The third part of this book primarily targets the business managers who want to take advantage of this newly emerging sustainability-based competitive environment. It gives a step-by-step practical approach which can be followed to achieve sustainable value creation within a large and complex organization. The process and tools provided by the author can be used to achieve sustainability-driven innovation for competitive advantage. The author tries to help managers identify how and where they can create sustainable values to compete in the twenty first century business world, moving towards little explored “Blue Ocean”.
The book emphasizes on the sustainable value toolkit which, the author claims, have been implemented successfully in thousands of industries throughout the US, Europe and Asia. It talks about the core ingredients which have successfully worked in creating sustainable values within an organization. After introducing the sustainable value framework, the author then moves towards describing the eight disciplines which form the core competencies required to create sustainable value. Finally, the author tries to put them all together and embeds measurement and evaluation as well for result tracking and verification. Hence the life cycle of sustainability completes its full circle.
In today’s world, where over 70% of a company growth is based on intangible economics such as brand, goodwill, reputation and stakeholder relationships, businesses around the globe surely want to advance their business priorities, drive innovation and achieve competitive advantage. Sustainable value is exactly what the businesses need to achieve these goals by carefully considering the social and environmental dimensions of their business activities.
Stakeholder relationship is probably the most important and it can be the key to unlock the door to success. Profit is certainly for shareholders but business value is created with the wellbeing of stakeholders and vice versa. Within an organization, we should be able to view the business from the stakeholders’ perspective as well. The author argues that “delivering value to shareholders while destroying value for stakeholders” is fundamentally wrong business model. The sustainable value framework presented by the author is a “win-win” scenario for both shareholders as well as the stakeholders.
Although the book clearly identifies that the stakeholders play a pivotal role in sustainable value creation, most of the businesses today are struggling to provide strong leadership to manage the stakeholder values and align them with the organizational vision. This might be because of company’s lack of awareness, unrealized CSR culture within the organization or short-sighted line managers who prefers short-term shareholders’ value over the stakeholders’ dire socio-economic issues. Top management leaderships should thus understand and spread the fact that “the company versus stakeholders” (Us vs. Them) attitude does not fit in sustainability value chain and it should be replaced by “the company and stakeholder” (Us and Them) attitude.
The eight sustainability disciplines presented by the author can be broadly classified into two parts namely discovering value opportunities in society/environment and creating values for the shareholders & the stakeholders. Discovering value opportunities means understanding current social, economic and environmental issues along the value chain and identifying future business risks as well as opportunities. On the other hand, creating value means mitigating identified future risks and taking advantage of identified opportunities through innovation and product differentiation.
Finally, the measurement of the progress of stakeholder value and its return impact on shareholder value provides us with validated results and learning. It seems that the author has based the implementation of his eight sustainable value disciplines on the popular Deming Cycle (Plan-Do-Check-Act). This makes sense, as more and more companies are racing for ISO implementation which completely follows the plan, do, check and act sequence.
Describing the process of creating values for stakeholders and shareholders, the author tries to put three major entities of an organization together namely productivity, quality and safety. The tools such as Sig Sigma, Lean manufacturing/management, Total Quality Management (TQM), Supply Chain, Customer Relation Management (CRM) and Re-engineering are best used to capture the sustainability value within the framework of operational efficiency.
From the risk control perspective, we are looking at identifying, eliminating or reducing future losses while at the same time expanding the opportunities such as enhanced reputation, product differentiation, motivated employees and reduced cost. Risk control strategy can create significant value for both shareholders and stakeholders by avoiding penalties or legal fees. It helps lower insurance premium as well as probability of catastrophic loss events. Ultimately, companies end up making profit and reducing negative impacts on stakeholders. (To be continued….)