Stakeholders and Sustainability-An Envolving Theory

Stakeholders and Sustainability: An Evolving Theory

Kevin Gibson

Published online: 27 June 2012

Springer Science+Business Media B.V. 2012

Abstract This conceptual article has three parts: In the

first, I discuss the shortcomings of treating the environment

as a stakeholder and conclude that doing so is theoretically

vague and lacks prescriptive force. In the second part, I

recommend moving from broad notions of preserving

nature and appeals to beauty to a more concrete analytic

framework provided by the idea of human sustainability.

Using sustainability as the focus of concern is significant as

it provides us with a more tenable and quantifiable standard

for action, as in the case of carbon offsets and development

of measures such as the United Nations Sustainability

Indicators. In the final section, I draw on notions of stew-

ardship to suggest that stakeholder management has a

positive responsibility to promote sustainability.

Keywords Stakeholder Sustainability Environment Nature Responsibility Management

Introduction

Concern about the environment has become an integral part

of the business literature and practice. Many major cor-

porations have integrated environmental issues into their

mission statements, and spend considerable sums on pres-

ervation and remediation efforts (Mirvis et al. 2010; Snider

et al. 2003; Rondinelli 2004).

My thesis is that sustainability concerns should be

embedded in stakeholder theory rather than being treated as

a marginal issue. To establish this, I will first critically

assess claims that the environment should be a stakeholder.

Next I will consider the notion that regard for the envi-

ronment ought to be a necessary background condition for

doing any business at all, and consequently stakeholder

theory has no particular advice to add. In response to both

these views, I contend that we should drop references to the

environment in general, and instead concentrate on sus-

tainability in terms of human values. Unlike general

exhortations to preserve the environment, sustainability

offers a specific gauge of the positive and negative effects

of business practice. After considering some objections, I

then argue that because stakeholder managers should have

an other-regarding attitude, they have an obligation to

pursue sustainable corporate strategies in order to avoid

diminishing available resources for human wellbeing.

Adopting this view will have significant implications for

both management theory and action.

In an influential 1991 article, Managing as if the Earth

Mattered, James Post presented a case where the local

manager of an American company in Mexico City faced a

dilemma. SEDUE, the Mexican environmental protection

agency, had ordered the plant shut down for a day because

air quality had deteriorated to emergency levels. At the

same time, the manager realized that these calls are rou-

tinely ignored by other companies, with the support of both

business leaders concerned about efficiency and unions

whose workers would be sent home without pay. The

article is accompanied by a drawing of a biblical shepherd

figure looking over both skyscrapers and a pastoral scene

with the thought bubble Finding a balance between

industry and life sustaining systems (Post 1991, p. 37).

The case and the picture present two elements of a

discussion that has subsequently become dominant but

conceptually cloudy by endowing stakeholder status to

K. Gibson (&)Departments of Philosophy and Management, Marquette

University, Milwaukee, WI, USA

e-mail: [email protected]; [email protected]

123

J Bus Ethics (2012) 109:1525

DOI 10.1007/s10551-012-1376-5

mean, variously, nature, the environment, or the

earth. For example, Post (1991, p. 37) says:

To whom, and for what, is the modern corporation

accountable?Each attempt to extend corporateresponsibility to meet the expectations of new

stakeholders forces a reassessment of corporate

accountability and practiceThe analysis of stake-holders that is so easily organized for most problems

is radically different when earth itself is a stakeholder

and the stake is nothing less than planetary

survival.

My contention is that the image Post presents ultimately

obscures discussions about the most significant issues

facing corporate attitudes to the environment and dimin-

ishes the power of stakeholder analysis. Freeman and

Reichart (1998) have described this sort of view as the

Incompatibility Thesis Mindset, insofar as it suggests

that capitalism and market approaches are incompatible

with concern for the environment. When this view is

married with stakeholder terminology, it gives the

impression that the environment is a stakeholder whose

interests have to be balanced against other competing and

exclusive claimants in a zero-sum fashion: that is, if we

attend more to environmental concerns then business is

likely to become less efficient.

First, I will briefly discuss the claim that the environ-

ment can be a stakeholder. Following Phillips and Reichart

(2000), I argue that the notion is conceptually vague and

impractical. They conclude that the natural environment

merits stakeholder consideration only instrumentally

based on obligations due legitimate stakeholders such as

local communities (Phillips and Reichart 2000, p. 195). I

agree that managers should care about the environment as a

reflection of human interests, although I want to extend the

idea of the affected community from the immediate and

local to potentially all humanity, and, further, suggest that

the language of sustainability serves to clarify the issues at

hand. Finally, I suggest that stakeholder managers should

play a leadership role in promoting sustainability.

The Environment as Stakeholder

The term stakeholder came into prominence with work by

Freeman (1984), when he challenged the prevailing view of

managerial capitalism by saying that managers bear a

fiduciary relationship to those who have a stake in or claim

on the firm. Although Freeman himself has not made the

claim, the idea that the environment can be considered a

stakeholder is attributable to a loose interpretation of his

original definition of stakeholders as any group of indi-

viduals who can significantly affect or be affected by an

organizations activities (Freeman 1984). Thus, Starik

(1995, p. 216), for example, says that the current anthro-

pocentric definition of the concept stakeholder may be

expanded to any naturally occurring entity which affects

or is affected by organizational performance. In another

case, Mitchell et al. (1997) suggest that the natural envi-

ronment is a potential stakeholder of an organization, and,

as Kolk and Pinkse (2007, p. 371) note, It is clear that the

natural environment forms a stakeholder if it is affected by

corporate activity. Taking the definition even further, if

the term environment includes the atmosphere, hydro-

sphere, lithosphere, ecosystem processes and all human and

non-human life forms (Driscoll and Starik 2004, p. 56),

then it becomes necessarily self-verifying that they are all

stakeholders, since any activity at all on earth will affect it

in one way or another.

Initially, it appears that by understanding stakeholders in

this way Starik (1995) and Driscoll and Starik (2004) make

a category mistake, as in Ryles classic case where a visitor

to Oxford is shown various buildings but complains that he

cannot find the University, not realizing that the University

is a collective term for the community of colleges (Ryle

2008, p. 16). In the situation presented by Post (1991), the

stakeholder manager has to balance the interests of man-

agement and unions on the one hand against those of nature

on the other. Surely, though, Post is using shorthand

placeholder statements here, so that the SEDUE is not

actually guarding nature or the environment so much as

the interests of the populationthat is, people. If the smog

continues, then the local population will be harmed, and

costs incurred through deteriorating health and wellbeing.

The regulations requiring a shutdown in fact act as a proxy

for the general welfare of humans. Moreover, they are

determined by a political process representing collective

choices about the trade-off between wealth and wellbeing,

and we can easily imagine a democratic society that

chooses to forego environmental welfare in favor of eco-

nomic development.

Thus what is really going on in the case is that the

manager is faced with a choice about which kind of human

satisfaction is to be favored: one which gives a significant

benefit to select groups for which he has fiduciary duties, or

a more general human interest in clean air. In this context,

nature is a hypostatization, where we endow an abstract

concept with concrete status, in the same way as the claim

that the budget forces us to let you go looks like an

outside force is at work, although in reality, it cloaks

human acts and human choices.

As a case in point, let us examine an often-cited dataset

generated and categorized by the research firm KLD (Hill-

man and Keim 2001; Bartkus and Glassman 2008). In an

influential article, Bendheim et al. (1998) looked at

five groups of stakeholders: community, shareholders,

16 K. Gibson

123

consumers, employees, and the environment. Following

Starik (1995), they proposed as follows:

The environment ought to be given primary stake-

holder status because companies depend on it in such

a way as to not reduce its potential for replacement

and renewal (Bendheim et al. 1998, p. 309).

They found that companies routinely treated environ-

mental concerns more poorly than the other categories, and

concluded:

The scores for the environment are the lowest on

averageperhaps highlighting the fact that there isno direct voice for the environment (as there tends

to be for other stakeholders) and environmental

groups that do exist tend to lack power to bring about

change in private corporations (Bendheim et al. 1998,

p. 326).

At first glance it seems as if the same measures can be

used for both the environment and the other stakeholders.

However, the significant difference is that the first four

groups are collections of people. Thus, the studys metrics

assessed litigation costs associated with plant closures as a

negative, and philanthropy as a strength when looking at

the community category; the effect on shareholders was

shown by the returns on investment. The data for

employees consisted of costs related to dealing with unions

and legal penalties for safety violations as negative indi-

cators, compared to profit sharing, generous benefits, and

joint decision making as positive ones; and product recalls

were contrasted with products and services that benefit the

economically disadvantaged in the area when generating

data for consumers. These seem like reasonable ways of

quantifying a firms commitment to various stakeholder

groups.

However, it is not evident that the environment itself

emerges as a stakeholder on the basis of the way the data are

organized. When Bendheim and her colleagues looked at

the environment, they highlighted liabilities for hazardous

waste and regulatory problems, production of ozone-

depleting chemicals, high levels of legal emissions, and

production of agricultural chemicals as areas of concern,

while they regarded environmental remediation income,

pollution reduction, use of recycled materials, and conser-

vation projects as positive indicators. In each of these cases,

the activities have been framed in terms of whether or not

they constituted violations of the law, which is something of

a floating target as legal standards vary across time and

communities. For example, a company that legally dumps

toxic chemicals in an African country with lax rules might

not register on this scale. In contrast, many firms use the law

as a moral yardstick, and hence a firm that pollutes up to

legal limit, but not beyond, would be censured by this

analysis, although the regulations may reflect the popular

will in a democracy. Moreover, the production of chemicals

in itself is not egregious; there may be cases where fertil-

izers and insecticides enable agriculture to flourish in areas

where it would be impossible to do so without their help.

Conversely, income from remediation may simply indicate

that the company has branched out into an innovative area,

not necessarily that it is committed to environmental con-

cerns. Similarly, the use of recycled material could be a

prudent strategic choice by management.

Hence while the authors claim that these actions dem-

onstrate a given corporate attitude to the environment, it

seems that we could reasonably recharacterize them on a

more human scale, perhaps in terms of, say, a corporate

stance on compliance with external regulation, a strategic

decision about sourcing raw materials, or taking advantage

of opportunistic new markets. Although the researchers

consider nature to be a stakeholder, when we parse out the

corporate actions that are used to assess environmental

responsibility, it turns out they could just as easily be

described as strategic choices that affect human stake-

holders, such as regulators, suppliers, or consumers.

As Orts and Strudler (2002) have persuasively argued,

even if we concede that nature is a stakeholder, it does not

automatically follow that it has unitary interests, or there

would be agreement on how we should interpret what is the

best for it and advocate accordingly. For example, as

Callicott (1980) has shown, the interests of animals can

clash with those of the land, and if we want to reduce the

suffering of sentient creatures, then perhaps humans should

intervene in some way. In Wisconsin, for instance, deer are

plentiful, and if we were to shield them from predators or

starvation to prevent suffering, the population would

increase and lead to overgrazing of the land and consequent

starvation. Similar problems arise with the ethics of

farming, in that rearing animals is unnatural in the sense

that we are engineering animals and putting them in arti-

ficial surroundings for our own ends.

The same holds true when we consider flora. The plant

kudzu is an invasive species which increases nitrous oxide

levels and ground level ozone. There are significant ques-

tions about whether an environmental ethic would treat it

as a precious part of nature that ought to be preserved or as

a danger to the ozone layer that should be destroyed.

Similarly, tearing up old growth forest creates subsequent

opportunistic growth of younger trees of different species,

and we have to ask which should be favored. Nor does

nature provide clear messages: Brown grass on a golf

course in Las Vegas could be an indication that it has an

interest in being watered, or alternatively could simply

mean that it does not belong there. A marshy area infested

with mosquitoes may be improved by drainage, but we

have to recognize that artificial changes are a result of

Stakeholders and Sustainability 17

123

humans assigning values, not that nature presents us with

any obvious intrinsic interests.

The concern here is that when humans advocate for

nature, they will usually employ an implicit normative set

of assumptions about what constitutes a desirable outcome.

For example, Starik (1995, p. 216) says:

Treating non-human nature as one or more stake-

holders would provide some organizations a different

and, hopefully, a more enlightened perspective from

which to manage their relationships with their

respective natural environments. [Emphasis added]

Further, Stead et al. (2004, p. 22) suggest that environ-

mental awareness should be allied to certain politically

desirable states:

The economic dimension of sustainability also

involves the need to create for posterity an ecologi-

cally balanced and socially just system that provides

humans with the goods, services, economic justice,

and meaningful employment necessary for a high

quality of lifethe rapid entropy associated withhigh economic growth rates is not sustainable over

the long run. [Emphasis added]

In sum, argumentspurporting to show that the envi-

ronment, as broadly understood, is an independent stake-

holder and therefore deserves consideration by business

managersare not persuasive. As Phillips and Reichart

(2000) conclude, the stakeholder framework does not

underwrite direct duties, but rather allows some stake-

holders to promote values they support. For example, local

communities may qualify as stakeholders, and the com-

munity members may advocate for, say, businesses to

lower pollution levels.

In the next section, I will examine the claim that man-

agers have a general responsibility to the environment.

While sympathetic to this view, I conclude that any such

duties should be based on resource preservation rather than

an intuitive or aesthetic sensibility.

The Background Duty to the Environment

When Orts and Strudler (2002, p. 226) critique the concept

of considering the environment as a stakeholder, they make

the positive suggestion that we consider regard for nature

to be a background condition for any business:

Our general point remainsjust as every firm has a

moral responsibility to obey the law, so too every

firmhas a moral responsibility to do the rightthing with respect to the natural environment,

regardless of its human stakeholders.

These baseline duties, such as regulatory compliance or

maintaining healthy and safe working conditions, will be

endorsed by all moral theories, and so they conclude that

duties to the environment are an obligatory part of doing

business.

There is a second element to their claim that is more

contentious, though. In order to work out what the duties to

the environment are, Orts and Strudler (2002) appeal to the

individual aesthetic values of managers. As I understand it,

this would be in line with a perspective that takes beauty to

be an inherent quality of nature existing independently of

human valuers, but is accessible to those with aesthetic

discernment. They say:

Environmental management must include an appre-

ciation of ethical value of the natural environment,

including esthetic, cultural and historical value.

These dimensions of ethical value are not easily

measured but to try to balance ethical values con-

cerning the natural environment in a framework of

human interests cannot be done. Questions about the

value of nature cannot be answered purely in terms of

human interests any more than can such questions as

Is this a piece of great art? or Is this mathematical

proposition true? (Orts and Strudler 2002, p. 227).

On reflection, Orts and Strudlers (2002) two questions

appear different in kind. Mathematical propositions are

subject to rational assessment and critical tests where

predicted results can be proven. Art is much trickier. Orts

and Strudler (2002) do not attempt to explicate their aes-

thetic theory in their article but seem to draw on work

associated with Moore (1989), who believed that there

were multiple facets to happiness, including the apprecia-

tion of beauty. He felt that beauty was a non-natural

property that could not be fully described, but inherent in

objects. Accordingly, we might consider a piece of art or a

person to be beautiful, and we know it when we see it, but

it is impossible to define precisely. Although Moore

believed in inherent values and acknowledged the difficulty

in confirming a statement such as This is great art, he

nonetheless thought that we could refine our sensibilities,

and that beauty served to enhance human welfare. Hence,

he held that the question of whether an object is great art,

can, in fact, be translated into statements about human

interests.

A more recent attempt to prove that values exist inde-

pendent of human judgment has been put forward by

Richard and Val Routley (1980), with the famous last

man argument. Roughly, the argument asks us to imagine

that the world is decimated, and one dying individual is the

sole remaining sentient creature. The person destroys all

the geological and biological examples of great beauty, and

justifies doing so by noting that, as there will be no one

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around to appreciate them, it makes no difference. We are

then asked to judge his actions. If we respond by saying

that his actions are wrong regardless of humans being there

to appreciate nature, then this is held to demonstrate that

there is such a thing as inherent value.

The claim turns out to be less convincing than it first

appears, since the thought experiment is not actually

devoid of human valuers: we as the observers are making

judgments, and thus the story does not prove, as supporters

might suggest, that there are values which exist indepen-

dently of humans. Moreover, as Jamieson (2008) has

shown, the concept of inherent value can be ambiguous.

One of the several ways we use the term is to assert that

something is of moral concern, not just that it possesses

some mysterious quality. Thus, we sometimes use the

phrase that animals or natural sites have inherent value to

show that they ought to be included in a discussion (e.g.,

unspoiled vistas are valuable), but it does not necessarily

follow that we can extend that claim of consideration to the

statement that these things possess value in and of them-

selves. This is not to deny that many, if not most, people

might agree on the beauty and majesty of a vista such as

the Grand Canyon or the undesirability of oil-soaked

waters, beaches and seabirds from a break in a pipeline.

The point is that when Orts and Strudler (2002) advocate

environmental duties, we need to bear in mind that the

standards of aesthetic value they appeal to are human social

constructions.

To be fair, Orts and Strudler (2002) acknowledge that

values need to be balanced. Their resolution is to have the

participants think seriously about the consequences for

the natural environment. For example, a company should

incorporate aesthetic, cultural, and historical values with

traditional bottom-line concerns, so that companies and

communities make thoughtful trade-offs. The knotty

problem with their terms, though, is that they do not tell

how a manager should quantify those values, especially as

they argue that it is impossible to assess aesthetic concerns

within a framework of human interests.

It is also important, I believe, to not trivialize or caricature

the approach, since the position may in fact reflect the

general vagueness of ethical prescriptions overall. Yet for

our purposes, we can see that the move to a general admo-

nition to regard the environment in business decisions begs

questions about environmental valuation and priorities.

Consider the case of interstate highways in America. A

century ago, travel was relatively limited, but at the same

time, there was relatively little pollution from automobiles.

Today, road travel is easy and quick, but the amount of

pollution has increased. However, it remains an open

question as to whether we would trade places with our

forebears, since many of us prefer the convenience of cars

at the price of slightly dirtier air. Similarly, take the case of

traveling to Las Vegas from a distant city in the USA. An

airline provides a service that people are willing to pay for,

and flying will cause pollution in the atmosphere. Cus-

tomers are aware of this, and are willing to tolerate it in

exchange for the convenience travel affords. In general, the

carbon emissions are not offset, and thus, the market

effectively hides the true cost of the pollution levels,

although we could fairly easily make the carbon offset

calculation and incorporate it into the cost of travel if there

were the political will to enact such regulations. Las Vegas

is something of an artificial city, sustained by water piped

in from distant locations, and cooled by mechanisms which

release yet more heat into the surrounding area. Yet there is

no general outcry against the environmental degradation

the city causes: indeed, it has been one of the fastest

growing areas in America (Christie 2007).

It appears, then, that the way we treat the environment is

often judged normatively, but there is no universal agree-

ment about the standards involved or how managers should

weigh environmental factors against others, such as con-

sumer demand. If we take the case of heritage sites, for

example, it turns out that up to two-thirds of respondents

(and often up to 90 %) regularly say they are not willing to

pay anything at all to preserve cultural and historical sites

(Pearce et al. 2002). Based on this information it would be

reasonable for a manager to argue that, given consumer

demands, economic progress should outweigh aesthetic

considerations. Developers of major highways in Los

Angeles, for example, apparently gave human convenience

a greater priority over esthetic concerns (or perhaps had a

modernist aesthetic favoring functionality); the notion of

beauty can be very much in the eye of the beholder. Thus,

idea of a factory in a pristine rural landscape could be very

appealing to an impoverished farmer.

In short, the move that Orts and Strudler (2002) make to

preserve environmental concerns by appealing to the

esthetic sense of managers is nebulous and overly depen-

dent on individual sensibilities. It is therefore desirable to

establish a less subjective unifying principle, even at a

fairly abstract level.

Human Sustainability

If we look again at some of the scholars in this area, it

turns out they have actually blended the notions of envi-

ronmental interests and sustainability. In Christopher

Stones (1972) seminal article Should Trees Have

Standing? for example, he endorses a form of universal

consciousness as a desirable change in our attitude toward

the environment, but it is actually manifested using the

traditional legal concept of remediation. For instance, he

suggests:


123

One possible measure of damageswould be the costof making the environment whole, just as, when a

man is injured in an automobile accident; we impose

upon the responsible party the injured mans medical

expenses. Comparable expenses to a polluted river

would be the cost of dredging, restocking with fish,

and so forthConsider, for example, an oceansidenuclear generator that could produce low cost elec-

tricity for a million homes at a savings of $1 a year

per home, but through a slight heating effect threa-

tened to kill off a rare species of temperature sensi-

tive sea urchinsone compromise solution would beto impose on the nuclear generator the cost of making

the ocean whole somewhere else, e.g., reestablishing

a sea urchin colony elsewhere, or making a somehow

comparable contribution (Stone 1972, pp. 476, 478).

Similarly, Driscoll and Starik (2004, p. 62) move,

almost imperceptibly, from talking about a natural contract

with the biosphere, to the way managers change focus

from firm-centered to eco-sustainability. They conclude

that nature ought to be a stakeholder because of the

inherent interdependency between the global economy

and the global ecology (Driscoll and Starik 2004, p. 69).

That is, we need to care about nature, but only insofar as it

is instrumentally valuable for humankind. In Posts article,

he is concerned about the fate of the earth, but similarly

concludes that our main worry is whether we are facing a

loss of human welfare. What emerges, then, is that these

authors have an implicit view of environmental responsi-

bility in terms of what may benefit or hurt people. Human

welfare will be harmed by diminishment of resources

overall. Therefore, a more explicit version of their view

reveals an underlying concern for sustainability in terms of

human wellbeing, and hence we could drop the language of

responsibility to the environment in favor of making sus-

tainability the locus of moral discourse.

Stakeholder Theory and Human Sustainability

So far my argument has been fairly negative: regarding

nature as a stakeholder in its own right seems rhetorically

powerful but conceptually lacking. In addition, utilizing a

general principle of environmental concern to undergird

management attitudes begs questions about balancing pri-

orities based on personal aesthetic judgment. Next, I turn to

more positive claims based on sustainability and stake-

holder theory.

Stakeholder theories rely on various foundational moral

approaches. Phillips (1997), for example, bases his analysis

on notions of fairness and reciprocation. Central to most

interpretations of the theory is the idea that stakeholders are

interdependent and can forge symbiotic relationships.

Stakeholder awareness is essentially, in Senges (1990)

words, other directed. Thus, a firm ought to recognize

the local community by virtue of the benefits it has

received from its host. Following Wicks et al. (1994) the

future of business leadership is likely to lie in a collabo-

rative approach that involves inclusion and cooperation

with various stakeholder groups.

Here I want to take a far more expansive view of

community than Phillips (1997). He restricts his analysis to

beneficial acts that ought to be reciprocated, such as tax

breaks given to a company by a town that subsequently

imply some obligation on the part of the firm. However,

when it comes to environmental issues, I see no reason to

consider any particular action as local, since all actions are

likely to have some effect on total welfare. For instance, in

Posts (1991) example of the smog in Mexico, the effects

are probably far-reaching, and even if they are small they

may be cumulative. Thus, the plant managers decisions

are partially responsible for climate change or other effects

on people in distant lands. The point is that when it comes

to planetary sustainability, the whole global population is

likely to be affected by business decisions, and therefore

ought to be considered under a stakeholder approach.

Moreover, a minimal ethical obligation under any classic

theory will be to avoid unnecessary harm. This would

allow for the use of resources, and even their destruction if

there were available substitutes. Combining these ele-

ments, then, results in a moral prescription for businesses:

at least, to desist from diminishing the available resources

(e.g., clean air or the ozone).

At this point, I will make a constructive proposal by

moving to a third approach that reasserts the role of stake-

holder theory. It involves two crucial distinctions: First, we

should abandon talk about the environment and talk

about human sustainability, which is, in principle, quanti-

fiable. Second, managers should acknowledge a minimal

moral principle of avoiding unnecessary harm. Combined,

these elements will give managers a workable normative

principle to deal with environmental questions, especially

when seen through the lens of stakeholder theories.

It is easy to see that diminishment of natural resources

over time without invention or discovery of substitutes will

likely lead to shortages, especially given a growing global

population and heightened material aspirations. However,

under the principle that people need not live at a subsis-

tence level, there is no imperative to restrict production or

consumption unless it results in overall depletion. Use and

even destruction are morally permissible as long as there

are appropriate substitutes available through recycling,

remediation, or innovation. Thus, there would be plural

moral bases for maintenance, perhaps best summed up by a

version of Rawlss difference principle, to the effect that

20 K. Gibson

123

anyone may benefit from use of natural resources as long as

no one is made worse off (Rawls 1971, p. 68).

The proposal has several virtues. It is principled, and

gives us a standard by which we can measure our decisions

rather than having to rely on vague recommendations to

support the environment. It is based on metrics such as

carbon offsets or pollution control, which are assessable. In

effect, this view provides a middle ground between envi-

ronmental protectionism and exploitation, based on a

general principle of resource sustainability.

Reliance on sustainability as the key value will be

neutral about the type of use that we make of the envi-

ronment and agnostic about the merit of any given decision

as long as the available resources of the earth are not

diminished. In a contentious example, we might imagine

that we could power vehicles using whale oil, and a con-

certed whale oil industry might be created, but more along

the lines of farming than ocean fishing. While the merits of

using sentient creatures for human convenience might be

debated, the principle would allow the industry to prosper

as long as the population of whales was not reduced.

Explicit in my proposal is an anthropocentric point of

view that rejects intrinsic values, or values that do not

originate as human judgments. This is not to deny that

there are some things that we value very highly, sometimes

more than we value our own lives (e.g., when activists put

themselves at risk to protect hunted animals). The con-

trasting view, the so-called deep ecology, will claim that

nature has value in and of itself. However, as noted with

Orts and Strudler (2002) above, there are difficulties in

determining the origin and articulation of any such values

(see also Dorf 2001).

Furthermore, human-centered sustainability implies that

a company would have no obligations to flora or fauna that

may be affected, unless they impinge on human welfare. In

aquafarms, for example, the company may have duties to

remediate the salinated ground water or to compensate

the community to make sure humans are not harmed by the

presence of the industry. We could imagine that the

farming might affect the local insects, with the result that

disease bearing mosquitoes become more of a problem, in

which case stakeholder management would see a reason-

able argument for intervention. On the other hand, if there

were a species perhaps like ticks or kudzu the presence or

absence of which had a negligible effect on the human

population, then the company would not have to protect

them based on a purported claim that nature, as broadly

interpreted, was being harmed.

Contrary to some theories, life under my analysis only

has instrumental value, and humans assert it (contra e.g.,

Rolston 1989). Thus, a yew tree may be valuable for its

medicinal qualities, or vultures may benefit us indirectly by

scavenging. On the other hand, it would be acceptable to

kill and consume purpose-bred chickens. Similarly, the

value of habitat would be determined in human terms.

None of this is to deny a principle of conservation, in the

sense that flora and fauna should be assumed to have value

to humans unless they can be shown otherwise. Never-

theless, the locus of consideration remains human welfare.

The principle would allow consumption, but it would

require that any resource either be maintained or replaced

with a substitute. Thus, if we could get power from sea

water, there would be no prohibition on using it as long as

we did not diminish the various other ecological functions

of the oceans such as carbon sinks, home for aquatic ani-

mals, and so forth. Using sustainability as a yardstick for

corporate environmental responsibility will not make dif-

ficult issues easy or resolve conflicting interests. Yet it does

give us a principled decision procedure, although it will

always be tempered by the limits of the available metrics.

Measurement

Using sustainability indicators has the promise of showing

the extent to which business activity is depleting overall

resources. For example, Ray Anderson, CEO of Interface, a

major carpet manufacturer, had an epiphany when he

realized that, in order to create a billion dollars worth of

product, his company had extracted 1.224 billion pounds of

material from the earths natural stored capital, and of that

about 800 million pounds was either coal, oil, or natural

gas that was burned up in the process (Anderson 1999).

Developing appropriate metrics to gauge optimal human

welfare is by no means unproblematic. On the other hand,

using sustainability as a basis for decisions at least puts

such concerns on a rational footing. For instance, the

concept of accounting for the production and remediation

of carbon dioxide production has become commonplace

(Carbon Trust 2011). Over 30,000 firms worldwide now

subscribe to standards such as the United Nations System

of Integrated Environmental and Economic Accounting

(United Nations et al. 2003) and the International Organi-

zation for Standardizations ISO 14000 family of require-

ments (International Organization for Standardization

2004), both of which allow benchmarking and quantifiable

decisions about sustainability (Peglau 2007). In a similar

vein, John Elkington (2004) and his colleagues have

developed metrics to assess the financial, social, and

environmental impacts of businessthe so-called Triple

Bottom Line (see, e.g., Elkington 2004; Hubbard 2010).

The Center for Sustainable Organizations (2011) has

introduced the concept of a social footprint to advance

conventional indicators (Kleine and von Hauf 2009; Center

for Sustainable Organizations 2011). Moreover, some

accounting firms now offer social and environmental


123

auditing services, for example, Cap Gemin Ernst &

Youngs Value Creation Index (Funk 2003). Such auditing

mechanisms have limitations, to be sure (see, e.g., Russell

and Thomson 2008), but at the same time, represent an

industry in its infancy, and at least provide some means to

weigh choices on a rational and defensible basis.

Some Objections

There are three likely objections to making sustainability

the main focus of environmental responsibility for man-

agers. The concept of sustainability may not capture all that

is valuable about the environment; sustainability calcula-

tions reduce environmental concerns to cost/benefit anal-

ysis; and assigning values will be subject to interpretation.

It is sometimes said that some natural and cultural

objects are literally priceless, and hence cannot be given a

market value. In the same way, in the same way as we

would find it odd to put a price on love, the argument goes

that there are some things which are so precious that they

ought to be preserved no matter what.

The argument has great appeal, but we should note two

points. One is the fact that some things are very difficult to

quantify, such as the value of a heritage site or a colony of

sea urchins. Yet that is not to say that it is impossible to

make ranked decisions based on sophisticated techniques

such as contingent valuation or choice modeling. In con-

tingent valuation, people are asked to put values on hypo-

thetical trade-offs, along the lines of how much would you

be prepared to pay to preserve spotted owls from extinc-

tion? and in choice modeling, respondents rank a set of

possible outcomes, which allows researchers to determine

authentic preferences. Even in a case such as designating an

area as a wildlife preserve, we still make ordered trade-offs,

which are essentially quantified rankings of human welfare,

and they will always be subject to revision.

Recall that in the earlier discussion of intrinsic value, the

term might mean that something is worthy of moral con-

sideration, and not always that it is literally priceless. Thus,

it makes sense to say that in many ways, human life has

infinite value. At the same time, though, we routinely make

decisions that have actually put a monetary amount on life:

whether they are decisions about allocating health care

funds or how much compensation a court would award for

a wrongful death. That is, we can perfectly reasonably say

of human life, or the environment, that it has infinite value

while at the same time making quantitative decisions about

them (see, e.g., Mills and MacLean 1992).

Orts and Strudler (2002) make a similar point in their

article when they note there are significant problems with

reducing the analysis of harm to cost/benefit calculations.

They illustrate it using the notorious Pinto case where

juries awarded large damages after learning that the Ford

company had made a financial calculation that had put a

dollar figure on the suffering and death of potential burn

victims and weighed it against the cost of fixing a design

problem. Nevertheless, while the moral issue in the case

has often been interpreted as one of doing a cost/benefit

analysis on human life, the actual problem may not have

been the methodology but instead getting the figures right.

That is, businesses do have to make decisions, just as

municipalities have to when weighing the costs of install-

ing traffic lights against the potential for accidents. The real

issue, it seems to me, was not that Ford made a cost-based

calculation, but instead that they put an unrealistically low

price on human life which resulted in misleading economic

signals. In brief, we should not confuse poor projections

with a poor decision procedure.

Moreover, following Amartya Sen, we can say that

rational choice theory ought to include notions of self-

interest, sympathy, and commitment (Sen 1977, 1985;

Peter and Schmid 2005). Sen describes sympathy as the

beneficial feeling that comes about from incorporating

others welfare into our choices (social psychologists have

used the term social utility for this effect). Commitment

refers to decisions where there is no obvious link to our

personal welfare; for example, activities that fail to provide

benefits and may even create losses. Sens (1977) charac-

terization demonstrates that there is grounding in actual

economic activity that may be other-directed. Conse-

quently, the metrics involved in sustainability calculations

will be more than a simple cost/benefit analysis. By inte-

grating sympathy and commitment, any calculation will

have to take account of harm to others, including negative

externalities or the overall reduction of resources.

An associated objection is that in moving from a general

duty to the environment to a human-centered focus on

sustainability we will likely lose something: we may make

misguided decisions which will deprive future generations

of an invaluable and irreplaceable resource. For example,

the Burrup peninsular in northwestern Australia has over

300,000 petroglyphsstone etchingssome dating back

over 10,000 years. Recently it has been the site of indus-

trial development, including a fertilizer factory that pro-

duces urea and ammonia, and it is estimated that a quarter

of the images have been destroyed by construction and

pollution (Bird and Hallam 2006).

Certainly, some resources will be at risk under the

principle of sustainability, and some managerial decisions

will be deleterious to the environment. Recall, though, that

it is not the case that anything goes, since the threshold of

acceptability would be whether current benefits would

deprive not only current but also future generations of

resources that have no substitutes or adequate remediation.

Hence, the Australian petroglyphs may be highly valued,

22 K. Gibson

123

but are not of infinite valueperhaps it turns out that many

petroglyphs are repetitious and artistically insignificant

and thus not inviolate as long as the sustainability condi-

tions are met.

Individuals and groups could advocate for the social

utility of resources at risk (Loewenstein et al. 1989). For

instance, those who favor preservation of Australian petro-

glyphs could make the case that they are a unique resource

that could be lost forever, and future generations would be

poorer for the loss. There are also models that could incor-

porate the desires of those without financial clout and use

political and transnational standards to establish a standard

of heritage sites that are deemed valuable. For example,

Faucheux and OConnor (1998) conclude that economic

models will always be incomplete and will have to be sup-

plemented by value-based dialogue. These lacunae need not

necessarily be pernicious, though, as long as there is an

overarching commitment to sustainability by all parties.

Admittedly, assigning values to the environment in any

form will involve judgment calls that are inevitably open to

interpretation, and the demand to maintain the extant

resource levels will be somewhat vague because of the

difficulties in creating appropriate metrics. In addition,

psychologists repeatedly tell us that we are inclined to

ignore negative information, and interpret data that favors

immediate and personal interests, as well as underestimate

our drain on common resources and the amount it would

take to replenish them (Messick and McLelland 1983;

Bazerman and Watkins 2004). Overcoming these biases

will require moral imagination and a realistic understand-

ing of the ecological threats we face.

Ultimately, the question may boil down to whether there

are any adequate alternatives to the principle of sustain-

ability, such as free markets or regulation informed by

panels of experts. Yet a persistent difficulty is that pre-

valent current business strategy tends to treat resources as

if they are not significantly reduced by consumption, like

Lockes (1980, Sect. 33) vision of someone harmlessly

drinking water from a river, whereas the evidence shows

that under market capitalism as currently practiced, world

resources are indeed being depleted (Hart 1997). In the

absence of infinite resources, untrammeled depletion can

be considered harm to those who no longer have the

opportunity to enjoy them (see, e.g., Freeman and Reichart

1998). The minimal stance of maintaining the available

resource pool at least provides a potentially quantifiable

principle undergirded by the general moral imperative to

do no unnecessary harm. Another way of putting this is to

consider ourselves as stewards of our shared planetary

resources. This does not mean that we abandon private

property, but rather when we realize that there are common

and enduring human interests, we should look to a model of

stewardship instead of consumption.

The basic principle of stewardship is drawn from

notions of tenancy governed by the legal term usu-

fructliterally, use of the fruit. The concept underwrites

the fact that it is acceptable to use and make profit from

property belonging to someone else or held in common so

long as the property is not depleted, and these principles

form the basis of tenancy and trusteeship. Thus, someone

who rents an orchard is entitled to the fruit from the trees,

but the land has to be maintained to ensure future crops.

Similarly, established law says a mill may use a river as a

resource, but cannot reduce its capacity for use by others.

As Carol Rose (1994) suggests, in contrast to traditional

notions of private property dominant in recent history,

these laws promote values of moderation, proportionality,

responsibility to others, and prudence. Existing ideas of

property rights can easily accommodate approaches that

see the world in terms of stewardship and preservation of

resources for future generations, since the conceptual

framework of use while maintaining the underlying

resource is already in place.

Toward Stakeholder Leadership

The challenges of sustainability have to be confronted

urgently, given the trend of economic development to

deplete the earths resources and the rapidly emerging

markets in China, Brazil, India, and Russia, among others.

A generalized duty for businesses to act responsibly toward

the environment as a background condition has the risk of

being interpreted locally, and often in the form of miti-

gating pollution (Bansal and Kistruck 2006). In addition, if

a business has a neo-classical view of property rights, there

is no moral prohibition on acquisition, use and disposal of

materials without regard to the depletion of global

resources overall.

All things considered, the issue of sustainability ought to

be an underlying principle of business practice. Thus, the

appropriate leadership will necessarily incorporate a moral

sense, concern for others, and a wide vision about the

future of the planet: in short, stakeholder leadership.

Following Wicks et al. (1994), the future of business

leadership concerning the environment is likely to lie in a

collaborative approach that involves inclusion and coop-

eration with various stakeholder groups. Maak and Pless

(2006, p. 103) develop this insight when they maintain that

role of leadership is:

To build and cultivate sustainable and trustful rela-

tionships to different stakeholders inside and outside

the organization and to coordinate their action to

achieve common objectives (e.g., triple bottom-line

goals), business sustainability and legitimacy and


123

ultimately to help to realize a good (i.e., ethically

sound) and shared business vision.

To this end they believe leaders should take on multiple

roles: a steward of values and resources; a good citizen; a

servant to others; a visionary who provides inspiration and

perspective with respect to a desirable future; and a coach

who can bring together people from multiple backgrounds

to realize a common vision.

Conclusion

In this article, I have suggested that describing managements

task as balancing the interests of the environment as one

stakeholder among many is initially attractive but ultimately

lacks conceptual clarity or prescriptive power. On the other

hand, suggesting that managers have general duties to the

environment has its own set of difficulties. My proposition is

that we discard general talk of the environment, and instead

focus on the more tangible idea of human sustainability. Doing

so will give managers a more definite standard for decisions

involving nature and social values. As a final point, the

emphasis on sustainability implies that moral managers should

adopt a broad stakeholder approach that takes a leadership

stance in face of the pressing and universal demands that

economic activity places on our limited common resources.

Although there are differences in our conceptual

frameworks, I agree with Post (1991) in believing that

sustainability is the prime issue confronting business today,

and his concluding comment remains as compelling now as

when he wrote it:

One hundred years ago, business was on the verge of

defining a scientific way to manage enterprises.

Today, we stand at the edge of another transforma-

tion, in which the planet imposes the boundaries

within which efficiency and abundance are under-

stood. It is a time of both promise and consequence.

The promise is that we will find an environmentally

sustainable path into the twenty-first century. The

consequence of not doing so, as Churchill said of

defeat, unthinkable.

Acknowledgments The author is grateful to the organizers of the3rd Bergamo-Wharton Joint Conference on Stakeholder Theories, and

the useful comments of anonymous reviewers who have helped in

shaping the final form of the article, as well as invaluable assistance

from Elizabeth Lentini. Financial support was provided from the

Marquette University Way-Klingler Faculty Research Fellowship.

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Stakeholders and Sustainability-An Envolving Theory

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