Concerns about the environmental and social impacts of corporate activity are moving sustainability and social responsibility from important peripheral problems to issues debated in the boardrooms of the world's leading companies. The worldwide challenges faced by Monsanto around its genetically modified seed products, or by Occidental Petroleum around impacts on indigenous peoples in South America, are examples of this growing pressure on companies to pay attention to a broad range of stakeholder issues, or risk negative impacts ranging from damaged reputations to loss of license to operate.
Companies as varied as Home Depot, Starbucks, Nike, Archer Daniels Midland and Shell have felt the sting of stakeholder protest. The protesters may be only a tiny percentage of the population, and socially responsible investing may be only a drop in the Wall Street bucket, but the trend is clear: there is a growing intolerance for business models that are based on exploiting externalities, models that transfer value from stakeholders to shareholders.
Yet there are many obstacles to companies bringing these issues into the mainstream of business. Abstract concepts like sustainable development and social responsibility are a source of contention and confusion, and even executives who are supportive of the concepts find it difficult to frame them in ways that are useful in informing their investment decisions. Corporations have a fiduciary duty and a practical imperative to deliver financial return to their shareholders.
THE EIGHT DISCIPLINES OF SUSTAINABLE VALUE
In addition to leadership commitment, sustainable value requires excellence in eight disciplines:
- Understanding the firm's current shareholder and stakeholder value position: Knowing where and how the company is creating, destroying, and transferring value to shareholders and stakeholders.
- Anticipating emerging issues: Tracking key trends, identifying emerging issues that may change the firm's shareholder and stakeholder value position.
- Setting sustainable value goals: Establishing specific strategic intent and goals, aligned with corporate strategy, for creating additional value for shareholders and stakeholders.
- Discovering sustainable value: Identifying sources of value through a stakeholder approach, and designing initiatives to capture that value.
- Developing the business case: Creating a compelling business case that aligns line managers and financial managers around the initiatives.
- Capturing the value: Executing and managing initiatives to ensure value capture.
- Validating results and capturing learning: Tracking and assessing shareholder value and stakeholder value, and communicating the connection between the two.
- Building sustainable value capacity: Developing the mindset and capabilities needed to capture shareholder and stakeholder value.
Six of these disciplines can be organized into two ongoing processes, value opportunity discovery and value creation. The seventh discipline serves as a feedback loop from one process to the other. The eighth discipline is a meta-discipline focused on building the organization's overall capacity to deliver sustainable value, embedding the mindset, frameworks and competencies of sustainable value into the corporate culture.