Jakob Utgård

Organizing and leading business sustainability

Business strategy and organization

To achieve high sustainability performance, sustainability must be part of the firm’s strategy (Figge et al. 2002, Jaganjac et al 2024). This typically includes  

  • Commitment from the top: The owners, board and management group should support and prioritize the sustainability work, with clear decisions, communication and the necessary resources.
  • Clear goals: The goals should be integrated in the strategic plans and processes of the company.
  • Inclusion in the business processes: Sustainability should be integrated into all aspects of the business, from product design and development to sourcing, marketing, accounting, and customer service.
  • Stakeholder involvement: Sustainability normally needs collaboration, so the company should include and communicate with stakeholders to understand their expectations and give them understanding for your sustainability initiatives.
  • Monitor and report performance: To know whether goals are reached, and to be able to adjust the course, sustainability performance must be monitored and reported
  • A culture of sustainability: The common culture of the firm should (also) be about sustainability.

The role of the board and CEO

The board (board of directors) is responsible for ensuring that sustainability is integrated into the organization’s strategy and operations. The board also monitors the organization’s sustainability performance and holds management accountable for delivering on sustainability goals. This involves reviewing sustainability reports, metrics, and key performance indicators, and challenging management’s assumptions and decisions where necessary.

The CEO has many of the same responsibilities as the board. He or she must set the tone, help integrate the sustainability in the organization, set realistic goals, and monitor the organization’s performance. The CEO is ultimately responsible to the board for the organization’s performance also on sustainability.

There is a rich body of research on boards, CEOs and sustainability. Typical topics are how characteristics of the CEO influence corporate sustainability performance, and whether it helps linking CEO pay or bonuses to sustainability (Mahran & Elamer 2024). The role of diversity in the board has also been studied extensively with unclear results, some studies have found that women on the board lead to better environmental performance (e.g Khatri 2023).

The sustainability manager

Most big (and many smaller) companies have a department for sustainability, headed up by a sustainability manager or director. The role of the sustainability manager varies, but he or she is often partly responsible for developing the sustainability strategies. A big job for the sustainability manager is also compliance and reporting, where they make sure that the company complies with different types of sustainability reporting, and reports according to the relevant reporting laws and standards. Sustainability managers typically also work as the contact point for all sustainability issues, for both internal and external stakeholders.

The role of the sustainability manager varies depending on whether the company has a focus on compliance, efficiency, or innovation (Miller & Serafeim 2014).  Sustainability managers also take on different roles as strategists (focusing on strategy and long-term goals), change agents (being catalysts of sustainability in the organization), collaborators (focusing on coordinating and harmonizing between stakeholders both internal and external), and facilitators (hands-on implementers of sustainability projects) (Loos and Spraul 2024).

New sustainability manager in Power. Power is a large electronics retailer with stores in Norway, Sweden, Denmark and Finland. Ine Opseth (29) was recently hired as the sustainability manager in Power. She had worked in Power for many years, with sales, logistics and after market services. She holds a bachelor in business administration and a master in logistics. In the press release presenting her new role, Opseth praises the good sustainability work in Power in areas such as waste management and recycling, minimizing plastic waste, and social inclusion in the store work force. Going forward, much of her attention will be on increasing circular processes and reducing waste, including extending the life of the products sold by Power.

Collaborations for sustainability

Collaborating with suppliers

Since most environmental impact typically happens at the raw material and production stages, it is important for companies to manage their supplies and suppliers to achieve as high levels of sustainability as possible or desired. This can happen in different ways (Cao et al 2023).

  • Selecting the suppliers that have the best performance on sustainability. When searching for suppliers, a criterion can be their performance on sustainability issues (the environment, energy use, social issues etc) (Ehrgott et al 2010). While some things can be difficult to observe, other things can be possible (certifications, reputation in the industry, check with other customers etc).
  • Influencing suppliers to improve: Existing suppliers can be influenced in different ways to improve their sustainability performance. This can happen through the negotiation of contracts, common projects, long-term commitments with clear expectations, orders of “more sustainable” products and services, requirements to implement certifications, knowledge-sharing and competence-building.
    • A popular approach is the use of “codes of conduct”, where the supplier has to sign on a document outlining the expectations in terms of ethics, treatment of workers, the environment and other issues. The effects of such codes of conducts have frequently been questioned, often it is just a “piece of paper” (e.g Egels-Zanden, 2007).
  • Monitoring suppliers: Some degree of monitoring/measuring how suppliers are doing is necessary. This can happen through site visits and inspections, dialogue with other parties (NGOs, environmental organizations, labour unions etc) or the use of third parties. The effect of monitoring is often not very clear (Short et al. 2016).
  • Dropping the worst suppliers: Suppliers that do not perform well on sustainability (and who do not improve) could be dropped in favour of better suppliers.
  • Producing in-house. It is always an alternative to produce internally, possibly by

Many of the challenges with suppliers depend on their location, which typically determines things like carbon emissions (depending on the local energy mix) and labour conditions (wages, rules & regulations). Companies should therefore consider which countries they want to have suppliers in – the cheapest suppliers are often in the countries with most emissions and poorest working conditions. However, dropping the worst countries is not necessarily “good”, often the workers in these countries are poor and need good jobs (industrial jobs, while tough and poorly paid by our standards, are often better than the alternative.

Collaborating with competitors: Industry self-regulation

Industry self-regulation (ISR) is “the voluntary association of firms to control their collective action” (King & Lenox 2001). As the name suggests, ISR takes place at the industry level, often through an industry association. Normally ISR involves drafting a policy agreement or code of conduct that the members of the ISR commit to follow. ISR exists on a wide range of issues such as advertising content, environmental issues and labor rights in developing countries. Companies and industries use self-regulation for different reasons. They want to maintain a positive public image, and self-regulation can help them demonstrate corporate responsibility and gain public trust. Self-regulation can also be a way of avoiding more strict government regulation.

In theory, ISR can be more efficient and flexible since the companies understand their operations and challenges better than regulators. ISR also takes away the monitoring costs from the government agencies. On the other hand, ISR is often very “soft” and does not impose strict rules or sanctions on the participating companies. The effectiveness of ISR has therefore often been questioned, and empirical studies of the effectiveness of ISR are not conclusive. Several studies have found that the members of the self-regulations are worse or not different from the non-members (e.g. King & Lenox 2001, Rivera et al. 2006), but there are examples of programs where the members of the self-regulation program perform better (Khanna & Damon 1999). 

The Norwegian Food and Drink Industry Professional Practices Committee (MFU) is a self-regulating industry association. It was established 10 years ago by the food and drink industry (NHO, Virke and ANFO)  to review and limit marketing communications of unhealthy food directed at children and young people. The MFU has guidelines that companies should follow when marketing food and drink products to children and young people. These guidelines include restrictions on the use of characters and celebrities, promotional offers, and online and digital marketing to children under 13 and 16. Anyone can submit a complaint to the MFU if they believe that a company’s marketing activities breach the guidelines. The MFU reviews the complaints and decides whether the marketing communication breaches the guidelines. If a breach is found, the company is asked to withdraw or change the marketing communication. The decisions are published on the webpage of MFU.

How as the MFU worked? An independent evaluation shows that the industry is happy with the self-regulation, but that consumer organizations and NGOs are more critical. Public authorities are in between. The main point of disagreement is the definition of children as aged under 13, NGOs want this limit to be raised.

Environmental and social certifications

Environmental certifications are certifications by third parties confirming that an organization adheres to a specific minimum standard regarding sustainability policies, efforts or results (Jahn et al., 2005). While firms may engage in different types of pro-sustainability actions and communication, either on an individual basis or in an industry initiative, certifications by third parties secure that the firm has satisfied some type of criteria regarding its processes or performance.  

Certifications are useful because the environmental performance of a firm or product is often difficult to assess for outsiders, since it often is a result of hidden and internal processes, a result of diffuse emissions through the supply chain, and cannot be observed directly from the product (Jahn et al 2005). The certification may work as a signal to outsiders, showing who have a good performance (the certified firms) and who has not (the not certified), separating good performers from not as good performers (Spence, 1973).

In sustainability, there are plenty of certification programs used by companies. The International Organization for Standardization (ISO) has several standards. ISO14001 sets out the criteria for an environmental management system. ISO26000 provides guidance on how businesses and organizations can operate in a socially responsible way. SA8000 is a certification by Social Accountability International that encourages organizations to develop, maintain, and apply socially acceptable practices in the workplace. More specific certifications include LEED (Leadership in Energy and Environmental Design), which certifies buildings that fulfil criteria including site sustainability, water efficiency, energy consumption and greenhouse gas emissions, materials and natural resources, indoor environmental quality, overall carbon footprint. Forest Stewardship Council (FSC) certifies that forests products come from responsibly managed forests that provide environmental, social, and economic benefits. The Marine Stewardship Council (MSC) certifies that seafood comes from environmentally sustainable fishing. Fair Trade ensures that products are made in an environment where workers are treated fairly and child labor is not used. B Corporations are businesses that meet standards of social and environmental performance, public transparency, and legal accountability to balance profit and purpose.

In Norway, The Environmental Lighthouse (Miljøfyrtårn) is the most widely used certification for firms seeking to document their environmental efforts and demonstrate social responsibility, with more than 11 000 certifications. To be certified, the organization must satisfy common and industry-specific criteria. Common criteria that organizations regardless of sector must fulfil include requirements about policies, procedures and resources related to the environment. Organizations must have an environmental policy, environmental objectives, clear responsibilities, a plan, risk assessment, reporting procedures internally and externally, and policies regarding purchasing, transportation, and waste.

References

Cao, Y., Lawson, B., & Pil, F. K. (2023). Social sustainability and human rights in global supply chains. International Journal of Operations & Production Management, 44(1), 370–390. https://doi.org/10.1108/IJOPM-10-2022-0670.

Egels-Zandén, N. (2007). Suppliers’ Compliance with MNCs’ Codes of Conduct: Behind the Scenes at Chinese Toy Suppliers. Journal of Business Ethics, 75(1), 45–62. https://doi.org/10.1007/s10551-006-9237-8.

Ehrgott, M., Reimann, F., Kaufmann, L., & Carter, C. R. (2010). Social Sustainability in Selecting Emerging Economy Suppliers. Journal of Business Ethics, 98(1), 99–119. https://doi.org/10.1007/s10551-010-0537-7.

Figge, F., Hahn, T., Schaltegger, S., & Wagner, M. (2002). The sustainability balanced scorecard–linking sustainability management to business strategy. Business strategy and the Environment, 11(5), 269-284.

Jaganjac, B., Hansen, K. W., Lunde, H., & Hunnes, J. A. (2024). The role of organizational culture and structure in implementing sustainability initiatives. Business Ethics, the Environment & Responsibility, beer.12710. https://doi.org/10.1111/beer.12710.

Jahn, G., Schramm, M., & Spiller, A. (2005). The Reliability of Certification: Quality Labels as a Consumer Policy Tool. Journal of Consumer Policy, 28(1), 53–73. https://doi.org/10.1007/s10603-004-7298-6.

Khanna, M., & Damon, L. A. (1999). EPA’s voluntary 33/50 program: Impact on toxic releases and economic performance of firms. Journal of Environmental Economics and Management, 37(1), 1–25.

Khatri, I. (2023). Board gender diversity and sustainability performance: Nordic evidence. Corporate Social Responsibility and Environmental Management, 30(3), 1495–1507. https://doi.org/10.1002/csr.2432.

King, A. A., & Lenox, M. J. (2001). Does It Really Pay to Be Green? An Empirical Study of Firm Environmental and Financial Performance. Journal of Industrial Ecology, 5(1), 105–116. https://doi.org/10.1162/108819801753358526.

Loos, C., & Spraul, K. (2024.). The Why, How, and When of CSR Managers’ Internal Legitimation Strategies. Journal of Management Studies. https://doi.org/10.1111/joms.13145.

Mahran, K., & Elamer, A. A. (2024). Chief Executive Officer (CEO) and corporate environmental sustainability: A systematic literature review and avenues for future research. Business Strategy and the Environment, 33(3), 1977-2003.

Miller, K. P., & Serafeim, G. (2014). Chief Sustainability Officers: Who Are They and What Do They Do? SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2411976.

Rivera, J., De Leon, P., & Koerber, C. (2006). Is Greener Whiter Yet? The Sustainable Slopes Program after Five Years. Policy Studies Journal, 34(2), 195–221. https://doi.org/10.1111/j.1541-0072.2006.00166.x

Short, J. L., Toffel, M. W., & Hugill, A. R. (2016). Monitoring Global Supply Chains. Strategic Management Journal, 37, 1878–1897. https://doi.org/10.1002/smj.2417.

Spence, M. (1973). Job Market Signaling. The Quarterly Journal of Economics, 87(3), 355–374.