The ‘honest corporation’, combining
values and strategy
A search (through Europe) for the organization of the
future
10/20/2009
Bourgonje, Berit
Student number: S1383973
Email address: berit.bourgonje@gmail.com
Supervisors
Dr. B.J.W. Pennink & Prof. Dr. L. Karsten
Research conducted for
Social Venture Network – the Netherlands Internet address: http://www.svneurope.com/nl Contact SVN: Chairman – Dhr. Engbert Breuker
Abstract
In search of the organization of the future, this thesis describes the „honest corporation‟; an organization that is based on the values of respect, responsibility, value creation, reciprocity and honesty. Using these values in daily business-decisions the design of the organization, their relationship with stakeholders, and their approach to PPP practices are viewed in another light.
Keywords
Preface
“… for one can always express his hopes, it could even evolve into a perspective on who we are; an awareness about how my understanding of myself has always a relation to a primary responsibility and this responsibility not only extends to you – here and now – but also to future generations, to the environment and to those that I
cannot directly share my life and my well being with”.
(Sanders, 2008, p.7)
Over the past few months I have had a hate – love relationship with this thesis. On the one hand I was interested in this topic the moment I heard about the assignment and committed to finishing it. On the other hand the quest of dealing with the puzzle of what to research, how to do it and actually doing it, mixing and matching different theories and experiences, exploring new paths, looking for what seems right and reasonable also drove me crazy at times. Looking back I think that it was this second part that taught me the most and that only this quest allowed me to write something that will hopefully create some change in the world (or at least in the minds of the people reading this thesis). Even though solving this puzzle was a lot of fun, at times it was also overwhelming and I must honestly say that finishing it was the best part.
I want to thanks all the people that have supported me during the research. All the people that cared to listen to my problems when I got stuck and convinced me that I just had to continue and I could make it happen. Thanks to my mom for her support; who patiently listened to me organizing my thoughts and gave me tons of advice & confidence. I also want to thank my roommates; Floor who gladly took my mind of writing this thesis when I needed it, and Moyra who made me a cup of tea and listened to me thinking out loud but also forced me back to my computer after fifteen minutes. Thanks girls! Furthermore, I want to thanks all the other people that showed their interest and stood by me with cooking meals, giving advice, taking my mind of things and celebrating finishing my thesis. Thanks to all my family members, friends and volleyball-team (Herman Z. sr., Herman Z. jr., Brigitte, Hans, Sith, Thomas, Aura, Laurien, Karin Z., Inge H., Haio, Joline, Sanne, Renske v L., Ingrid, Karen, Jolien de L., Adriaan, Lotte, Linda, Annemiek, Renske M., Jolien B., Inge v Z., Hanne, Karin P., Judith, Anouk, Nicole, and the rest I may have forgotten to mention here).
Finally, I also want to thank the people that guided me with the content and structure of my research. These people are Engbert Breuker, who kept envisioning his dream to me; Andre Nijhof, who always asked the right questions; and Bartjan Pennink, who read and re-read my chapters, gave all kinds of feedback and helped me decide which steps to take next.
Index
List of figures & tables Page 6
Introduction Page 7
Research topic – background Page 7
Problem statement – research questions Page 9
Approach – theoretical concepts Page 11
Structure of the thesis Page 12
Chapter 1: The rise of sustainable development and „honest corporations Page 13
1.1. Changes in society Page 13
1.2. Changes in the environment Page 14
1.3. Changes in the business environment Page 15
1.4. Developments in practice Page 17
1.5. Proceedings Page 18
Chapter 2: The fundaments of sustainable development (refining the concept) Page 19
2.1. Worldviews Page 19
2.2. Motivations for adoption Page 21
2.3. Drivers for adoption Page 24
2.4. Approach to sustainable business practices Page 25
2.5. Theoretical framework Page 27
2.6. Towards a value-based approach Page 27
Chapter 3: Characteristics and underlying values for „honest corporations‟ Page 28
3.1. Names and definitions Page 28
3.2. Motivations for „honest‟ behavior Page 32
3.3. A value-based approach to „honest corporations‟ Page 35
3.4. Values for „honest corporations‟ Page 36
3.5. Towards an „honest corporation‟ Page 41
Chapter 4: The design of an „honest corporation‟ Page 42
4.1. The value-based framework Page 42
4.2. Three inspiring cases Page 43
4.3. Insights & examples from the fields of brand marketing
4.4. Strategy, design, governance and value creating activities
in an „honest corporation‟ Page 57
4.5. Design consequences Page 62
Chapter 5: Conclusions on the characteristic of the „honest corporation‟ Page 66
5.1. Ethical behavior of organizations Page 66
5.2. A name for the organization of the future Page 67
5.3. The „honest corporation‟ Page 68
5.4. Suggestions for further research Page 70
Chapter 6: Methodology Page 71
6.1. Type of research Page 71
6.2. Research strategies Page 71
6.3. Retrieving & analyzing data/ information Page 73
6.4. Limitations Page 75
Epilogue Page 76
References Page 77
List of figures & tables
Figures
1. Measures of happiness Page 14
2. Spiral Dynamics Model Page 20
3. Ranking of motivations for „honest‟ behavior (Cohen & Bronn) Page 34
4. Ranking of motivations for „honest‟ behavior (KPMG) Page 35
5. Value Reporting Framework by PwC Page 42
6. Design parameters of the „honest corporation‟ Page 64
Tables
1. The nature of sustainable development Page 26
2. Overview of sustainability definitions Page 31
3. Motivations for „honest behavior of organizations Page 32
4. Principles combination table Page 38
Introduction
This master thesis will discuss the development towards more sustainable, social and health practices in everyday life which is apparent for individuals as well as organizations. The research is commissioned by the Social Venture Network of the Netherlands, who have provided organizations with help and a platform to change the way they do business, in a way that allows organizations to act more moral and perform better.
Research topic – background
The way of doing business is changing. Both organizations and the academic world have been paying more attention to social themes like „green status‟, corporate social responsibility, social accountability, ways to improve work-life balance etc. A changed mindset is seen in different areas of society, for example in business organizations, government institutions and non-profit organizations. Furthermore, attention is paid to many different aspects of (business) life when it comes to sustainability. Think for example about the changes in beliefs on how to treat people (inter- and intra organizational) and the environment, how and where to invest and the purpose of making profit. Nowadays, many organizations are striving to make a difference in this world. For example, organizations have tried to implement sustainability improvements like, corporate social responsibility codes, the production of „greener‟ products, investing in charitable projects etc. The most well-know case is probably that of Semco Inc. from Brazil. A case in which Ricardo Semler transformed his organization so that no more hierarchies exist and employees are in control of their work, pay, time and even Semco‟s business activities (Semler, 2005; 2007). Also banks are known for their (somewhat limited) actions towards a „greener‟ way of doing business, like investing in environmental projects (Rabobank, the Netherlands), implementing greener IT systems (ABN AMRO, the Netherlands) or checking all investments for sustainability (Triodos Bank, the Netherlands). Or for example Gulpener a brewery from the Netherlands, that has explicitly placed sustainability in its strategy and includes all stakeholders in this process. Also organizations in the fashion industry (Kuyichi), educational projects in Africa (The Hunger Project), governments (Municipalities of Eindhoven & Amsterdam) and multinationals (Shell) have implemented sustainability in (some of) their processes. (Hoogendoorn et al, 2006; 2007)
Also in academic literature clues of a changing mindset and feeling of responsibility towards more parties than just direct stakeholders, can be found in many different areas. These clues are either oriented towards a changing mindset of people, an internal development, and towards broader societal and environmental changes, an external development.
more people recognizing the social side of doing business. Fuentes-Garcia et al (2008) write about how this increased interest in the social dimension of entrepreneurship has caused organizations in the past to take actions on environmental and social issues. This growing importance of social satisfaction is also mentioned in literature on corporate social responsibility (Baron, 2007) and social entrepreneurship (Roberts & Woods, 2005). According to theories of Maslov and Graves personal needs are known to evolve over time and as the environment changes (van Marrewijk & Were, 2003), which also influences what people need in their jobs. So, people have recognized that their needs have changed to a greater emphasis on quality of life (Brown, 2001) and, as Beck (1998) describes it, want to take control over their lives and take responsibility. This implies a responsibility and incentive for organizations to meet these changed needs, if these organizations want to be able to survive in a more social environment (Baard et al, 2004; Ryan & Deci, 2000).
Furthermore, the society as a whole is changing rapidly. Our environment has become increasingly dynamic, complex, and characterized by crisis and sociological and ecological revolutions (Beck, 2001), our world has become more spiritual (Fry & Slocum, 2008), networked and interconnected, it pressures people towards greater participation, transforms faster and confronts us with issues with higher stakes (Brown, 2001). Besides that, we also demand more from ourselves and organizations, as information is easily accessed and competition increases (Fuentes-Garcia et al, 2008). In the past few years some traditional business theories have failed and the consequences of economization have become clear; a shareholder-focus led organizations to bad mergers & acquisitions, a profit-focus led to enormous scandals, privatizing organizations led to decreased quality and downsizing led to organizations unable to perform their tasks (van Aken). However, this new complexity provides us with a challenge to „develop new business models that accentuate ethical leadership, employee well-being, sustainability and social responsibility without sacrificing profitability‟ (Fry & Slocum, 2008, p86), and to (re)create credibility and trust vis-à-vis stakeholders (Gilbert & Rasche, 2008).
However only a few organizations have attempted to do more than that and create an organization that is in all its aspects (people, planet, profit) sustainable, but its popularity is increasing. It is safe to say some kind of quest is going on to find that organizational form, tool, solution or theory that allows these organizations to do business in a more moral way. So, if we are to look for a truly sustainable & social world, what does this change for organizations? Many organizations ask themselves the same questions, like how to deal with changing or tough times, combining sustainability and profitability, deal with the conflict between industry and environment, the consequences for organizational structures and governance, and whether even the fundamentals of competitiveness are changing (examples from the themes for EAPM 20091).
crisis) they are forced to view the world from a different perspective and take action (Beck, 2006; Hart et al, 2008).
In this research I want to look at sustainable entrepreneurship (which is not the ideal term, but will do for now) and its grounds in both theory and practice. As mentioned before, I do not wish to explore all different types of environmentally friendly initiatives and charity, which are merely a number of (limited) tools to achieve sustainability or parts of it. What I want to talk about is the paradigm shift so many experts are talking about that goes beyond the well-known tools that are available to appear „green‟ or „social‟. The paradigm shift towards something that has been called many names and has many different definitions of which some are more suitable than others for this research. Examples of terms used often in literature and business are; doing business by heart (Pentascope, Netherlands), inspired entrepreneurship (Easy Sport, Netherlands), conscious company (de Baak, Netherlands) or conscious capitalism (Fry & Slocum, 2008) , transformational entrepreneurship (Third Eye-movement, Belgium), co-creative power (Leadbeater, 2002; Svendsen & Laberge, 2005), disposable organizations (Brown, 2001), social accountability (Courville, 2003), (corporate) sustainability (van Marrewijk & Werre, 2003; PPP theory), social entrepreneurship (Austin et al, 2006; Dees, 1998), value-based organizations (Bue & Buckley, 2004), people-centered management (Pfeffer & Veiga, 1999), business spirituality (Prof. Paul de Blot, Nyenrode University), inclusive entrepreneurship (Goodijk, 2003; Goyder, 1999).
The notion under investigation here is a holistic and evolving concept of an organization that strives to be sustainable regarding to people – planet – profit (or prosperity). An organization that attaches a different meaning to value creation and does not consider sustainability as something that is implemented beside the daily business processes, but regards it as its raison d‟être. This organization is based on different values than a „traditional‟ organization; or better at least this organization is based on some shared values between the people in the organization. To be able to reach this state, there is a search for an organizational model or theory that explicates how an organization is to take into account the needs and rights of all parties connected to the organization (be they people, environments, economic measures, in this time or in the future) and deal with some of the inevitable dilemma‟s that come with an undertaking that is more social and responsible than the organizations we have seen before. So, what I want to research in this thesis is what these changed values are and how they influence some strategic and design parameters within organizations.
Problem statement – research questions
After gaining a little more insight in the changing business environment and mindset, it is interesting to go deeper into this subject and see what lies at the heart of this development and finding out how these developments can be linked to theory.
literature on sustainability is scattered in different areas of expertise and usually does not include all the aspects of the organization we are looking for here. So, due to the high ambiguity in literature concerning the name, definition and theory on this topic there is need for a research that tries to incorporate all aspects and grounds this new concept in a broad ray of (traditional) theory. Furthermore, in the business world there is a call for a more academic approach and a curiosity to see what other organizations (in other countries) think and do.
Since this research is conducted on behalf of a sponsor, the Social Venture Network (the Netherlands), first I will mention the problem as stated by them. Then I will modify this problem statement into research questions so that it suits a master thesis.
The problem as stated by the sponsor of this research is as follows: (free translation).
“There is a shift in paradigm going on which enables the movement from „fear/greed‟ to „love/need‟. This movement could also be the starting point of solving the current crisis. This way of doing business can be speeded up by investigating all business aspects in which innovations are needed to implement the so called „head-to-heart‟-connection. Eventually this may lead to an entirely new business format, possible named „sustainable corporation‟. Or maybe better the „honest corporation‟, linked in Dutch to equity which is suitable because of the focus on human talents (which are also a form of „equity‟). This business format is recognizable to people willing/ able to live in this new paradigm and also to legislators and regulators so that laws can be changed.”
The research objective is to figure out what is currently going on in this area, in the Netherlands and abroad and to lay the basis for this development using academic theories. The most important aspects that come forth in this problem statement of the sponsor are, first of all the broad question of gaining insight into the movement towards a mindset based on love & need; and second what an organization that goes through this development would look like. Further questions are concerned with possible names, design or strategic elements of this new organization, and the underlying values. Baring in mind these question subsequently the research questions are redefined to suit an academic thesis. 1. What are the developments underlying the paradigm shift towards more social and moral ways of
doing business?
What are societal, environmental and business changes leading up to this new way of doing business?
2. What values are at the core of this development and can be the basis for an „honest corporation?
What are underlying assumptions and worldviews in this development?
What values can be extracted from this worldview?
What values can be identified from expert opinions and real life projects concerning the „honest corporation‟?
3. What are the consequences of this values-based approach towards entrepreneurship on the strategy and design of an organization (the „honest corporation‟)?
What can be learned from new and existing organizations involved with „sustainable development‟?
What are consequences of taking a value-based approach to „sustainable‟ developments?
What are the implications of the distilled values for the organization‟s strategy and design?
What are relevant parameters for the design of an „honest corporation‟?
Approach – theoretical concept
This research will serve two different types of readers, namely the academic world and interested parties in the business world. Therefore this research design will incorporate a theoretical/ academic approach combined with some more practical insights. In general this research takes along several paths, from a broad scope to a more narrow scope; from exploring to designing; from high to low aggregate levels; from opinions & thoughts to specific characteristics and parameters.
Since this is a topic about which little is known and written, a combination is made from different academic fields touching upon this subject, expert opinions and practical examples. At first, emphasis is placed on describing and clearly defining what this development is about. Literature or theory will not be comprehensive on this topic, therefore the concept is placed in between several work fields and examples are used to illustrate the concept.
As the basis for identifying the nature (and later the underlying values) of an „honest corporation‟ a framework is build using both popular and academic theories; which are theories on changing values & worldviews (spiral dynamics) and grounds for ethical decision making (philosophy), combined with motivations, drivers and approach for implementing sustainability or social responsibility (different business research). Additions to this framework are made with the use of literature on HR, CSR studies, as well as other new & upcoming theories. After this first insight into the emergence of „honest corporations‟ and the meaning of sustainable development, the „honest corporation‟ is described in more detail; which leads to the identification of some core values that are at the root of this new organization-type.
of organization and uncover topics that require attention. Using the underlying values and examples from business cases and new insights from the fields of marketing and people practices, the dimensions of VRF will give rise to some parameters for design. Finally, the process of designing an „honest corporation‟, including the parameters, are described and visualized in a model. The goal is to indicate points that need special attention when designing an „honest corporation‟.
Structure of the thesis
The thesis is structured as follows. Chapter one describes the development towards sustainable and more social practices of individuals and organizations over the past years. Then in chapters two and three a more detailed picture is painted of organizations that go along this path. Here the fundaments and matching worldviews are explored, combined with general motivations and drivers individuals have to act morally. This then leads to a more detailed investigation of literature and opinions on actual motivations and drivers for behavior that is in line with the concept of an „honest corporation‟. And at the end of chapter three the approach to and values of, a possible „honest‟ corporation are identified. Finally in chapter four, these values are used to explore the consequences of applying these values to business. Using three cases, the analysis of values and practices leads to several strategic and design implications for „honest corporations‟. The conclusion gives an overview of all developments and findings described in the chapters as well as concluding remarks on the design of a „honest corporation‟. After that the methodology chapter will discuss in depth the research approach that is taken and limitations of this research. Additionally, a CD-ROM is created containing a PowerPoint presentation of the final model of the „honest corporation‟. This show explains in more detail the dynamics of the model and provides extra material for interested parties.
Chapter 1: The rise of sustainable development and ‘honest corporations’
In the introduction I already mentioned some sources of this paradigm shift that is at hand. While we live in a world that changes on the spot all the time, where due to changing financial conditions, environmental interventions and social revolutions are at the order of the day, economic and business theories change at a faster pace than ever (Beck, 1999). In this chapter I will describe some main trends in society, environment and business underlying the increased attention towards sustainability issues and more social types of entrepreneurship.
1.1
Changes in society
Generation Y they are called, the generation following the baby boomers that seem to have so many different wants and needs. Some articles report in favor of this generation, others regard them as spoiled. But fact is that this generation was born and raised in another economic and social plane, in which the economy was doing well and endless possibilities seemed to be available. This has had its influence on this generation that is currently entering the business world. Growing up during the digital revolution, access to competitive sport where everybody is a winner, and dealing with a multicultural society from birth, generation Y has an increased need for impact, communication and flexibility2.
Keywords to describe this generation are open-minded, including multiple views, tolerant to otherness, asking for responsibility and involvement, self-realization, meaning, and balance. Most important to recognize is that this generation no longer sees a contradiction between freedom and solidarity, they combine self-realization with a contribution to society. This social responsibility is apparent in both their personal and professional lives, as the boundaries between work and life fade away. Bontekoning (2003; 2005) & Prinsen (2006-2008)3. If it was up to this generation organizations would allow their employees to incorporate self-realization in their work and make room for social involvement of the organization.
It seems that this development is not exclusively for the generation born after the 1980s. There are people that argue this change is much larger and also comprises of „older‟ people whose view of the world has evolved and grew more dissatisfied with the way things are going; arguing that the society is changing as a whole. This change has two sides, where on the one hand people become the governor of their own lives and personal identity becomes more important, on the other hand this individualism inherently leads to internalization of social discipline. Professor F. de Lange4 describes how different sociologists describe the two sides of this change. First of all, Martin Kohl argued in 1985 that traditional life phases would fade away; people would take control over their lives and find more balance between work, care, education and fun. Second, Nicolas Rose mentions the concept of „governmentality‟ and portrays an individual that is ambitious, energetic and manages his/her own live. Finally, Martha Riley states that learning, caring, working and having fun/ free time will become dimensions of live rather than chronological phases. The conclusion of these contributions is that people will start to broaden their lives instead of only focusing on the next phase. And according to the theory of spiral dynamics, as will be explained in the next chapter, people tend to change their world-view as environmental conditions Figure 1: Changing measures of happiness
change.
However associated with age or not, this development is strikingly obvious and also displayed by Kleanthouse & Peck in their research for WWF; in figure 1. This figure shows that on any level of aggregation people use a broader concept to measure happiness.
Source: Kleanthouse & Peck. Let them eat cake. www.wwf.org.uk/letthemeatcake, Accessed 23-08-2009
Furthermore, in the past decades we have been confronted with many different types of crisis, directly or indirectly influencing our quality of life. Social, economical, and environmental issues have caught more and more attention. The urgency of some of the problems and the need for impact and meaning led to an instant increase in a feeling of responsibility (Beck, 2006). Also, our world has become increasingly networked and interconnected, while at the same time information is more easily accessed. Svendsen & Laberge (2005) link these changes to a society that is pressuring people for more participation - as less trust is placed in authority - and issues cross cultural boundaries, causing collaboration and including different perspectives to be essential.
1.2
Changes in the environment
Lama) have tried to increase awareness of the (in)direct consequences of the way we currently treat the resources (material, environmental and human) in this world in return for instant gratification and maximization of return for shareholders. Business literature with a transformational nature even fall back on religions like Buddhism, which state that in order to be effective over time past, present and future needs to be brought together to facilitate groundbreaking change (Shiba & Walden, 2006). An overcrowded world and the destruction of entire eco-systems led to questions about what there is to learn from nature and the adoption of models that are more similar to nature itself, doing the planet more justice. Supporters of biomimicracy argue that we have reached a turning point in the evolution, at which we realize that our habits are no longer sustainable and ask ourselves the question how to change the way we live without harming nature5. De Bettignies & Lepineux (2009) argue in this case that this corrosion of the biosphere is the cause of human actions, and therefore also the responsibility of humans to undo. The average living standard in OECD countries and the eagerness of developing countries to join this „energy-intensive lifestyle‟, paints a very bleak picture for the future of this planet. Even though some attempts have been made to reverse the „massive ecological damage that plagues the world‟ (p.162), like technological advancement and the Kyoto protocol, they are not enough. While countries work to turn around the deterioration, organizations should also take their responsibility, since some of the major corporations have grown revenues comparable to some middle sized- non poor countries‟ BNP.
1.3
Changes in the business environment
Important concerning the changes in the business environment is, that due to all kinds of technological advances and the fast globalization of the world, organizations are confronted with more a complex and dynamic environment and increased transparency of their business and social activities. With customers, investors, employees and many others paying more attention to sustainability and social engagement of businesses, organizations are forced to act differently. As a consequence of these changes, organizations are also faced with more different parties that need to be involved and increasingly conflicting interests. Goyder (1999) describes this change and concludes that there is a development towards an experience economy (instead of a consumerist economy). He argues that the rules of the competition are changing due to new technologies, globalization of markets, a shift in the nature of work and the growth of a knowledge-economy. And, that the success of sustainable organizations in the future is heavily dependent on how well they extend their focus from shareholders and financial performance to a more inclusive approach in which they „include all their stakeholder relationships, and a broader range of measurements, in the way they think and talk about their purpose and performance‟ (p. 217).
resource based view and corporate social responsibility (Baard et al, 2004; Baron, 2007; van den Berg, 2009; Colbert, 2004; Fry & Slocum, 2008; Fuentes-Garcia et al, 2008; Pfeffer & Veiga, 1999; Ryan & Deci, 2000).
More specifically are the articles about corporate social responsibility and value-driven organizations, that not only argue more emphasis should be placed on the needs of the individuals within the organization but also that the values at the basis of the organization should be realigned to current circumstances (van Marrewijk, 2004) and a “more humane, more ethical and a more transparent way of doing business” is emerging (van Marrewijk, 2003, p.95). In addition Bue & Buckley (2004) advocate that, as business is a kind of society, doing business and making profit should be
restricted within the boundaries of certain universal values.
Finally, when we look at some important event in the past few years, we see that organizations have become more conscious of their responsibilities. Examples are Greenpeace pointing out to The Royal Dutch Shell that sinking the oil platform of Brent Spar would lead to serious environmental damage, causing Shell to reconsider. Or the well-known accounting scandals, like Enron. Movies like „the inconvenient truth‟ by the previously mentioned Al Gore that increased awareness for climate change6
. And of course the most recent one, the financial and economic crisis that caused people to seriously questions the profit-maximization focus of many organizations. This crisis has not only had its effect on the awareness of organizations; also society voices complaints and frustration with the way things were handled. And governments convoke organizations to change their ways in order to prevent similar practices in the future. Fortunately, this crisis also offers opportunities for organizations to dramatically change traditions and creates room for more sustainable practices, as the call for moral behavior of organizations is vast. Accordingly, Goyder (1999) argues that business success cannot and should not be dependent on approaches that solely emphasize economic incentives. In these models many assumption on human behavior have prescribed organizational behavior; however this economic image of human behavior is proofed to be incorrect. The major flaw in these assumptions is the maximizing shareholder value argument, since never in the history of man an individual has started an organization in order to make profit for people they don‟t know.
redesign of the social contract since global corporate power has grown bigger than the power of national states.
1.4
Developments in practice
All these developments - an internal feeling of responsibility, the limits of this planets resources and the need for moral organizations - give rise to the notion that businesses solely focusing on making profit are no longer appropriate. This is also reflected in some consumer-trends, like dematerialization, humanization, the importance of authenticity, the involvement of citizens in projects to change the world, and the health focus of consumers7.
A sentence I have heard many times during this research is: „most economic models are not correct, but they work‟. Well, how is that possible? The fact is that they don‟t seem to work as well as people might think. Most of our effort goes into reacting on changes in the environment, we keep doing business as usual and try to change/ manipulate the environment, the people and the rules so that we can keep doing what we were doing. Instead we should think of changing the way we do business to suit the current environment, like the Social Ventures Network is trying to promote and realize. Chilean economist Max-Neef has prove that some models we assume to be correct, are in practice counter effective. In a study in 1991, he researched different countries‟ welfare levels and found that „for every society there seems to be a period in which economic growth (as conventionally measured) brings about an improvement in the quality of life, but only up to a point – the threshold point – beyond which, if there is more economic growth, quality of life may begin to deteriorate‟ (Max-Neef, 1995, p.117). Additional studies by other economists from the UK, Germany, the Netherlands, Denmark and Austria have found similar results, which showed that there seems to be an inverted U-shaped function between ISEW (Index of Sustainable Economic Welfare) as a function of GNP. The problem is that concerning social responsibility, sustainability and corporate governance etc. there is no one-size-fits-all type of solution; therefore more emphasis is placed on the underlying values that drive these organizations to do good. In a report comparing traditional economic assumptions to the needs of organizations with a more social angle, Millar & Abraham (2006) argue that these traditional assumptions are no longer appropriate to design the governance system. Rather a governance system should be related more to the nature of the organization at hand. These values will be investigated in more detail in this research.
Fortunately, there are also examples of organizations that have succeeded in changing the way they do business to a more ethical and sustainable form. For example the Great Place to Work project has identified many organizations across Europe and the United States that have created workplaces that respond in an original way to employees‟ needs and wants. Awards are given to organizations that make the best effort like, the number one best workplace in Europe, Microsoft. In several countries across Europe, with over 12 000 employees, Microsoft has implemented programs to stimulate of trust, pride and camaraderie among their employees and to help them reach their full potential. Also the book by Dubbink & van Luijk (2006) describes many examples of Dutch and international organizations that have taken a moral and sustainable road. The Body Shop, for example, benefits from a founder that has always been concerned of the global problems formed by the increased globalization. An organization that has distinguished itself from other cosmetics companies by its vision, values and concern for social and environmental issues.
And in the Netherlands, even some supermarkets, providers of one of the most basic human needs have become morally innovative (5K Group, 2008). There is a trend of implementing sustainability in the entire value chain, including changes concerning transportation, suppliers, communication, positioning, management and PPP-practices.
1.5
Proceedings
What these different approaches tell us is that the values commonly held in an organization present many choices concerning organizational design (structure, ownership, product etc.) and the nature of the inter- and intra-organizational relationships (with for example employees, shareholders, stakeholders, and parties along the value chain). It is interesting to see what these values are and what consequences and opportunities they offer to an organization that is looking to do business in a more moral way.
In order to do this, first we need to look at the fundaments of this development. In other words, what are existing worldviews that lead to this development? And what drives/ motivates individuals to adopt these worldviews? And finally, when a certain worldview has become dominant what does this mean for the approach to sustainable development and business organizations? In the next chapter the nature of the development described above is explored in more depth.
2 http://en.wikipedia.org/wiki/Generation_Y
3 http://www.quarterlifequest.nl/kenniscentrum/generationy.htm, 21-09-2009
4 De Lange, F. 2009. Kalenderwijsheid. Trouw, 10-10-2009
5 http://www.biomimicryguild.com/guild_biomimicry.html
Chapter 2: The fundaments of sustainable development
In order to be able to extract values from this development of „better‟ organizations, we need to look at the fundaments on which these developments are grounded. All practices that are aimed at improving the organizations relation to people, planet and profit (corporate social responsibility, strategic HRM, social accountability, value-based organizations, etc.) are somehow related to the concept of „sustainability‟. Sustainability in an economic sense is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” according to the World Commission on the Environment and development. Additionally they add that sustainability is not only about the environment, but also about our communities and economic systems and how they will survive in the future. Therefore, I will investigate sustainability first to identify some of the fundaments for the new ´honest corporation´.
It has become clear that sustainability and the way businesses interpret and deal with it varies on several issues. To get a clear view of the concept of sustainability, I will classify different foundations and drivers of sustainable entrepreneurship in a framework. These issues form the basis for the framework and are the following: worldview, drivers & motivation for adoption, approach to adoption.
2.1
Worldviews
In order to gain insight into the basic values and assumptions of people striving for some type of sustainability it can be very helpful to identify the way they view the world and the according behavior and motivations. Dr. Claire Graves developed in the 1950s a theory building on Maslov‟s needs-hierarchy that describes how peoples‟ value systems change over time as they are confronted with changed environmental characteristics and complexity. This idea was developed further and published by his pupils Cowan & Beck in 1996, and who called it „spiral dynamics‟.
Based on these three elements the various value systems can be explained using the time in which they first prevailed (and were dominant). Many authors have described the value systems of spiral dynamics and added their own interpretation; the summary below is based on the articles of Beck (2003); Combs (2007); Cowan & Todorovic (2000; 2000-2006); van Marrewijk & Were (2003); van Marrewijk (2004); NVC (1997-1999; 2001) on the website by Cowan and Todorovic8.
Figure 2: Spiral dynamics model the awakening of a system to deal with life; c) the way the coping mechanisms are displayed in everyday life.The combination of these elements lead to very different worldview that lead to differences in all aspects of (business) life, differences in decision-making, principles for doing business, economic modeling, ideas of right and wrong, and so forth. A more detailed visualization of spiral dynamics can be found in Appendix I.
It starts with the first six value systems called the subsistence levels. The first value system is based on survival and is rooted in the beginning of human life, but also seen in newborns and times of crisis. It is focused on expressing self. Keywords are; instinctive, biological urges, reproduction, and genetic memory.
The second value system is based on safety and originates in the ice age when people saw the need to organize themselves in tribes and Source: http://www.artofleadership.nl/ needed a more complex system to deal with other people. It has a werkwijzen/SpiralDynamicsIntegral. focus on sacrificing self. Keywords here are; animistic, family html, accesed 14-09-2009 bonds, honor ancestors, and tribalism.
The third value system is based on power & action and is seen in the first tribe clashes, empire ages etc, when people felt the need to overpower others. It has again a focus on expressing self. Keywords are; egocentric, domination of others, control, avoid shame, and no eye for consequences.
The fourth value system is based on order & stability and developed when people saw the reality of death and started looking for meaning. It is focused on sacrificing self, this time to gain rewards or be punished later. Keywords are; absolutistic, willingness to conform, obedience, meaning, guilt, higher authority, and truth.
The fifth value system is based on opportunity & success and stems from the idea that you can make a difference; it is about achieving something, expanding the world. It is focused on expressing the self again instead of the collective. Keywords are; multiplicity, competition to achieve results, influence, materialistic, and autonomy.
After the sixth system the cycle starts over again but at a higher level, which are called the being-levels and focus more on life questions (questions of being) as we have satisfied our more animalistic needs in the first five stages and cleaned up in the sixth. The seventh value system (related to the first) is based on independence & self-worth and is based on fitting in a (new & sustainable) living system. It has an individual focus as it is the start of a new cycle and people in this value system start to repair the flaws in the first cycle, however only for their personal behalf. Keywords are; systemic, integrative, cognitive, interdependent, existential, questioning, and long-term view.
When this yellow system is complemented with a focus on - and caring for - the collective, people have reached the eighth value system (related to the second). This system is based on the global community & life force and still about rebuilding the world but finally offers people the opportunity to move ahead. Keywords are; holistic, experiential, survival of the earth, transpersonal, collective consciousness, interconnected, understanding, and acceptance.
After this, a ninth and tenth value system have been named, but the characteristics of these systems and the life conditions can only be known over time.
Most of these value systems are present in today‟s world and coexist at the same time. They account for the many differences between cultures, nations, organizations and even persons. Furthermore, they can be used to explain different types of - and motivation for - the adoption of sustainability (or the adoption of other business models for that matter).
2.2
Motivations for adoption
More specific differences between motivations people have to adopt a sustainable business approach can be explained using theories on ethics. With a basis in philosophy, many researchers have investigated the source on which human beings base their judgment of right and wrong. It leads to differences between (groups of) people in their motivation to adopt a sustainable business approach, how they can be convinced to adopt it, and it even influences at what parts or in what magnitude their efforts are directed. In literature about business ethics and its critique, several dimensions can be identified on which people can differ regarding the source of ethical behavior and the characteristics of moral „reasoning‟. Many organizations view sustainability something they need to do because it is „right‟. For some organizations „right‟ means that it is forced by laws from governments, rules from the mother organization, and regulations within the organization. Other organizations consider it „right‟ because they belief it is a source for profit, and profit is their main reason for existence. And then there are also organizations that believe it is the „right‟ thing to do because of a moral belief to treat all people and the planet with care.
best interest and may act unethical when they have something to gain, like agency or social exchange theory. However, in a society that is built on relationships, unethical behavior may lead to „societal dissolution‟ (p. 69). Relationship-based theories, like social network theory, therefore argue that when involved in trusting relationships unethical behavior is unlikely to happen. Nevertheless, relationships in business are multiple and difficult to assess for trustworthiness and thus some theories argue that rewards or sanctions are the best way to assure ethical behavior. So, in order to understand where these differences in the basis for ethical behavior come from, we have to look at the core of moral behavior.
In a reaction to conservative business ethics literature, ten Bos (2003) describes the important difference between grounding morality in reason or in emotion. Morality based on reason can be divided in four different sources of this rationale, which are 1) calculation of the nature of the consequences, which is seen in for example the classical economic theories like profit maximization, layoffs etc. 2) Compliance to universal rules & regulations, often resulting in ethical or governance codes. 3) Living a thoughtful life showing the „right‟ intentions and virtues, as seen in many religions. 4) Creating an ethical environment that stimulates moral behavior, this results in for example „ethical risk management‟. (ten Bos, 2003; Jones et al, 2005). On the other hand, morality based on emotion is derived from an internal moral compass that is autonomous and unpredictable, and cannot be standardized nor guaranteed. It is placed outside society and it is argued that morality is only relevant for the person in question. (Bauman in ten Bos, 2003). Ten Bos (2003) argues however that it is dangerous and unwise to choose either side of this dogma and advocates taking away the hierarchy between reason and emotion.
Consequently, following the reason versus emotion discussion, there is a difference in morality being either universal (standard; the same for everyone in any circumstance) or specific (regarding individuals) (ten Bos, 2003; Jones et al, 2005). Gilligan (1985) describes this difference in a slightly different way, namely by making a distinction between an individual perspective and a relational perspective (which is usually seen as the difference between respectively men and women). The individual perspective comprises, solutions being based on a logical calculation of a dilemma using impersonal rules and regulations. It is individual because it focuses on a certain hierarchy and tends to create a win-lose situation for the parties involved. On the opposite there is the relational perspective that searches for the solution in activating the network and using communication. It has regard for the relationships between parties involved and involves strengthening ties instead of creating a winner and a loser. When confronted with a dilemma the most important source of misunderstanding between users of these perspectives is the question that is asked. The person with an individual perspective would ask him/herself if a certain action should be taken, while the person with a relational perspective would ask him/ herself what action should be taken.
image that other have of the organization. On the other hand CSR can also be adopted from a stakeholder perspective, which is still strategic but does seek to understand and bridge different sets of interests.
Following Gilligan‟s theories, a combination can be made and would result in a four step ladder9 regarding sustainability; ranging from reactive (compliance and charity), through active (managing risks & financial performance) and pro-active (business opportunities & recognition of importance), to integrative (responsibility & meaning) (van Marrewijk & Were, 2003). The integrative step comprises a sustainability approach that is also known as inclusive entrepreneurship, in which organizations engage the whole value chain and other interested or influenced parties to create a sustainable future. Also Carroll (1979) recognizes these four categories of motivation in his discussion of corporate social responsiveness; and they are called the reactive, defensive, accommodative or proactive responsiveness strategies. Fuentes-Garcia et al (2008) recognize in their study about the adoption of corporate social responsibility also the possibilities of no adoption and the option to take some social actions, but they do not classify these as corporate social responsibility. Also advocates of the Rhenish capitalism or the social market economy, distinguish between the external and internal motivations of traditional and Rhenish capitalism respectively. They also identify the difference between being accountable and taking responsibility.
However, there seems to be an extension to the integrative step in which the motivations and goals are different or bigger. Van Marrewijk & Were (2003) originally identified two steps that are considered integrative, in which their final level goes beyond integrating all stakeholders and creating a win-win situation. They try to describe a next level that is already integrated and imbedded, in which all parties aim to contribute to the value and continuance of life. Jones et al (2005) explain this using five concepts; community, trust, whistleblowers, responsibility, cynicism.
opportunity or ability to act independently and make decisions‟ or „a thing which one is required to do as part of a job, role, or legal obligation‟ (Compact Oxford English Dictionary, 2005), but in the case of morality should be defined more as the response to another person in relation of openness to the other. In this light, for example, a stakeholder approach is not yet responsible, because it does not give stakeholders an appropriate response but merely involves them while doing business as usual. So, what needs to be done in order to go beyond what we know now? Cynicism is the answer of Jones et al (2005). We all have some kind of cynicism towards sustainability approaches like CSR or business ethics, we all see that very often it is just a charade. When we can overcome this cynicism, and respond without restraint, in public, in a direct intervention we can „make the world stammer and stutter (Jones et al, 2005, p. 125).
2.3
Drivers for adoption
Forthcoming the basis for different motivation, as explained above are the direct drivers that cause people to adopt a sustainability (or other) approach. These drivers are based on researches concerning the adoption of corporate social responsibility practices, as these motivations have similarity to motivations seen to adopt a sustainable strategy. Fuentes-Garcia et al (2008) divided the drivers to adopt a corporate social responsibility strategy into two simple categories, namely to either avoid lawsuits (which they call a defensive strategy) or to create value (an offensive strategy). Based on a research conducted by van Marrewijk & Were (2003) concerning different levels of adoption of corporate social responsibility practices, the following internal and external drivers can be classified. Associated with the reactive approach drivers come forth from opportunities to increase personal power, improve reputation and compliance „proper‟ procedures that invoke a sense of duty. The active approach is more driven by personal success and possible increases in financial performances. Then values and beliefs of the importance of social and/ or environmental care arise and top management may push for a pro-active approach. Finally, also stakeholders and other parties recognize this importance, which requires an integrative approach and a long-term orientation. This integrative approach would ultimately lead to a more advanced step in which people are driven by a feeling of a worldwide responsibility and are aware of the reciprocal interdependency.
Another classification of the drivers can be made based on the difference between means and ends. There are two possibilities; in the first one sustainable development practices are the means to business success and in the second one business success is a means to a contribution to environmental and social well-being. And when business success is merely a contributor to environmental and social well-being, financial performance can never be the sole purpose of an organization.
2.4
Approach to sustainable development practices
Another important aspect to consider when discussing the nature of sustainability is the approach organizations take when adopting it. In the previous sections, differences have already been made between integrated or isolated approaches, but there is more to it. There are differences between partial and wholly, phased and at once, integrated and isolated, continuous and one time, top-down and bottom-up, long-term and short-term focus.
In general advocates of a sustainable business approach, like in Rhenish capitalism and for example Herman Wijffels (former president of World Bank and SER), argue for an integrated approach in which multiple stakeholders are engaged. Also Pfeffer & Veiga (1999) in their research on people-centered management, which concerns an important part of sustainable business, argue that isolated implementation can be counterproductive. Closely related are the arguments of the supporters of a stakeholder or network approach towards sustainability. They argue that in order to deal with the complexity of sustainability and corporate responsibility issues, it is necessary to create and use an integrated multi-stakeholder network (van Marrewijk, 2004; Svendson & Laberge, 2005). And that these new sustainable strategies need to have a positive impact on economic, social and environmental factors (Fry & Slocum, 2008) and incorporate all facets of the organization (Colbert, 2004; Austin et al, 2006). Because it is about bridging differences, it is important to combine economic models with sustainability instead of isolating those (Svoboda & Whalen, 2004/2005).
Instead of integrated, also the word inclusive is used often. Goyder (1999) and Goodijk (2003) argue that an inclusive approach is best for an organization that is trying to be successful and sustainable, and that the organization needs to deal with the complexity of value creation instead of profit making. An inclusive approach entails building structural relationship, including all stakeholders in the network, combining both internal and external stakeholders, and is based on a shared-destiny relationship.
W o rl d v ie w M o ti v a ti o n D ri v e rs A p p ro a c h B a s is K e y w o rd s Le v e l S o u rc e S u rv iv a l (s e lf ) D e a lin g w it h c ri si s, in st in c ti v e --S a fe ty (o th e rs ) T ri b a lis m , fa m ily bonds --P o w e r & A c ti o n (s e lf ) D o m in a ti o n , e g o c e n tri c Re a c ti v e Co m p lia n c e & Ch a ri ty D e fe n si v e P e rs o n a l p o w e r, re p u ta ti o n Is o la te d , p a rt ia l (m in im a l), sh o rt -t e rm o ri e n ta ti o n , o n e -ti m e O rd e r & S ta b il ity (o th e rs ) O b e d ie n c e , h ig h e r p o w e r Re a c ti v e Co m p lia n c e & Ch a ri ty D e fe n si v e Co m p lia n c e t o w h a t is 'p ro p e r' Is o la te d , p a rt ia l (IS O -l ik e st a n d a rd s), s h o rt -t e rm o ri e n ta ti o n , o n e -t im e O p p o rtu n ity & S u c c e s (s e lf ) M u lt ip lic it y , in fl u e n c e A c ti v e M a n a g in g ri sk & F in a n c ia l p e rfo rm a n c e O ffe n si v e P e rs o n a l su c c e ss & P ro fi t Is o la te d , to p -d o w n , sh o rt -te rm o ri e n ta ti o n , o n e -t im e H a rm o n y & Lo v e (o th e rs ) A w a re n e ss , c o n sc io u sn e ss P ro a c ti v e Bu si n e ss o p p o rt u n it ie s & Re c o g n it io n o f im p o rt a n c e O ffe n si v e Im p o rt a n c e & c a re , in v o lv e m e n t o f to p m a n a g e m e n t Is o la te d , to p -d o w n & p h a se d , lo n g -t e rm o ri e n ta ti o n In d e p e n d e n c e & S e lf -w o rth (s e lf ) E x is te n ti a l, in te rd e p e n d e n t In te g ra ti v e Re sp o n si b ili ty & W in -w in s it u a ti o n s O ffe n si v e Im p o rt a n c e & c a re , in v o lv e m e n t o f a ll p a rt ie s In te g ra ti v e / S y n e rg e ti c , m u lt ip lis ti c , lo n g -t e rm o ri e n ta ti o n , c o n ti n u o u s G lo b a l c o m m u n ity & Li fe f o rc e (o th e rs ) H o lis ti c , in te rc o n n e c te d In te g ra ti v e + M e a n in g & Re c ip ro c a l in te rd e p e n d e n c y W o rl d w id e fe e lin g o f re sp o n si b ili ty & in te rd e p e n d e n c y . 'o n ly a lt e rn a ti v e ' In te g ra te d , h o lis ti c , lo n g -te rm o ri e n ta ti o n , c o n ti n u o u s
approaches (Powley et al, 2004) - requires including all stakeholders in the design & decision-making process (Hart et al, 2008).
Additionally, there is a lot of emphasis on the long-term orientation needed for the adoption of sustainability. In theory on breakthrough management, it is argued that these kinds of changes can only be achieved when there is concern for the past, present and future (Shiba & Walden, 2006). Also in literature on for example stakeholder network theory (Svendson & Laberge, 2005), people-centered management (Pfeffer & Veiga, 1999), inclusive business approaches (Goyder, 1999), and Rhenish capitalism (van Aken), the importance of a long-term focus is stressed.
2.5
Theoretical framework
The previous discussion of worldviews, ethical decision-making and the motivation, drivers and approach to the adoption of sustainability practices is combined in the following framework which can be seen in table 1.
Similar to the research of Fuentes-Garcia et al (2008), I want to make a distinction between the categories of sustainability as seen in the framework below. From now on, for the new organizational form, I will use the fundaments of the last two categories. The stages prior to these categories, although they can have a significant impact, are not considered truly sustainable [yet]. Furthermore these are based on entirely different values that are not suitable for the search of the organization of the future. In the last two categories the concept of sustainability has a broader scope, which means that it is considered with more (or all) parties influenced by the organization and a long-term orientation. Furthermore it goes beyond a feeling of mere responsibility of the direct actions but comprises of organizations that see the bigger picture and feel the need to create value. This responsibility is mostly intrinsically motivated and comes forth from an understanding of interconnectedness and reciprocal interdependence. Therefore it is difficult to encourage the adoption of sustainability with external factors like rewards and codes of conduct.
2.6.
Towards a value-based approach
Now that I have identified the characteristics or nature of the development towards sustainability it is interesting to see which organizations have succeeded in adopting such a sustainability approach for their business and how they have implemented this in their business strategy and structure.
I argue that if sustainability is to be implemented in an organization this implies changes in its structure, strategy and management, since the starting point and values of true sustainability seem to be in conflict with some very basic economic assumptions and models. In order to find these tensions it is important to look at the values of these organizations first. In the following chapters I will describe the values at the basis of this new organization type and their consequences for the organization.
8 Http://www.spiraldynamics.org
9 Nijhof, A. 2009. Presentation on „inclusief ondernemen‟. SVN seminar at Nyenrode Business University about inclusive
Chapter 3: Characteristics and underlying values for ‘honest corporations’
Now that we have an understanding of the level of sustainable development an „honest corporation‟ ought to have, it is interesting to see how similar kinds of organizations and practices are described in literature and how they are named and defined by business experts. In this section I will give an overview of the names, definitions and most seen motivations for these kinds of organizations as they are portrayed in previous researches and expert opinions. Then, in order to look more closely to the dilemmas of a value-based and honest corporation, the values underlying sustainable and responsible initiatives are investigated. This results in the identification of some (universal) values that underlie „honest corporations‟.3.1
Names and definitions
Research and expert opinions have provided over thirty different names for a company that is similar to the „honest corporation‟ as it has been described before. Some of these names however are more suitable than others, as we will see in the discussion of the definitions. The names mentioned can be classified in names that represent a certain value that the organization should keep in mind, others concern the nature of structure of the organization and yet others are deduced from the different trends related to sustainable development.
Value-based names
Names that incorporate a certain value are; conscious company (de Baak; Fry & Slocum, 2008), spiritual company (de Baak; Prof. de Blot of Nyenrode Business University), ethical company (Fry & Slocum, 2008), natural company (The Natural Step; Biomimicry Guild; Max Herold in Konica Minolta Magazine), life phase conscious company (debrancheorganisatie.nl; van den Berg Training & Advies), and triple M value company (Cooymans, 2001).
disciplines. Interesting is a definition described by Jamali (2008) about the social part of corporate social responsibility, saying that it thus relates to the well-being of the society as a whole. The use of the concept of society in these fields inescapably means that the level of analysis is „more inclusive, more ambiguous and further up the ladder of abstraction than a corporation itself‟ (Clarkson in Jamali, 2008, p. 214).
Structure-based names
There are also names that say something about the nature of the company, which are the value-based organization (Fry & Slocum, 2008; Bue & Buckley, 2004; van Marrewijk, 2004; Stansbury & Barry, 2007, the transformational organization (Third Eye; Shiba & Walden, 2006), the co-creative organization (Leadbeater, 2002; Svendsen & Laberge, 2005), the people-centered organization (Pfeffer & Veiga, 1999; GreatPlaceToWork), the meaningful organization (Nyenrode article), and the collaborative organization (Tencati &Zsolsnai, 2008). And names that refer to the structure of the organization like, the inclusive organization (Goodijk, 2003; Goyder, 1999), the vertical or virtual organization (van Eenennaam & van der Velden, 2007), and the multidimensional organization (5K Group).
Users of the first batch of names argue that these organizations are based on the assumptions that values and attitudes drive behavior and are revealed in values which - when combined with others - form the basis for an organization‟s ethical system (Fry & Slocum, 2008) and ultimately form its unique business personality (Goyder, 1999). The 5K group argues that this search for unique value creation gives an organization its basis for success and personality. It is also argued that an organization is subordinate to society and should therefore meet the demands of the community (Goyder, 1999); and that „the freedom of businesses to make a profit is limited by the values of fairness, equal opportunity, honesty, and truthfulness‟ (DeGeorge in Bue & Buckley, 2004, p.68) and the following obligation to adapt the organization‟s structure and processes accordingly.
