12.03.2020    |    Opinion

Sustainable Business Transformation - The New Management Paradigm!

Avtor: Prof. Dr. Rene Schidpetter

Epidemics, climate change, biodiversity loss, mass migration, social injustice, economic obstacles, trade-wars. Looking at the current global social and economic challenges, we need to think about the future of our businesses as consistently as we did after World War II. More and more executives of the world’s largest companies are fundamentally questioning the former ‘corporate value/shareholder value’ business paradigm, which leads to a short-term profit orientation, as well as to an unacceptable trade-off thinking in management. At the World Economic Forum in Davos, as well as all over the world, business leaders are beginning to change their mindset.

For the emerging new leadership, it is obvious that creating sustainable values and having a positive impact on society are just as important – if not more so – than profitability. The example of the auto industry, as well as many other industries, show that all companies need to realign their business models, minimizing any negative effects and keeping the positive effects for society as high as possible. Most recent academic studies show that, the more positive the impact of a company towards society, the higher the entrepreneurial return. More and more top executives are realizing that the current far-reaching environmental and social changes are leading to unpredictable risks but, at the same time, are also creating unforeseen business opportunities.

Yet, how can European companies be the driving force of this new world?  First of all, Europe has invented the idea of the social market economy which provides a good basis for resolving paradoxes such as the incommensurability of profit and sustainability, thus creating an "eco-social” market economy. The European Union needs to develop these ideas further and make Europe the most sustainable market and business hub in the world. In addition to the political frameworks, we also need to integrate sustainability systematically in all areas of business organizations.
Instead of an isolated add-on sustainability management approach, companies need a holistic sustainable management approach which is purpose-driven and creates positive impact for society. Innovative companies no longer discuss what "ought” to be done, but rather strategically increase their sustainable business potential and thus, the "ability” to do more. Thus, they change from a moral-oriented sustainability to an action and solution-oriented approach. This leads to a more positive and value-added idea of sustainability.

The new mindset of sustainability is no longer a mere matter of avoiding damage, rather the systematic generation of positive impact. Thus, ecological and social topics are not seen from a defensive but from a more proactive perspective – which gives companies new opportunities rather than limitations. This leads to a much more focused idea of sustainable management. Companies identify the real challenges and material issues and do not waste time and resources for unessential questions or mere PR issues without real impact. The new value-driven management approach targets the sustainability sweet spot in which the corporate strategy and its derived measures promote social, ecological, and economic added-value at the same time.

Instead of having the choice between the traditional concept of the financial bottom line and the potential trade-off of a triple bottom line, companies have started developing a new perspective. Innovative companies use a single bottom line: e.g. the Sustainability Index, based on their individual purpose and their social impact. With this non-financial impact oriented controlling, as well as new sustainable Key-Performance-Indicators, business leaders are overcoming the conventional trade-off mindset. Sustainability and profit do not oppose each other, but are mutually dependent. So, those companies are now dismissing all trade-off thinking from their management systems are more successful.
The new line thinking of sustainable management shows, that sustainability is not about an outside-in perspective, rather consistent development from within the organizational core leads to business models and sustainable innovation. The ideas must not be to leave future generations with the same opportunities, rather creating more opportunities and potential for present and future generations. This is the entrepreneurial answer to the public discussion about sustainability and becomes an economic necessity to survive – in business as well as in human beings!

Prof. Dr. René Schmidpeter holds the Dr. Juergen Meyer Endowed Chair of International Business Ethics and Corporate Social Responsibility at Cologne Business School (CBS), Germany. He is a series editor for Springer’s CSR, Sustainability, Ethics and Governance books, a section editor of the Encyclopedia of Corporate Social Responsibility (ECSR) and an editor of the Dictionary of Corporate Social Responsibility (DCSR) as well as Editor-in-Chief of the International Journal of CSR (Springer). His research and teaching activities focus on the management of Corporate Social Responsibility, international perspectives on Sustainability, Social Innovation and Sustainable Entrepreneurship as well as the relationship between business and society. He is also founder of the international consultancy