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Corporate Sustainability – Board, Management, Market, and Stakeholders

January 17, 2011 5 comments

I am carrying out research on the adoption of Triple Bottom Line Sustainability (TBLS) in business companies, and I am pondering the question “Is it all about financial return?” In this regard I am interested in tapping into the wisdom of readers of this Blog.

I define TBLS as the outcome of the activities of an organization, voluntary or governed by law, that demonstrate the ability of the organization to ethically maintain its business operations (including financial viability) whilst not negatively impacting any social or ecological systems.

As I understand it, the Board of Directors of a company is responsible to the shareholders for optimizing shareholder value, making sure profit compares favorably with businesses in comparable industries, being competitive relative to challengers, and guiding the company’s strategic management by controlling and monitoring the activities of the company’s management. The CEO and management team in theory only design and run the company to satisfy the Board. This looks to me like a directive tailored for ‘Financial’ not ‘TBL’ Sustainability.

The Board and/or the CEO and the management team may be wise enough to envisage enhanced profits and market position by taking advantage of the uniqueness of products and services tailored to TBLS; however, this approach is still financially, rather than ethically, motivated.

It would be encouraging to see large numbers of companies embracing TBLS for ethical reasons, but that may not be realistic given the Board mandate highlighted above. It seems to me that the ethically driven leverage for introduction of TBLS comes from the marketplace, the shareholders and the stakeholders – we the people!! In other words, if enough consumers, shareholders and stakeholders are sensitive to ethical concerns and place pressure on companies to operate in a TBLS manner or else risk earning lower company profits and reducing shareholder value, then the relevant Boards have a responsibility to make appropriate changes to introduce and sustain TBLS, and must ensure the changes take place (or risk the corporate consequences). Indeed under these circumstances the CEOs and management strategists ought also to be pressing for change based on strategic imperatives. However, even if corporate action is based on the ethical concerns of “we the people”, the outcome is still based on a Board’s financial obligations.

The only other option for introduction of TBLS that I see is by Government intervention through a change in Corporation law – not likely to happen I think.

Your thoughts and comments on the general thrust of this Bog would be most welcome and thanks in advance for taking time to consider the thoughts expressed here …

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