In some cases it needs the determined and persistent actions of a government. At one point in the 1990s in Brazil, the major oil companies became aware that through an ingen-ious scam involving the paper export and improper re-import of Brazil-ian petroleum products, the Brazilian government was being defrauded of well over a billion dollars a year in tax revenue. Furthermore, as this product was much cheaper than properly taxed product, the inde-pendents were taking market share away from the major companies, further compounding the loss to the state and rendering honest busi-nesses unprofitable. The government agreed with industry that action was needed to stamp out the practice. However, it took two years or so to achieve it. Perpetrators would be brought to regional courts, but judges would be bribed to dismiss the cases or find the perpetrators not guilty. A billion dollars a year of illicit revenue gives ample ammunition and incentive for corruption.9 In a democracy, quite correctly, corrupt judges cannot simply be fired; due process has to be followed. Persist-ence and ingenuity on the part of government is required.

Practical steps to beat corruption

If corruption is to be beaten, it needs a concerted effort by different ele-ments of society. An organisation such as Transparency International focuses on forward-looking action, using the sins and shortcomings of the past as lessons in how corruption can be prevented in future rather than seeking ultimate justice. They have developed many ingenious

9 This is part of the problem with the illegal theft of crude oil or ‘bunkering’ in Nigeria. As described in Chapter 1, the proceeds of this activity are at least some $1.8 billion a year, and probably much more; sums that can buy a great deal of delay and inactivity, if not actual support.

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collective approaches, bringing together companies and civil society to see how the issues can be addressed in various ways and lobbying gov-ernments to improve legislation and then to enforce it rigorously. Trans-parency International UK also provides excellent anti-bribery training material on its website.10

However, there is absolutely no doubt that from a corporate point of view the place to start is within the corporation. That requires not just an uncompromising attitude towards any form of corruption, however minor, but also great care in sending the right signals from the top. Send-ing the right signals involves talking about corruption openly and giving examples of consequences, including being very open when contracts are lost or access is denied through refusing to pay a bribe. People within a company are more convinced by a good concrete example of where taking an ethical line actually lost the company a contract or cost money than they are by any number of talks on the theory of corruption and the applicable laws.11 Discussion and training needs to include as many practical ‘war stories’ as possible. Setting an example in relatively minor things includes being careful about hospitality and gifts both offered and accepted at a senior level. It is useful in a company to distinguish between outgoing bribes and incoming bribes. Outgoing bribes are within the control of a company. If a company does not want to pay a bribe, it does not have to, even though there may be severe damage to the business as a result. For any company to survive it has to have sound accounting systems so that it is clear what the money is being spent on. Developing and operat-ing such systems is a core skill for a corporation. For that reason it is just nonsense for the senior management to say that they were quite unaware of systematic payments made over a long period. Either the management is lying, or they are woefully incompetent. How could a company such as Siemens pay out well over a billion euros improperly without being aware of it? Siemens is rightly now taking the lessons

10 www.transparency.org.uk. 11 See also the discussion in Chapter 12.

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seriously to heart and is to be commended for it.12 That is not to say that a country manager may not at some point, perhaps in what might be regarded as a fit of misplaced enthusiasm or an effort to improve performance, make an improper payment. In my Shell career I know of one such case. A country manager arranged for a political payment to be made for campaign expenses and disguised it as an advertising or information technology contract payment. Proper financial controls from the finance function and internal audit will normally reveal this. The country manager in question, an otherwise effective individual, left the company, and everyone knew why. However, it is much better to try and ensure that such things do not happen in the first place. In contrast, incoming bribes are less in the control of a company. A decision by another business to try to distort a bidding process by attempting to bribe an employee is not something that management can control directly. One simply has to be aware of the possibility and to put in place processes in which decisions are not in the hands of a single individual but require input or agreement from others. Likewise in a country where small payments as an encouragement to do your job are common, vigilance is needed to ensure that a receptionist is not receiving small tips to ensure delivery of employment applications. Such practices are not easy to control. Clearly, development of an overall ethos will help, along with pride in company standards, but it would be wise to make sure that there is a functioning and trusted communication route to report irregularities that is available both to company employees and

12 In a settlement in 2008 with the US Justice Department and the Securities and Exchange Commission, Siemens pleaded guilty to violating accounting provi-sions of the Foreign Corrupt Practices Act, which outlaws bribery abroad. The company received fines of some $1.6 billion in fines and fees in Germany and the United States and will spend more than $1 billion for internal investigations and reforms. See www.nytimes.com/2008/12/21/business/worldbusiness/21siemens.html?pagewanted=all&_r=0. At the same time, in an agreement with the World Bank, Siemens agreed to spend $100 million in supporting anti-corruption pro-jects around the world. See www.siemens.com/press/en/pressrelease/?press=/en/pressrelease/2010/corporate_communication/axx20101225.htm. A small por-tion of that money is being spent in supporting UN Global Compact Local Net-works in anti-corruption work.

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to suppliers or contractors to the company. Sometimes the disappoint-ment that a representative of a major contractor was prepared to offer a bribe to company staff, perhaps even in the form of a bundle of notes left in a bag, is offset by delight that the company employee concerned reported it immediately. Saudi Aramco, the Saudi state oil company on whose board I sit, works hard on the development of such an ethos, with encouraging results. The document ‘Doing Business with Saudi Aramco’ makes plain that companies do not require an agent to deal with Saudi Aramco but can deal directly with the company.13 At the same time all suppliers and contractors must sign a Supplier Code of Conduct and are given a confidential contact point within the company to raise any issues or concerns in relation to corruption. The company is also extremely tough on delisting contractors and suppliers who attempt to bribe staff or engage in corrupt behaviour, and major Saudi and Western companies have been suspended or delisted from doing business with the company for offences. Western companies are often more cautious about taking such action, at least overtly, as they are more likely to be subject to legal challenges in different jurisdictions if they attempt to apply global bans to suppliers and contractors.

13 ‘Doing Business with Saudi Aramco’ is on the Saudi Aramco website (see www.saudiaramco.com/en/home.html#doing-business-with-us%257C%252Fen%252Fhome%252Fdoing-business-with-us.baseajax.html). This includes reference to the Supplier Code of Conduct, which states: ‘Saudi Aramco is committed to conducting its business in an ethical manner. Saudi Aramco requires its Suppliers and Contractors to share these commitments and, therefore, has established the Supplier Code of Conduct. All registered vendors, manufacturers, contractors, and sub/contractors with which Saudi Aramco conducts business are required to acknowledge, and agree to abide by, the policies and principles set forth in the Code of Conduct to continue doing business with Saudi Aramco. This is also applicable to all new potential vendors, manufacturers, contractors, and sub-contractors. We also expect our Suppliers and Contractors to provide this Supplier Code of Conduct with all Employees within their organizations who are involved in conducting business with Saudi Aramco. Our business relation-ships are founded on trust and we understand that it is essential that all parties involved in supply-chain procurement activities feel confident in the fairness and transparency of the related process.’

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In Shell an important control instituted was part of a normal ‘letter of representation’, signed by the country manager, which attested not just to the fact that two books of accounts were not being kept but that no bribes had been paid. Most country managers cascaded this system down the company so that those reporting to them signed similarly. More important was the institution of the so-called ‘face-to-face’ inter-view between the country manager and the managing director or exec-utive committee member responsible for that region. This discussion covered the whole state of corruption in the country concerned. Grey areas could be discussed. Did the placing of a traditional seasonal gift of chocolates and fruit from the company by the stand of the policemen stationed at the intersection close to the office constitute a bribe? In my opinion this is marginal, but I think nowadays it has been so deemed. I recall Jacques Gueneau, a long-time colleague and friend and at that time country manager in Congo Brazzaville telling me in his face-to-face interview that in the year he had paid an Angolan soldier, who was part of an invading force supporting a scandalous coup, five hundred dollars to allow a third-country national and his family to go to the airport because he deemed them to be at risk of violence. Jacques said to me that he thought it was money correctly spent. I agreed with him. Our country manager in Yemen told me that he had fired two finance staff for collaboration and malfeasance and reported them to the police. He heard shortly after that the police were using violent methods to deter-mine which was the guiltier. He had had to rush to the police station and withdraw the charges as he correctly decided that protection of human rights was more important than punishment for defrauding the com-pany. Every year would bring a number of examples of business lost or grey areas discussed, which provided valuable and real practical exam-ples from around the world that could be used elsewhere in training and discussion. Generally this was not a matter of legal discussion but of human common-sense as to where to draw boundaries. The annual face-to-face discussion would also cover the issue of incoming bribes. What was the general atmosphere in the country? Were there likely to be cases undetected? Was the company hotline or whistle-blowing sys-tem in place in the local language and was it open to both staff in the

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company and to contractors who felt that a staff member was looking for some benefit? Was there trust that identities would be protected and that there could be no retaliation?

The complexities of corruption and conflicts of interest

There are obvious pitfalls to be avoided in preventing outgoing bribe payments. The fixer who explains that the president’s wife has founded a society for the preservation of the national culture that just happens to have a bank account in Switzerland is unfortunately a relatively com-mon approach. I recall the case of a US citizen, James Giffen, operating very effectively in Kazakhstan controlling or brokering access to the President. His suggested methods could not be reconciled with Shell’s principles. He was eventually arrested in the United States in 2003 for offences under the US Foreign Corrupt Practices Act in what was dubbed Kazakhgate, but I believe that all the charges against him were eventu-ally dismissed by 2010. When I was in Turkey in the early 1980s, the effective mayor of Istanbul was Bedrettin Dalan. His declared ambition was to clean up the Golden Horn, the inlet of the Bosphorus that divides the city, at that time heavily polluted by sewage that poured untreated into the restricted waters of the Horn through Byzantine and Ottoman drains. He famously declared that by the end of his period of office the waters of the Golden Horn would be as blue as his eyes, and as he came from the Black Sea coast, his eyes were indeed blue. He achieved much of his objective by digging two interceptor drains along each shore of the Golden Horn. These cut through Byzantine, Venetian, Genoese, Greek and Ottoman drains and collected their muck before it hit the waters of the Golden Horn. By bulldozing and dredging he created a series of spaces for gardens along the waterfront. This incurred the wrath of conservationists when a couple of fine Venetian houses were bulldozed. It incurred equal wrath of environmentalists as there was not enough money for a treatment plant and the collected sewage went into the Bos-phorus, injected into the deep north flowing current that took it into the

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euxinic waters of the deep Black Sea. This was not a perfect solution by any means but I think it was a commendable practical start and visitors to Istanbul today will see the results of his efforts in the cleaner waters of the Golden Horn and the gardens that line its shores. At that time Shell had an old oil product depot site on the Bosphorus that had been closed by government orders to avoid any possibility of pollution of the waterway. It had been converted into a very pleasant staff recreation site. In the hot summer, families could perhaps swim in the Bosphorus, but the waters were insalubrious and the currents were dangerous at that point. The answer was to build a swimming pool. So we applied for planning permission. The Mayor let it be known that planning permission would not be a problem if Shell adopted one of his new garden sites along the Golden Horn. This could be appropri-ately branded as Shell and would surely be a good way of Shell showing civic consciousness as well as gardening skills. I explained to the disap-pointed staff that the planning permission should not be linked to some other benefit. Planning permission had its own legal processes and regu-lations. Both sides were intransigent and we never got our swimming pool. The staff thought me frankly unreasonable, and perhaps I was, although the message on zero tolerance for corruption has to be clear and unequivocal, whatever the cost. On returning to London to work some ten years later I was astonished to find that a similar approach had been enshrined in the British planning process. Planning permis-sion may be granted if sufficient ‘planning gain’ is included in a plan-ning application under Section 106 of the Town and Country Planning Act 1990. Public spaces and elements of social housing count towards this. To my distress it appears that the amount of additional work is at the discretion of planners and is not simply a fixed quantum. Allowing judgement in such matters that are difficult to measure objectively is, in my opinion, an open invitation to corruption. If one wanted to devise a system to facilitate corruption, difficult-to-measure benefits and large amounts of discretion would be high on my list of desirable character-istics. Bedrettin Dalan was perhaps a pioneer in more than cleaning up polluted waterways.

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Sometimes the cost of corruption is much higher than a matter of plan-ning permission. Since the inception of the gas supply from the Soviet Union to Europe, the main pipeline system has crossed Ukraine, then of course part of the Soviet Union. The construction of this system, bring-ing gas from giant West Siberian fields such as Urengoy, was a major technological achievement. It is often forgotten that at that time the United States refused export permission for the huge compressors neces-sary to compress and pump the gas to Europe, so that the compressors had to be built in the Soviet Union or acquired from more sympathetic European suppliers. The development and construction was handled by the Soviet gas company Gazprom, which was probably the closest thing in the Soviet Union to a Western corporation. Gazprom at the time was efficient and had its own pride and ethos. Shell, itself a major gas supplier with partners Exxon and the Dutch government from the giant Groningen field in the Netherlands, had rela-tively close relations with Gazprom. The two sources, Gazprom and the Netherlands joint venture Gasunie, were the major suppliers to Europe, with Norwegian gas being later added as a major source. As the Soviet Union broke up, Ukraine split off and became independ-ent in 1991. The pipeline system across Ukraine began to suffer from a lack of maintenance and upgrading of compressors. Furthermore, a cer-tain amount of gas was taken off the system for Ukrainian domestic use. This was not always with the agreement of Gazprom, the owners of the gas. The issue of ‘leakage’ arose. Gazprom wanted to buy the lines from Ukraine, but the price could never be agreed. This was an emotional business. As the then Chairman of Gazprom, Rem Vyakhirev, pointed out to me, he had built the lines and regarded them as Gazprom’s in any case, so paying for them was unpalatable. There was also the question of Ukraine’s relationship with Russia. In Ukraine I was often told the joke about a Russian and a Ukrainian finding a ten-rouble note lying on the ground. As they fought over it, each holding one end, the Russian says, ‘This is ridiculous, why don’t we split it like brothers.’ To which the Ukrainian replies, ‘No, let us just split it fifty–fifty.’ With the knowledge of Gazprom, Shell made an offer to make a major payment—some $1,500 million—to Ukraine for a share in the

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pipeline. The idea was a three-way Ukraine/Gazprom/Shell joint ven-ture, with the Western partner playing an independent role between the other two parties. All three had a critical interest in the pipeline. The funds injected would be used to upgrade the pipeline and ensure that all offtake in Ukraine was properly regulated and measured. The proposal also included a plan to upgrade and develop the compressor manufac-turing capacity of Nikolaev, the former Soviet centre for compressor manufacturing where the original compressors for the pipeline had been made, which happened now to be in Ukraine. For Shell’s part, we were prepared to evaluate compressors made by Nikolaev, which were advanced, and possibly use them in Shell operations as a step towards a major manufacturing export marketing thrust by Ukraine. It seemed to me to be a plan with great benefits all round. I made repeated visits to the then President Leonid Kuchma in the beautiful city of Kiev, redolent of tragic wartime and post-war history where so many Soviets and Germans had died, including many prison-ers in the post-war period. We discussed the advantages of the proposed arrangements. I pointed out that unless there was a stable route through Ukraine for the Russian gas, eventually other routes would be found through Poland and elsewhere. Ukraine would lose volumes of transit gas and a source of income. President Kuchma was always enthusiastic and promised that the team we needed to inspect the state of the pipe-line (and check on the ‘leaks’) would be granted access. In the days and weeks following each meeting such access would always be blocked. There were clearly vested interests making much money out of the exist-ing situation. The then Prime Minister Pavlo Lazarenko was opposed to the arrangement.14 In August 2006, Lazarenko was convicted and sentenced to prison in the United States for money laundering, wire fraud and extortion. According to the official count by United Nations, approximately $200 million was looted by Lazarenko during 1996–97 from the government of Ukraine. He is said to have had a business con-nection with United Energy Systems (UES) of Ukraine, which was the

14 Lazarenko was one of those on my mental list of people whom I have met who should be in jail, and on the shorter list of those who did indeed eventually go to jail.

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main importer of gas from Russia. The state of the pipeline and the number and nature of offtake points was clearly a sensitive matter, and perhaps for that reason a survey by a Western company was not desired. The Chief Executive of UES at the time was Yulia Tymoshenko, said to be one of the wealthiest women in Ukraine. She subsequently came to fame politically in Ukraine’s 2004 ‘Orange Revolution’, appearing a picture of innocence with her traditional plaited hair and supporting the democratic cause. She was Prime Minister briefly in 2005 and from 2007 to 2010. She is currently in prison in Ukraine after a very contro-versial trial relating to alleged abuse of office in relation to a much later agreement with the Russians on gas supplies. It is tragic that the issue of reliable gas transit across Ukraine has never been resolved. Gazprom and Russia have always been stymied by the fact that they cannot cut off supplies to Ukraine without affecting supplies to Europe. In the short term, Ukraine thus had a strong hand. However, the game is playing out just as one long expected it would, with alternative pipeline systems being built across the Baltic, across Poland, across Belorussia, and southwards though Turkey. While some multiplication of pipelines was necessary and desirable, it is a tragic waste of resource where this is driven by short-term obstruction for personal or political gain.

What if the cost of saying no is simply too high?

Simply saying no is a luxury that a large international company such as Shell or Anglo American can afford. I recall encouraging Owen Bavin-ton, the head of exploration in Anglo American, to set up an exploration office in the Democratic Republic of Congo, for it is only by having eyes and ears on the ground that one gets a true picture of opportunities and risks. Owen pointed out that to set up an exploration office one needed maps. From his observation, the only way of acquiring the basic maps was to bribe the local survey office and he was not prepared to do this. He was of course right and the results potentially costly. Either the com-pany did not have an office on the ground, meaning that opportunities

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might be missed, or it would be necessary to set up an office without all that was needed to be effective. The amount of time required for a patient and persistent approach that would allow progress without cor-ruption was quite unpredictable. In some cases refusal to bribe means that a competitor gets the business, but in others you actually get there in the end by expensive and frustrating patience and persistence. Such an approach may not be easy or even possible for a small com-pany. A manager of a small company awaiting payment for a major contract successfully delivered in a corrupt country would find it tempt-ing on a lesser-of-two-evils basis to make a small facilitating payment in order to free up the main payment rather than laying off large numbers of staff for lack of funds. Telling such a person that a prudent company would never put itself in a situation where it is wholly dependent on payments from such a country is not really helpful, although it may be true. Equally, companies often argue that their competitors in the busi-ness corrupt the bidding process. Transparency International has developed a practical collective approach to overcoming this problem. Often, companies feel that they are pushed by competition, or by those tendering contracts, to enter the ultimately self-defeating process of offering inducements of various kinds. Yet many of those companies involved regard this as an unde-sirable practice that they would like to avoid. Likewise, governments or individuals within governments are often also trying to clean up their bidding processes. Transparency’s approach is to try to capture the desire for improvement in ‘Integrity Pacts’.15 An Integrity Pact is a bit like a peace treaty with monitored disarmament clauses or an arms embargo. It has to start with willingness on the part of an agency to run a transparent bidding process. Of course, most countries and agen-cies profess that they do so, but when it comes to agreeing transparent monitoring procedures they may have second thoughts about entering into the process. Equally important is an agreement by all bidders that they will refrain from paying bribes and commissions and that they too will agree to an independent and transparent monitoring process. It is

15 www.transparency.org/global_priorities/public_contracting/integrity_pacts.

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essential that the bidding agency remove from the list of acceptable bid-ders any company that does not agree to sign up to the pact. As part of the pact there are agreed penalties for malfeasance, such as the loss of bid bonds and exclusion from future bid rounds. The process is not easy, but it can be effective. The likelihood of such processes being agreed is now being further increased by anti-corruption legislation in the home countries of many of the major companies that bid for international construction contracts. A similar collective approach to address corruption and the misuses of funds in the oil, gas and mining industries is the Extractive Industries Transparency Initiative (EITI) (referred to in Chapter 2). This developed out of the Publish What You Pay campaign and was led in its early stages from 2002 by the UK government and Transparency International. The secretariat was subsequently established in Norway. The strength of the EITI is that it requires countries to commit to undertaking a number of steps to improve the transparency of and accountability for payments by companies and their receipt by governments. Agreement from the national government is essential to prevent legislation or confidentiality agreements being used as an excuse to avoid the publication of pay-ments. Countries seeking to join the EITI, and the companies which support it, commit within a certain time frame to ensuring independ-ent auditing of all payments by extractive companies to governments and equally and separately independent auditing of the receipt by gov-ernment. In addition to this, countries agree to set up an independent panel with the involvement of civil society organisations to oversee the process. As of October 2013 there are some 40 implementing countries that have committed to the process, with 25 of those countries having reached the stage of being considered ‘compliant’. There are a further 16 candidate countries and 3 countries whose status is currently sus-pended for failing to meet some requirement. There is no doubt that this thorough process is significantly strengthening capacity for the control and management of funds in many countries with extensive extractive industries. The initiative has addressed over a trillion dollars of govern-ment revenue. While sovereignty and control of the process still clearly rests with the national government, the EITI and its multi-stakeholder

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board ensures that the required standards are met in the process and that commitments are also honoured. The board includes representation from implementing governments of countries in which the extractive companies are domiciled as well as civil society organisations, extractive companies and investors. In my opinion this is a much more thorough process than the extraterritorial activity of the US Dodd–Frank legis-lation requiring extractive industry companies with US connections to make very extensive declarations of payments. This requires no commit-ment from the country concerned and unlike the EITI does not address the issue of what happens to the money paid. In addition, Dodd–Frank only applies to one group of companies involved in a country (those registered with the US Securities and Exchange Commission) and does nothing to address the others. In the worst case it might provide an excuse for a country to do no more. In summary, like so much extra-territorial legislation it will have little impact in the real world on the ground—it will just make a few people feel that they have achieved something.

Some dilemmas of exposing corruption at high levels

Any business person operating internationally at a high level will inevi-tably become aware of cases involving distortions of processes and corruption. An individual and a company may conduct business with impeccable integrity but will still be aware of failings in the system, although they themselves are not involved. They may also be well be aware of individuals who have actually asked them for bribes that they have refused. What is the business person’s responsibility in such a case? The act may not be damaging to the company’s own business, but it is certainly damaging to the economy of the country as a whole. On one occasion, a new minister asked that he be granted the same arrangements or payments as his predecessor had enjoyed. It was explained to him that there were no such arrangements with his pre-decessor. This led to embarrassment on both sides. Having made the request the minister clearly felt compromised. I was concerned that the

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impression of corruption with the former minister might be more widely shared, so contact was made with the country’s ubiquitous security ser-vice. We were assured that they knew that there were no corrupt rela-tionships with the previous minister and that the president was also aware of this. You may ask why we did not expose the new minister’s request to the government or the president. There were two reasons. First, such an accusation in the end comes down to one person’s word against another. More importantly, if the authorities accepted the charge and decided to act on it, it was probable that the actions taken would not have been in line with generally accepted human rights principles. Drawing the line of responsibility is difficult. I once had a discus-sion in London with a minister of a country in which the company I worked for played a major role. He asked me to intervene with the head of his government to try to stop the irregular activities of certain people who were earning large amounts of, at best undeserved and in all probability downright dishonest, income from the country. We had, as a matter of deliberate policy and principle, avoided any connection with their activities and the minister himself knew it. The government as a whole also knew it because I had discussed with them the undesir-ability of any link and my views on one of the projects that this group proposed. When I pointed out to the minister that this was no concern of mine, that it was not my country or my government so why me, he replied that when it all went wrong I could guess whose fault it would be seen to be. At first this seemed to me to be grossly unfair. But was it really so unfair? We were long-standing friends and partners of the country. Had the issue been a natural disaster, or even a social issue for the nation, we would have immediately offered to play our part. Is it the act of a friend to avert your eyes and walk down the other side of the street when a crime is being committed, just because it is not your busi-ness? So I pondered the wisdom of entering into what would have been controversial discussions. Telling a friend that in your opinion another friend of his is a crook is in any society a high-risk strategy, even if you think that you have a relationship of trust. Your motives may be ques-tioned. In the event, before I had come to a conclusion an unrelated but

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accidental event occurred that caused a review and termination of all those relationships. It is sometimes possible to take a somewhat roundabout route. Consider the case of a well-functioning and profitable mine in Venezuela. A few years ago the government suddenly cancelled permits covering reserves around the mine, alleging breach of contract. In discussions with the ministry to resolve the issue it was made plain that for $35 million in a certain bank account the problem would be resolved. The demand was clear, but it was not clear from what level it was coming. Was it the minister, or was it from freelancers in his office? In either case the answer was going to be no, but it was important to try and establish where the request really originated. After much effort a meeting was arranged with the minister with non-nationals also present; the meeting was cordial and promises to investigate were made. In the antechamber after the meeting the demand was again made by a couple of very smooth professionals. When it was refused, they said that in any case $2 million was already owed for arranging the meeting with the minister. This was also refused. While we knew that the Chavez regime was in no way pro-business, I had hitherto not thought of it as inherently corrupt. We attempted to see or phone President Chavez without success. At that point I adopted a different tactic. In London there are frequent diplomatic receptions to celebrate the National Days of different countries. At these, and even at the Venezuelan reception itself, ambassadors of Latin American countries would be present. I told anyone interested the full story of the demand with details of the country concerned and that we were not going to pay because we never did. I was reasonably sure that this would get back by some route to the President Chavez. I still do not know the extent of ministerial or even presidential involvement. The mine continued to operate for some years and no payment was made. I think this experience suggests that the advice that I used to give to Shell country representatives on major bribery demands was accu-rate. The advice was in case in their country they received a high-level demand for a corrupt payment, with the threat that the company would lose its entire business in the country or that the expatriate country

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representative would be expelled. They should do two things; first, say no, and, second, report it to the centre at the highest level. Should the threat be implemented, they could be certain that the corrupt demand would be made public. I think that it is most unlikely that many gov-ernments or presidents would be willing to face the questions that their own people would ask. It is also a good argument for never engaging in such practices. Once you have done so it will weaken your ability to cry foul in the case of threats. I have seen examples where competitors paid for grants of licences and received them more swiftly than we did. But when the time comes, as it almost inevitably does, that the demands have escalated to a point where it is not worth paying, both bribers and non-bribers have similar difficulty in getting the permits. The non-bribers can at least complain loudly.

The beneficial effects of transparency—and its limitations

There is no doubt that transparency is a great disinfectant for the dis-ease and infection of corruption. When there is transparency, the gen-eral public can find out what is happening to flows of money and can demand explanations and correction where necessary. This is further reinforced where there is a lively free press. This is unfortunately not always the case. Sometimes it is disappointing that when corruption is exposed, the public reaction is remarkably forgiving. The populace does not rise up and demand resignation or punish the offenders in the ballot box. At present this disturbing trend is visible in South Africa, where members of the ruling party who appear to be at very least involved with those found guilty of corruption do not seem to lose their positions. It is encouraging that the South African judiciary continues to pursue such cases in an independent way. Such surprising tolerance has also been seen in Italy in the case of the repeated re-election of Silvio Berlusconi and it is not entirely absent elsewhere in Europe or the United States. The cause is not clear. Is it due to a cynical view of all politicians, or due to pragmatic acceptance that although an individual has clear moral failings none the less he remains a proven effective performer? Or is it

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tolerated by one part of the population because the individual is seen to be delivering benefits or protection to them? In such circumstances one can only take comfort from the recent events in the Middle East that show that even after many years of apparently passive acceptance of cor-ruption, in the end the population responds collectively and effectively. Perhaps this, together with an increasing web of legislation against cor-porate corruption, gives hope that in the end there will be appropriate retribution for the perpetrators. As Henry Wadsworth Longfellow put it in ‘Retribution’, a 19th-century poem derived from earlier sources:

Though the mills of God grind slowly;Yet they grind exceeding small;Though with patience he stands waiting,With exactness grinds he all.

May it indeed be so!

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If partnerships are considered to be a means of achieving enduring positive change, the importance of a principled approach is critical in creating and sustaining a just society. Ensuring that all partners are able to contribute, participate and benefit as fully as possible is central to the achievement of deep engagement, system change and, potentially, a wide range of positive outcomes.

There may be many occasions when a more powerful partner at the table will impose their own views, systems, priorities or approaches on other partners, whether out of frustration, a need for control, unquestioned as-sumptions about how things should happen or a genuine belief that their way is ‘best’. In partnerships where there are no agreed operational princi-ples, there is nothing to prevent this from occurring, and what started as a ‘partnership’ may quickly unravel into a traditional contract management scenario, with, at best, its subsequent loss of value for all concerned, and at worst, the cynical exploitation of one or more partners.

In this kind of scenario, the partnership may shift from a win-win to a win-lose engagement. The longer-term impact of this can be that the partners who are, or who feel, weaker or less important simply ‘with-draw’ by contributing or participating less. feelings of disempowerment and sense of a devaluing of what the partnership should be achieving if it was managed optimally, inevitably lead to less effective partnerships. whilst this is something to be avoided, it is not an uncommon expe-rience for those involved in arrangements described as ‘partnerships’. The effective management of power may be therefore to make the dif-ference between a genuine partnership and the one that is a partnership in name only.

Another driver for adopting an approach that is underpinned by agreed core principles is that partners cannot rely solely on their own organisa-tional or personal assumptions about how things will work between people as they strive to achieve collaboratively desired outcomes. Nor are they able to exercise the same degree of control over the process or the other partners compared to a scenario where they are sole owners or contractors.

Chapter 5

Embedding ethical and principled partnering approachesJulie Mundy

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Embedding ethical and principled partnering approaches 69

Agreeing upon principles by which partners will be guided to collaborate and share ownership responsibly can provide a compass for the pathway they are building together.

Partnering principles

what are partnering principles?1 In fact, it is due to a number of com-mon challenges evidenced across all sorts or different types of partnerships that the fundamental principles of good partnering have emerged. They are explored here in some detail because it falls to partnership brokers to help partners explore, adapt and adopt such principles into the day-to-day working of a partnership.

Valuing diversity

One of the main reasons organisations come together is to address prob-lems that they are unable to solve by themselves. They recognise that it is necessary to bring together different actors with complementary or diverse strengths, experiences and approaches. yet, it is often the reality of work-ing with those who are different from us that causes serious anxiety within partnerships and may hold back progress.

Andrew Acland2 talks about a cycle where uncertainty, if left unaddressed, escalates into fear, then hostility and eventually erupts into counterproductive

Common partnering challenge: ANXIETY ABOUT DIFFERENCE

Key principle: VALUING

DIVERSITY

Leads to:NEW VALUE

Artist: Guy Venables

Partnership broker’s roleDisrupting the uncertainty cycle

Providing reassuranceBuilding understanding of different perspectives and approachesDemonstrating respect for and acknowledging the challenges and

benefits of diversity

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conflict.3 Any number of things can cause partners to feel anxious and uncer-tain about working together. uncertainty can be caused by: a lack of infor-mation or understanding; different values or experiences; preconceptions and stereotypes about each other; poor prior experiences of partnering; discom-fort about how decisions are made; different communication protocols and pressures in the operating environment including time or financial concerns.

An important role for a partnership broker is to help disrupt the uncer-tainty cycle and thereby protect and build on the diversity that brought the partners together initially. This can be done by building better communica-tion between partners, helping to surface hidden interests and agendas and discussing any differences openly. Sometimes, a partnership broker will need to reassure partners that just because their approaches are different, this does not need to be a cause for alarm, and that in partnerships, we seek alignment rather than agreement in everything.

Ian Dixon, an experienced partnership broker working in Australia, uses the analogy of a piece of rope where each partner represents one of the indi-vidual strands; each individually coloured to represent the diverse strengths, skills and expertise which they bring to make up a stronger whole.4 Part-nership brokers need to watch for the more powerful partners in any part-nership seeking to change the colour of those strands to reflect their own, particularly as there seems to be an innate desire for some partners, once together, to enforce homogeneity on others (e.g. in terms of reporting re-quirements or governance) which suits their own needs but may risk losing the very diversity which brought them together in the first place.

Equity

Common partnering challenge: POWER IMBALANCE

Key principle: EQUITY

Leads to:RESPECT


Partnership broker’s roleBuilding understanding of each partner’s contributions and value

Ensuring all partners have a voice at all stages of the Partnering CycleManaging the dynamics of power in the partnership

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A constant challenge in all partnerships is maintaining equity. It is impor-tant to differentiate between equity and equality. Equality refers to each partner having exactly the same level of contribution and benefit. Since this is not a realistic aim in society, it is similarly unachievable in partnerships. However, adopting the term ‘equity’, where each partner’s voice is heard and their contribution is respected, and where all partners are able to contribute from their unique area of strength, is fundamental to good partnering.

Providing a partnering framework and environment where partners, no matter how powerful or powerless they are, can operate equitably will help to ensure that each partner is able to contribute fully and thus optimise value for all concerned. Power imbalances or inequity in partnerships can result in a lack of respect which, in turn, can impact on partners’ willing-ness to stick at it and work collaboratively when difficulties arise.

A great deal has been written about the deeply layered nature of power in relationships by social psychologists. french and Raven describe six forms of social power: coercive, reward, referent, legitimate, expert and infor-mational.5 All these forms of power may play out in complex partnerships (see Table 5.1). In partnerships, power can be attached to a situation, an or-ganisational partner (often the funding partner) and an individual’s status, role, expertise, reputation and even personality. It is therefore important for a partnership broker to be able to penetrate and understand the layers of individual and group dynamics and how they impact on the overall part-nership, helping to manage them accordingly.

In addition, it is vital to understand that power in any partnership can be both real and perceived. for example, donors, with the weight of their funding or influence behind them, may choose not to exercise their power but other partners may expect them to wield it, and behave accordingly. where power is present in an obstructive way, a partnership broker can assist partners to acknowledge and address the types of unhelpful be-haviours that will, over time, reduce the effectiveness of the partnership. This may not be a one-off conversation: power imbalances, both real and perceived, are ever-present threats to good partnering, and need to be acknowledged and discussed in an ongoing manner. New Zealand-based partnership broker, Trish Hall, asks two overarching questions of part-ners and/or partnership brokers that are designed to uncover and address power dynamics. These invite them to consider what types of power they have in any collaboration, and what types of power they perceive others to have.6

In order to manage issues of power, a partnership broker can help partners achieve equity by ensuring that they each have a voice in meetings and pro-viding opportunities to build understanding of what each of them contrib-utes. Partners can, for example, develop a resource map that captures both financial and non-financial contributions each brings to the table. This, in turn, can help partners to understand that much more than financial contri-butions are required for a partnership to be successful. where partners with

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less confidence or experience may not be able to identify what they bring to a partnership, a partnership broker can encourage partners to help each other to draw out and value the many different kinds of contributions. Partnership brokers can help partners to think very broadly about contributions using a visual tool such as the one developed by Tennyson (see figure 5.1).7

Table 5.1 Collaboration and dif ferent forms of power

Type of power Impact on collaboration

Legitimate power/formal authority

Legitimate power belongs to a person who holds a position or a role (e.g. project manager) within an organisation. An individual can exercise legitimate power when they carry out tasks with the authority their position gives them (e.g. formal chain of command). Partnerships need this authority at times. If people use this power inappropriately in partnerships, the results will be constrained and the commitment of others to the partnership could be minimised.

Reward power Reward power is the ability to give rewards to individuals. Rewards in a partnership can be a public acknowledgement, or recognition, praise or asking for input on other initiatives.

Charismatic power

Charismatic power is based upon the engagement and appeal of individuals who inspire others. It depends on personal flair, but also on skills acquired through training and practice. People with charismatic power are respected for their competence as well as their personal characteristics regardless of their formal authority in the organisation. Partnerships need this sort of power to be used to build a collaborative team.

Expert power Within organisations and partnerships, a person who has expert knowledge, ability or skill can influence others. Expertise may be obtained through special training, experience, access to specialist information, exceptional abilities or a general aura of competence. Partnerships need expert power that is exercised with generosity rather than control.

Information power

Anyone who possesses information of any type desired by others has information power. Collaborators exercise information power because everyone brings their information about the initiative.

Connection power

The ability to network and build and maintain relationships is central to the success of partnerships. Everyone in a partnership will need to exercise and expand this power. Some people have super-connector abilities that will be invaluable to a partnership.

Source: Adapted from French & Raven (1959) and Raven (1965) by Trish Hall.

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Openness

Although transparency is often cited as a key partnership principle,8 this can be a difficult concept to promote, particularly as in some con-texts it is quite a politically charged term that may be linked to societal perceptions of fraud and corruption. It may thus be helpful for partner-ship brokers to focus on promoting and encouraging openness between

KnowledgeDifferent types

Specialist knowledgeUnknown to others

InformationDissemination

Technical methodsNon-technical methods

ContactsCredibility

Spheres of influenceSupply chains

ProductsMedicine

FoodComputers

PeopleExpertise

ChampionsLabour/volunteers

NetworksSector specific

Types of contacts

Other? Physical ResourcesBuildingsTransport

Infrastructure

What could each partner contribute?

Figure 5.1 Partnership resources mapping.Source: Adapted from Tennyson, R. (2004) The Partnering Toolbook , London & Geneva: IBLF and GAIN: 12.

Common partnering challenge: HIDDEN AGENDAS

Key principle: OPENNESS

Leads to:TRUST


Partnership broker’s roleSurfacing hidden agendas and interests

Facilitating interest-based rather than position-based engagements between partners

Navigating differences to help partners achieve alignmentChallenging the status quo

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partners, so that there are no hidden surprises – especially unwelcome ones – as a partnership progresses. In addition to consideration of a partnership’s common goals and objectives, a good way to do this is to help partners to identify and disclose their individual organisational motives and drivers for engaging in a partnership from the very start. facilitating full and frank discussion of these drivers can assist part-ners in assessing whether there is any conflict that will potentially pre-vent the partnership from achieving its goals. well-honed negotiation skills and the courage to challenge strongly held views are also key at-tributes a partnership broker may need to bring in order to preserve this principle.

Case study 5.1 The elephant in the room

At the end of a successful day’s negotiations to develop a detailed partnership agreement among a travel company, an investor and an environmental NGO, who were partnering to develop and deliver ecotourism initiatives to benefit local villagers, the partnership bro-ker asked whether there was anything else which was important for the partners to know about each other in order for them to work successfully together. At this point, the partners had been collabo-rating together for some months to develop the concept and design of the partnership. The investor mentioned its anti-fraud and child protection requirements, which everyone was aware of and under-stood. The travel company then stated that its organisational values meant that it could not support elephant rides or related tourism in any form. The NGO was surprised by this as its own principles straddled the government policy towards positive (‘chain free-pain free’) use of elephants in research and anti-poaching and local tour-ism entrepreneurs who could have included elephant rides as part of the tourism offering. The travel company, in turn, was surprised as it had thought it had made its intent on the matter of elephants clear from the start of discussions. The investor was neutral on the matter. Given that the issue was linked to organisational values, this was potentially a ‘deal breaker’ moment for the partnership. It involved patient subsequent exploration of organisational val-ues, motivations and modus operandi which took many months to navigate, both at head office and in-country, before the partnership could proceed. A clear understanding of and alignment between the respective organisational values of partners can be fundamental to effective partnering.

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Mutual benefit

when partners stop turning up to partnership meetings, or send junior dele-gates, or do not do what they have committed to do, it may be a flag for part-nership brokers to check that there is still ‘enough in it’ to keep the partners engaged. The most successful partnerships are those where there is very clear mutual benefit for all partners concerned so they are prepared to commit or-ganisational resources to the partnership. when partners are only interested in achieving their own organisational goals, at the cost of others, a partner-ship will not be successful. A key role for partnership brokers can thus be to help partners identify the potential and actual value-add of working in a partnership by developing indicators of success for both the partnership and individual partners at the outset, and by ensuring that these are measured and reviewed regularly. If this is done at an early stage, a partnership broker can assist partners to assess whether their individual objectives are similar or aligned enough with those of others in order for the partnership to suc-ceed. where objectives appear to be in conflict, a partnership broker can help partners to explore these differences and consider how far there is a basis to proceed with the partnership (see Chapter 4). what is needed and what is important to each partner may evolve as partnerships (and organisations) progress, so this may not be a static consideration. Sometimes too, partners will not identify all the value-add at the start of the partnership, as this may emerge as the partnership unfolds, so asking questions during review pro-cesses such as ‘what are the unexpected and intangible benefits of working in this partnership for your organisation?’ can be important.

Common partnering challenge: COMPETITIVENESS

Key principle: MUTUALBENEFIT

Leads to:COMMITMENT


Partnership broker’s roleHelping partners to identify and maximise the value-add

for each partnerIdentifying and measuring indicators of success for the

partnership overall and for individual partnersAssessing value-add (benefits versus costs) during review processes

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Courage

Partnerships are increasingly being created to solve genuinely complex and often intractable problems, those which have stymied society for decades: gender violence, climate change, terrorism, water resource management, economic empowerment, homelessness, recidivism, etc. These types of challenges are of a nature and seriousness that they cannot be solved by or-ganisations or sectors working in isolation, no matter how good the intent or how deep their pockets. By their very nature, partnerships working in these spaces require a wide diversity of resources combined with the ability to adopt new ways of thinking and innovative approaches and plans.

As suggested earlier, this way of working can breed uncertainty and re-quires quite new thinking. It can be useful for partnership brokers working in innovative partnerships to facilitate a conversation around risk as each partner’s appetite or tolerance for risk is likely to be different. Governments, for example, are often seen as risk averse due to reputational or political considerations. This can become problematic when partnering with NGOs or the private sector that may be used to operating more nimbly and with increased appetites for risk.9 The resulting disconnect can cause considerable difficulty in partnerships, and may be a vital conversation to have upfront.

As noted in Chapter 4, a partnership broker may need to help ‘hold the space’ for partners to reflect and take time to generate new ideas and strat-egies, especially when they get stuck in the ‘groan zone’10 (see figure 5.2) and want to move to a quick fix solution without adequately exploring

Common partnering challenge: UNCERTAINTY

Key principle: COURAGE

Leads to:Breakthrough

results

Artist: Unknown

Partnership broker’s role‘Holding the space’ when things become unclear or difficult

Asking the tough questionsReminding partners of purpose and progress

facilitating discussions on risk appetite and risk management

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possibly more effective options. Sam Kaner’s model of divergent and con-vergent decision-making in groups helps partnership brokers to explore the value of this approach.

A partnership broker may be able to reassure or support partners by help-ing them to have courage to: stay the course; try something new and keep them focused on what they are trying to achieve (the big picture). In doing so, there is the possibility of entirely new thinking and innovation to occur.

Courage may also be needed to find new ways to plan and act together beyond conventional, more linear, ‘management-by-milestones’. Partners may need to be brave in experimenting with approaches to complex issues, learning together as they go, utilising design methodologies that are agile and iterative and, critically, they must have users at their heart. Such ap-proaches are only feasible where partners have learnt to trust, respect and value each other, and have the backing of their own organisations and sys-tems as well as an enabling environment.

Whose principles?

who chooses which principles will be adopted and promoted? Is it a part-nership broker, based on their global and/or personal experiences? Or the partners themselves? If it is a fundamental precept that every partnership is unique and that no ‘one size approach’ will fit all, it may be that principles essentially need to be quite partnership-specific.

New Topic

DecisionPoint

Familiar Opinions

Diverse Perspectives

Figure 5.2 The groan zone.Source: Dynamics of Group Decision Making in Kaner, S. (2007) Facilitators Guide to Participatory Decision Making, San Francisco: Jossey-Bass, A Wiley Imprint: 19 © Community At Work.

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In any event, during the scoping and building phase of the partnering cy-cle (see Chapter 2, figure 2.2), it is important to have a discussion between partners to identify the principles that they feel will best govern the part-nership and the way they engage with each other. Another way of thinking about this is for partners to consider the ‘personality’ of the partnership: how would they like others to describe it? what do they want to be known for? Depending on what the partnership is trying to achieve, some exam-ples of the kinds of principled aspirations that may be considered are high-lighted in figure 5.3.

Moving from principles to practice

A key question (all too often forgotten) is how to move beyond aspirational principles to daily practice. How best can principles become part of the very DNA of a partnership? This is not easy, and it cannot be assumed that it will just happen. A partnership broker can play an important role here. when value-laden terms (such as those used as partnering principles which are out-lined earlier) are ascribed, they often hold very different meanings for different partners, particularly in cross-sectoral or cross-cultural partnerships.

for example, what does ‘respect’, a much-cited principle with wide op-portunity for discrepancy between theory and practice in partnerships, mean to different partners? Many people can recognise what they consider to be a lack of respect, but this does not automatically lead to them enacting a respectful approach in their daily interactions with others. In one culture, ‘respect’ may be taken as never contradicting one’s elders; in another, it may mean speaking fearlessly. At a more practical level, ‘respect’ may mean responding to requests quickly and for others, it may be about not clogging up their inboxes with poorly worded and long-winded emails.

These kinds of discrepancies can be a key cause of dissent and ill feeling in partnerships. A partnership broker can assist in avoiding unintended misunderstandings by facilitating a discussion about the types of behaviour that illustrate what respect (or other principles) actually means for each partner. This can be a relatively straightforward conversation opening up debate about different expectations and values. It can be a first step in mov-ing principles from the ideal into reality.

Accountable, Adaptable, Adventurous, Communicative, Complementary, Courageous, Diverse, Effective, Equitable, Flexible, Fun, Inclusive, Innovative, Learning,

Mutually Beneficial, Open and Honest, Optimistic, Pragmatic, Outward-Looking, Productive, Respectful, Responsive, Results-focussed, Risk-taking, Transparent, Trusting

Figure 5.3 Partnership aspirations.

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An example of partnering principles, where an effort has been made to better explain each principle, is provided by uNICEf, the uN agency re-sponsible for children. uNICEf has defined 11 guiding principles11 for its engagement with civil society partners.

Case study 5.2 UNICEF’s partnership principles

1 Mutual focus on delivering results for women and children, es-pecially the most disadvantaged – Partnerships that directly con-tribute to the effective and efficient implementation of agreed programmes of cooperation and humanitarian intervention. Such partnerships must contribute clear value to the achievement of uNICEf strategic priorities and internationally agreed conven-tions and development goals, including the Convention on the Rights of the Child, the Convention of the Elimination of All forms of Discrimination Against women and the SDGs.

2 Mutual commitment to the core values of the Convention on the rights of the Child and the principles of good governance, notably transparency, accountability and sound financial management – uNICEf and its partners will each bring specific skills, resources and abilities to the partnership or collaborative relationship based on their respective tolerance for risk and in response to the needs of the relevant programme environment at national, regional and global levels. uNICEf will not partner with organisations found to be in breach of core uN norms or with any other entities that pose a reputation risk to uNICEf.

3 Equity among all partners – The objectives and activities pursued throughout the life of a partnership or collaborative relationship should be fully transparent and involve mutual accountabilities and mutual contributions as well as shared risks and benefits among all partners.

4 Integrity and independence of partners – Partnerships need to maintain the integrity and independence of both uNICEf and the partner(s).

5 Cost-effectiveness of the partnership – Partners should seek to minimise administrative and financial costs without compromis-ing accountability or effectiveness.

6 Forms of cooperation appropriate to the context and the goals to be pursued – These arrangements should be formalised through a written, legally enforceable agreement when funds, supplies or other resources are transferred from uNICEf to the partner.

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It is worth noting that these principles have been developed internally by the agency to inform its wider engagement with all civil society part-ners, and serve to make its intentions and expectations very clear which can be of great help to the partners. They also assist the agency to filter out unsuitable partners – those who do not subscribe to its approach – and do not necessarily reflect the needs, objectives or expectations of each individual partner which, even if not the same, may be sufficiently aligned for a partnership to be successful. In some ways, while a positive step, it could also be argued that this approach reinforces the power of the larger partner.

The partnering principles from the Australian Government’s Business Partnerships Platform initiative among a private sector financial services organisation, a state bank, a government agency and an NGO provide

7 Equality among all partners – Equality requires mutual respect among all partners, regardless of the size or power of one part-ner. The participants must respect each other’s mandates, obliga-tions, principles and independence.

8 Transparency in all decision-making processes that affect the partnership – Transparency is achieved through open and partic-ipatory dialogue, with an emphasis on consultation and sharing of information from the earliest stages of the partnership. Com-munications and transparency, including financial transparency, increase the level of trust among partners.

9 Responsibility to fulfil all obligations and commitments to the partnership – Partner organisations have an ethical obligation to fulfil their responsibilities to the partnership in a responsible and context-appropriate manner. They may agree to undertake ac-tivities only when they have the means, competencies and skills needed to deliver on those commitments.

10 Complementarity among partners – The diversity of the devel-opment and humanitarian community is an asset when organi-sations build on their strengths and advantages and complement each other’s contributions.

11 Capacity development of national partners – Partnerships with national and international CSOs will actively pursue opportuni-ties to develop the capacities of these organisations at national and community levels. Capacity development initiatives will be undertaken in accordance with the goals and commitments ex-pressed in the Paris Declaration on Aid Effectiveness and Accra Agenda for Action.

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another example of principles in partnership.12 Here, the principles were de-veloped collaboratively and specific to this particular partnership through a guided discussion facilitated by a partnership broker as part of the Part-nering Agreement negotiations. These principles reflect the partners’ shared intent of how they plan to work together going forward and were not used as part of a due-diligence process to select or exclude partners.

Dealing with dilemmas

Brass, Butterfield and Skaggs describe an ethical situation as one in which the ‘consequences of an individual’s decision affect the interests, welfare or expectations of others’.13 In no situation is this truer than where a

Case study 5.3 Australian government’s business partnerships platform partnership principles

Principle For example, this means:

1 Assume good intentions

• Everyone wants the project to achieve• Understand each other’s constraints• Keep Partners informed early and equally allow time

to reflect

2 Shared, long-term goal

• Can solve short-term problems if we commit to thelong-term view

3 Retaining a sense of urgency

• Be responsive to other partner’s needs• Be practical – keep an operational perspective• Meet commitments• Be aware of constraints and deadlines

4 Openness and trust

• Work through problems together, proactively• Inform each other as soon as any issues arise: ‘early

warning’• No surprises• Clear and transparent communications• Do what we say we are going to do• Trust that Partners can and will want to help• Build on existing good relationships and reputations

5 Willingness to adapt and change

• May need to be flexible and change as things evolve• Recognise the diversity of the different Partners

6 Respecting diversity and ensuring mutual benef it

• Respect what each Partner brings to the Partnership• Partners bring different skills, talents and knowledge• Ensure there is some benefit for each PartnerTa

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partnership broker is walking the fine line between a range of partners, many of whom may have competing interests and agendas, and he/she is seeking to help partners explore complementarity and arrive at alignment. There is, of course, considerable potential for abuse or misuse of this in-fluential role: partnership brokers are often privy to confidential and sensi-tive information from a variety of sources within the partnership and must carefully navigate and understand what can and cannot be revealed in the interests of a principled and effective partnership, and what needs to merely inform the work they do with the partners. Partnership brokers can also be at risk of becoming too powerful themselves as players in the partnership, and must be alert to the danger of taking over leadership and direction from the partners, even where this is encouraged by the partners, thereby undermining one of the most fundamental principles of good partnering (as outlined earlier).

for independent partnership brokers, there is always the issue of who they are paid by and what impact this might have on their neutrality and how partners perceive them: in whose interests do they act if paid by one partner? In sensitive partnerships with low levels of trust, partnership bro-kers may be required to actively demonstrate the principles of openness and equity in all engagements. Partnership brokers may even find it necessary to consider negotiating with partners in advance to ensure that all partners agree to their appointment. To help build a sense of accountability to the entire partnership, they can also suggest a sharing of costs and responsibil-ity relating to their hiring arrangement (for example, one partner paying, another managing the contract, another providing accommodation, etc.).14 At all times, partnership brokers (whether internal or external to the part-nership) need to act in the interests of the partnership, not the individual partners, though in our experience, this is ultimately one and the same.15

An ethical code for partnership brokers?

In light of these challenges, how can partnership brokers aspire and com-mit to a professional ethical code of conduct for their work? The answer to this question is likely to help determine the future role and credibility of this emerging profession. The Partnership Brokers Association advocates for (and requires its Accredited Partnership Brokers and Associates to sign up to) ten principles of partnership brokering good practice as a means of embedding/promoting ethical practice (see Table 5.2).16

Conclusion

Partnership brokers can play a fundamental role in supporting partners to establish efficient, effective and ethical ways of working collaboratively. Partnership brokering requires a nuanced and sophisticated skill set that

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Table 5.2 The ten principles of partnership brokering good practice

1 Keep up to date with new developments in the theory and practice of brokering multi-stakeholder partnerships

Partnership brokering is an emergent and rapidly evolving profession. For this reason, it is important that partnership brokers remain abreast of current practice and thinking, ref lecting on current lessons acquired from partnerships worldwide. This can be done in a number of ways: reading of practitioner and academic journals17 and case studies; peer review and participation in Communities of Practice and other active forums of learning and exchange with other partnership brokers, as well as continuing professional development.

2 Being ref lective and striving for diversity, equity, openness, mutual benef it and courageous practice when operating in a partnership brokering role

‘Do as I say, not as I do’ is anathema to principled partnership brokers, who strive to role model the types of behaviours and approaches they are trying to support partners to embed themselves. This is particularly important for partnership brokers at the start of a partnership process when they are establishing their credentials and trustworthiness as ‘neutral brokers’ but must be consistently so throughout their engagement with any partnership.

A critical aspect of partnership brokering is the individual’s ability to cultivate a ref lective approach to their practice. This is in the interests of continuous professional development and assists understanding of the impact the decisions they make and how the way the broker has an impact on the outcomes of the partnership. A partnership broker therefore needs to systematically consider in advance of any intervention: What am I planning to do or say? What design choices will I make in running the process? How will I role model and promote the partnering principles in the partnership? And afterwards: What did I do? What happened? How did what I do impact on the partnership? What could I do dif ferently? What patterns or insights do I notice in my own partnership brokering?18

3 Being prepared to challenge assumptions and poor partnering behaviour at any stage of the partnering cycle in ways most likely to bring about constructive change

This is frequently described as one of the areas in which the role played by a partnership broker is substantially dif ferent to that of a facilitator. It is often a partnership broker’s role and responsibil ity to ask the tough questions; the ones that make partners uncomfortable; to uncover the ‘elephants in the room’ which no one else is prepared to ask about; to expose poor partnering behaviour which is inhibiting progress – just as much as it is to recognise and acknowledge positive partnering behaviour – when partners go above and beyond the upholding of principles they have committed to. Displaying such courage judiciously, at times when others are not prepared to do so, can often unblock and help partnerships to progress. In this way, a partnership broker can support partners to challenge their own and each other’s assumptions and behaviours, in the interests of progressing the partnership. In order to build resilient and sustainable behaviours in partnerships, a partnership broker ideally builds the capacity of partners, over time, to surface and work through tough conversations themselves.

(Continued)

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4 Taking every opportunity to build partnering and partnership brokering capacity in others

For effective partnerships to be sustainable, it is essential that partnership brokers build their own capacity to be internal brokers, acting for and on behalf of the partnership as well as their own organisations. To do this requires a focus on the skills and processes involved in good partnering, as well as both a commitment and an understanding that good partnering takes a little time and attention throughout: it is not just a ‘set and forget’ process. This is a key role for a partnership broker who, from the outset , can raise this need to build a sustainable approach which is not reliant on external support over time. A good approach is for an external broker to work hand in hand with internal brokers from some, or all of the partner organisations, building their skills and understanding of what the broker is doing and why. For partnerships which have internal brokers from the start , building capacity may mean similar things – raising and acknowledging the partnering component of what they are doing, perhaps conducting short trainings or encouraging other partners to attend partnership training and development, and sharing responsibility for the partnership processes which they may have introduced.

5 Share knowledge generously and not hold onto knowledge for personal aggrandisement or gain

It is important that partnership brokers ‘wear their skeleton on the outside’, being purposeful and explicit about what they are doing, why and how, and not allowing what they do to become something ‘mystical’. This goes hand in hand with the previous principle, where partnership brokers need to be committed to building capacity in others. It also speaks to the need for partnership brokers to be committed to the concept of ‘servant’ or invisible leadership, understanding that their role is to act in service of the partnership. Jim Collins identifies what he calls Level 5 leaders of consistently high-performing organisations as having both personal humility and professional will, noting that ‘their ambition is first and foremost for the institution, not themselves’.19 The same is true for partnership brokers, who need to be both modest and forthcoming with their knowledge, in the interests of the institution (the partnership) which they serve.

6 Explore any available alternative approaches before promoting a partnering process, in a commitment to achieving the best possible outcomes

With the flourishing of ‘all things partnership’, there is a risk that the approach itself is being done a disservice. A partnering approach is not always the best or most appropriate paradigm to achieve outcomes: partnerships can be costly in terms of transaction costs compared to alternative approaches, though in successful partnerships, this is usually considered a worthwhile investment. Partnership brokers have a responsibility to not promote the approach when they are aware that there is a better alternative model, such as a straight service contract or grant mechanism. It may be a partnership broker’s role to identify this disconnect to the potential partners, and to help move the partnership to where it should be.

Table 5.2 (Continued)

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7 Be open about risks and seeking prior endorsement of those most likely to be affected by them before taking actions that might entail such risks

Partnership brokers are often privy to a great deal of information and also have the benef it of being able to take an overview of the entire partnership. For these reasons, they are often well placed to identify early any potential risks to partners, and also, very importantly, to project users or benef iciaries. The fundamental principle must be to do no harm, and to act with openness and integrity when identifying those risks and ensuring that partners are aware of them and act accordingly.

8 Be an ethical and responsible practitioner by raising concerns about the partnership or the actions of individual partners

Should a partnership broker become aware of any ethical issues which are impacting or have the potential to adversely af fect the partnership or the partners, whether due to an external inf luence or to the actions of an individual partner, they must have the courage to raise them with those concerned. This may be highly sensitive and requires sound judgement and careful consideration of the most appropriate approach, but not to address the situation would be negligent .

9 Acknowledge competence limitations and be open to requesting assistance from others who will bring complementary skills or dif ferent approaches to the task

Every partnership broker is unique and dif ferent . They each bring dif ferent strengths to the partnerships they serve; based on their own experience, skills and training, and each will f ind their own unique style and approach. It is important for partnership brokers to have an objective understanding of their own capabilities and to know when to call on others for assistance. The test question should always be: What does the partnership need now and am I best placed to provide it?

10 Be willing to let go and hand over the partnership brokering role when the time is right

For partnerships to be successful and sustainable, they need to become self-reliant . This has particularly implications for external partnership brokers who have to avoid partnerships developing a dependency on them to manage the partnership or jump in and resolve conflicts. However, even those acting as internal partnership brokers have to consciously work to build capacity in others and manage the process of partnering in order to help protect against their own eventual departure. This requires a considerable degree of judgement: letting go too early and before partnering capacity has been developed can mean partnerships f lounder; holding all the knowledge and expertise for the partnership can collapse them when partnership brokers do withdraw. Such an approach requires a certain amount of detachment and self lessness. Partnership brokering is not a role for those with egos which need constant af f irmation, but more for those individuals who can draw satisfaction from seeing the partnership itself succeed.

Source: The Partnership Brokers Association (PBA).

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can be adapted to each unique partnership scenario, along with sound judgement and a strong internal moral compass. A principled approach to partnering, as outlined here, requires a partnership broker to role model behaviours and approaches that can help partners to navigate complex challenges and solutions in a mutually beneficial way. While it is indeed a feature of partnership brokers that they seek to ‘lead from behind’, it is nev-ertheless important that they do not underestimate the direct impact they can have on improving (or undermining) partnership outcomes through their own behaviours, approaches and choices.

Notes 1 Principles 2–4 were originally identified and written about in Tennyson, R. (1998)

Managing Partnerships: Tools for Mobilising the Public Sector, Business and Civil Society as Partners in Development, London: IBLF: 63. Principles 1 and 5 were added by the Authorised Practitioner Trainers of the Partnership Brokers Associa-tion in 2016.

2 Acland, A. (2011) Working with Uncertainty. Working Paper. UK: Andrew Acland & Associates.

3 As noted in Chapter 2, it should be noted that conflict may not always be a bad thing and can sometimes be a force for creativity and the development of innovative/radical solutions to problems.

4 Dixon, I. (2013) Partnering Solutions: How to build effective partnerships be-tween the Business, Government, Community and Education Sectors. White Paper. Adelaide: Dixon Partnering Solutions.

5 French, J. & Raven, B. (1959) The bases of social power. In D. Cartwright (Ed.) Studies in Social Power, Ann Arbor, MI: Institute for Social Research: 150–167, and Raven, B.H. (1965) Social influence and power. In I.D. Steiner & M. Fishbein (Eds.) Current Studies in Social Psychology, New York: Holt, Rinehart, Winston: 371–382.

6 Hall, T. (n/d) Adaptation of French & Raven (1959) Op cit; and Raven, B.H. (2008). The Bases of Power and the Power/Interaction Model of Interpersonal Influence. Analyses of Social Issues and Public Policy, 8 (1): 1–22.

7 Adapted from Tennyson, R. (2004) The Partnering Toolbook, London & Geneva: IBLF & GAIN: 12.

8 Ibid: 6. 9 For more information about risk management approaches and tools in cross-

sector partnerships, see: Mundy, J. (2006) Risky Business: Removing Barriers to Effective Partnerships for Development. Risk Management for the Broker’s Toolbox. In Café Conversations, A compendium of essays on the practice and theory of brokering multi-sector partnerships for sustainable development, London: Partnership Brokers Association and Overseas Development Institute: 105–118.

10 Kaner, S. (2014) Facilitator’s Guide to Participatory Decision-Making, 3rd edition. San Francisco: Jossey-Bass.

11 https://www.unicef.org/about/partnerships/index_60074.html August 2016 (accessed 9/2/2018) for a detailed description of UNICEF’s civil society part-nership principles.

12 See: http://dfat.gov.au/aid/who-we-work-with/private-sector-partnerships/bpp/ Pages/business-partnerships-platform.aspx (accessed 9/2/2018).

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https://www.unicef.org/about/partnerships/index_60074.html

http://dfat.gov.au/aid/who-we-work-with/private-sector-partnerships/bpp/Pages/business-partnerships-platform.aspx

http://dfat.gov.au/aid/who-we-work-with/private-sector-partnerships/bpp/Pages/business-partnerships-platform.aspx


13 Brass, D.J., Butterfield, K.D. & Skaggs, B.C. (1998) Relationships and unethi-cal Behavior: A Social Network Perspective. The Academy of Management Review, 23 (1): 14–31.

14 These issues are explored in more detail in Dixon, I. (2006) funding Approaches for External Partnership Brokers. In Café Conversations: A Compendium of Essays on the Practice and Theory of Brokering Multi-Sector Partnerships for Sustainable Development, London uK: IBLf and Overseas Development Institute.

15 Sarah Nyanti explores some of these dilemmas further in her paper, Dealing with ethical dilemmas – a partnership brokers personal perspective. Betwixt and Between, The Journal of Partnership Brokering, Issue 6, June 2016 which is reproduced in Part 2 of this book.

16 These principles have been developed and refined collaboratively by partner-ship brokers from PBA’s Communities of Practice, led by Ros Tennyson and Bulbul Baksi, and were expanded from the original seven to ten in 2016, reflect-ing the Communities’ experience and lived practice over the preceding 10 years.

17 Betwixt and Between, The Journal of Partnership Brokering, is available on-line and includes articles addressing current practice from partnership broker-ing practitioners worldwide.

18 Ros Tennyson discusses different reflective approaches for partnership brokers in, ‘The Imagined Conversation’ in MacManus, S. & Tennyson, R. (2008) Talking the Walk: A Communication Manual for Partnership Practitioners, London: IBLf/TPI.

19 Collins, J.C. (2001) Good to Great, London: william Collins: 39.

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3

Sustainability- aligned strategiesSmart enterprise strategies to progress along a bridge to thriving

William G. Russell and Joel Harmon

We live in a fundamentally changed world. It’s time for your approach to strategy to change, too.

(Andrew Winston)

How can we create “smart” enterprise strategies that will collectively guide us over the complex bridge of sustainability to a thriving future? Earlier chapters have helped develop an increased and shared awareness of many of the factors that impact our journey. These include defining sustainability, highlighting global and enterprise systems and the forces driving them, mindsets that help us and hinder our progress, and the unique leadership approach needed to achieve success. These are all key aspects we build upon as we share our bridge strategy framework to help you formulate and execute a sustainability- aligned strategy.

This chapter is about how to create adjustable or “smart”1 strategies that can guide enterprises along a progressive sustainable enterprise journey. Stated in simple terms strategies guide you from where you are, or your current state, to where you hope to move, or your desired state. We use a sustainability lens to describe four discrete and progressively hol-istic stages to orient an enterprise’s purpose and progress. Here and again within Chapter 6, we suggest progressive, but interconnected smart goals to assess and iteratively evolve the founding mental models and performance expectations of the enterprise itself and the strategy guiding it. A sustain-ability- aligned strategy is not a fixed one, but adjusts and adapts as the enter-prise progresses. Executing a sustainability- aligned strategy will be more integrated and interdependent than traditional strategies. It requires wise change management practices, diligent employee and stakeholder engage-ment, and a strong appreciation of global conditions and trends discussed in the chapters to follow.

The basic notion of sustainability is evolving toward a more aspirational vision of creating a “flourishing” or “thriving” desired state for the planet and society (Ehrenfeld & Hoffman, 2013; Laszlo & Brown, 2014). It is aspir-ational and we believe with the right blend of humility, precaution, and

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enlightenment, it is truly possible. We understand that we don’t actually know how we will get there. Our strategies will reveal multiple paths where we must assess the near- and long- term risks and opportunities.

An effective strategy requires reviewing the state of global environmental and social systems. Our understanding about planetary boundaries, natural resource thresholds, and ecosystem services that support life is limited and evolving. The implications of what we are learning are alarming. Previously unknown or misunderstood risks are manifesting. Our strategies must manage the paradox between the near- term urgent risks and long- term, less certain, but important and life- sustaining, environmental risks. Our understanding of current social and economic system conditions is also evolving. These systems have knowable macro- system weaknesses and alarming feedback signal conditions that beg for mindset and performance reviews and system adaptation. Conversations and change- oriented collaborations are questioning the basic purpose of business and the economic and regulatory systems that drive its beliefs and behaviors.

It gives us renewed hope to see that sustainability is now “a key strategic priority” for many leading CEOs, according to several executive surveys from 2010 to 2017. Leading firms are seeing that an integrated “triple bottom line” (i.e., people, planet, profits) requires vigilant engage-ment and collaboration with employees, their external stakeholders, and society. Responsible stewardship of the environment, people, and financial resources must build resiliency and enhance wellbeing, our ultimate outcomes. Successfully navigating enterprises into the future is critical not only to each enterprise’s own long- term viability in the global marketplace, but to sustaining and hopefully enhancing the wellbeing of all humans.

The goal of this chapter is to help leaders re- imagine their company from a more holistic and interconnected systems perspective. From this open mindset they can apply a mix of pragmatic strategy- informing tools to create a progressive, agile, and even adjustable or “smart” strategy. The progres-sive or smart sustainability- aligned strategy bridge framework, introduced later in the chapter, provides enterprises with a clear purpose, vision, goals, and values. The bridge strategy process reveals uniquely appropriate paths for action and achieving progress. It adjusts for each enterprise’s current state, and provides an approach to obtaining a more diverse foundation by engaging employees and stakeholders into the strategy process and understanding each other’s mindsets, biases, and capacities as we commu-nicate together.

The chapter reviews some core strategy development concepts and best practices. We then review sustainability- aligning concepts and how processes that align strategies with sustainability have evolved to work with today’s new understandings and goals. We then introduce the idea of strategies that are more iterative, progressive, and adjustable or smart. We build upon the systems thinking messages presented in the Mental Models

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chapter by presenting brief stage- setting perspectives for the co- evolution of interconnected human and enterprise systems. Throughout the chapter we include contextual observations, statistics, and trends that inform and remind us of the current progress and challenges ahead for the sustainability movement. Sustainability- aligned enterprise strategies and the outcomes they produce will transform the businesses that apply them and the lives of every employee, customer, and broader communities they serve.

We introduce an epoch story with quests to build bridges and cross chasms as a way to creatively help guide you through four progressive sustainable enterprise stages. The stages of our journey are inclusive and depict diverse enterprise types with diverse stakeholders all traveling together. We must be respectful of each other and formulate inclusive strategies that meet people and enterprises where they are today. For most, this is a difficult mindset shift to grasp as they re- imagine their enterprise’s beginning state. Each of our four chasm- crossing missions starts with having enterprises choose that stage’s mission and formulate their strategy to progress towards their new re- imagined strategic purpose and goals. Even these smaller segments of the more complete journey seem daunting at first and have risks that can cause the company to fail. Case studies are provided that assure you and others you work with that you are not traveling alone. Heroes have been working hard to understand what lies ahead, and innovate new tools to help you travel. Pioneering enterprises are attempting new paths that you can follow.

Achieving sustainability will require everyone’s engagement and hard work. That said, it is important to be present as we travel, take time to reflect, have fun, and make this journey an enjoyable ride.

Enhanced strategic management process

The industrial system takes too much, extracting and frittering away Earth’s natural capital on wants, not needs. It wastes too much. It abuses too much. It takes stuff and makes stuff that very quickly ends up in landfills or incinerators— more waste, more abuse, more pollution.

(Ray Anderson)

In our first edition of the Fieldbook, we presented the Sustainability Pyramid (also featured in the Introduction to this second edition). That framework insightfully emphasized that making sustainability central to an organization’s overall strategy was a foundational quality for cre-ating a sustainable enterprise (American Management Association [AMA], 2007; Wirtenberg, Harmon, Russell, & Fairfield, 2007). The journey’s vision at that time was more internally oriented focusing on building traction by engaging employees and aligning internal systems and performance metrics. Broader stakeholder engagement and the need for holistic integration was

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identified, but not urgently required. Most people were not (and still are not) yet aware of or have accepted the scenario modeling signals of Limits to Growth (Meadows, Meadows, Meadows, & Behrens, 1972) and other insightful, but undervalued or dismissed work released in more innocent times. Even through today, very few enterprises have sustainability groups— and those that do are still operating as silos— and are generally not well integrated with other core business functions. Leadership from large investor groups including Blackstone and BlackRock (Sorkin, 2018) are shaking things up, but for the moment, growth and single- bottom- line performance are still the primary drivers for governments and the formulators of risky, even bad, corporate strategies.

The basic strategic management process

This section reviews the general strategic management process and the SWOT framework for strategy formulation and execution. Enhancements for sustainability- alignment and insights learned over the past decade are included to help deepen understanding and promote further learning and adaptation in the future.

Viewed through a strategic management lens, a good strategy for sustain-ability must first and foremost be a fundamentally sound strategy. A good strategy promotes positive, system- reinforcing competition within indus-tries, markets, and communities. Diversity builds resiliency and stakeholder- valued advantages that help assure the better performing enterprises also are the most viable and survive (Porter & Kramer, 2006). This applies to any type of enterprise, whether a large corporation that strives for market share and profitability, a small family- owned business serving local markets or an NGO (nongovernmental organization) that competes for clients and funding support. Thus, from this perspective, creating a good sustainability- aligned strategy essentially represents a critical enhancement of a solid basic strategic management process.

Figure 3.1 visualizes the essential elements of the strategic management process. In essence, a successful strategy is one that positions the organiza-tion so as to create an alignment or “fit” between its inside and outside worlds at any point in time. One aspect involves taking an “outside- in” perspec-tive, analyzing the general and industry- specific forces in the organization’s external environment to discern opportunities and threats.2

Another aspect involves taking an “inside- out” perspective, analyzing the organization’s value chain, resources, and capabilities to discern its own “core competencies”: What can it do to create value that is relatively rare among its rivals and hard for them to easily imitate?3 A good strategy adopts a mission and goals that continually position the organization favorably in the outside world and that guide the creation and recreation of the competencies neces-sary to succeed there in a resilient and sustainable manner.

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Traditional strategic process enhancements

When reflecting on this process after a decade of application, two enhancements are noted. First, the system boundary between the firm and the environment on the left should be viewed as porous and adjustable depending upon the issues being considered and expansive to include the holistic triple- bottom- line economic, social, and environmental system interconnections of threats and opportunities at both the industry value chain and broader macro- level national and global boundaries. Second, when examining internal firm core competencies, more attention must be paid to the human capital (employees) mindsets and capacities and stakeholder engagement processes than what previous nonsustainable strategic processes required.

Understand the mission

Strategy is best formulated by a diverse team with diverse perspectives. A small group within senior leadership may have unconscious biases which risk missing vital insights that fresh broader stakeholders can infuse. A more inclusive and diverse team of enterprise leaders and stakeholders will require more time for collaboration. A diverse team, supported by leadership that is open to new ideas and an arsenal of tools to stimulate dynamic probing of key challenges, opportunities, and mindsets will produce better strat-egies. The outcomes will be better and more transparently reflect on the enterprise’s current state and mission being confronted. Thinking strategically

Alignment/“fit”

Integration

Firm

Internal analysis:What can we do?

External analysis:What might we do?

Strategy

Positioning

Resources andcapabilites:

valuable, rare,hard to imitate

Value chain,culture,

control systems

Intent, mission,core strategy, goals,

effectiveness

Leadership,governance

Social, political,economic,

technological,industry forces

Competitive arenaThreats and opportunities

Core competenciesStrengths and weaknesses

Environment

Figure 3.1 Strategic management: alignment of organization– strategy– environmentSource: Copyright 2008, J. Harmon. Used with permission.

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is to understand the problem you are trying to solve and seeing the problem from different views. Sometimes, the problem you need to address is not the one you originally set out to tackle. When a leader attempts to formulate a strategy in isolation or only with internal staff too similar in shared views and experiences, they may falsely believe that they completely understand the situation. All sorts of biases including groupthink may result, as the actual problem is frequently broader, more nuanced, or different than the leader or team originally may assume.

Formulating and executing activities

It is useful at this point to distinguish two interrelated sets of strategic man-agement activities. The first set involves formulating (or developing) the direc-tion and content of a strategy: its purpose, mission, and goals. The second set involves executing a strategy: the numerous activities that an organization needs to engage in to sustainably- align and apply the guidance of its strategy. It is also vitally important to recognize the back- and- forth iterative and emergent nature of the strategy formulation– execution process (Mintzberg, 1978). An organization tries to adopt approaches to the world that it believes will create success but adjusts its intentions according to realities encountered along the way. Senior enterprise executives are not the only ones who have a crit-ical leadership role to play in developing strategies fit for the more complex, rapidly changing, 21st- century global economy. People at all levels, especially those who work at the organization’s boundaries with customers, suppliers, regulators, and community groups, often can make powerful contributions to shaping and modifying their organization’s strategy.

Performing a sustainability- aligned SWOT

Finally, for strategic action- planning purposes, it is useful to introduce the notion of a “SWOT” analysis as shown in Table 3.1. Strategic management is often pragmatically defined as the pattern of management actions to accomplish mission and goals by leveraging Strengths and addressing Weaknesses to cap-italize on Opportunities and counter Threats (see, for example, any good basic strategic management text, such as Hill & Jones, 2008).

Note that when done well a SWOT analysis requires an organization to:

• scan and make sense of both the broad and the industry- specific dynamics that to some extent drive its behaviors and results;

• assess the organization both for valuable resources and capabilities andfor areas of relative weakness.

Distilling this analysis (which would go into the gray cells of Table 3.1) provides the strategic framework for formulating actions (the white cells of

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Table 3.1). See the Living Fieldbook for a sustainability- specific SWOT tool for analysis and planning activities.

Strategy versus plans: Why versus how you do something

There are important distinctions between a strategy and a plan. A plan is usually a list of steps taken to accomplish a goal. A plan tackles questions like how, when, where, who, and what? A plan is a good thing to have, but a strategy is bigger than a plan. Strategy tackles the question of why? It has a large scope and looks at the end result as well as the many paths to the desired outcome. A strategy looks at every possible influencing factor, both seen and unforeseen and comes to terms with the whole situation, not just one end result.

Good versus bad strategy

A good strategy does more than urge us forward. “Let’s get going,” is not a strategy. A good strategy is one that reaffirms the enterprise purpose and refocuses its vision for the future. It reflects an awareness and honest assessment of current reality. It incorporates a SWOT analysis to capture current conditions, and also adapts the strategy as execution progresses. This implies checking and monitoring progress towards goals. It means incorpor-ating qualitative and quantitative feedback, and having that feedback itera-tively adjust the initial assessments of how things are.

A good strategy can look simple and obvious in retrospect. Conversely, bad ones can kill momentum, cause great delays, and even backslide an enterprise’s progress. Any perceived improvements are likely achieved through dumb luck. Bad strategy ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests.

Table 3.1 A SWOT framework for strategic analysis

OpportunitiesWhat conditions in the outside world could we really take advantage of?

Threats/ risksWhat conditions in the outside world might really hurt us?

StrengthsWhat things do we do really well or possess that have great value?

How can we leverage our strengths to exploit these opportunities?

How can we leverage these strengths to neutralize or minimize these threats/ risks?

WeaknessesWhat things do we lack or do very poorly?

How can we address these weaknesses to exploit these opportunities?

How can we address these weaknesses to neutralize or minimize these threats/ risks?

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Sustainability- aligned enterprise strategies

This section offers a few distinctions between traditional strategies and ones that are sustainability- aligned. Sustainability strategies as initially depicted in our original book have evolved substantially and are poised for scaled pro-gressive application.

Sustainability- aligned strategy, purpose, and goals

The journey to corporate sustainability can be viewed as a progression of stages and steps toward meeting societal expectations (Hitchcock & Willard, 2006; Willard, 2005, pp. 26– 27). The earliest stages have tended to be compliance- driven, with a focus on rep-utable business practices (e.g., laws, regulations, contracts). In midpoint stages, organizations move beyond mere compliance to concerns for cus-tomer expectations (e.g., quality) and employee needs (e.g., health, safety, quality of work life). Advanced stages are characterized by a more integrated strategic approach infused with purpose and passion and marked by environ-mental stewardship and deep concerns for community needs. Some early adopters of advanced- stage sustainability qualities were founded on social- environmental ethical principles and have it in their “DNA.” It is simply how they operate: what they do and have always done. More recently, with a par-ticular emphasis on climate change risks, corporations have started to inte-grate science- based goals into their long- term strategies and plans. We have reorganized this continuum of strategic logic, purposes, and goals into a sustainability- aligned bridge framework presented later in this chapter.

Systems thinking advancements

Systems thinking in theory and practice was introduced in Chapter 2, and is a core enhancement for formulating sustainability- aligned strategies. Some will argue that systems theory has been applied for sustainability framing for decades. Sustainability thought leaders including Donella Meadows (Meadows, 1999; Meadows, 2015), Peter Senge (Senge, 1994), Hunter Lovins (Lovins & Lovins, 1989), and Daniel Aronson (Aronson, 1996) and others, have been applying and promoting this for over 30 years. That work however, like other thought leaders who were ahead of their time, has not been given enough attention. It has yet to become mainstream and scale as we desire. We hope that through this book and the work of other fellow sustainability leaders who also are aware of it and applying it now (Baue, 2017), its wisdom will finally be appreciated and its application vastly scaled. The aggregate state of the enterprise movement, as reviewed later in this chapter, is still nascent. Broad, inclusive, adoption of systems- based sustainability- aligned strategies can be transformative to any enterprise and the broader systems with which they interconnect.

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The following are systems thinking advancements applied to sustainability- aligned strategies:

• articulating a systems view of an enterprise with interconnected andinterdependent purposes, functions, mental models and elements;

• use of the Daly Triangle to establish ultimate means, intermediate means,intermediate ends, and ultimate ends;

• multicapital ecological accounting including the acknowledgment oflimited nonrenewable (technical) and renewable (organic) natural capital;

• blind spots, disruptive technologies, system weaknesses, and criticalassumptions positive or negative are probed;

• agile quick pivots and velocity adjustments are made as new feedbacksignals are monitored and adjusted.

Adjustable or smart strategy for clear purposeful vision

We tell our story as if it takes place linearly in time. One arc from start to finish. Or in our case four arcs creating a bridge crossing four potentially journey- ending perilous chasms. Implementing a systems- oriented holistic, sustainability- aligned strategy in reality will be more complex. The sustainable enterprise strategic journey integrates or blends the view ahead through mul-tiple time periods and is adaptive, agile, and multidimensional.

The linear version of our bridge story is viewed like looking through progressive lens glasses. Progressive glasses allow you to see clearly across distances from close to far away. Our progressive bridges allow enterprises to see clearly through time from near term to times further and further out into the future. A progressive sustainability- aligned strategy must allow you to see anything ahead, close and far. As you react to these multi- distant sights, you process risks and opportunities. With the help of feedback signals (i.e., good metrics), you adjust the strategy and continue progressing ahead with a clear purposeful vision.

While progressive glasses are wonderful advancements for seeing clearly, technology has advanced to the next level with the innovation of adjustable or “smart” lenses. Smart glasses come with liquid lenses that can automatically adjust their focus, which means that you don’t have to take reading glasses on and off (Chang, 2017). This technology can also replace bifocals, or progres-sive glasses as we propose. Bifocals, which itself would be an improvement in strategy development, help you see through one prescription at a distance, and another for nearby objects. Now imagine the future of sustainability- aligned smart strategies. “The major advantage of these smart eyeglasses is that once a person puts them on, the objects in front of the person always show clear, no matter at what distance the object is,” (Carlos Mastrangelo quoted in Chang, 2017).

Ultimately the aggregate smart strategy reveals a jagged, but precautionary path with the highest probability of progressing in a positive direction for

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the longest foreseeable time periods. This path is inclusively iterated between the enterprise and its stakeholders throughout the process. Each progres-sive insight helps avoid both impasses caused by human paradox priority differences (tradeoffs) and delayed or inaccurate environmental and or eco-nomic feedback signals. Illustrative priority performance risks include:

• current economy value propositions and finances during startups; • competitor and customer reactions and feedback signals in the medium

term; • expanded more complex market and supply chain perspectives;

• geopolitical and environmental risks and opportunities.

If strategic conditions change, the strategy needs to be updated and a new strategic direction or velocity developed.

Sustainability- aligned human/ enterprise systems perspective

I believe that a sustainable society depends totally and absolutely on a new mindset to deeply embrace ethical values. Values that, along with an enlightened self- interest, drive us to make new and better decisions.

I also believe that it doesn’t happen quickly … it happens one mind at a time, one organization at a time, one building, one company, one com-munity, one region, one new, clean technology, one industry, one supply chain at a time … until the entire industrial system has been transformed into a sustainable system, existing ethically in balance with Earth’s natural systems, upon which every living thing is utterly dependent.

(Ray Anderson)

As discussed in earlier chapters, we are constraining our ability to influence effective progress towards a more sustainable thriving future in part because of our failure to think holistically. Systems thinking helps us do that. It tells us that, like all systems, humans and enterprises lean toward self- organizing. Nature and the people who came before us evolved the environmental, social, and economic systems that define our reality and influence mindsets and our way of being.

Human and enterprise evolution

According to the International Geological Congress, humanity’s impact on the Earth is now so profound that a new geological epoch— the Anthropocene— was declared (Carrington, 2017). From a human systems perspective, this new “epochal” story is about humans finally recognizing weak or delayed planetary feedback signals. The signals took scientists about

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60 years to appreciate. That clearer vision caused them to declare that a new story had begun. Those signals included the radioactive elements dispersed across the planet by nuclear bomb tests, plastic pollution, soot from power stations, concrete, and even the bones left by the global proliferation of the domestic chicken (Carrington, 2017).

According to the Smithsonian Institute, our ancestors have been around for about six million years. Our more evolved or “modern” form of humans only evolved about 200,000 years ago. Humans adapted and learned how to self- organize. They formed early social enterprises in the form of families and tribes. They innovated and used tools. The societal system that we con-sider to be “civilization” has only existed for about 6,000 years with the indus-trial age starting in the 1800s (Howell, 2015).

While we’ve accomplished much in a geologically short time, our shared responsibility to serve as caretakers for the planet is becoming more clear and urgent. We are reaching and even surpassing certain safe resilient threshold limits of both the supplies of natural resources and the ability of the planet to accept and absorb our wastes. The effects of humans on Earth cannot be understated. There are now 7.5 billion people on Earth who need food, shelter, and energy. This represents growth opportunities that can be incorporated into the strat-egies of businesses, but they also require sustainability- alignment to avoid blind spots, unintended consequences, and causing externality impacts and economic costs beyond whatever revenues and profits they might earn today.

Enterprise system construct for sustainability- aligned strategies

If any individual enterprise within the broader economic, social, and envir-onmental systems goes away, if the good or service is still adding value to the system, a new enterprise will self- organize to replace it. As described in Chapter 2, a sustainable enterprise system is also interconnected with internal subsystem functions like sales, manufacturing and procurement, and broader external systems like cities or industrial sectors within which it operates and serves as a part.

The following are the key system constructs that enterprises explore when re- imagining their enterprise as a sustainable enterprise system. The Daly Triangle perspectives were previously introduced in Chapter 2 and sustain-ability goals and multicapital accounting are presented in more detail in Chapter 6.

Sustainability- aligned strategies examine the assumptions, priorities, rele-vance, and performance expectations regarding the following enterprise system constructs:

• Functions or its purpose: Why is it in business? What role do its products and services contribute to its customer’s wellbeing? (Ultimate ends)

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• Resources, multicapital system elements: Stocks, flows andthresholds for: • Natural capital: Raw materials and ecosystem services (Ultimate

means) • Human capital: Enterprise and supplier employees and gig

contractors (Intermediate means and intermediate ends) • Built capital: Facilities, inventory and equipment (Intermediate means) • Social capital: Supplier and other stakeholder relationships

(Intermediate means and intermediate ends) • Financial and economic capitals (Intermediate means) • Intellectual capital: Experiences, innovations, and technology

(Intermediate means and intermediate ends). • Time horizons: Critical, resilient, thresholds for capital flows with

particular focus on constraining resources that might cause the enter-prise to fail. Constraining resources included financial capital, butalso might be some other capital such as labor or a critical supplierrelationship.

• Strategic goals and resiliency: Goals define how much the enter-prise wants to progress along some set of key system conditions.Resiliency conditions are precautionary reserves related to system feed-back expectations and/ or critical capital stocks and flows. Reserves orbuffers bring security and confidence to business leaders as they makesustainability- aligned, purposeful, strategic choices about risks andopportunities among diverse paths ahead.

• Boundaries, interconnections: What internal (SW) systems (e.g.,procurement, manufacturing) and progressively broader external (OT)system developments (e.g., technology innovations, political risks, cli-mate change, economic growth), feedback loops, and other relevantnexuses that the enterprise’s operations, products, and/ or servicesimpact broader systems and/ or the broader systems may impact theenterprise.

• Mental models: Enterprise system behavior expectations and rules,organizing frameworks, and business models. Mental models andarchetypes of connected and broader global systems should also beexamined as appropriate for the strategic purpose.

• Networks and collaborations: How might the enterprise system and itsstrategy be different if it were able to acquire, merge, or develop strategicpartnerships and collaborate with other stakeholders? What might begained through sharing perspectives, resources, information, and insightsto collectively travel farther, more successfully and resiliently to pursuecommon purposes together?

With hope and a clear strategic purpose, complex systems become comfort-able (we can never actually manage a complex system). We next present a

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brief overview of the state of the sustainability movement and the collective challenges enterprises face as they formulate their sustainability- aligned strategy to resiliently progress them towards their thriving future.

The current state of the sustainability movement

As Andrew Winston pointed out in the quote which opened this chapter, we live in a fundamentally changed (or in our view changing and evolving) world. We need new and better strategies to guide us and the systems that we depend upon. It is helpful, but sobering, to reflect briefly on the broader context of our global governance, economic, and enterprise systems. What are the system levers driving the movement? What is the current state of wellbeing of people? The wellbeing of all people everywhere matters and is the ultimate ends of the movement and for the businesses enabling it. Business systems convert limited natural capital ultimate means to higher states creating unlim-ited shared value at both the intermediary and ultimate end states. From these honest holistic systems perspectives, we get a better understanding of the magnitude of challenges and leverage points for the amount of change truly needed to accelerate sustainability movement, accomplish goals, and enhance wellbeing for all.

The movement from a macro- level perspective is stuck. No clear collective purpose, no strategy, no chance of getting unstuck and safely resiliently functioning without collaborative engagement by people everywhere to do what they can to effect change. We believe that sustainability or its alternative, more inviting visions of flourishing or thriving, is our best compass to guide the purpose and direction of the changes ahead. It is the best lens through which to view our current state of reality and guide us to better future states of progress. Sustainability- aligned strategies to guide us are needed at all system levels, but especially so for businesses. Business has been identified as the most effective system lever through which progress towards our environ-mental, personal, and societal goals can be attained.

We set the journey’s stage with a few brief statistics and observations about the current reality of the sustainability movement generally. We add some perspectives on the human and enterprise “travelers” whose systems interconnect and interdependently are progressing along the journey together.

Context: negative global outlook, business needs to do good

We provide insights on the sustainability movement’s current state from the lenses of business and government. We first use the World Economic Forum’s 2018 Global Risks Report to provide business perspectives. We use the World Bank’s Global Economic Prospects Report for 2017 to depict a government

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perspective and we close with comments from a more focused green business and environmental impacts perspective from the GreenBiz 2018 State of Green Business report.

The World Economic Forum: business sees fractures and failures in global systems

The 2018 Global Risks Report presents a perception survey of nearly 1,000 experts and decision- makers about the likelihood and impact of 30 global risks over a 10- year horizon. Over this medium- term period, environmental and cyber risks predominate. While acknowledging recent encouraging global growth, they express caution noting: “Any breathing space this offers to leaders should not be squandered: the urgency of facing up to systemic challenges has intensified over the past year amid proliferating signs of uncer-tainty, instability and fragility” (World Economic Forum, 2018, p. 5).

Klaus Schwab, Executive Chairman of the World Economic Forum, summed up the 2018 Global Risks Report4 by saying:

The World Economic Forum presents the latest Global Risks Report at a transformational time for the world … Globally, people are enjoying the highest standards of living in human history. And yet acceleration and interconnectedness in every field of human activity are pushing the absorptive capacities of institutions, communities and individuals to their limits. This is putting future human development at risk. In add-ition to dealing with a multitude of discrete local problems, at a global level humanity faces a growing number of systemic challenges, including fractures and failures affecting the environmental, economic, techno-logical and institutional systems on which our future rests.

The World Bank: the economy and government overreliant on fragile growth

A few statements from the World Bank’s Outlook Report for 2017 present a slight, but fragile upturn in economic growth prospects. That said, governments of diverse forms, locations, and means are collectively struggling to achieve their purposes for their citizens. Acknowledging many alternative govern-ment systems, we offer the US constitution’s language as one helpful example expressing the purpose of a government system. The purpose of the Federal Government of the United States of America, as found in the Preamble of the Constitution, is to “establish Justice, insure domestic Tranquility, pro-vide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our posterity.” Let those words sink in as we consider our reality today. It appears that government leaders and politicians responsible for leading their diverse governing enterprises are not

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able or willing to effect real policy reforms and invest the resources needed to slow and redirect negative sustainability movement trends.

Economic growth is viewed as the solution to world problems. It is the mental model governments rely upon to produce the financial capital they need (taxes) to invest for sustainable progress. Through this mindset, finan-cial capital is governments’ limiting resource for moving sustainability ahead. Not only the World Bank, but the World Economic Forum, the United Nations, and most governments share this growth- dependent mindset. From that perspective the feedback signals anticipate weak global trade growth. Cascading systems risks occur as financial conditions become volatile. The World Bank also added that rapid reassessment of risk could also be triggered by a spike in geopolitical tensions, bouts of volatility in commodity markets, or financial stress in major emerging market economies (World Bank, 2017). Paradoxically, if the economy grows without disconnecting limited natural capital stocks and flows, successful economic growth accelerates planetary ecosystem deterioration!

Business progress is mixed but hopeful

With government stalled, our hopes shift to the business community to lead the movement. A report by Globescan/ SustainAbility (2012, p. 5) pointed to a deep systemic role for business, stating,

the private sector has both the capability and reason to play a catalytic leadership role where collective action and change to underlying system conditions are required. This will demand that businesses improve and evolve their own strategies and practices, as well as stimulate and support the shifts in policy, capital markets and consumption that will be required to achieve sustainable development.

The GreenBiz Group5 has been tracking the sustainability movement and reporting on “how” and “what” the private sector is doing for over a decade now. It collaborated with TruCost6 to produce the 2018 State of Green Business report. Joel Makower, GreenBiz, Group Chairman summarized its assessment, noting:

To be sure, this is no rose- colored view of planetary problems. When it comes to transforming products, value chains and entire economies to align with the environmental and social goals of sustainability, the dynamics are significant. They include a lack of US political leadership but the rise of subnational actors, such as cities and companies; the short- termism of investors but the rising awareness of the relationship between climate and risk; the many difficulties of transforming supply chains but the growing number of companies investing in their suppliers’

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wellbeing. Simply put: This is hard work, and progress at times can be elusive. But we are seeing such obstacles being overcome in company after company, across sectors and borders.

(Makower, 2018)

Human perspectives: heroes; unemployed; displaced

Be the change you want to see in the world.(Mahatma Gandhi)

When viewing society from a global systems perspective, people are the human capital that drives the economic and enterprise systems. They also are residents and citizens within nations, states, cities, and communities. People evolved government, economic, and enterprise systems to serve their needs. If enough people’s needs are not being met by those systems, the systems will change. Today’s question is not, “Are people’s needs being met?” but “When will these failing systems be changed and evolve?”

The quest for the sustainability movement is to move ALL people to have thriving lives. We take a moment to acknowledge both people who are leading others in this journey and others who are insufficient and deserve help to pro-gress and thrive.

Heroes

Positive Mavericks, a term coined by Preventable Surprises Founding CEO Raj Thamotheram (Baue, 2017 p. 18), along with Ray Anderson’s radical industrialists are heroes in this story. They provide us with hope, inspiration, and much appreciated leadership as we get engaged through our own life’s work. We dedicated this book to a few of these heroes who have left us, but whose shoulders we stand upon now.

Heroes tend to be heroes because of their deeds rather than what they say. Countless ordinary people are already quietly setting the example of sustain-able living. They work hard and lead within their enterprises and communi-ties. Sustainable Jersey, a nonprofit that works with communities and schools throughout New Jersey showcases just such people. Heroes who are humbly serving their communities.7

Unemployed and impoverished

Unemployed and underemployed people inhibit human capital productivity and wellbeing. The International Labor Office shared these statistics and trends in their 2016 outlook report (ILO, 2016). They also noted that the global economy was weakening and as a consequence, global unemployment increased to over 197.1 million, 1 million more than in the previous year and

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over 27 million higher than pre- crisis levels. They also noted that the increase in jobseekers in 2015 occurred mainly in emerging and developing countries.

Some of our travelers are living in extreme or moderate poverty and have insufficient financial means to enjoy sufficient or secure lives. Thinking about the previous employment statistics, an estimated 327 million who are counted as employed are still living in extreme poverty (those living on less than US$1.90 a day in Purchasing Power Parity terms) and 967 million live in moderate or near poverty (between US$1.90 and US$5 a day in PPP terms) (ILO, 2016).

Refugees, displaced, and incarcerated

According to the United Nations High Commissioner for Refugees, an unpre-cedented 65.6 million people around the world have been forced from their homes. Among them are nearly 22.5 million refugees, over half of whom are under the age of 18. There are also 10 million stateless people who have been denied a nationality and access to basic rights such as education or healthcare (United Nations High Commissioner for Refugees, 2017).

By the end of 2016 there were 40.3 million people living in internal dis-placement as a result of conflict and violence in the world. This number has nearly doubled since 2000 and has increased sharply over the last five years (IDMC, 2017).

There were 31.1 million new internal displacements by conflict, violence, and disasters in 2016. Of these, 6.9 million were displacements by conflict and violence, and 24.2 million were caused by weather- related disasters (IDMC, 2017).

According to the World Prison Population List (WPPL), more than 10.35 million people are held in penal institutions throughout the world. Including the numbers reported to be held in detention centers in China and in prison camps in North Korea, the total may well be in excess of 11 million (Walmsley, 2016).

There are more than 2.2 million prisoners in the United States of America, more than 1.65 million in China (plus an unknown number in pre- trial deten-tion or “administrative detention”), and 640,000 in the Russian Federation (Walmsley, 2016).

Enterprise perspectives: the big; the small; the emergent

To grow a business, you need to spot a gap within a given market, fill it and establish ownership of the space.

(Allie Webb)

The quest for the sustainability movement is to move ALL enterprises to re- imagining their purposes and produce ultimate ends of human wellbeing and thriving.

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The big

The GreenBiz report showcased several leading corporations and mixed progress within the top 1,500 publicly traded companies in the world. That said, there are approximately 630,000 companies traded publicly throughout the world.

The total number of employees among all Fortune 500 companies is estimated to be 26,405,144 and the average number of employees per firm is 52,810.8

The small and independent

Small businesses in the US (enterprises with 500 employees or fewer) are representative of the relative contribution these enterprises have in regional economies around the world. In the US, they make up 99.7% of US employer firms, 64% of net new private- sector jobs, and 49.2% of private- sector employment.9

There are about 28 million small businesses in the US. Of these over 22 million are self- employed with no additional payroll or employees (these are called non- employers) (United States Census Bureau, 2011).

Over 50% of the US working population (120 million individuals) works in a small business (US Census Bureau, 2011).

Small businesses have generated over 65% of the net new jobs since 1995.

The number of nonemployer firms are rapidly increasing in the emerging gig economy. The 22 million self- employed in the US in 2011 was a 2% rise from the prior year. Of those 19.4 million nonemployer businesses were sole proprietorships, 1.6 million were partnerships, and 1.4 million were corporations (Small Business Administration Office of Advocacy, 2012).

The majority of employees globally work for small and medium- sized businesses, and 91% of employees believe it’s important to work in a men-tally healthy workplace. Some 75% of employees believe employers need to provide the support to achieve this (Marcos, 2015).

The emergent

The US averaged between 500,000 and 600,000 new companies every year from the late 1970s to the mid- 2000s. That trend has adjusted due to the impacts of big box stores on mom and pop ones, more regulation, and more adaptation by large companies to support entrepreneurial projects and cultures internally. Startup companies around the world are important contributors to local economies and will benefit from aligning with sustain-ability and applying smart strategies from their inception.

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Sustainability- aligned strategy chasms and bridges

I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.

(Jimmy Dean)

Chapter 9 presents a force field diagram that includes our suggested top 10 forces driving change (tailwinds) and top 10 restraining forces impeding change (headwinds). All of these topics represent knowable opportunities to proactively formulate or adapt enterprise strategies and systems. Depending upon the current direction of an enterprise, a tailwind for one enterprise may be a headwind for another. Following the strategic formulation process in Figure 3.1, each force could manifest within an internal system Strength or Weakness or through an external system Opportunity or Threat. Strategies are the navigation tool that position these and reveals choices of when to change course and tack. Large, less maneuverable sailboats, like large companies may move slower and ignore small gusts. Their momentum tends to require longer- term thinking and less volatile speed and/ or rudder adjustments. They are resilient and can travel far, withstand high seas, and heavy winds. Small boats are more agile and changing speeds and/ or direction can be done quickly. That said, even minor waves or wind gusts represent risks of cap-sizing. There are overwhelming numbers of people and enterprises whose sails are luffing and are stuck in irons. With this reality, we saw the need to build an inclusive progressive strategy bridge framework and use hope to fill their sails with wind.

A bridge framework and systemically formulating chasm crossing stories

Borrowing from gamification best practices, we introduce our sustainability- aligned strategy bridge framework as an “epochal” story of the time of man on Earth. Some storytellers, like Ray Anderson, used climbing a mountain or “mount sustainability” as their metaphor for sharing their vision and strategy for the journey (Anderson & White, 2011). We use chasms and building bridges as our metaphor. Figure 3.2 depicts four progressive bridges and four treacherous chasms that characterize generic, but customizable and scal-able segment quests and a holistic story arc for the sustainability movement’s journey.

The sustainability- aligned strategy bridge framework helps enterprises re- imagine themselves from a systems perspective. Good sustainability- aligned strategies include clearer vision, appropriate goals, and reveal resilient pur-poseful execution paths. The framework inclusively meets every unique enterprise where they are now (their “as is” state) and guides them toward

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their desired destination (their “to be” state). Using this framework, a com-pany creates one integrated strategy that every enterprise function and all of its employees and stakeholders can use as their compass. The selected paths are resilient and informed by sustainability insights and opportunities. The framework also helps identify blind spots and avoid knowable risks in both the short and long term. The bridges in our story are being built as they are being crossed.

Each segment has heroes leading self- organizing communities of travelers who opt in and engage. Each treacherous chasm- crossing mission seems daunting at first, but there are tools that reveal insights and generate innova-tive ideas on how to proceed. Case studies are provided that assure you that you are not traveling alone and that others have already been where you are going. Prepare yourself to be moved into action creating progressive systems- based sustainability- aligned segments or holistic smart strategies. Set your goals and chart a path to cross chasms and reach new levels of human and enterprise wellbeing.

Learning maps and systematic bridge story development

Transitioning to Green,10 the sustainability strategy and training consult-ancy that formed to advance and scale insights from the original Fieldbook, developed learning map tools for building sustainability awareness and sys-tematically creating innovative bridge- crossing stories. These bridge stories get generated in a three- stage process. The general process is fueled by using open- ended questions throughout to promote broader discussion. Participants are also reminded to be mindful of their own listening behaviors and biases. Other good process behavior practices include soliciting input from all the voices in the room and encouragement to be open to new and different ideas and inputs from any and all participants. There is no one single fix to complex problems or processes. Allow solutions to emerge rather than endorsing ideas from the most powerful or vocal stances presented.

Doing

FixesthatFail

Tragedyof the

Commons

DoingWell

ThrivingUnknownAwareness

Doing Well& DoingGood

Stuck

Figure 3.2 Sustainability- aligned strategy chasms and bridgesSource: William G. Russell, with permission.

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• The first stage is to use a structured conversation to get as completean understanding of a problem including what caused it and what theconsequences really are. We review the current “as is” state by reviewingthree Elements:

• Drivers: i.e., mental model flaws that created problems or traps. Lackof awareness/ consciousness; thinking win- lose vs. both/ and; andtoo focused on the single bottom line;

• Systems and measurements: i.e., GDP/ GNP as signals for a goodeconomy; revenue and sales growth of low margin or even lossleading products (see Chapter 6); and

• Outcomes: Waste of any and all capital resources (see Bridge 2,Doing Well for more about this); military conflicts; poverty andinequity; over- consumption; water pollution; unemployment.

• The second stage is to create a vision for what is possible in a future“greener” state for the specific stage of progress towards some longer- term future- fit and thriving state of performance. The vision is informedby reviews of best practices and purpose- specific goals of competitorswithin your industry as well as best in class performers across industries.

• The third stage is to utilize story- aiding prompts and create a bridgestory of how you propose to “build a bridge” to move from your current“Gray” state to your envisioned “Greener” state. Specific attention isgiven to exploring how the enterprise might benefit through adoptingsome known “green” best practices. It also explores opportunities forcollaboration that reduce risks and scale impacts of each path identified.

As we move through these stages, a strategy team can acknowledge what is gray (Threats) about our world and honor green efforts that our society and companies are doing, as a work- in- progress. They share several bridge story scenarios while systematically re- imagining their enterprise as it moves from wherever it is to the next progressive state of sustainable performance.

Watch out for chasms

At this time we wish to briefly alert you to a few persistent and tricky chasms that if not seen early enough can slow and even reverse expected progress or in some cases cause the enterprise to go over its resilient guardrails and fall into the chasm and go out of business completely. These are pitfalls, traps, or blind spots that every enterprise runs into when they are busy and don’t take the time to reflect fully while re- imagining the company. Chasms can be iden-tified and resiliently navigated around as part of a good strategy. Chasm risks can arise at any moment in time. When a disruptive chasm is identified, agile adjustments or new or next strategies must be adapted. Blindly following an existing strategy knowing the “bridge is out” just ahead is foolish.

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The sustainability- aligned strategy bridges are introduced in the next section and elaborated on to include more specifics about the system constructs, tools, and case examples for each strategy segment (Bridge) proposed.

CHASM 1: AWARENESS

The first chasm that keeps enterprises stuck is that they don’t know what they don’t know. Warning signs include being stuck using old mindsets, compla-cency, arrogance, insularity, and a general lack of curiosity. They fail to see a truth as a result of groupthink, blind spots, and related biases.

CHASM 2: UNINTENDED CONSEQUENCES (ALSO KNOWN AS FIXES THAT FAIL)

Ignoring the balancing forces of a paradox and looking for “silver bullets” and overly simplistic solutions to intractable problems, rather than a willing-ness to deal with complexity and whole systems. For example, when ethanol was first introduced many people failed to take into account the fact that it would lead to reduced land and crops for food production.

CHASM 3: TRAGEDY OF THE COMMONS

When Garrett Hardin first proposed this concept in 1968, he demonstrated the idea that a small increase in use of a shared resource (e.g., one extra cow grazing on the grass) provides a great benefit to an individual, while the cost of that additional use (decreased grass supply) is shared by all. Therefore, each user has an incentive to use (and exploit) the resource to the greatest of his or her ability. Ultimately there is a decrease in yield for both the group and the individual.

This has many applications today as we experience shared and finite resources in oil, water, and other natural resources. This chasm also has many social and economic applications that emerge through our mental models and feedback signals about what a just, fair, and caring society chooses to provide. Relevant topics from today include: healthcare, minimum wage, immigration practices, access to education and the arts, and freedoms of many forms.

The situation is made worse by what is known as the Lauderdale Paradox, first enunciated by the seventh Earl of Lauderdale in 1804. He observed that rising private riches were associated with declining public wealth, including a shrinking commons. In modern terms, as the riches of a minority elite grow, their ability to deprive the majority of the commons is strengthened (Standing, n.d.).

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CHASM 4: THE UNKNOWN

Nothing keeps us stuck more than our deep- seated collective fear of the unknown. As we move from Doing Well and Doing Good today to Thriving, we don’t know how we are going to do it. No company is Thriving now. Also complex systems behaviors with long- delayed feedback signals will not be known until the unknown chasm is too close to be avoided. Two hopeful comments are offered now to preemptively sensitize you and avoid common barriers of getting overwhelmed, depressed, or fearful of an unknown future. First, know there are hundreds of heroes and leading enterprises already hard at work exploring the unknown paths ahead. Second, we actually don’t need to know and can’t even know everything anyway. Current trends are not inev-itable indicators of our future outcomes. We have the ability to create the future we choose.

Sustainability- aligned bridges

As we built out the progressive bridge strategy, it evolved to a more highly iterative and integrated, smart strategy concept blending sustainability- aligned and traditional core strategy segments within evolving enterprises and across diverse client groups. The smart bridge is an adaptable framework that can scale to be as simple or complex as it needs to be. An enterprise just starting its first steps is free, so long as it incorporates a few core behavior principles, to focus its strategy on a near- term purpose. As externalities are assessed and common resiliency boundaries or threshold risk bands become known, corporations which are already resilient will need to begin responsibly adapting their behaviors and as needed help smaller suppliers, customers, and communities. Those less resilient stakeholders are also expected to do their parts and get their own resiliency levels up in order to progress them-selves. The final bridge to Thriving will need pioneer companies like Interface Carpet has been already. Those companies large or small that understand the consequences of operating beyond safe thresholds will choose to take risks that lead the way and test unknown approaches to arrive at our ultimate des-tination of Thriving.

The four bridge segments are briefly introduced here and then elaborated on in the progressive chapter sections that follow. Those sections include the key system construct elements, frameworks and tools, and case examples for each progressive bridge segment.

Doing

Doing is our phrase for enterprises that are just starting up or have been operating insufficiently. We present tools to help them get unstuck. Some are stuck due to external threats and poor, difficult circumstances which they had

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little control over. Others are stuck or even in motion, but don’t have a sense of direction. Sustainability awareness and best practices for these enterprises serve to offer hope and a direction that allows them to confidently take their first steps on this first progressive bridge and get started on their sustain-ability journey.

Doing Well

Doing Well is our phrase for companies that are already profitable, but do not yet have sufficient financial or some other strategically vital stock inventory to safely take risks and invest money and other resources towards worthy, but long- term sustainability- aligned risk mitigation or growth opportunities. Using tools like Bob Willard’s ROI Workbook, introduced in more detail in the Doing Well section ahead, enterprises can identify sustainability- aligned efficiencies to reduce material and energy wastes, increase employee productivity, and innovate. Most companies can improve profits substantially while also reducing risks to cashflow without needing to make big investments or take on debt. Such obvious self- serving strategies also have synergistic positive benefits to society in the form of reduced environmental and social footprints. These opportunities abound and are not being pursued.

It is also important to note that companies traveling on this bridge are only doing what they should have been doing all along, or catching up to work they have ignored. These enterprises should only be granted a limited time before other stakeholders would force them to progress fur-ther or fold.

Doing Well and Doing Good

Doing Well and Doing Good is an enhanced version of the former strategy of Doing Well by Doing Good. That original strategy was grounded in a purpose of gaining a competitive advantage. Using that mode to guide the strategy was therefore no different than the companies that use sustainability- alignment to do well. It just so happens that their best opportunity to do well was aligned with a need in a market that served the customer and a broader community.

Doing Well and Doing Good is more evolved. Doing Well and Doing Good are not separate or separable efforts over the long term. Enterprises choosing this strategic purpose must still compete in the global economy. At the center of their efforts is the premise of service. Service to a truth larger than self, a demand more pressing even than its financial performance. While its leaders are still accountable to owners and shareholders, they also recog-nize and accept a responsibility to use their wealth and strength to work, in

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the context of a for- profit business, for the common good. Business cannot survive in a society or environment that fails.

Thriving

Thriving is the phrase we chose to depict those companies that are accomplishing their purpose for their customers while having no net decline in natural capital, improving the wellbeing of their employees and the com-munities within which they operate and their products are used. This bridge completes the holistic arc of our journey. Enterprises achieving this level of performance are Thriving within their system’s context responsibility. For more on context sustainability goals see Chapter 6.

A TOOLBOX FOR SUSTAINABILITY- ALIGNED BRIDGE STRATEGY FORMULATION

Every bridge strategy and their holistic interconnected progressive or smart versions all begin by applying sustainability- aligned SWOT assessments. These are done for various perspectives and system boundaries. Similarly the tools presented within any specific bridge category are also helpful to cre-ating the strategies within the other bridge sections. We have placed a few highly effective tool introductions within the bridge section that seemed to most fit its innovations and strategic insights. Collectively these are a powerful toolbox for sustainability- aligned strategy formulation.

Doing: starting the journey, stepping onto the bridge

The purpose of a business is to create a customer.(Peter Drucker)

We are at a unique moment in history, where we can and must create a new future for enterprises— indeed for all humanity— to thrive into the future and for perpetuity. It starts with a commitment to work together to accel-erate the journey from awareness to understanding and, most important, to action. We use the enterprise system constructs presented earlier to outline key perspectives for each of the four sustainability- aligned strategy bridge segments. Each segment can be implemented independently, if appropriate. This is particularly true for the millions of startup, small and independent enterprises with little or no resiliency guardrails to buffer them from falling into one of many chasms these enterprises face every day. They can be fueled by hope that comes from increased sustainability awareness (Bridge 1’s pri-mary chasm impeding force) and confidence gleaned from the cases and tools ahead to get started on their journeys.

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Sustainability- aligned strategic system perspectives to get started

The following are selected enterprise system construct items most relevant for enterprises formulating sustainability- aligned strategies for Bridge 1, Doing:

• The purpose for Doing: Enterprises in this stage likely don’t have adefined purpose or a good strategy for pursuing it. Now is the time toreflect and ask: Why are we doing this business? How might our productsand services contribute to the wellbeing of our customers? Anotherreality- grounding question vitally relevant to enterprises on this bridgeis: Which strategic path most safely progresses the enterprise to breakeven financially?

• Take inventory of multicapital stocks and most vital thresholdflows: For most businesses on the Doing strategy bridge, financial cap-ital including personal assets and friends and family investments is themost limited stock. Do also inventory other multicapital assets relevantto your business and its strategy.

• Time horizons: Resilient thresholds for independent non- employmentand startup companies are expected to have time horizons of two yearsor less.

• Strategic goals and resiliency: The goal for companies either juststarting up or operating independently on the margin of being insuffi-cient is to get to break even from a cash flow perspective. It must doso using a sustainability- aligned respect for how it treats its employees,suppliers, and community. Fair compensation and policies that supportgender equality, religious freedoms, and health and wellness are normalcultural expectations. Once profitable, these enterprises can move to thesecond bridge and begin building up financial and other stocks. Just likea rainy day buffer in a personal bank account, this class of traveler mustoperate frugally and build capital stocks.

• Boundaries, interconnections: The primary boundary of interest forBridge 1 travelers is between the enterprise and the customers it is serving. Assuring its product or service enhances value to the customer’s well-being in a differentiated way. Transparent, respectful, and collaborativerelationships with employees, investors, and suppliers are all importantand can buy some flexibility during this volatile period.

• Mental models: Startups and independents must be sensitive to the fullcosts and impacts of the business model. Strategies that are dependentupon government subsidies or not paying equal and fair wages toemployees are not sustainably- aligned. When considering partnerships,beware of exploitative schemes that fail to account for the full boundaryand capital elements that the business must operate within to be viable.

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• Networks and collaborations: Partnering with other individuals andenterprises within the industry or local community may serve to moreefficiently add capital stocks to the enterprise’s resources and help reducepersonal risk and stress.

Strategic tools for Doing

The two tools picked for enterprises developing sustainability- aligned strat-egies for Doing are Crossing the Chasm, and the Lean Business Model Canvas. These are both highly successful traditional strategy formulation tools that emphasize the importance of understanding the customer’s needs, examining business models, and focusing on critical resources (stocks) that create the enterprise’s value proposition. These tools help enterprises that are stuck to review and re- imagine their enterprise.

Crossing the chasm

Geoffrey Moore used Crossing the Chasm with an urgent D- Day battle stra-tegic analogy (Moore, 1999). Early- stage technology companies are alerted to a chasm of failing to anticipate the change in customer expectations as the company attempts to navigate from a sufficient state working with early adopter customers to a mainstream state working with pragmatic and conser-vative customers. Figure 3.3 provides a typical chasm- crossing journey within

Earlyadopters,

visionariesInnovators,technologyenthusiasts

Relative %ofcustomers

Earlymajority

pragmatists

Thechasm

Late majorityconservatives

Laggards,skeptics

Customers wantsolutions

and convenience

Customers wanttechnology

and performance

Time

Figure 3.3 Crossing the Chasm Strategy FrameworkSource: Geoffrey A. Moore, Crossing the Chasm, 3rd edition. New York: Harper Business. Copyright © 1991, 1999, 2002, 2014, Geoffrey A. Moore. Used with permission.

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the technology industry. His insights and strategic recommendations are highly appropriate for any Bridge 1 company. The approach suggests that the enterprise proactively think further ahead into the future and from a broader more holistic system perspective of competitors, partners, and customers. This strategic process works for all of our chasm- crossing challenges as well. Sustainability- alignment application simply includes more diverse, but mostly knowable chasms. The right blend of capital(s) investing and collaboration with strategic partners and stakeholders will reveal the best path ahead.

Lean Business Model Canvas

Lean Canvas also prioritizes getting your customer- problem- solution foun-dation in order first. It is ideal for guiding strategy formulation discussions of early stage innovation projects and startups. Figure 3.4 depicts the Lean Business Model Canvas Framework (LBMC). It helps strategy developers answer critical questions. Who are your target customers? What problem are you solving? How does this solution create value? The solution box becomes critical to aligning the strategy with the enterprise stated purpose and value(s). At this stage the discussions are not fixed, but a tool for guiding inclusive par-ticipation from other employees to comment and provide their inputs.

Lean Business Model Canvas Model Name:

Top 3 problems Top 3 features

Key activities youmeasure

Paths to customers

Can’t be easilycopied or boughtSingle, clear,

compelling messagethat states why areyou are different andworth buying

Target customers

Revenue modelLifetime valueRevenueGross margin

Customer acquisition costsDistribution costsHostingPeople, etc

Problem Solution

Key Metrics Channels

Unfair AdvantageUnique ValueProposition

Customer Segments

Revenue StreamsCost Structure

Figure 3.4 The Lean Business Model Canvas FrameworkSource: www.heflo.com, Creative Commons license.

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Startup and stuck enterprises find their purpose and begin doing

The following two case stories represent the transformative opportunity and impact that hope ignites. Each case included education and training to raise awareness and enhance employee skills. Both had supportive sponsors and investors to get them started. Both developed their own tools for scaling their progress and impacts. Lastly, both are being performed as collaborations and building up networks to further scale their learning and successes. Neither are subsidized models, but are frugal ones that work within reasonable startup capital thresholds while moving the enterprise from subsisting or startup to Doing Well and Doing Good. These enterprises have all discovered their purpose and with hope are working hard converting strategy into actions and deeds.

Timberland and Small Farmers in Haiti

Hugh Locke, President and Co- Founder of the Smallholder Farmers Alliance in Haiti and President and Founder of Impact Farming, is a hero to Bridge 1 travelers. He has helped thousands of smallholder farmers in Haiti to finance their way out of extreme poverty. The innovation is scal-able and has the potential to be applied with and transform millions more of the world’s 500 million subsistence farmers (impacting nearly a third of all people on the planet) into impact farmers. This social business used income from carbon credits or “tree currency” as a business model breakthrough which led to over 6.5 million trees being planted to date. Timberland was initially a strategic investor and corporate sponsor of the initiative (a classic Bridge 3 strategy). Now Timberland is becoming a customer and purchasing its organic cotton raw material inputs from these farmers. That relationship uses an innovative supply chain business model based on tree currency. It also connects smallholders to the global economy and has potential for applica-tion throughout the developing world.11

Smallholder farmers are enrolled into the Smallholder Farmers Alliance (social capital), trained in farming best practices (human capital), provided with a few critical tools (built capital), and seeds (natural capital) to get started. In just a few years they are profitable. The alliance is scaling a self- financed global force to combat climate change, improve food security, and empower women. Hugh’s work is the subject of a documentary “Kombit: The Cooperative.” View his TED talk and hear him tell his story.12

AIM2Flourish: Doing Well and good deeds

AIM2Flourish accelerates the shift to a Business for Good mindset by rec-ognizing the positive impact of today’s business leaders, and changing the

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way tomorrow’s leaders are taught. It is showcased within our Doing Bridge because of its Flourish Prize case companies and its impact nurturing of next- generation business leaders and startup enterprises that, like the small farmers in Haiti, move from Doing to Doing Well and Doing Good. This ini-tiative is a collaboration between the Fowler Center for Business as an Agent of World Benefit at Case Western Reserve University, a network of higher education partners, the United Nations Sustainable Development Goals (see Doing Well and Doing Good and Chapter 6), and a global community of Business for Good companies.

Using the SDGs as their lens, students identify an innovation, con-duct an “appreciative inquiry” in- person interview with a business leader working to apply the innovation, and then write about what they learned. The AIM2Flourish innovations page contains 1,000+ student- written stories about business innovations that are both profitable for their businesses and making a positive contribution to one or more of the UN SDGs.

The creation of Flourish Prizes is especially noteworthy. These award- winning case companies are each inspirational examples of using sustainability- aligned purpose and frugal strategies that expect profitability while responsibly serving customers and society. Throughout 2016, business students around the world submitted 422 AIM2Flourish Innovation Stories to the AIM2Flourish.com platform. A distinguished jury evaluated 48 semi- finalists and selected the 17 best- of- thebest— one for each SDG.13

Doing Well: risk management and business case for building resiliency

Do what you can, with what you have, where you are.(Theodore Roosevelt)

Every enterprise operating profitably can focus on advancing to the next phase, using their sustainability- awareness to improve resource efficiencies, engage employees, explore product and business model innovations that reduce their footprints and improve their profits. Smaller footprints and some financial reserves are important or critical to improving the company’s resiliency.

Sustainability- aligned strategic system perspectives to Do Well

The following are selected enterprise system construct items most relevant for enterprises formulating sustainability- aligned strategies for Bridge 2, Doing Well:

• The purpose for Doing Well: Efficiency improvements haveinterconnected financial and footprint benefits. Also, synergistic

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opportunities to Do Good, that do not require taking on high risks, should be pursued.

• Increase efficiency and productivity of vital stocks with most vul-nerable threshold flows and/ or greatest flow volatility. Material,water, energy efficiencies reduce footprints and save money. Engage withemployees to solicit diverse ideas for efficiencies, risk management, andinnovations. These actions in turn will increase margins reinforcing theobjectives and extending capital threshold runways.

• Time horizons: Profitable enterprises cannot rest or become compla-cent. The ROI Workbook tools below suggest a 3– 5 year time horizon.

• Strategic goals and resiliency: At this stage of operations, best prac-tice benchmark efficiencies and practices of both competitors and best inclass non- competitors should be reviewed. Drawing from Green to Goldpresented in more detail below and related works (see also, Hitchcock &Willard, 2006; Lazlo & Zhexembayeva, 2011), the potential immediatebenefits of sustainability- aligned strategies with a purpose to Do Wellinclude: • reduced operating expenses; • increased employee engagement and productivity; • increased revenue/ market share (in existing and particularly in new

markets); • reduced risk (especially to cash flow)/ easier financing; • increased innovation (in both processes and new products); • better recruitment and retention of talent; • increased social/ reputational capital.

• Boundaries, interconnections: Engaging with industry associations,community groups, and sustainability initiatives are helpful while alsoenhancing core relationships.

• Mental models: Companies crossing the chasm of unintendedconsequences need to be sure they have defined their purpose andproblems properly. One unintended consequence of early low hangingfruit successes is complacency. The efficiencies highlighted within thispurpose change constantly and can be repeated over and over again forcontinued benefits. See the Blackstone case below for more on this.

• Networks and collaborations: Focus on strategic partnerships thathave direct benefits to the core business performance and add to capitalstocks and enterprise capacities.

Strategic tools for Doing Well

It appears that many businesses are responding to the call for them to develop sustainability strategies as much because of the “business case” as because of their sense of citizenship. The two tools showcased here are both particularly effective at guiding enterprises to identify their best paths to enhanced

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profitability and resilience. More tools are included within the Blackstone case details below and additional Living Fieldbook sup-plemental materials.

Green to Gold

Green to Gold is a classic book for sustainability advocates written by two long- time heroes within the sustainability movement, Dan Esty and Andrew Winston (Esty & Winston, 2006). The book’s tagline, How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, is also the primary purpose of enterprises traveling on the path from Doing to Doing Well. The book, like our own, has a supplemental website with add-itional materials and a blog where the authors bring more depth to this class of business strategic opportunities.14

Sustainability ROI Workbook15

The Sustainability ROI Workbook is a proven simulator tool, informed by real company results, to estimate 3– 5 year bottom- line benefits for an enter-prise (Willard, 2012). This Excel workbook monetizes all direct and indirect benefits arising from sustainability- related projects and automatically does return on investment (ROI) calculations, based on user input. The model was initially developed by Bob Willard, one of the original leaders for articulating the business case benefits to companies. He is a hero to all companies seeking to cross the chasm of unintended consequences and Do Well. In the true spirit of service and Bob’s sense of urgency to enroll as many users of this tool as possible, he selflessly offers the tool as a free, open- source resource. Figure 3.5 provides an overview of the ROI Workbook including key decision- making criteria, and related, quantified business case elements. The tool improves the success rate of sustainability initiatives so that enterprises can increase their resiliency and take risks on next projects that also need to be done.

Sustainability- aligned enterprises Doing Well

The two case examples chosen to guide companies on this seemingly uneventful section of the sustainability movement demonstrate that even this stage is far from business as usual. Done poorly, the unintended consequences and blind spot risks are treacherous and have serious business consequences. We begin by updating our perspective on GE. It had been a poster child for Doing Well, but failed to be alert to more holistic system conditions. That case is followed by the insights shared by Don Anderson, Chief Sustainability Officer of the Blackstone Group. The two companies demonstrate that sustainability- aligned strategies can be complex or simple, but not too simple.

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GE: complex enterprise missed knowable strategic signals

Our original book contained a case on GE’s Ecomagination initiative. While that was a poster child for Doing Well at that time, recent events discussed next are a precaution that Doing Well performance must be achieved from a sustainability- aligned holistic perspective. Environmental efficiencies and certain risks to cash flows were knowable, but missed. GE’s structure was complex and investors could not understand how the whole and the sum of the parts added up. Simultaneously, its purpose was not sufficiently clear as its core “industrials” perspective was clouded by its substantial purposes of financial services (GE Capital and Insurance businesses) and most recently Internet of Things data and knowledge- based business models. How do these diverse feedback signals get prioritized and synergized within its strategy? How is that clearly communicated to investors in order that they sufficiently match their risk, impact, and return criteria?

Throughout the past three CEOs one gets the impression that the purpose of GE was to say good things while doing whatever it took to satisfy investors. Under Jack Welch, the company had a “take no prisoners” attitude toward

Figure 3.5 ROI Workbook overviewSource: Bob Willard through free, open- source, unrestricted permission.

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the Environmental Protection Agency. During his tenure, the company was criticized and dubbed an environmental bad actor. It avoided responsibility to clean up pollutants its factories had dumped into the Hudson and Housatonic Rivers.

The baton was passed to Jeff Immelt. GE became a world leader on cor-porate environmental matters. Executives saw environmental issues as opportunities for competitive advantage and marketplace success. So from a smaller Ecomagination perspective, GE was best in class. The company, how-ever, was more than just Ecomagination. The company was and is complex. Growing profits and satisfying shareholder demands still were the company’s main drivers.

With the exit of Jeff Immelt it quickly became clear that the emperor wasn’t wearing any clothing. How did the market (and analysts) get it so wrong for so long? What we do know is— in business and investments— complacency kills. Knowable sustainability- related risks were festering.

John Flannery, GE’s new CEO, initially appeared to have things under control. He was able to go through every segment and detailed the strengths and weaknesses of each business line and what he thought the immediate future held. It was classic “competitive strategy” type analysis. So how is it possible that only a few months later investors described a recent call with shareholders as looking “Enron” or “Tyco- like” or, “a pleasant fiction” (Gilmartin, 2018)?

The reality of GE was that it was a large complex company. It has an opaque financial structure and traditional financial reporting makes it diffi-cult to analyze and understand for even the most astute investor. As a reli-able dividend paying stock, GE did not treat its financial capital responsibly. Instead, it spent $22 billion in open market purchases of its own stock. It paid shareholders over $8 billion. A total cash outflow of over $30 billion. Cash declined by approximately $22 billion year over year. With $6– 7 billion in free cash flow from operations, something had to give. That something was a 50% dividend cut (Miller, 2017).

Next came underfunded long- term liabilities from both its insurance and financial businesses. Reinsurance reserves associated with North American Life & Health were failing to adjust, knowing the general popula-tion is living longer and consuming more nursing, assisted living, and home health services. That knowable system misread required a minimum of $6.2 billion of additional reserves. Another $15 billion in statutory contribu-tion needs to be funded by GE Capital through 2024. There are still more issues including latent subprime mortgage business liabilities, underfunded employee pensions ($31 billion), and last but not least, billions more tax- related obligations (Gilmartin, 2018). It appears this was the case of “let’s make money now, and let someone else clean up the mess later.” Well, it’s later now and shareholders are left to clean up the mess (Dergunov, 2018). Rather than a sustainability- aligned strategy for the future, this company is

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strategizing a capital raise or breakup. There is no clearer signal that an enter-prise system has failed than when the sum of its parts (SOTP) are worth more than its whole.

Blackstone: complex signals pragmatically focused for Doing Well

To preemptively clarify, the Blackstone Group and BlackRock who you will hear more about in the next section are both financial firms that Do Very Well. The two respective CEOs, Steve Schwarzman of Blackstone and Larry Fink of BlackRock, were partners back in the 1980s who had a breakup. That said, it appears both are playing powerful leadership roles transforming business expectations and behaviors with respect to sustainability. Both companies are demonstrating how sustainability is a transformational lens to guide any com-pany. Blackstone is leading by pushing enterprise travelers across the bridge to Doing Well and BlackRock is pulling enterprise travelers onto the bridge to Doing Well and Doing Good.

Don Anderson is Chief Sustainability Officer of the Blackstone Group. His 12- page report, “Sustainability: Myth, Madness and Magic,” is a foun-dational reference for everyone on Bridge 2, Doing Well (Anderson, 2017). Blackstone invests mostly in private equities and alternative investments. Its private equity business alone has 81 portfolio companies with more than 500,000 employees across a diverse set of industries and geographies. Its real estate business has one of the most expansive residential and commercial footprints in the world. Blackstone’s approach to sustainability is, in short, to pursue measurable, action- oriented operational interventions that improve a company’s bottom line and its impact on the environment. It first seeks to embed measurable, high return- on- investment (ROI) strategies that drive earnings and improve environmental performance.

Anderson shared three examples of “the magic” that allows it to scale, act nimbly, and start fast out of the gate. And this approach is replicated again and again across its portfolio companies:

• Playbooks―Playbooks codify good practice, including dashboards,scorecards, Portfolio Managers (utilizing Toolkits), and guidance onfinding and fixing low- and no- cost operational and maintenance issues.

• Summits―Where employees are brought together to learn how to launch and run a performance improvement program.

• Legislation―Rapid responses to legislation such as the EU EnergyEfficiency Directive (EED) give the ability to aggressively comply withthis dynamic legislation.

The company consistently sticks to this simple formula. It believes these efforts are not tangential, but mission critical.

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Doing Well and Doing Good: resilient enterprises seize opportunities and are called to be in service

Sustainability- alignment of doing well and doing good strategies is not new. Porter and Kramer argued in their award- winning 2006 Harvard Business Review article that a strategy of “corporate social integration” (Porter & Kramer, 2006, p. 92), takes two forms: “inside- out linkages” in which company operations impact society, and “outside- in linkages” in which external societal forces impact companies (Porter & Kramer, 2006, p. 84). Looking outside- in requires a company to understand the social- environmental influences in its competitive context that affect its ability to improve productivity and execute strategy. Looking inside- out requires a firm to map the social- environmental impact of its value chain.

In their 2011 Harvard Business Review article “Creating Shared Value” Porter and Kramer argue that no business can solve all of society’s problems. In short, they assert that the strongest mutual business– societal impact comes from applying corporate strategic thinking to both leverage positive social and environmental benefits and mitigate negative social and environmental impacts in ways that enhance competitive advantage (Porter & Kramer, 2011). This was the standard playbook of many of the world’s largest and most resilient companies. That said, it was all being done at their own pace and not necessarily the pace that larger social and environmental systems require.

On Tuesday, January 16, 2018, a game- changing shift took place. The chief executives of the world’s largest public companies received a letter from one of the most influential investors in the world. What it said is likely to have caused a firestorm in the corner offices of companies everywhere and a debate over social responsibility that stretches from Wall Street to Washington.

Box 3.1 presents key excerpts from the letter Larry Fink, Chairman and CEO of BlackRock sent out. BlackRock manages more than $6 trillion in investments through 401(k) plans, exchange- traded funds, and mutual funds, making it the largest investor in the world. He opens by acknowledging the economic system’s long- manifesting paradox between the wealthy and the poor. He describes it as a paradox of “high returns and high anxiety.” He follows with a second observation that the government system is failing to acknowledge known long- term deteriorating conditions and that society is now looking to the business community to help fix them. He has accepted this as a challenge (and opportunity) that he and BlackRock have accepted with the understated promise that their systems will “adapt.” His ultimate comments, which are game changing, is that BlackRock now is expecting every one of the companies that it is an owner of (actual or fiduciary) to have a clear strategy. That strategy must include, not only how does the company intend to earn a profit (being profitable is still a requirement), but ALSO, how will the company be serving society? This is a much needed

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pull to jolt all business leaders into a new reality. This new reality will have enterprises representing trillions of dollars in financial capital, developing their strategies to cross the chasm of the tragedy of the commons and guide them through the paradox of high returns and high anxiety to Do Well and Do Good.

Box 3.1 A sense of purpose: Larry Fink letter to shareholders

Dear CEO,… We are seeing a paradox of high returns and high anxiety. Since

the financial crisis, those with capital have reaped enormous benefits. At the same time, many individuals … don’t have the financial capacity, the resources, or the tools to save effectively …

… We also see many governments failing to prepare for the future … As a result, society increasingly is turning to the private sector … Society is demanding that companies, both public and private, serve a social purpose … Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short- term pressures to distribute earnings …

… BlackRock recognizes and embraces our responsibility to help drive this change. … We have undertaken a concentrated effort to evolve our approach …

Your strategy, your board, and your purpose … companies must be able to describe their strategy for long- term growth.

… The statement of long- term strategy is essential to understanding a company’s actions and policies, its preparation for potential challenges, and the context of its shorter- term decisions. Your company’s strategy must articulate a path to achieve financial performance. To sustain that performance, however, you must also understand the societal impact of your business as well as the ways that broad structural trends from slow wage growth to rising automation to climate change affect your potential for growth.

These strategy statements are not meant to be set in stone— rather, they should continue to evolve along with the business environment …

… We also will continue to emphasize the importance of a diverse board. Boards with a diverse mix of genders, ethnicities, career experiences, and ways of thinking have, as a result a more diverse and aware mindset. They are less likely to succumb to groupthink or miss new threats to a company’s business model. And they are better able to identify opportunities that promote long- term growth …

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Sustainability- aligned strategic system perspectives to Do Well and Do Good

The following are selected enterprise system constructs most relevant for enterprises formulating sustainability- aligned strategies for Bridge 3, Doing Well and Doing Good:

• The purpose for Doing Well and Doing Good: Companies on thisbridge may be smaller companies that had sustainability- aligned strat-egies from their beginning or larger successful companies that are nowexpected to demonstrate their social responsibilities. While the startupsand small nimble businesses are likely to have clear innovative solutionsfor their customers as the strategic driver for Doing Good, the role ofthe larger companies is not as clear- cut. Some good can be accomplishedby assisting suppliers to improve their practices. They also may be askedto support communities to advance broader social goals that are furtherremoved from their core business and capacity strengths.

• This is a good time to re- imagine how the enterprise’s strengths mightbe applied more expansively. Ask again from a secure foundation: Whyare we doing this business? How might our products and services con-tribute to the wellbeing of our customers, stakeholders, and society?What investments can I make with my, not unlimited, capital (as Portersays, no company can fix society alone) to continue building resiliencywhile accelerating progress towards responsible goals?

• Increase efficiency and productivity of vital stocks with most vul-nerable threshold flows and/ or greatest flow volatility. Both thebusiness world and the investment world must be vigilant about thechasm of complacency. They have enjoyed a long period of excesscapitals which were not being used with sufficient responsibility. As

… a company’s ability to manage environmental, social, and govern-ance matters demonstrates the leadership and good governance that is so essential to sustainable growth …

Today, our clients— who are your company’s owners— are asking you to demonstrate the leadership and clarity that will drive not only their own investment returns, but also the prosperity and security of their fellow citizens. We look forward to engaging with you on these issues.Sincerely,Larry FinkChairman and Chief Executive Officer

Source: www.blackrock.com/ corporate/ en- us/ investor- relations/ larry- fink- ceo- letter.

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http://www.blackrock.com/corporate/en-us/investor-relations/larry-fink-ceo-letter

http://www.blackrock.com/corporate/en-us/investor-relations/larry-fink-ceo-letter


Blackstone (Anderson, 2017) suggests, material, water, energy efficien-cies will continue to be expected normal business practices for reducing footprints and saving money. Employee and stakeholder engagement are also critical during this all hands on deck strategic shift.

• Time horizons: The new rally cry for business, “2 degrees and theSDGs,” emerged from the convergence of the United Nations releasingof the Sustainable Development Goals (see following section andthroughout this book) and the commitments that emerged out of theParis climate accord to limit global temperature rise to under 2 degreesCelsius. The SDGs are using 2030 or about 10 years as their horizon forDoing Well and Doing Good. Some thresholds, especially those inter-dependent with cash flow or the capital markets, may still be shorter.Environmental thresholds may have more time.

• Strategic goals and resiliency: Business goals may still look similar tothose for Doing Well. Societal goals can now align with the UN SDGs.See Chapter 6 for more on how enterprises are aligning their metrics andgoals with the SDGs.

• Boundaries, interconnections: The boundaries of Bridge 3 travelersare expanding. Longer- term environmental and societal feedback signalsmight be knowable. That said, if those signals are too delayed, somedifferent system boundaries may be helpful to determining safe resilientpaths ahead.

• Mental models: Companies crossing the chasm of the tragedy of thecommons must spend sufficient time determining their own historicexploitation of the commons and accept responsibility to end unjust,unequal, and overly privatized solutions.

• Networks and collaborations: For Doing Well and Doing Goodtravelers, collaborative solutions are essential. No company and nogovernment can thrive alone. Large or more resilient enterprises(and governments) can do more good and do more to support otherenterprises and communities with fewer means.

Strategic frameworks for Doing Well and Doing Good

The Sustainable Development Goals (SDGs) are proving to be a unifying framework for aligning the efforts of all stakeholders and especially those of government, investors, and the business community. We provide a brief introduction here and more on how to measure progress towards them in Chapter 6. We also include an introduction of the Big Pivot strategy frame-work. That framework, devised by Andrew Winston, might arguably have been grouped as a tool for Thriving. No matter where you first learn about it, the thought- provoking insights and guidance it reveals are extremely helpful to formulating a sustainability- aligned (resilient) strategy for Doing Well and Doing Good.

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The sustainable development goals (SDGs)16

Corporate social integration has exploded with the release of the UN Sustainable Development Goals or SDGs. We review them in more detail in Chapter 6, but need to assure all who are formulating strategy about their existence and the enthusiastic reception and integration they are getting within both governments and businesses around the world. The goals and other societally desirable system improvements may represent business risks in some industries, but many governments, corporations, and investors see these interconnected desirable solutions as opportunities for growth.

The SDGs define global sustainable development priorities and aspirations for 2030 and seek to mobilize global efforts around a common set of 17 goals and 169 targets. The SDGs call for worldwide action among governments, business, and civil society to end poverty and create a life of dignity and opportunity for all, within the boundaries of the planet. Figure 3.6 depicts the 17 SDGs.

The SDGs expand the challenges that must be addressed to eliminate pov-erty and embrace a wide range of interconnected topics across the global eco-nomic, social, and environmental systems. The SDGs were developed using an inclusive process with substantive input from all sectors of society and all parts of the world. Through the UN Global Compact alone, more than 1,500 companies provided input and guidance. The goals are universally applicable in developing and developed countries alike. Governments are expected to

AFFORDABLE ANDCLEAN ENERGY

CLIMATEACTION

LIFEBELOW WATER

LIFEON LAND

PEACE JUSTICEAND STRONGINSTITUTIONS

PARTNERSHIPSFOR THE GOALS

DECENT WORK ANDECONOMIC GROWTH

INDUSTRY, INNOVATIONAND INFRASTRUCTURE

REDUCEDINEQUALITIES

SUSTAINABLE CITIESAND COMMUNITIES

RESPONSIBLECONSUMPTIONAND PRODUTION

ZEROHUNGER

GOOD HEALTHAND WELL-BEING

SUSTAINABLEDEVELOPMENT

SUSTAINABLEDEVELOPMENT

G ALS

G ALS

QUALITYEDUCATION

GENDEREQUALITY

CLEAN WATERAND SANITATION1 2 3 4 5 6

121110987

13 14 15 16 17

NOPOVERTY

Figure 3.6 The Sustainable Development Goals (SDGs)Source: https:// sustainabledevelopment.un.org/ sdgs.

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https://sustainabledevelopment.un.org/sdgs


translate them into national action plans, policies, and initiatives, reflecting the different realities and capacities their countries possess.

While they primarily target governments, the SDGs are designed to rally a wide range of organizations and sectors to help shape priorities and aspirations for sustainable development efforts around a common frame-work. Most importantly, the SDGs recognize the key role that business can and must play in achieving them.

The Big Pivot: a strategic tool for resilient enterprises

New economic models and corporate strategies such as the circular economy and the sharing economy (see Chapters 7 and 8) and the Daly Triangle (see Chapter 2) seek to decouple economic growth from material and human resource consumption constraints. Andrew Winston in his book, The Big Pivot, provides a strategic framework for a resilient company (Winston, 2014). See Figure 3.7 below. The framework anticipates a hotter (climate change), more resource- constrained or “scarcer” (and more expensive) and better- connected world. He also seeks to build a better economy that properly quantifies investment returns and if appropriate can incorporate external-ities or more specifically, the costs and benefits of our common and mostly external ecosystem services. Chapter 6 includes more details on the value of ecosystem services.

Companies will also need to radically collaborate with competitors and other stakeholders, and engage with and lobby for new government policies

THE BIG PIVOT STRATEGIES

VISION PIVOT

VALUATION PIVOTPARTNER PIVOTFight short-termism

Set science-based goalsPursue heretical innovation

Build a Resilient Company

Change incentives & engageRedefine ROI

Value natural capital

Inspire customers to use lessCollaborate radicallyBecome a lobbyist

Figure 3.7 The Big Pivot strategies: build a resilient companySource: Andrew Winston, based on his framework from The Big Pivot (Harvard Business Press, 2014). Used with permission.

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and rules. These next sustainability- aligned capital market transformation and value creation trends are already being successfully applied. Executives and investors must now reflect on the core purpose of their investments and businesses, change their corporate visions, and implement new, emergent systems and mental models to guide, direct, and accelerate their progress towards the sustainable future they are creating.

Leading companies Doing Well and Doing Good

In September of 2017, Fortune Magazine put out an issue with a listing of 56 companies that would “Change the World.” The list included Accenture, which is using data to reduce Emergency Room visits; IBM, for helping urban high schools close the STEM skills gap; and Levi Strauss’s effort to make life better for some of the 300,000 garment workers who make its jeans. The list also included Unilever which we discuss in the next section. There are many more companies in this segment of the journey and as we recognize a few, it is important that all resilient companies begin to re- imagine themselves in service of both their customers and society.

Unilever: visionary leadership and Doing Well and Doing Good deeds

One of our foundational principles of a sustainable enterprise which was covered in depth in Chapter 1 was the importance of leadership. We follow with sustainably aligned values and then the good strategy. When we look at Unilever from a holistic sustainable enterprise perspective, it is the complete package. Its founder, Lord William Lever, built a business around the sale and distribution of soap that not only proved to be profitable and sustainable, but which also played a pivotal role in transforming the health of Victorian Britain’s poor (Mars, 2017). That baton has been handed on many times since then and today it is held by another of our sustainability heroes, Paul Polman.

Mr. Polman’s sustainability- aligned strategy for Unilever is known as the Unilever Sustainable Living Plan (USLP). It includes pursuing paths that decouple its growth from environmental footprint and increase its overall social impact. It takes this responsibility across the total value chain, and for all of its brands around the world. The USLP has helped the company grow its revenues and profits as well. When Unilever announced its first- half results for 2017 the news was good. Revenue of about $30 billion was up 5.5%, and earnings per share were up 24% over the previous year (Fry & Chew, 2017). The company is Doing Well. The USLP also has guided it to address external issues such as food security, deforestation, and sanitation. The company is Doing Good.

So what does Paul Polman think are the biggest challenges to companies progressing their sustainability journeys?

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Unilever saw the challenge of corporate sustainability as more clearly defining the “tactical” and “systemic” issues. And defining the termin-ology. On tactics: labeling claims need to be clear about what standards to develop, and disclosure and materiality. Systemic: system change, moving from short- term focus in politics and finance, and changing consumer preferences & habits. These need to change at the systems level; the first step is identifying the problem.

(G&A Institute, 2017)

We could not have said it any better!

Samsung: STEAM Challenge Doing Good through the SDGs

Samsung Electronics America, Inc. sponsored the Global Classroom STEAM Challenge, bringing teachers and students from five countries together to find solutions for sustainable development issues around the globe. The students were challenged to work collaboratively to use STEAM (science, technology, engineering, arts, and math) skills to build out possible solutions that align with the United Nations Sustainable Development Goals (SDGs). Samsung also demonstrated technology aligned with its core business as the teams used a virtual classroom platform developed by IVECA, a nonprofit organiza-tion that supports international collaborative learning. Schools and projects included:

• Ross High School’s Butler Tech in Hamilton, Ohio and Science Academyof KAIST in Busan, Korea, which are addressing the “No Poverty” and“Zero Hunger” SDGs by developing a website and an NGO to collectand distribute food.

• Downtown College Prep in San Jose, California and Zhenjiang Vocational Technical College in Jiangsu, China, which are addressing the “CleanEnergy,” “Climate Action,” and “Life on Land” SDGs thanks to co- developed devices to reuse recyclables and plastic to cool and filter theair and conserve water.

• Northwest Pennsylvania Collegiate Academy in Erie, Pennsylvaniaand International School of Tunis from Tunis, Tunisia, which areaddressing the “Decent Work and Economic Growth” and “Industry,Innovation and Infrastructure” SDGs through educational programsto create jobs and improve their economy through tourism and work-place equality.

• The Lawrence County High School in Moulton, Alabama and LuizaFormozinho Ribeiro Public School in Sao Paulo, Brazil, which areaddressing the “Good Health and Well- Being” SDG through co-developed websites and a mobile app to reduce and better manage wasteand litter in their communities.17,18

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The company continues to develop programs that inspire the next generation of innovators through STEAM skills that prepare students for their future.19

BASF: creating chemistry for a sustainable future20

With natural capital being our limited, ultimate means, it is comforting to know that one of the leaders advancing their sustainability- aligned strategy is also in the natural capital, chemicals, business. BASF has prominently stated that its purpose is: “We create chemistry for a sustainable future.” It is harnessing 114,000 employees to contribute to the success of its customers in nearly all sectors and almost every country in the world. With sales of over $70 billion and a healthy profit, BASF is Doing Well and Doing Good! It has a fully integrated sustainability- aligned strategy. It is purposefully guiding itself on a path that combines economic success with environmental pro-tection and social responsibility. We will share more in Chapter 6 about its work to not only talk about doing this, but to actually rigorously quantify it through its Value- to- Society methodology. “This approach has the poten-tial to transform the way corporations assess their impacts on society and will influence the way they are running their businesses in the future,” states Christian Heller, head of BASF’s Value- to- Society program. By measuring the impact on the health and wellbeing of people, the results reflect the “real” value contribution of BASF’s business activities: the benefits and costs created for society.

The Value- to- Society approach creates a more comprehensive picture of BASF’s impacts along the value chain and demonstrates how chemistry is enabling sustainable growth. Managing and improving its impact is key to keeping and strengthening BASF’s license to operate and to fostering its license to grow. BASF provides its approach and learnings to current debates on the monetary value of the economic, environmental, and social impact of business decisions. The company also shares its experience in networks and conferences like Sustainable Brands, GreenBiz, and more, to support transparency, and to contribute to the continued standardization and operationalization of impact valuation.

The Global Opportunity Explorer for SDG innovations21

The Global Opportunity Explorer is a joint project of Sustainia, DNV GL, and the UN Global Compact. The tool was created on the conviction that the SDGs offer a myriad of business opportunities with great value to companies, society, and the environment. The tool maps cutting- edge innovations and new markets. Over 300 innovative urban climate solutions from four years of Cities100 reports are showcased. It also helps business leaders, entrepreneurs,

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and investors connect with new partners, projects, and markets to foster more partnerships for the SDGs and a greener and fairer world by 2030.

Thriving: enlightened leaders accepting risks and embarking to create the new world

The final span along our sustainability- aligned strategy is Bridge 4, Thriving. In this span the company is actually accomplishing its purpose for its customers while having no net decline in natural capital, and simultaneously improving the wellbeing of its employees and the communities within which it operates and its products are used.

The sustainability movement requires collective bold and focused efforts like those performed to transport humans to the moon. In fact, Elon Musk, one of our heroes working to create enterprises that Thrive, is the founder of SpaceX among many other businesses. Companies choosing to compete in this sector of innovation may or may not be earning a sufficient profit to maintain their financial stock wealth. They are doing whatever it takes, failure is not an option for these individuals. The sobering truth is that there are no thriving companies today. That said, there are companies, business leaders, and sustainability professionals already hard at work on the journey.

Sustainability- aligned strategic system perspectives for Thriving

The following are selected enterprise system construct items most relevant for enterprises ready to take bold risks in order to explore the unknown frontiers of the final segment of our story, Bridge 4, Thriving:

• The purpose for Thriving: Progressing the enterprises’ natural cap-ital impact to 0 or positive regenerative performance while sustainingor enhancing the wellbeing of its employees, customers, and commu-nity stakeholders today without compromising the ability of futuregenerations to thrive.

• Increase efficiency and productivity of vital stocks with most vul-nerable threshold flows and/ or greatest flow volatility. Material,water, energy efficiencies reduce footprints and save money. Engage withemployees to assure diverse ideas for both efficiencies and innovation.These actions in turn will increase margins reinforcing the objectivesof building up a financial reserve and extending other capital thresholdrunways longer out into the future.

• Time horizons: 2050 or longer for this mission. But as cases show, finan-cial thresholds are a barrier to long- term strategies and business modelswith substantial volatility and unknown risks.

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• Strategic goals and resiliency: Companies seeking to advance toThriving are assuming large risks, but likely necessary ones as business asusual will not sustain society or their organization in the long term.

• Boundaries, interconnections: The boundaries of Bridge 4 travelersare highly fluid. Diverse enterprises can see their visions from vastlydifferent perspectives and it is not knowable if one or another is moreor less valid.

• Mental models: Companies crossing the chasm of unknowns must getcomfortable with failures. It won’t be the failures we remember, but howwe learn from them and adapt and keep moving.

• Networks and collaborations: Sharing unknown risks to advancethe needs of society and avoid tragedies of the commons seems like alogical path to pursue. Both science- based goals and future- fit businessframeworks presented next are striving to do so.

Frameworks and collaborations advance Thriving strategies

The following are a few initiatives making initial probes across the unknown chasm. These pioneers like the astronauts before them accept the risks with the belief that their service will make a difference.

Enterprises collaborate to integrate science- based goals

The Science Based Targets22 initiative champions science- based target setting as a powerful way of boosting companies’ competitive advantage in the tran-sition to the low- carbon economy. It is a collaboration between the Carbon Disclosure Project (CDP), World Resources Institute (WRI), the World Wide Fund for Nature (WWF), and the United Nations Global Compact (UNGC) and is one of the We Mean Business Coalition commitments. So far over 337 companies have signed on and are pioneering these goals that align with miti-gating climate change threshold risks.

Lila Karbassi, Chief, Programmes, United Nations Global Compact, while expressing her enthusiasm for this initiative, noted, “We cannot thrive in a world of poverty, inequality, unrest and environmental stress— all exacerbated by climate change,” (Karbassi, n.d.). See Chapter 6 for more on the Science Based Targets goal setting methodologies.

Enterprises commit to thriving and Future- Fit Business Benchmark23

Since the 1990s an international group of scientists, led by the founders of The Natural Step, co- created and refined an academically rigorous, systems- based framework designed to guide progress toward a flourishing future. They

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collaborate to mobilize business in pursuit of “future- fitness,” empowering any enterprise and eventually all market actors to recognize and reward the right kinds of action. This starts with understanding that companies don’t exist in a vacuum: business can only thrive if society prospers, which in turn demands that we safeguard Earth’s life- support systems. Future- fit com-panies add value to the holistic system ensuring that business in no way hinders, and ideally contributes to, society’s progress toward future- fitness. Figure 3.8 presents the Future- Fit Business Benchmark Framework including eight social and environmental system conditions. More information is avail-able on its website and in the Living Fieldbook.

Disruptive companies take risks to Thrive

Some leaders have studied the science and believe humans are plundering the Earth’s resources. Other leaders look at possibilities and want to be the first to achieve success and go beyond what is currently possible today. Interface Carpet and Tesla are working hard to have their companies be the ones out in front and demonstrating the behaviors and practices they believe will make the world a better place. They know the risks, but also see that our practices today must change.

Interface Carpet: Mission zero to Thriving

In 1994, Ray Anderson had an epiphany that started his journey to trans-form Interface Carpet into a sustainable enterprise that thrived. At that time the supportive tools and communities of science- based goals and future- fit business benchmarks did not exist. He chose to be a sustainability movement pioneering astronaut and Interface Carpet was his rocket. He set a seem-ingly radical strategic goal for the firm: “Mission Zero,” a commitment to eliminate any environmental impacts by the year 2020. Shortly before his death, he estimated that the company was more than halfway towards this vision. At that time in 2011, Interface had been on the journey for 17 years.

Figure 3.8 Future- Fit Business Benchmark Framework: eight social and environ-mental system conditions

Source: Future- Fit Business Benchmark, with permission.

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It had reduced greenhouse gas emissions by 24%, fossil fuel consumption by 60%, waste to landfill by 82%, and water use by 82%, while avoiding over $450 million in costs, increasing sales by 63%, and more than doubling earnings.

The good news is that Interface persevered after Ray retired. He passed the baton to Daniel Hendrix, who served as CEO for nearly 16 years. During that time, Interface adapted its sustainability- aligned strategy as it secured its pos-ition as the leading global manufacturer of modular carpet, while continuing its Mission ZeroTM quest. Hendrix successfully drove the company’s business by focusing on Interface’s core carpet tile business and diversifying its market segmentation through expansion into the education, hospitality, healthcare, retail, and institutional spaces. Hendrix will continue to bring his industry expertise and counsel to bear as Chairman of the Board, but has passed the CEO baton to Jay Gould as of March 2017. Gould is primed to lead the organization into its next phase of growth.

Interface is demonstrating what a thriving enterprise aspires to be. It has battled hard to make sustainability- aligned progress every day. It has done so while honoring its ambitious Vision and Mission statements.24 Its journey, as expected, includes failures which it does not hide, but shares so others might learn. The company accepts that it doesn’t know now how it is going to accomplish its ambitious goals, but remains hopeful. While some claimed it will take a miracle, Jim Harzfeld, a former Interface executive who was the head of the first Environmental Task Force in 1994, claimed that it is business as usual: “People don’t realize that it took five or six miracles to get this far; Interface has always been in the miracle business” (quoted in Davis, 2014).

We are grateful to Ray and everyone at Interface for being leaders. We wish you long- term success as you continue to work to be the first company that, by its deeds, shows the entire industrial world what sustainability is in all its dimensions: people, process, product, place and profits— by 2020— and in doing so we will become restorative through the power of influence.

Tesla: a thriving vision disrupting the status quo, but chasm warning signs loom

Brave risk- taking pioneer Elon Musk has made it his life’s purpose to carry multiple industries simultaneously toward his vision of a thriving future. As we think about the chasm of the unknowns that will need to be tamed, dis-ruptive innovations such as the ones he is pursuing will be needed. We are now at Bridge 4 for Thriving, but the company doing the disrupting is stra-tegically behaving like a bad Bridge 1 Startup. Let’s briefly review what we can see that is knowable.

Elon Musk thinks and acts on a larger, more cosmic scale than we’re accustomed to from entrepreneurs. He has become a household name syn-onymous with the future and is not shy about promoting his work. Whether

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he’s working on electric vehicles (Tesla) or sending rockets into space (SpaceX), he has obtained hero worship. He also has accomplished some deeds that keep him in the game while working hard to do industry- disrupting innovations within eight industries simultaneously (CBInsights, 2018).

Tesla by the numbers feels like another GE in the making. The company has a lot of work to do to improve its image of being able to produce positive results. Tesla is now on its fourth vehicle model and still cannot seem to get the manufacturing angle figured out. The result is that institutional investors are leaving. Because Tesla did not follow the Bridge 1 strategy playbook of getting to profitability before taking on the next risk bridge and the next, its ultimate viability will be subject to traditional investor behaviors.

If institutional investors don’t continue to buy into the vision, it is game over and Chapter 11 here we come. Learning from GE’s history, Tesla also does not seem to have the cash flow yet to stop raising funds. Since the Model 3 was unveiled, the cash reservations for new products have jumped from $1,000 to $5,000, $20,000, $50,000, and even $250,000 for the Roadster Founder’s Series. It is pretty obvious we are degrading into a quasi- Ponziesque situation where today’s reservation monies are building the previ-ously promised vehicles or paying the bills to keep the lights on. That cannot continue (Bailey, 2018).

There are other chasm warnings that might keep a normal human up at night. Let’s look at two. From an inside systems perspective, the history at SolarCity which is now owned by Tesla did not demonstrate sustainability- aligned values. By 2013, it was the leading installer of solar systems in resi-dential buildings in the United States. Its key innovation, though, was less on the technology side and more on the accounting side. SolarCity pioneered the “solar lease” strategy, which allows homeowners to get their roofs installed for free and pay back the installation costs over time. To grow sales, SolarCity used aggressive sales tactics and savings promises that critics say “bent the truth” of the numbers. Customers, once they realized they wouldn’t be saving as much as they’d been promised, canceled their installations in droves. That enterprise system hit a cash flow challenge, investors sold, and in February 2016, the stock price dropped by a third. Tesla subsequently bought SolarCity giving that startup a cash flow lifeline. And now Tesla’s business purpose shifts to absorb SolarCity. In some ways, it can make sense if, as Geoffrey Moore suggests, Tesla is going to attempt to cross the chasm with a more holistic product that makes it easier for mainstream customers to buy.

From a broader systems perspective, two different visions are colliding. Elon Musk’s vision is to disrupt the existing automobile industry. Tesla is a car company working to make the “car company” a thing of the past. Without going further, the alternative reality is that several more established automo-bile companies are reacting to the same opportunity of electric and autono-mous vehicles. Tesla is not the only investment option. Using our sustainability lens, we believe that betting on electric vehicles becoming mass market makes

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sense. Great Britain and France voted to ban diesel and gasoline auto sales starting in the year 2040. China has made it a point that one in five cars sold in the country should run on some alternative source of fuel by 2025. GM plans to have 20 electric vehicle models on the road by 2023. Volvo has decided to get rid of traditional fuel- powered cars entirely by 2019.

Our sustainability- aligned bridge strategy story ends on an unknown. Elon Musk is hard at work creating the future he wants. He is leading at this moment and like Ray Anderson before him, radical industrialists are needed.

Conclusion: Be hopeful, Do your best, Thrive

Welcome to the next phase of the sustainability movement. We thank you for being a leader dedicated to helping your enterprise align its strategy with sustainable, safe, and resilient paths. Relentlessly make progress towards your goals and know all progress advances us closer to achieving the SDGs. You know you are not traveling alone. Students have started through programs like Aim2Flourish. Small farmers in Haiti have joined in. Be hopeful as you take the first steps of your journey.

We have explored together the basics of both systems thinking and how to develop a good strategy. Now is the best time to form a diverse team of enterprise leaders, employees, and trusted stakeholders and begin to re- imagine your vision for the future you want. Use all of the tools in your toolbox, from SWOTs; to the Lean Business Model Canvas and ROI Workbooks; to the Big Pivot and Future- Fit Business Benchmarks. Follow the learning map process and create your enterprise’s epochal story. This will take time, hard work, and there will be many learnings (failures) along the way. Don’t get down and lose confidence, learn, adjust, and keep striving to do your best.

The sustainability movement is stuck, but there is a clear path forward. Government is failing its citizens and so business is expected to do more. We’ll give you a few years to build up your stocks, but not much more. Complacency is a blind spot chasm that pulled down many great companies such as GE. Larry Fink and investors will be watching. Accept and embrace your responsibility to serve others and make a profit while doing so. Use pre-caution as you navigate across the chasm of the tragedy of the commons as limited stocks are stressed. Get comfortable with the unknown and formulate the smart bridge strategy that puts you on a path to Thrive.

Notes

1 We derive our use of “smart” from its use in the eyewear industry as explained later in the chapter. We also support its use to describe SMART goals which are defined as ones that are specific, measurable, attainable, relevant, and timebound.

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2 Students of strategy will recognize this perspective as grounded in neo- Darwinian theories of population, ecology, and industrial ecosystems; see, for example, Aldrich (1979).

3 Students of strategy will recognize this perspective as grounded in classic resource- based theories of the firm; see, for example, Barney (1991) and Prahalad and Hamel (1990).

4 www3.weforum.org/ docs/ WEF_ GRR18_ Report.pdf 5 www.greenbiz.com 6 www.trucost.com 7 www.sustainablejersey.com/ media- communications/ sustainablejersey- heroes/ 8 www.quora.com/ How- many- employees- does- each- Fortune- 500- company- have 9 www.sba.gov/ sites/ default/ files/ FAQ_ Sept_ 2012.pdf 10 www.TransitioningtoGreen.com 11 www.SmallholderFarmersAlliance 12 www.youtube.com/ watch?v=Z0dvYFxVkUQ 13 https:// weatherhead.case.edu/ centers/ fowler/ aim2flourish/ flourish- prizes/ 14 www.eco- advantage.com/ 15 http:// sustainabilityadvantage.com/ 16 https:// sustainabledevelopment.un.org/ sdgs 17 www.csrwire.com/ press_ releases/ 40750- Samsung- Challenges- Students-

Around- the- World- to- Tackle- Sustainable- Development- Issues- Through- STEAM- Skills

18 A live webcast of the program on the United Nation’s YouTube channel is at www.youtube.comunitednations

19 https:// news.samsung.com/ us/ tag/ steam/ 20 www.basf.com/ en/ company/ sustainability.html 21 http:// explorer.sustainia.me/ about 22 http:// sciencebasedtargets.org/ about- the- science- based- targets- initiative/ 23 http:// futurefitbusiness.org/ 24 www.interfaceglobal.com/ Company/ Mission- Vision.aspx

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Chapter 4

SourceSupply chain satisfaction

No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.

Adam Smith (1723–1790)1

It was around 8 a.m. on 17 March 2010 when a young girl threw herself from her bedroom window. Tian Yu fell four storeys to the ground outside the factory where she worked and slept. After a 14-day coma, she emerged with a fractured spine and hips. The 17-year-old was left paralysed from the waist down. She survived to tell a heart-rending story of the human cost of brutal toil in multinational supply chains.2

The teenager was an employee at Foxconn’s Longhua plant in Shenzhen, China. She had been employed for just 37 days making Apple iPhones and iPads. She is typical of a generation of young women and men who have left their families and rural life to gamble on a hope.

“Hurry towards your finest dreams, pursue a magnificent life,” urged the employee handbook that she was given on arrival. But Tian Yu was not able to pursue her mag-nificent dream of a happier life. Instead, she experienced a system of inhumane effi-ciency. A typical day was 12 hours long with apparently mandatory overtime. The working week was six days. Toilet breaks and chatting on the production line were strictly controlled. After all, she had a quota to meet, checking iPhone screens for cracks. Even the way in which she had to sit was obsessively standardized.

Posters on the workshop walls ranged from the bizarre (“Growth, thy name is suffering; a harsh environment is a good thing”) to the ominous (“Achieve goals or the sun will no longer rise”). Each morning, managers would start the day with a ritual of shouting at employees, “How are you?”. The workers would chant in unison, “Good! Very good! Very, very good!”

But life was not good for Tian Yu. With little training and no emotional sup-port, the final straw came when the Longhua system failed to produce her first pay packet. Distraught, exhausted and highly stressed, the teenager decided to take her

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own life. Despite the relentless automation of humans at Longhua, the tragic irony is that the system couldn’t even pay this teenager what she was owed.

But what makes this story so devastating is that Tian Yu is by no means unique. Eighteen other workers at the same factory attempted suicide that year. Fourteen of them were successful. Foxconn, the factory owner, faced public outrage across the world. They scrambled to minimize the damage to their reputation – and that of their major customer, Apple. Foxconn made the extraordinary claim that the suicide rate at their factories was below the average in China of 23 deaths for every 100,000 people.3 Suicide nets now drape beneath the windows to prevent Tian Yu’s colleagues from following her and turning their backs on the Foxconn dream.

The globalization of supply chains has spawned hundreds of millions of new jobs like Tian Yu’s. The Longhua factory employs an astonishing 400,000 workers. That’s more than the entire population of a city such as New Orleans or Florence. Imagine the bustle and excitement of the new arrivals, most just 20 years of age, who have left their families to seek their fortune in this giant factory-cum-city.

Every day, young migrants across the developing world arrive by their thou-sands at city-factories such as Longhua. They assemble our gadgets, package our foods and stitch our clothes. Further up the supply chain, they mine minerals, chop forests and tend crops. Can they all be as unhappy as Tian Yu? If you read the stories in the media and follow the campaigns by non-governmental organi-zations (NGOs), you’ll have seen tales of degrading conditions, unsafe practices and human rights abuses. But workers keep migrating to mining towns, plodding through plantations and sweating in sweatshops. Why do so few turn their back on the dream?

The human side of supply networks

The supply and distribution networks of multinationals criss-cross the world in an elaborate web of lives. When a company sources its palm oil, potatoes or packag-ing from the developing world, the potential to improve lives and grow wellbeing is immense.

It’s been estimated that half a billion people work in such industries: digging up and chopping down raw materials from the earth, planting and harvesting, fishing, and sewing, stitching, moulding, soldering, assembling, painting and packaging goods for export.

Here’s a little exercise that brings the human side of this to life. Try to picture the people involved in creating this book for a moment. If you’re holding a paper copy, imagine where the pulp might have originated. What do the people look like who might have felled the tree, processed, inked, boxed and transported it to you? Are they happy?

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The answer is probably not. Gallup, the polling company, asks people whether they do something interesting and like what they do at work each day. Those work-ing in agriculture, fishing and forestry score the very lowest; just 11% are thriving, globally, according to this measure.4 This is a massive tragedy for all companies that buy these commodities – and a major opportunity for pioneering businesses to make a difference.

If you are holding an e-reader or tablet, the story is even more interesting. The circuitry, plastic, microchips and battery each have an extraordinary tale of their own. It starts down a mine, with someone digging up a rare component such as tantalum, perhaps from the war-torn Democratic Republic of Congo. This super-resistant metal is used in computers, phones, medical devices and DVD players. But it’s a conflict mineral that’s been linked to wars and serious human rights abuses. People such as Tian Yu then helped to mould, shape, solder, assemble, check and package your electrophoretic display.

A human web of workshops, factories, warehouses and packaging centres make up the vital organs of the supply network. Those working in transport are the life-blood that connects the organs, pumping parts and products through the system by bike and car, truck and boat, train and cargo plane.

Our whistle-stop tour of logistics ends with retail. After the product has been manufactured, it’s normally sold to you and me through a shop or website. We’ve all heard of Walmart and Amazon. But for everyday purchases, it might be your local store. In the developing world, many snacks, drinks and small household products are sold by entrepreneurial men and women from carts and makeshift huts beside roads, tracks and beaches. Even in the deepest forests of our planet, you can still buy a Coca-Cola or Colgate toothpaste. There is a par-ticularly exciting opportunity for businesses to create worthwhile jobs in these informal distribution networks.

What’s a job worth?

Economists used to say that the measure of whether someone liked their job was whether they stuck at it. The free market of labour dictates that supply matches demand. People move in response to what they are prepared to put up with. If the jobs at Longhua weren’t better than life on the family farmstead, people would simply leave the horrors of the factory and return to the countryside.

The reality is not so simple. There are all sorts of reasons why migrants don’t turn their back on export production and city life – even if the conditions turn out to be appalling. The massive distances that many migrate within and between countries is one barrier. Bonded contacts – forms of modern slavery in some cases – mean workers are in punitive levels of debt to their new masters and

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people traffickers. The fear of shaming a family back home also leads many to stay, no matter how tough, and fight for the dream of a better life.

To understand what a job is really worth to anyone, we need to unpick which aspects elevate and erode their happiness. For companies sourcing materials from the developing world, the challenges and opportunities are immense. We need to examine the real evidence on what does and does not affect life satisfac-tion. But the conventional criteria used to judge success in supply chains seem to obscure wellbeing.

New metrics for procurement

The relationship between a business and its suppliers used to come down to cost, time and quality. Can the procurement team get the parts needed, as quickly as possible, to the required standard at the lowest cost? Nowadays, most multination-als weigh up a more complex set of criteria, including the reliability and resilience of logistics, as well as traceability, which basically means whether you work out where each part has come from.

The rise of corporate responsibility has created a phenomenal industry of sup-plier standard setters and checkers. Inspections assess whether working conditions are safe, human rights are respected and environmentally sensitive processes are used. Every year, many thousands of audits are undertaken to try to ensure that promises are being kept.5

Cost, time and quality are no longer the only things that matter in logistics. But all the codes, checks and audits are no good unless we are clear about what we are trying to achieve. What we surely desire is for those working in supply chains to have basic rights, safe conditions and environmentally responsible prac-tices because these things make life better today and for future generations. An ethical supply chain should be about boosting of life satisfaction. But how many auditors ask about happiness?

Poverty is not just about money

On a warm summer’s day in 2010, shoppers on London’s Old Kent Road were handed two 1 pence coins (about 3 US cents). They were told to go into Asda, the supermarket owned by Walmart, and give the money to the cashier. A coordi-nated campaign by ActionAid, an NGO, was seeking to highlight what they called “poverty wages” in Asda’s garment sourcing. The two pennies were symbolic: it was the activists’ best estimate of what would need to be added to a £4 ($5.60) T-shirt to double the wages of the garment worker that made them in Asia.6

But the campaigners also did something even sneakier. They went into Asda stores and slipped little notes about wages into the pockets of the clothes. Any shopper who

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found a leaflet was offered a free T-shirt as a prize – an elaborate treasure hunt to raise awareness of pay packets in far-flung factories.

This campaign was highly innovative and media-friendly. It’s just one exam-ple of countless initiatives from increasingly savvy non-profits that target the big brands. It also highlights how many campaigns are increasingly homing in on just one issue: wages.

The global financial crisis of 2008 made the topic of pay all the more salient. Campaigners contrast massive pay packets awarded to executives with the “poverty wages” given to workers who made the products. The idea of a living wage has been rapidly gaining traction. This is pay that’s above legal minimums and enough to cover the costs of housing, food and other bills in a local country or city.

Asda responded to the ActionAid campaign by decrying the research as “flawed.” The supermarket pointed out that there was an incredibly complex set of issues involved in sourcing clothes from Asia, especially given the low prices needed to clothe poorer families in the West. The issues Asda listed included factory condi-tions, working hours and training.7 Reading their response to the campaign, you can sense their frustration that their critics had simplified all the nuances of the supply chain down to the singular topic of salaries.

Poverty used to mean a lack of income. But since the early 1990s, the develop-ment field has undergone something of a slow revolution. There is an increasing recognition in academic circles that quality of life depends on so much more than money alone. Just as we saw with the trash pickers of Nicaragua in the previous chapter, unhappiness and deprivation are not the same things as income poverty. As the development expert Robert Chambers pointed out over 20 years ago, it’s perfectly possible to have the highest income in your village but still lack adequate resources. You can also have very little money but a decent quality of life.8

The fruit farmers of Senegal

The fruit farmers of Senegal illustrate the point. In 2007, a team of researchers trudged along a slice of windswept coast known as Les Niayes. They knocked on the doors of the huts and shacks of nearly 500 farming households. Their mission: to find out how farming green beans and mangos for export affected quality of life.

The farmers were asked a series of questions about their household income, and whether they worked on commercial farms or small-scale family ones. But they were also asked a more profound query: “In general, are you happy?” The answers were scored on a five-point scale from “very unhappy” to “very happy.” Once the data were crunched, the findings were consistent with others we have seen: household income bore no relation to how happy the farmers were.9

Further studies in supply chain industries have backed up these results. For example, among paddy farmers in Malaysia, government support, cooperation

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among peers and satisfaction with the work are stronger determinants of quality of life than income.10 For a cross section of agricultural, mining, manufacturing and construction workers in rural Vietnam, only relative, not absolute, income matters.11 In the developed world, a study of farmers in Northern Ireland found no clear relationship between household income and life satisfaction; again, other factors such as levels of education were more significant.12

We need to reiterate a note of caution here. There is no doubt that a lack of money is the primary cause of misery in many lives. Paying wages that are inad-equate for even the basic necessities of life is a recipe not just for unhappiness, but quite possibly death. Hence, the toxic term that has been levelled by American politicians against some brands: “starvation wages.”13

Back in the 1940s, the American psychologist Abraham Maslow proposed that we seek to satisfy physical needs (such as for food and safety) before personal and emotional ones.14 Without a basic level of income, the lowest earners cannot feed their children, put a roof over their heads or access basic resources such as nutri-tious foods, safe drinking water, clean sanitation and life-saving medicines. All the other things that make for a happy life are irrelevant unless those on the breadline receive an adequate wage.

Among the very poorest households in Bangladesh, for example, significantly fewer people say they are happy with their lives. Farmers and transport workers are among the most miserable.15 Studies of artisans enrolled in a fair trade scheme in Peru show that for those on the lowest incomes, pay is a key variable to raising happiness.16

For the very poorest, wages are vital for wellbeing. But the debate comes down to what constitutes a breadline level.17 Some pioneers such as Unilever and H&M are already working this out and enforcing minimum levels among their suppliers.18 Yet when it comes to life satisfaction, it’s far too simplistic to conclude that just raising wages will make life better for those working in supply chains.

Amartya Sen, the Nobel Prize-winning economist, has championed the idea that quality of life for the poor is not adequately explained by income. Economic pros-perity is just one pathway to improving life.19 Sen’s solution – a focus on what he terms “capabilities” – requires a more rounded approach to meeting their needs.20 Some of his solutions are for governments, such as political freedoms. But many of them are issues that businesses can tackle, such as increasing access to finance, food, education and healthcare. The latest research on wellbeing shows that one particular capability does more to increase happiness than anything else: increasing access to worthwhile jobs.

Creating jobs in supply chains

Creating employment is the single most powerful means to raise life satisfaction in supply chains. As we saw in Chapter 2, jobs enhance self-esteem, strengthen

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personal networks and promote a feeling of control over life. This is particularly true of the world’s poorest countries. In most cases, having any job – no matter what job – boosts wellbeing. As long as it pays a basic minimum wage, a job is better than unemployment.21

Of course, not all jobs are the same. The better the quality and more reliable a job, the better for wellbeing it will be. Those most satisfied with their experiences at work are typically more satisfied with life overall. But the key point is that it’s the existence of the job itself that matters most.

A job can mean very different things to different people. In order to optimize the impact on life satisfaction, there is a twist to all this. A Wellthy Company cre-ates jobs for those who value them the most. The business creates opportunities for the very poorest, women and minority groups to have a disproportionate impact on quality of life.

Imagine that getting a new job takes the average out-of-work city male from a 5 to a 7 (out of 10) on the life ladder that we looked at in Chapter 2. Now imagine that the starting point is not 5, but 3, for a mother who desperately needs work, but faces racial discrimination, perhaps in an isolated rural community. Now that very same opportunity, for a person with the same skills, might take the woman from a 3 to an 8. That’s a transformational change to someone’s life.

This jump from a job matters for two reasons. First, the starting score is lower. Within many developing countries, minorities are often the least happy groups.22 Second, the boost is bigger. For those that face hurdles to employment, the benefit from getting the job – the value it creates for that individual – is greater.

The gender divide illustrates this perfectly. Women face widespread disad-vantage and discrimination across the world, particularly in poorer countries and especially in industries such as agriculture. Studies have shown that a woman get-ting a job typically results in significantly higher jumps in wellbeing than a man would experience. This is perhaps because women’s expectations from work are lower than men’s.23 Men have been running organizations and employing other men for 10,000 years, and seem subconsciously to have high expectations for patriarchy to continue.

Conversely, women appear, on average, to value the opportunity more. Some businesses have cottoned on to this opportunity, recognizing the benefits from investing in women as employees and suppliers. It’s been estimated, for example, that women in developing countries reinvest about 90% of their income in their families. The equivalent for men is about 30–40%.24

Global food business Mars has established agricultural programmes that specifi-cally source commodities from female smallholder farmers. Walmart, the world’s largest retailer, has introduced a pioneering “women-owned” label for products bought from female-run suppliers.25 Lots of companies talk about their social impact, but few think through how to really maximize it. The Wellbeing Purpose

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is about creating jobs across the supply network that are targeted at those who will benefit the most from them.

The same thinking applies not just to groups such as women or the rural poor, but whole countries. How about prioritizing buying from regions where wellbeing is lowest? Some of the poorest countries in the world, such as Burundi, Burkina Faso and Benin, consistently come bottom of the league tables of happiness. Cotton is grown in all three of these nations. For a Wellthy Company in the textiles busi-ness, procurement from these countries would be a top priority. Remember, the benefits are greatest where the starting point is most desperate.

There is a moral case for job creation in countries and communities where unhappiness is most endemic. But there is also a business one. Those given work who might otherwise lack it don’t just get happier. They are also most likely to work hard to keep their opportunities. A study from Russia in the late 1990s found that happier people tend to earn more money and perform better in the labour market in future years – an effect felt most strongly for those on the lowest incomes.26 In the next chapter, we’ll look at the evidence showing that happier people perform better at work. Take just one example from a Chinese factory. Higher levels of hope, optimism and resilience among workers has been shown to be strongly correlated with higher productivity as rated by supervisors.27 Happier workers are almost always more productive than unhappy ones.

For a Wellthy Company thinking about procurement policies, there is a strong alignment here. Wealth creation for shareholders and wellbeing creation for com-munities can go hand in hand. Suppliers who are happier are more reliable and more productive, and this can help to lower risks and increase margins. Improving productivity benefits the business while also improving life for many who would otherwise be very unhappy.

Although there are great challenges in sourcing from countries without the infrastructure and quality checks that established players have, the benefits of a long-term investment can pay off. Making procurement decisions to create the “greatest happiness of the greatest number,” as Jeremy Bentham put it, could make great business sense. Yet we know that not all jobs are equal. As well as sheer numbers, there is another crucial component to ensure happiness in supply chains. To find out the answer, we must continue our journey across Africa and visit the oil palm farmers of Ghana.

The key to happiness for Ghanaian oil palm farmers

Around half the goods we use every day contain palm oil.28 The oils are used to make foods such as margarine and chocolate, as well as cosmetics, candles and even laundry detergents. This phenomenal commodity is mired in huge controversies

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because of its impact on deforestation. But the story of its impact on happiness is less well known.

Ghana has been exporting palm oil for nearly 200 years. Around 80% of the crop comes from small-scale farmers.29 Just as we’ve seen in other countries, stud-ies of rural Ghanaians have found that strong community ties, access to water and the act of working – rather than wealth itself – affect wellbeing the most. While money can create “momentary happiness” for Ghanaians, income levels show a weak relationship with wellbeing.30

But amid these palm oil communities, one research project has discovered a fascinating factor with a striking correlation with happiness: formal contracts. Oil palm farmers with written deals to supply their crop turn out to be much happier with life than those in more precarious self-employment.31

It shouldn’t come as a great surprise that job security is vital to feeling good about life. After all, how can anyone lead a happy existence if they don’t know when the next pay cheque will come? Establishing formal contracts, particularly long-term ones, takes the pressure off suppliers. Reliability is the crucial comple-ment to providing a job that’s needed to grow wellbeing in supply chains.

In manufacturing “sweatshops,” unstable employment is endemic. In Bangladesh, for example, some 75% of waged workers in the garment industry lack a for-mal contract.32 Encouraged by NGOs and organizations such as the Ethical Trade Initiative, some companies have taken steps to reduce this type of precarious employment. For example, Adidas has a programme to increase the ratio of per-manent to temporary workers among its suppliers.33 Reliable jobs with formal con-tracts are the first steps. But there are other sources of pressure that need to be addressed too – some of which can have deadly consequences.

Lethal lead times

On 23 April 2013, workers at one factory making clothes for many high-street brands noticed large cracks in the walls. The shops and a bank on the ground floor were immediately evacuated as a precaution. Locals believed that the eight-storey building looked structurally unsafe. But the garment makers on the upper floors were in a different position. They were told to go back to work. After all, the fac-tories had big contracts to supply brands such as Benetton in Italy, Cato Fashions and The Children’s Place in the US and Matalan and Primark in the UK. Despite the apparent risk, management decreed that the day’s orders had to be completed. Fast fashion couldn’t wait.

The next day, the entire building crumbled in a lethal collapse. Bangladesh’s Rana Plaza disaster was a devastation, taking 1,138 lives. Nearly 2,600 more people were injured, many of them maimed for the rest of their lives.34

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It was the pressure to meet the day’s orders that prompted managers to send workers back into the Rana Plaza factory. In the dizzy world of fast fash-ion, deadlines drive the decisions. Speed strains the system. Companies serious about wellbeing need to design and plan for stable lead times. In competitive clothing manufacture, this is a big challenge. Businesses must encourage safety and contentment in their supply networks by banning crazy lead times.

As well as reasonable deadlines, payments to suppliers must be prompt. If you are a small-scale farmer or artisan, a contract to supply a big company is only a legal promise to be paid in the future. It’s cash that counts. Paying suppliers within a decent time period complements the stability and reliability of formal contracts. A relation-ship founded upon mutual respect can ensure a decent quality of life for suppliers.

Long-term relationships in the logistics network can make for more profit-able business. By reducing the number of times that contracts are reviewed, and the paperwork of switching suppliers, set-up costs can be cut, price volatility minimized, and stronger relationships built.

By committing to a partnership over many years, not months, you can build mutual trust. That means both parties are more likely to invest in improvements such as training, safe in the knowledge that everyone’s in it for the long haul. Making a commitment to suppliers can make great business sense and create more stability, and less risk, for the purchasing company. It also goes a long way towards helping those working in the developing world to plan for their future.

To summarize, then, wellbeing can be elevated in supply chains through cre-ating worthwhile jobs where they matter the most, reliable contracts wherever possible, reasonable lead times, and prompt payments. It’s not rocket science, but once we shift the focus away from simplistic slogans about pay and measure what improves people’s life satisfaction, the answers are revealing, realistic and potentially life-changing.

Is small always best?

Both the Senegalese fruit and vegetable farmers and the Ghanaian oil palm farmers reveal something fascinating about size. Alongside being told to pay better wages, another big issue that campaigners lobby companies about is doing more to support small-scale enterprises.

Oxfam, for example, urges companies to “Think Big, Go Small.” The romantic image of the self-sufficient farmer is contrasted with the big bad world of land-grabbing agri-firms, smiling cottage crafters are set against industrial sweatshops, and plucky street sellers battle with the retail giants. Is small best for happiness?

Some evidence suggests big is bad for wellbeing. For example, waged work-ers in Vietnam are much less happy than self-employed farmers.35 Small can be

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more personal. Having a direct relationship with independent entrepreneurs can create more authentic and unique brands. It can result in better wellbeing if the relationships are managed judiciously. Fair trade cooperatives illustrate this per-fectly, where wellbeing is typically much higher.36

Yet in the case of the Senegalese farmers, small is unhappy. The research-ers found that while income didn’t matter for happiness, self-employment did. Independent farmers were significantly less happy than those employed in the larger, agro-industrial farms.37 In Ghana, the independent farmers were also less content than those on the formal outgrower scheme with a proper contract. This is because small often equates to unreliable and risky trade for suppliers. This means more stress, less ability to forward-plan, and so less happiness.

The truth is that the evidence is mixed in terms of whether small and independ-ent is better for wellbeing. One small pilot study in Ethiopia found strong benefits to wellbeing from being given a job in a “sweatshop” compared to a cash grant for self-employment.38 Yet a larger study by the same authors found no clear relationship, possibly because exposure to chemicals and fumes made the factory job less healthy.39

A review of multiple studies has found that the self-employed are happier, on average, in the US and Russia, but less happy in Latin America.40 In the develop-ing world, self-employment is often a necessity. If stable work isn’t available, it can literally be for survival. In richer countries, working for yourself used to be considered a lifestyle choice. In the new gig economy of on-demand, often part-time workers, this is not always true. Happiness among freelance workers seems to depend on whether it’s a career choice for more flexibility or a forced necessity for the money.41

This illustrates why sweeping generalizations such as “independent self-employment is best” or “formal employment is better” are misguided. If inde-pendent means a fear of being out of work, it’s definitely not best for wellbeing. It’s not the structure of the jobs that affect people’s satisfaction with life. It’s the reliability of their income and their experiences of the daily tasks involved.

Human rights and wellbeing wrongs

Over 20 years ago, a journalist by the name of Sydney Schanberg paid a visit to some workshops in a remote corner of Pakistan. What he found shocked the world: 12-year-old children squatting in shacks, stitching together footballs. The toys were being shipped to America for kids to do what kids should be doing: kicking the ball around outside, after a day at school.

“Do you want to go to school?” Sydney asked the children in one workshop. “Yes,” came the quiet reply. But these children couldn’t go to school. They had been bought for a few dollars from their parents, sold and resold, destined to years

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of enforced slavery. While Sydney’s article in Life in 1996 mentioned Adidas and FIFA, the football governing body, one brand was struck so hard that it echoed through the ages: Nike.42

The public and political reaction was dramatic, bringing worldwide atten-tion to the real-life stories behind Nike’s supply chain. Within two years, Philip Knight, Nike’s chairman and chief executive, admitted that “the Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse . . . I truly believe that the American consumer does not want to buy products made in abusive conditions.”43

This was without doubt one of the greatest corporate exposés in history. It shone a light on the shady corners of a multinational’s supply network, illuminat-ing misery and oppression that had been hidden from view. But it was the pub-lic’s reaction that forced Nike to rethink human and labour rights. The firm began working with international bodies to create regulations banning child labour in Pakistan and supporting kids who had worked for their suppliers.44

It might sound obvious to state that fundamental freedoms and an absence of forced labour, violence and discrimination are essential for wellbeing to flourish. Oppression – whether caused by governments or supported by businesses – is one of the most potent causes of misery.45 Industries at the top of the supply chain often face the most acute safety and human rights risks. According to one study of min-ers in Australia, improving working hours, accommodation standards, personal conflict and mental health does most to improve wellbeing.46

In any workplace, practices that promote safety and dignity create happier employees and a stronger work environment. The idea of decency at work should make sense for all companies in an age where transparency in the supply chain is changing so rapidly.

Edward Fisher, a professor of anthropology, has described how dignity and fair-ness are just as important to the wellbeing of the Guatemalan coffee farmer as to the German coffee drinker who frets over ethical sourcing.47 Businesses need to put in place processes to identify and mitigate human rights issues in the supply chain, following a framework such as the United Nations Ruggie Principles.48

Mondelez International, a global foods company that makes Kenco coffee, has embraced a particularly innovative sourcing programme. Coffee Made Happy aims to do exactly that: source coffee beans from farmers in a way that makes every-one happier. It may sound twee, but there are rigorous targets behind the prom-ise, including to help 1 million coffee farmers become successful entrepreneurs by 2020. The company makes the same link between the consumers’ happiness and the suppliers’ wellbeing. Mondelez says that “our coffee makes people happy” when they drink it, and they’ve extended that mission to the farmers who make the beans as well.

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Coffee Made Happy is more than just a contract to supply beans to the business. It’s an intensive programme of investment in skills such as bookkeeping and accounting, growing the self-confidence and respectability of farmers and securing a more reliable supply for the brands. Mondelez has set key performance indicators covering issues such as whether a career as a coffee farmer is respected in the com-munities that they source from.49

This example shows how multinationals can take a more rounded view of well-being in the supply chain. By investing in training, education and healthcare in local communities, brands can build strong social capital that is essential to well-functioning supply chains. Happier suppliers make for a more reliable network, and stronger ethics in sourcing can help sell brands too.

Environmental contentment

Alongside improving social standards, Mondelez’s Coffee Made Happy also has a strand on environmental sustainability. Can greener practices really make farm-ers happier? The standard line with eco-initiatives is that it’s all about the future. Managing resources such as water, minimizing greenhouse gas emissions and pre-serving vibrant habitats are all actions intended to grow the wellbeing of future generations. That’s what environmental sustainability is all about – sustaining life’s critical resources for the generations that follow.

But some studies suggest that there might be a more immediate link between greener behaviours and our happiness today. Researchers working with dairy farmers in New Zealand have discovered that organic farming is a strong contribu-tor to feelings of personal wellbeing. Being in tune with the environment, and feeling part of something bigger, creates more positive emotions for farmers in their daily work.50

At an intuitive level, this seems logical: looking after the land might make our job seem more wholesome and worthwhile. It could even cause people to look after themselves more carefully too – and we know that good health, in turn, improves wellbeing. Air quality and pollution have been shown to have a marked effect on happiness.51 Studies have also shown that exposure to parks with more butterflies – and even aquariums with more fish – can have a very immediate effect on our mood and health.52

The implications of this are quite profound. Rather than just talking about the future benefits of greener supply chains, a Wellthy Company can capitalize on more immediate ones. By looking at supplier practices with a wellbeing lens, it opens up opportunities to innovate radical new approaches to environmental responsibility. It’s still early days, and there is more research to be done in this area. But a case could be made for joining the dots. Care for the environment might not be just for

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the happiness of our descendants. It could also raise the satisfaction of those working in agriculture, forestry, fishing and mining today.

These conclusions might seem unsurprising. It may sound obvious that secure employment that respects people and nature will increase wellbeing, whereas an unreliable income from unsafe, undignified and polluting work sows misery. But very few companies set out to measure and improve wellbeing in the sup-ply chain. For all the audits and standards, only a tiny number of initiatives have attempted to measure how people feel about life and explore the difference that business can make.

The debates over pay and small-scale employment illustrate how wild generali-zations can cause us to focus on the wrong issues. Companies wanting to take ethi-cal sourcing seriously need to have a laser-like focus on enhancing life satisfaction. That should be the real objective of ethical supply chain management.

The lesson from Senegal’s fruit and vegetable farmers, just like Ghana’s oil palm farmers, is that providing a reliable income is one of the most influential interventions that corporate procurement can make. Pay levels matter to the very poorest, but any job with a reliable wage is the essential ingredient for most people’s happiness. It’s all too easy to be seduced by the romantic ideal that self-employment is always best. But a decent and steady income may trump an independent lifestyle if it results in wages that can be counted on and a more stable and safe working environment.

We can begin to see how the decisions made in sourcing – in what are often very long and complex networks – can grow wellbeing significantly. Across the world, in all workplaces, perceptions and experiences matter just as much as mate-rial living standards. Meaningful and healthy employment, strong social networks and personal autonomy matter the most wherever we work. What matters to the Senegalese farmer is not that different from the San Francisco shopper. It is a use-ful reminder to think of those whose lives are touched by any part of the business as humans – not workers or consumers, but people who are motivated and made happier by more than just money.53

Most CSR supply chain initiatives are all about the negatives: minimising risks, stopping abuses and tackling injustices. But employment should be about enjoy-ment. There has not been enough focus on the joys of work.54 The Wellbeing Purpose is about creating life-changing opportunities in the supply chain for those who value them the most. To learn more about the benefits of wellbeing for employees, we must continue our journey across the footprint of business. We must leave the supply chain and arrive at the busy manufacturing facilities, offices and shops that are owned and controlled by a Wellthy Company. It is here, peeking into the lives of employees, that we’ll discover the phenomenally potent case for improving life satisfaction in the workplace.

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Notes

1 Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. London: Methuen.

2 The story of Tian Yu is detailed in Chan, J. (2013). A suicide survivor: the life of a Chinese worker. New Technology, Work and Employment, 28(2), 84–99. See also Chakrabortty, A. (2013) The woman who nearly died making your iPad. The Guardian. Retrieved 1 April 2016, from www.theguardian.com/commentisfree/2013/aug/05/woman-nearly-died-making-ipad.

3 Chan, J. (2013). A suicide survivor: the life of a Chinese worker. New Technology, Work and Employment, 28(2), 84–99.

4 Gallup (2014). World Faces Shortage in Purpose Wellbeing. Retrieved 1 April 2016, from www.gallup.com/poll/177191/world-faces-shortage-purpose.aspx.

5 Short, J. L., Toffel, M. W. & Hugill, A. R. (2016). Monitoring global supply chains. Strategic Management Journal, 37, 1878–1897.

6 ActionAid (2010). ActionAid Brings Its Campaign to the Streets of Leeds and London. Retrieved 1 April 2016, from www.actionaid.org.uk/news-and-views/asda-campaign-comes-to-leeds-and-london.

7 London SE1 (2010). Protest over Asian Factory Pay at ASDA in Old Kent Road. Retrieved 1 April 2016, from www.london-se1.co.uk/news/view/4711.

8 Chambers, R. (1995). Poverty and livelihoods: whose reality counts? Environment and Urbanization, 7(1), 173–204.

9 Based on research from Dedehouanou, S. & Maertens, M. (2011). Participation in mod-ern agri-food supply chain in Senegal and happiness. No. 114447, 2011 International Congress, 30 August–2 September 2011, Zurich, Switzerland. Zurich: European Association of Agricultural Economists.

10 Terano, R. & Mohamed, Z. (2013). Quality of life among farmers in selected granary areas in Malaysia. European Journal of Social Sciences, 41(1), 100–110.

11 Markussen, T., Fibæk, M., Tarp, F. & Tuan, N. D. A. (2017). The happy farmer: self-employment and subjective well-being in rural Vietnam. Journal of Happiness Studies, 1–24.

12 Miller, A. C., Jack, C. G. & Anderson, D. J. (2014, April). An exploration of the fac-tors influencing well-being of farm and non-farm households. No. 169732, Annual Conference, 9–11 April 2014, AgroParisTech, Paris, France. Paris: Agricultural Economics Society.

13 Bernie Sanders on Walmart, comments on The Ed Show, MSNBC, 3 August 2013. 14 Maslow, A. H. (1943). A theory of human motivation. Psychological Review, 50(4),

370–396. 15 Camfield, L., Choudhury, K. & Devine, J. (2006). Relationships, Happiness and Well-Being:

Insights from Bangladesh. Bath: ESRC Research Group on Well Being in Developing Countries.

16 Becchetti, L., Castriota, S. & Solferino, N. (2011). Development projects and life satis-faction: an impact study on fair trade handicraft producers. Journal of Happiness Studies, 12(1), 115–138.

17 There is an active debate among economists as to whether those on minimum wages, such as in America, really are on the poverty line or not. See Palumbo, M. (2015). Will Raising the Minimum Wage Lift Full Time Workers out of Poverty? Atlanta, GA: Foundation for Economic Education.

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18 Ethical Trading Initiative (2015). Living Wages in Global Supply Chains. London: Ethical Trading Initiative.

19 Sen, A. K. (1990). Development as capability expansion. In S. Fukuda-Parr et al. (eds.), Readings in Human Development. New Delhi & New York: Oxford University Press.

20 Sen, A. K. (1999). Development as Freedom. Oxford: Oxford University Press. 21 Wietzke, F. B. & McLeod, C. (2013). Jobs, wellbeing, and social cohesion: evidence

from value and perception surveys. World Bank Policy Research Working Paper (6447). 22 Graham, C. (2012). Happiness around the World: The Paradox of Happy Peasants and Miserable

Millionaires. Oxford: Oxford University Press. 23 Clark, A. E. (1997). Job satisfaction and gender: why are women so happy at work?

Labour Economics, 4(4), 341–372. 24 Borges, P. & Albright, M. (2007). Women Empowered: Inspiring Change in the Emerging

World. New York: Rizzoli. 25 Walmart (2017). Women-Owned Businesses. Retrieved 3 February 2017, from www.

walmart.com/cp/women-owned-businesses/1094926. 26 Graham, C. (2012). Happiness around the World: The Paradox of Happy Peasants and Miserable

Millionaires. Oxford: Oxford University Press. 27 Luthans, F., Avolio, B. J., Walumbwa, F. O. & Li, W. (2005). The psychological capi-

tal of Chinese workers: exploring the relationship with performance. Management and Organization Review, 1(2), 249–271.

28 Rainforest Alliance (2016). Rainforest Alliance Certified Palm Oil, 6 June. Retrieved 2 February 2017, from www.rainforest-alliance.org/articles/rainforest-alliance-certified-palm-oil.

29 Ministry of Food and Agriculture, Republic of Ghana (n.d.). Brief on the Oil Palm Sector of Ghana. Retrieved 2 February 2017, from http://mofa.gov.gh/site/?page_id=8819.

30 Dzokoto, V. A. A. (2012). Ghanaian happiness: global, cultural, and phenomenological perspectives. In H. Selin & G. Davey (eds.), Happiness across Cultures (pp. 311–327). Dordrecht: Springer.

31 Väth, S. & Gobien, S. (2014). Life Satisfaction, Contract Farming and Property Rights: Evidence from Ghana. Joint Discussion Paper Series in Economics (No. 15-2014).

32 Wilshaw, R. (2010). Better jobs in better supply chains. Oxfam Policy and Practice: Private Sector, 7(1), 1–20.

33 Ibid. 34 Clean Clothes Campaign (2013). Rana Plaza: A Man-Made Disaster That Shook the World.

Amsterdam: Clean Clothes Campaign. 35 Markussen, T., Fibæk, M., Tarp, F. & Tuan, N. D. A. (2017). The happy farmer: self-

employment and subjective well-being in rural Vietnam. Journal of Happiness Studies, 1–24.

36 Becchetti, L., Castriota, S. & Solferino, N. (2011). Development projects and life satis-faction: an impact study on fair trade handicraft producers. Journal of Happiness Studies, 12(1), 115–138.

37 Dedehouanou, S. & Maertens, M. (2011). Participation in modern agri-food supply chain in Senegal and happiness. No. 114447, 2011 International Congress, 30 August–2 September 2011, Zurich, Switzerland. Zurich: European Association of Agricultural Economists.

38 Blattman, C. & Dercon, S. (2012). More Sweatshops for Africa? Pilot Results from an Experimental Study of Industrial Labor in Ethiopia. IGC Working Paper.

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39 Blattman, C. & Dercon, S. (2015). More Sweatshops for Africa? A Randomized Trial of Industrial Jobs and Self-Employment. Mimeo.

40 Graham, C. (2005). Insights on development from the economics of happiness. The World Bank Research Observer, 20(2), 201–231.

41 Pofeldt, E. (2016) The gig economy happiness gap. Forbes, 13 February, citing research by Steve King from Emergent Research.

42 Schanberg, S. H. (1996). Six cents an hour. Life, 19(7), 38–46. 43 Cushman, J. H. (1998). Nike pledges to end child labor and apply U.S. rules abroad.

New York Times, 13 May. 44 Peters, C. (2008). The rise of the corporate citizen: Nike’s evolving supply chain. The

Chazen Web Journal of International Business. Retrieved 9 June 2018, from www8.gsb.columbia.edu/researcharchive/articles/3147.

45 Layard, R. (2011). Happiness: Lessons from a New Science. London: Penguin. Lord Layard cites the Journal of Bhutan Studies for this story.

46 Carrington, K. & McIntosh, A. (2013). A Literature Review of Wellness, Wellbeing and Quality of Life Issues as They Impact Upon the Australian Mining Sector. Brisbane: Crime and Justice Research Centre.

47 Fischer, E. F. (2014). The Good Life: Aspiration, Dignity, and the Anthropology of Wellbeing. Stanford, CA: Stanford University Press.

48 Ruggie, J. (2008). Protect, respect and remedy: a framework for business and human rights. Innovations, 3(2), 189–212.

49 Mondelez International (n.d.). Coffee Made Happy: Key Facts and Figures. Retrieved 3 February 2017, from www.mondelezinternational.com/~/media/Mondelez Corporate/uploads/downloads/CoffeeMadeHappyFactsheet.pdf.

50 Mortlock, B. & Hunt, L. M. (2008). Linking Farmer Wellbeing and Environmentally Sustainable Land Use: A Comparison between Converting Organic and Conventional Dairy Farmers. Christchurch: ARGOS.

51 Welsch, H. (2002). Preferences over prosperity and pollution: environmental valuation based on happiness surveys. Kyklos, 55(4), 473–494; Welsch, H. (2006). Environment and happiness: valuation of air pollution using life satisfaction data. Ecological Economics, 58(4), 801–813.

52 Kinver, M. (2015). Aquariums “deliver significant health benefits.” BBC News, 30 July. Retrieved 3 February 2017, from www.bbc.co.uk/news/science-environment-33716589.

53 Rojas, M. (2007). The complexity of well-being: a life-satisfaction conception and a domains-of-life approach. In I. Gough & A. McGregor (eds.), Well-Being in Developing Countries: From Theory to Research (pp. 242–258). New York: Cambridge University Press.

54 Thin, N. (2012). Social Happiness: Theory into Policy and Practice. Bristol: Policy Press.

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www8.gsb.columbia.edu/researcharchive/articles/3147

www8.gsb.columbia.edu/researcharchive/articles/3147

www.mondelezinternational.com/~/media/MondelezCorporate/uploads/downloads/CoffeeMadeHappyFactsheet.pdf

www.mondelezinternational.com/~/media/MondelezCorporate/uploads/downloads/CoffeeMadeHappyFactsheet.pdf

5 Safety and employee healthand wellbeing

Daniela M. Andrei, Paola Ochoa, andMark A. Griffin

Introduction

The “Health and Safety” concept is commonly used in contemporary organizations,with both terms being more often used together than separately. Most organizationshave a Health and Safety Department, or Health and Safety managers, coordinatinginitiatives and programs aimed at improving health and/or safety of employees.In a similar way, wider national or international organizations tend to use “health”and “safety” as inherently linked terms when devising strategies, policies, regu -lations, recommendations, or programs. But when analyzing both actual practiceand research, it becomes apparent that, more often than not, health and safety aretreated independently, and there is minimal integration between the two con -structs. This is especially true when the concept of health encompasses issues ofemployees’ mental health and wellbeing at work. For example, recent attentionto mental health in the Australian mining industry has resulted in companiesimplementing independent safety and mental health interventions through differentdepartments focusing on distinct goals and reporting structures.

Growing awareness that mental health is an essential component of OccupationalHealth and Safety (OHS), in addition to physical health, is expanding the field but also increasing risk of the further fragmentation of efforts to manage anincreasingly complex domain.

Increased attention to the demands of workers in remote mining sites in Australiahighlights the need to more effectively include concerns on mental illness in OHSresponsibilities. But for most companies, and in particular for companies managinghazardous operations, the role of mental health is difficult to integrate with urgentpriorities to reduce accidents and injuries, and even harder to align with scheduledproductivity goals. It is our contention that one of the main reasons for thisdifficulty is related to a predominant focus on the negative aspects of employeemental health – and on individually oriented, reactive interventions to mitigatepoor mental health outcomes (Caulfield, Chang, Dollard & Elshaug, 2004;Kompier, Cooper & Geurts, 2000). However, a positive approach to employeemental health improves links with a high range of organizational outcomes becauseit allows for a clearer focus on positive aspects of employee performance andwellbeing at work and in life.

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This chapter explores how to improve integration of safety and health with eachother as a necessary condition to support important individual and organizationaloutcomes. The focus is on wellbeing rather than purely on physical health for thefollowing reasons: (1) research on health and safety as one field of concern seemsto operationalize health almost exclusively in terms of physical health, leavingmental health issues unexplored; (2) attention to mental health in safety contextshas focused predominantly on the more negative aspects of mental health; and (3)a focus on positive aspects of employees’ mental health (i.e. wellbeing) allowsfor better integration of safety, health, and wider organizational goals, identifyingpsychological mechanisms effective in supporting safe operations, and improvingwellbeing and performance of employees. Therefore, although work wellbeingand health (mental and physical) are inherently linked, this chapter focusespredominantly on aspects of wellbeing at work and determinants and outcomesin relation to safety and overall individual wellbeing.

An overview of existing research linking safety and employee wellbeingfacilitates the development of a framework highlighting the role of psychologicalmechanisms reinforcing safety behavior and employee wellbeing. In particular,active mental states based on positive affectivity (positive emotions), recovery(replenished resources), and cognitive states (self-efficacy) that empowerindividuals to work proactively achieving individual and organizational goals.The same mechanisms facilitate better understanding leading to health and safetypractices and policies devised to contribute to employees’ performance thatcontribute to meeting wider organizational goals.

Overview of existing evidence linking safety and employeewellbeing

Existing research provides limited support for expanding the OHS fieldincorporating employee wellbeing. Lack of physical harm is often indirectlyimplied in research focusing on safety, often as an outcome of safety practicesand policies (meta-analysis conducted by Christian, Bradley, Wallace, & Burke,2009, safety outcomes are defined in terms of accidents and injuries) or even asa broader indicator of business unit outcomes (e.g. Harter, Schmidt, & Hayes,2002). The same applies to wellbeing. Although the interest in employee wellbeingin safety critical contexts is growing, recent publications on safety show lowernumber of papers linking employee wellbeing to safety specific demands andresources and safety outcomes (Nahrgang, Morgeson, & Hoffman, 2011), whencompared with traditional topics of safety behaviors. A literature search usinggeneral terms revealed a limited number of studies that integrate safety andwellbeing or mental health. And even here the focus on wellbeing with empiricalsupport varies significantly.

Conceptual links between wellbeing and safety

Most discussions on the importance of wellbeing related to safety emerge fromreviews of links between organizational practices and employee wellbeing typically

Safety and employee health and wellbeing 59

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focused on general aspects of employee health and performance. However,expanding the approach to employee health – including aspects of workplacewellbeing and safety, allows inferences to be made about specific relationships(Danna & Griffin, 1999; Grant, Christianson & Price, 2007; Grawitch, Gottschalk& Munz, 2006; Manser, 2009). All advance the construct that employee wellbeingis the most effective mechanism in leading to safety practices with increasedsafety and overall organizational performance.

For example, in healthcare, a field that produces a high volume of studies andresearch on teamwork and its impact on the safety of patient care, Manser (2009) argues that the way the staff perceive leaders and teams influences theirwellbeing, with a potentially negative impact on their ability to provide safepatient care. Hall et al. (2016) arrive to the same conclusion in a review onhealthcare staff wellbeing, burnout, and patient safety. Most studies reveal thatlow levels of employee wellbeing and moderate to high levels of burnout areassociated with negative safety outcomes, and tend to increase the number ofmedical errors.

In a broader review, Grawitch et al. (2006) show that healthy workplacepractices increase employee wellbeing and improve organizational performance.These authors propose a direct and an indirect path to link organizational practiceswith improvements including employee wellbeing. While health and safetyprograms are listed among the organizational practices considered, the focus is onphysical health initiatives, rather than safety. The authors argue that these initia-tives result in organizational support that contributes to wellbeing, reducing levels of stress. Furthermore, employee wellbeing impacts workplace practices,organizational improvements, and successful outcome. They claim that employeewellbeing should not be considered a byproduct of health initiatives, but rather acritical factor in achieving expected organizational outcomes. This argument isdiscussed next.

Grant et al. (2007) expand the discussion, considering the relationships betweenvarious aspects of wellbeing, and the temporal aspects of these relationships,supporting the idea that wellbeing acts as the main mechanism linking managerialpractices to outcomes, and drawing attention to the multidimensional nature ofwellbeing and potential trade-offs. Working with a comprehensive definition of wellbeing that includes physical, psychological, and social aspects, Grant et al.argue that safety practices aimed to improve physical health might have thepotential to introduce a negative effect on aspects of psychological wellbeing. Theauthors highlight that when safety practices have an initial negative effect onemployee psychological wellbeing, overtime time they can fail to protect physicalwellbeing due to lack in safety compliance, and affect social wellbeing due tocompromised working relationships. It is apparent that any attempt at integratinghealth and safety has to take into consideration potential positive and negativesynergies between all aspects of wellbeing. Moreover, timing is critical becauseaspects of psychological wellbeing at work are immediately sensitive to practicescarrying effects on wellbeing dimensions.

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Empirical evidence linking employee wellbeing and safety

Ideas advanced in theoretical reviews have not received consistent empiricalsupport. Studies presenting empirical investigations on the role of mentalhealth/wellbeing for safety are few and hard to integrate because they investigatedifferent aspects of wellbeing at different levels of analysis. For example, in thesafety context, stress is one of the factors that received high attention in somepublications. Safety climate and stress are shown as predictors of fatigue-relatedbehavior (Strahan, Watson, & Lennonb, 2008); permanent stress factors can besignificant predictors of injuries (Kirschenbaum, Oigenblick, & Goldberg, 2000);and safety appraisals of work (working safely, bending rules, and managementsafety climate) can affect eustress (stress perceived as a positive challenge), ratherthan distress (negative stress) (Hansez & Nyssen, 2006).

Studies oriented on general aspects of psychological wellbeing, such as overallmental health, commitment, or satisfaction support the idea that the way organiza-tions approach safety can impact employees’ overall wellbeing and these effectsmight lead to safety outcomes. For example, general mental health (operationalizedin terms of general anxiety and depression) can act as a mechanism linkingaccidents to organizational practices and the physical work environment (Oliver,Cheyne, Tomas, & Cox, 2007). Management commitment to safety is a significantpredictor of job satisfaction and affective commitment (Michael, Evans, Jansen,& Haight, 2005).

Hoffman and Mark’s study (2006), focused on the relationship between safety climate and indicators of nurses and patients’ health, showed a significantrelationship between safety climate and nurses’ job satisfaction at the unit level. This relationship is strengthened when organizations take a proactiveapproach to safety. The employees of organizations with a more pro-active approach to OHS management are more committed to their organizationand experience greater job satisfaction (Haslam, O’Hara, Kazi, Twumasi, &Haslam, 2016).

The empirical evidence reviewed to this point has mainly addressed general,stable elements of employee wellbeing. However, more specific, dynamic elementsof employee wellbeing are necessary to explain the link between safety practicesand outcomes.

An interesting insight is provided by Game (2007), who showed that employeeswho can adapt to cope with boredom at work score higher on work-relatedwellbeing measures and report higher levels of safety compliance. This impliesthat, when the mental wellbeing of employees is impaired (people feel bored atwork), individuals suffer and organizations do too. Game (2007) also showed thatemployees who cope better with boredom do it in ways that better align with theorganization through positive (finding new ways to complete tasks) rather thannegative (reading something unrelated to the job) strategies. Given the importanceof designing jobs that reduce boredom and detachment, and that support continuouslearning, it is also important to acknowledge that boredom cannot be totallyeliminated from contemporary organizations (for example, with highly automated


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work environments). In these environments the focus should be to provide supportto employees, allowing them to adopt coping strategies that promote wellbeing atwork in parallel with safety behaviors.

The importance of workplace wellbeing as a mechanism linking organizationalsafety with policies, practices, and outcomes has been advanced by Nahrgang etal. (2011). Their study of 203 samples advances the idea that a mental healthimpairment process of burnout and a motivational process of engagement can beused to explain how safety specific job demands and resources influence safetyoutcomes. While the associations reported are encouraging, pointing to theexpected links between safety and wellbeing aspects (burnout, engagement), thisstudy did not differentiate between aspects of wellbeing (engagement) and stableaspects such as satisfaction or behaviors such as compliance. Safety outcomesinvestigated were mostly related to accidents, incidents, and unsafe behavior,leaving aside indicators of general safety performance, organizational improve-ments, and employee overall wellbeing. Although this study provides initialempirical support to theoretical claims, the importance of workplace wellbeingaspects is still underdeveloped.

The overview this chapter gives of research linking safety and employeewellbeing identifies gaps in the current understanding of the role that employeewellbeing plays to attain safety outcomes. From the perspective of this chapterthe focus on wellbeing aspects seems to be secondary to physical health and thereis scarce literature approaching the two topics together. Theoretical reviewsapproaching the topic, directly or indirectly, converge on the idea that the focuson workplace wellbeing can advance the understanding of mechanisms and workcharacteristics in safety critical contexts and safety practices which can improveoutcomes for individuals and organizations. Empirical support for these assump -tions remains unclear because, as stated above, different aspects of wellbeing thathave been investigated in different studies challenge integration of one construct.Therefore, empirical research needs to be grounded in theoretical developmentidentifying those aspects of workplace wellbeing most relevant to the safetycontext.

More attention should be given to more dynamic aspects of mental health atwork because existent investigations focus on more stable, long-term aspects ofemployee wellbeing, such as depression, anxiety, satisfaction, and commitment,rather than the more dynamic, state-like aspects (specific feelings or thoughtsabout particular tasks or situations that occur within a workday) that are moresensitive to changes in parallel with workplace conditions (Sonnentag, 2015).While stable elements, such as satisfaction and commitment, may be expected tochange over longer periods of time and in reduced marginal increments, otherwisethe ability to gain insights into the most important wellbeing mechanisms ishampered.

As we discussed previously, wellbeing is a broad and complex concept thatincludes a variety of affects and aspects of psychological and social performanceand behaviors (Diener, 2000; Lamers, Westerhof, Bohlmeijer, ten Klooster, &


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Keyes, 2011; Warr, 1990). It refers to a global and often stable evaluation of one’slife and context specific aspects and also momentary mood and experiences(Diener, 2000). To understand wellbeing in the context of workplace safety,research should focus on wellbeing aspects that are specific to work and that aredirectly influenced by work-related factors.

To understand how organizations can actively support employee wellbeing andsafety it is necessary to shift focus from general to situational wellbeing, althoughlong-term effects on employees’ general wellbeing and health can also be assumed.Situational wellbeing is an evaluation of an employee’s state at a specific momentin time and can also be an indicator of long-term wellbeing achievement(Sonnentag, 2001). In this chapter, we argue that careful consideration of situationalwellbeing elements pertaining to work versus long-term, general individualwellbeing helps to advance understanding of the role wellbeing plays in safetyoutcomes. In the model we propose, situational work wellbeing, defined in termsof active psychological states (APS), presents the mechanism that influencesperformance and safety outcomes, as well as long-term individual health andwellbeing.

Proposed integrative framework

In this section we propose a framework that identifies active psychological statesas the main mechanisms of work-related wellbeing that explain the effects ofindividual and contextual factor on employee safety and overall wellbeing andhealth (Figure 5.1). We describe the main elements of this framework togetherwith existing literature supporting inclusions. We identify future research directionsto facilitate understanding the role of work-related wellbeing in relation toorganizational safety.


Organizationalculture

Demands andresources

Work Context

Recoveryactivities

Dispositions

Individual Factors

Affectivestates

Replenishedresources

Cognitivestates

Active Psychological States

Proactive safetyinvolvement

Psychological andsocial wellbeing

Health and Safety

Figure 5.1 Overview of antecedents and consequences related to active psychologicalstates (APS) at work.

Source: Authors.

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Active psychological states: a dynamic resource for safety and

general health and wellbeing

“Active psychological states” (APS) represent a complex concept that articulatesa fundamental link between health and safety goals. APS represent the ongoingadaptive capability of an individual that is derived from affective engagement,cognitive control, and resource replenishment. APS are dynamic states that arelikely to vary each day under the influence of factors related to the individual andhis/her work. For individuals, APS are a source of wellbeing and motivate a rangeof proactive safety behaviors in the workplace. Variation in APS is influenced byorganizational practices and resources such as the design of jobs and managementbehavior.

We use the term “active psychological states” to encompass a variety ofconcepts that promote performance and learning in the workplace and are centralto human centered management (Lepeley, 2017). These states are dynamicpsychological resources that are shaped by the organizational context and thattranslate into long-term outcomes such as health and performance throughindividual adaptation and innovation (Parker & Griffin, 2011). The commonfeature of these states is a positive activation of psychological resources throughaffective engagement, confidence, and energy. An essential underpinning of allthese states is that they help to explain the active process through which peopledevelop their capabilities over time (Bandura, 2000).

APS act as psychological resources that contribute to self-initiated behaviorsand wellbeing. As an example of APS, Spreitzer et al. (2005) proposed thatthriving at work is achieved through a combination of affective experiences suchas feeling energized and alive, and cognitive experiences such as continuallylearning and improving learning.

Below, we will consider the affective and cognitive elements that constituteAPS. We also introduce the notion of replenishment as a necessary element ofAPS based on the extensive literature on recovery from work and its impact on wellbeing.

Affective states: They play an important role in the motivation of proactivebehavior and innovation at work (Parker, Bindl, & Strauss, 2010). In particular,activated positive affect, which entails feelings of energy and enthusiasm (Watson,1988), is considered a key driver of innovation. The practical and theoreticalimplications of affect for wellbeing as well as safety are well supported, with alldefinitions of general wellbeing and mental health including hedonic elements(e.g. Diener, 2000; Lamers et al., 2011; Ryan & Deci, 2001) and evidence thatfrequent experience of momentary positive affect translates into long-term feelingsof happiness and life satisfaction that consolidate individual wellbeing.

There is growing evidence that the experience of momentary positive affectleads to success in different aspects of our work and non-work life. For example,Lyubomirsky, King, and Diener (2005) showed that positive affect is associatedwith a number of desirable characteristics, some of which are particularly relevant


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to health and wellbeing (such as healthy behaviors, sociability and activity,positive construal of self, prosocial behavior) or to safety, especially proactiveparticipation in safety (such as more creative and more efficient problem solving).Moreover, their work supports the idea that the experience of positive emotionsis an antecedent for working more productively, having more satisfying relation-ships with colleagues, and for superior mental and physical health (Lyubomirskyet al., 2005).

Although the link between positive affect and long-term wellbeing isstraightforward, safety outcomes can also be impacted by feelings of activatedpositive affect experienced at work. This effect is expected to manifest throughthe active goal involvement that is promoted by positive affect and is beneficialto a range of performance behaviors (Lyubormisky et al., 2005), including safety.Furthermore, concepts closely related to positive emotions, such as satisfaction orengagement, have been shown to predict important safety outcomes, both in termsof behavior and accidents/incidents rates (Nahrgang et al., 2011).

Cognitive states: the cognitive factors associated with APS involve self-efficacy(Yeo & Neal, 2006), perceptions of control (Bakker & Demerouti, 2007), andpositive beliefs about learning and change (Parker & Sprigg, 1999) that have beenconsistently linked to performance and wellbeing (Parker, 2014).

In general, less is known about the role of these active states for safety outcomes(Christian, Bradley, Wallace, & Burke, 2009), although studies have begun toexplore this link more directly. For example, in their study using a sample of 239commercial pilots, Chen and Chen (2014) found direct, positive links betweenpilots’ self-efficacy and their safety behaviors, both in terms of compliance andsafety participation. While the authors acknowledge the fact that high self-efficacymight represent a double-edged sword in relation to safety due to increasedtendencies to take shortcuts, the effects they reported in this sample are positive.However, this relationship needs to be more carefully considered in otherindustries, as the aviation industry employs sophisticated solutions for continuousmonitoring that might automatically inhibit taking shortcuts.

In a similar way, Fugas, Silva, and Meliá (2012) examined the role of perceivedbehavioral control over safety and showed that it represents one of the mechanismsthat translate the effects of safety climate onto safety compliance behaviors. In adifferent sample, perceived behavioral control emerged as the variable that bestdifferentiated the groups that consistently behaved in a safer manner (Fugas,Silva, & Meliá, 2013).

Another important insight into the role of cognitive states for safety is providedby research on psychological empowerment. Empowerment is defined as a set ofcognitions related to the meaning of work, self-efficacy, self-determination, andimpact, shaped by the work environment (Spreitzer, 1995). A comprehensivereview (Clarke, 2013) showed that relations characterized by empowerment andparticipation can act as a support for turning employees’ safety intentions intosafe behavior. Similarly, Armstrong and Laschinger (2006) provided evidencethat leader nurses have the ability to improve the level of patient safety in their


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organizations by creating an empowering professional practice environment forstaff nurses.

Overall, existing evidence supports the idea that active cognitive states thathave been traditionally associated with individual wellbeing could also promotesafety, not only in terms of safety behaviors of employees but also broaderorganizational safety outcomes.

Replenishment: We argue that replenishment of resources or recovery is a necessarycondition for active engagement. Recovery is “restoration of impaired mood andaction prerequisites” and is achieved through detachment, relaxation, mastery,and control (Sonnentag & Fritz, 2007). A need for recovery is a self-regulatoryprocess involving the desire to be relieved from demands in order to restoreresources (Sonnentag & Zijlstra, 2006) related to both cognitive and affectivestates (de Jonge, Dormann, Dollard, Winefield, & Winefield, 2003).

Most research has focused on detachment from work where an individual hasa sense of being away from the work situation (Etzion, Eden, & Lapidot, 1998;Sonnentag & Fritz, 2015). This evidence supports the critical role of recovery foremployee wellbeing as well as performance (Fritz & Sonnentag, 2006; Sonnentag& Fritz, 2015; Sonnentag & Zijlstra, 2006). But work activities themselves canalso be restorative and contribute to recovery, depending on how work interactionsgenerate personal resources (Lilius, 2012).

At first sight, the link between recovery and safety outcomes appears to havereceived less attention. But if research on fatigue (a concept closely related to theneed for recovery) is taken into account, there is strong support for recovery asone of the main contributing factors to accidents, injuries and deaths in a widevariety of settings (Williamson, Lombardi, Folkard, Stutts, Courtney, & Connor,2011). However, the effects of specific recovery strategies in the context of safetybehaviors and outcomes are considerably less understood. This is especially truefor those recovery strategies that can be used during work (e.g. restorative workactivities) that are extremely relevant for safety critical environments whereemployees work in roster systems that keep them in a work environment forextended periods of time.

Overall, we argue that replenishment of resources is essential for an activeinvolvement with work that will support not only individual wellbeing in the longterm, but also better safety and performance outcomes for the organization.

Health and safety outcomes

In the previous section we underlined critical links between the main elements ofAPS and outcomes in terms of individual wellbeing and organizational safety.Here we would also like to make further distinctions between health and wellbeingoutcomes in the short term and in the longer term.

In the relatively shorter time frame, the experience of APS at work will bereflected in fluctuations in workplace wellbeing and safety proactivity. Overextended periods of time, these fluctuations are expected to accumulate into more


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stable effects on the overall mental health and wellbeing of employees and theirperformance capability. The model proposed here focuses primarily on enhancingthe understanding of effects for employees’ proactive safety behavior andindividual wellbeing.

Proactive safety behaviors: Many studies support the idea that employees’ activeinvolvement in safety goes beyond simply complying with rules and procedures(Clarke, 2006; Flin, Mearns, O’Connor, & Bryden, 2000). Proactive safetybehaviors include activities such as suggesting new ideas, helping co-workerswith safety, and anticipating safety problems (Curcuruto & Griffin, 2017) thatcontribute to the overall safety of a group or organization (Griffin & Neal, 2000).Proactive safety behavior is increasingly recognized as an essential requirementin safety critical environments as it has been shown to influence group safetyoutcomes over time (Neal & Griffin, 2006). Like other forms of proactivity, wepropose that safety proactivity is self-initiated, anticipatory, and change-oriented(Grant & Ashford, 2008; Parker & Collins, 2010).

General wellbeing: This is the positive experience of both satisfaction and meaningin one’s life (Ryan & Deci, 2001). It is a desirable state of experiencing positiveemotions, purpose, and fulfillment that is increasingly valued by individuals,companies, and societies (Sonnentag, 2015). Recent research argues that we needto adopt a temporal perspective in order to better understand the experience andoutcomes of wellbeing (Sonnentag, 2015). The main reason is that wellbeingfluctuates within shorter periods (e.g. days) as well as longer periods of time (e.g.months and years) and that these fluctuations are influenced less by individualcharacteristics and more by what people experience in their life and by theirbehaviors.

The proposed model incorporates this temporal perspective by consideringboth short-term and long-term fluctuations of wellbeing. The short-term perspectiveis represented by the focus on APS as dynamic wellbeing states that can varyunder the immediate influence of different factors in the work environment andin the individual. However, over reasonable periods of time (e.g. months andyears), these experiences are expected to accumulate into longer-term effects onthe general levels of health and wellbeing of individuals.

Considering different time frames is particularly important in the context ofsafety critical industries where different roster designs can influence the amountof time employees spend at work as well as their patterns of recovery at work andoutside work. There are concerns that wellbeing might deteriorate over longerschedules associated with remote working but a better understanding is neededabout the factors that influence employee wellbeing fluctuations and how theseaccumulate over longer periods of time to determine changes in the levels ofgeneral wellbeing.


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Contextual influences of APS

As mentioned in previous sections, APS are conceptualized here as work-relatedwellbeing aspects that can fluctuate within a person within relatively shorterperiods of time (e.g. within the same day, day to day, or week to week). Literaturehighlights that these fluctuations can be systematically linked with experiencesand events that employees encounter while at work or during non-work hours(Sonnentag, 2015). Therefore, the proposed framework identifies work contextand individual factors as the main sources of fluctuations in APS.

Work design: The immediate requirements of the work role create demands andgenerate resources for employees that have a direct impact on APS and on safetyand wellbeing outcomes. Job demands such as physical hazards, time pressure,task complexity, and resources like autonomy, support, or the psychologicalsafety climate are known to influence both safety (Nahrgang et al., 2011) andwellbeing (Bakker & Demerouti, 2007). Therefore, we expect these effects onsafety behavior and overall wellbeing to manifest through more immediatefluctuations in employees’ APS at work.

In safety critical industries, the use of extended roster systems raises questionsabout how individuals manage daily recovery to maintain attention and energyover long periods of time.

Organizational culture: Interpersonal factors play an important role for dynamicwellbeing (Sonnentag, 2015) as well as safety-related outcomes (Christian et al.,2009). Research on wellbeing has specifically looked at the role of positivefeatures of the social environment (such as social support) and leadership, whichis similar to the increased consideration given to safety culture and leadership forunderstanding safety-related outcomes (Clarke, 2006; Clarke, 2013).

The role of organizational climate has been one of the most investigated aspectsin relation to safety performance or outcomes (Clarke, 2006; Nahrgang et al.,2011). There is increasing evidence on the effects of interpersonal factors onfluctuations of APS, indicating that more positive and supportive climates are ableto boost levels of APS during work (Sonnentag, 2015).

In a similar way, leadership and supervision have a strong impact oneffectiveness, wellbeing, and safety (Day, Griffin & Louw, 2014; Griffin & Talati,2014). In particular, the role of team leaders or direct supervisors appears to bemost influential as they are in a position that allows them to translate values andgoals set by senior management and to provide direct guidance to team members.But different leader behaviors can support different outcomes. For example,inspiring behaviors (e.g. presenting a positive vision of safety to employees) areparticularly helpful in facilitating proactive participation is safety. When leadersrely on monitoring behaviors, they will typically facilitate compliance, but whenthey combine monitoring with behaviors that create a learning supportive environ -ment (e.g. encouraging communication about mistakes) they have the potential toencourage more proactive participation in safety alongside compliance (Griffin &


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Hu, 2013). Building on the existing evidence about drivers of participation andcompliance, it is expected that facilitating APS during work is one of themechanisms by which leader behaviors generate these effects.

Individual differences

Evidence indicates that the effects of individual differences might be expectedmostly at the level of outcomes in our framework. For example, personalcharacteristics like safety knowledge, experience, and skills play a key role forsafety-related behavior (Griffin & Neal, 2002). In a similar way, stable individualdifferences will be reflected mostly in longer-term changes in overall wellbeinglevels (Sonnentag, 2015). However, evidence is accumulating also for the impactof personal resources (such as abilities to manage emotions and coping) on dailyfluctuations of work-related wellbeing (Weigl, Hornung, Parker, Petru, Glaser, &Angerer, 2010).

Another important role for experiencing APS is played by personal factorssituated at the interface between work and non-work life (Sonnentag, 2015).Among these, recovery activities after work (e.g. physical exercise) and theconflict between work and family life have received particular attention in thecontext of wellbeing.

Taken together, these findings support the idea that, in order to facilitatewellbeing at work, individual interventions might be targeted at improving personalresources while also facilitating a work environment that minimizes negativeinterference with family or social life. These interventions have the potential toincrease employee resilience over time and contribute to positive outcomes forthe individual and the organizations (Lepeley, 2017).

Practical implications

In this chapter, we argue for a more systematic understanding of the interplaybetween safety and wellbeing, particularly relevant to safety critical work contextswhere individuals are likely to face more challenging conditions such as remotelocations and hazardous work.

The framework we propose for integrating wellbeing and proactive safetyextends to current approaches, which traditionally focus on the negative elementsof mental health and on the compliant aspects of safety management. Despite theimportance of these initiatives, a better understanding of positive mental health interms of wellbeing and of safety in terms of proactivity has a number of benefits,some of which will be briefly highlighted in this section.

First, work environments are changing at faster rates due to technologicaladvancement and demographic changes, among other pressures. As a result,having a more adaptive, agile, and thriving workforce becomes crucial in obtaininga competitive advantage for all organizations, industries, sectors, and nationsworldwide (Griffin, Neal & Parker, 2007; Lepeley, 2017). Therefore, a systematicapproach to facilitate individual health and wellbeing at work in a way that


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supports important organizational outcomes such as safety is no longer an optionbut an imperative.

Second, this refocus comes in alignment with wider policy frameworksproposed. For example, Health 2020, the new European policy framework forhealth and wellbeing (WHO, 2013), supports the idea that good health is a vitalingredient for economic recovery and social development, drawing obvious linksbetween health and broader organizational and societal outcomes. The mainthemes among the four priority areas are empowerment of individuals, increasedindividual and social capabilities, and resilience. We believe that the frameworkwe provided here is in alignment with these policy priorities and highlights howthese outcomes can be supported at the organizational level. Therefore, it canserve as a framework for guiding the design and development of policies andintervention programs in organizations that can contribute to social developmentand economic growth.

By actively supporting the experience of positive affective engagement,cognitive controls, and replenishment while at work, the organizations can takean active part in supporting the development of individual and psychosocialresources in their employees that directly contribute to supportive, resilient, andhealthy environments and communities.

Last but not least, through our focus on learning and development supportedby APS, we believe that our framework provides an opportunity to contribute tomore sustainable ways of functioning and more sustainable organizations.Sustainability implies learning processes at different levels, from individual tosocietal, and involves a strong motivation to act in sustainable ways (Hansmann,2010). By highlighting those factors that contribute to individual learning andmotivation, the framework proposed here has the potential to contribute toincreased organizational sustainability.

But how can organizations practically achieve these outcomes? While theframework we proposed here is a broad one, its development is based on the coreidea that there is theoretical support for a strategic integration of humanresources polices and safety policies that could generate and sustain competitiveadvantage for contemporary organizations. Moreover, by focusing on the APS ofemployees that constitute the basis for an overall active involvement in work andlife, policies and interventions can simultaneously contribute to the achieve-ment of several individual, organizational, and societal outcomes. Therefore,organizations will need to reassess and align systems and practices in order topromote active psychological states (affect, positive thoughts, and recovery) intheir employees. Our framework points to the different levers by which this canbe achieved, from building individual resources to more purposefully balancingleadership behaviors and organizational culture. This is even more critical as the relevance of health and safety is transcending more and more the traditionalhigh risk industry, becoming relevant not only for the large resource sector, butalso for small scale mining (Smith, Ali, Bofinger, & Collins, 2016), micro-firms (Boustras, Hadjimanolis, Economides, Yiannaki, & Nicolaides, 2015), or


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nanotechnology (Gendre, Blackburn, Brighton, Rodriguez, & Abhyankar, 2015),just to give a few examples.

Another important aspect that is highlighted in our framework is the fact thatbroader organizational factors can simultaneously contribute to individualwellbeing and organizational safety. Health and safety are not the soleresponsibility of the Health and Safety Department, or of the Health and Safetyprofessionals. It is intertwined with all aspects of organizational functioning as allemployees have a personal responsibility for safety, while all organizationalsystems and practices have direct or indirect implications for safety. Therefore,we argue that an organizational climate and balanced leadership behaviorsthat promote the active involvement and empowerment of all employees inall aspects of work will benefit not only health and safety outcomes, but alsooverall productivity, competitiveness and innovation.

The proposed framework is built around the idea that the everyday workexperiences and environment are contributing to wellbeing variations that canaccumulate in time. Therefore, the focus shifts from the individual factors thatcontribute to overall wellbeing levels to the organization and the nature of workitself. To actively support organizations in creating healthier and saferenvironments for employees, it is critical to support a better understanding of theway the work itself and what happens at work is contributing to workplacewellbeing. Therefore, a more careful consideration of work experiences throughwork design and redesign is imperative. To actively support APS at work,organizations have to promote a healthy balance between the work demands thatare placed upon employees and the resources they afford employees, so thatemployees are challenged, but at the same time offered the necessary tools torespond adaptively and to actively engage in their work for the long-term benefitof the individual and the organization.

In conclusion, contemporary social, financial, and environmental pressures arecreating the need for innovative approaches to create human centered organiza-tions. Organizational Health and Safety policies, integrated and aligned withorganizational strategic goals supporting employees’ learning and wellbeing atwork, expand necessary agility to adapt to changes and induce change andinnovation that foster progress in all kinds of organizations.

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