Sustainability Reporting Today

Sustainability Reporting Today:

 With the advent of sustainability reporting, various indicators and standards have been developed to measure and evaluate sustainability and to anchor it in corporate reporting on value creation. A sustainable commitment to stakeholder relations on an economic, social and ecological level has a proven positive impact on value creation and ultimately also on the strategic success of a company. To make this transparent, the following principles for an integrated sustainability reporting - which are to a certain degree also part of standards such as the Global Reporting Initiative, Integrated Reporting and the European Foundation for Quality Management (EFQM) - can lead the way:

 

-         Strategic Focus: Sustainability should be embedded in a company’s purpose, in its derived vision and in its strategic objectives. This forms an essential basis for a periodic corporate sustainability reporting at a strategic level.

-         Embeddedness: Not only singular projects, but the entire strategy development and revision should be communicated comprehensively to make the company’s attractiveness visible for current and future partners. It is deliberately not about retaining information to calm down stakeholders and to secure competitive advantages over competitors, but about gaining strategic stakeholders for a mutual corporate value creation process.

-         Inclusion: When different stakeholders contribute to value creation, it is crucial to also recognize these stakeholders as owners of their contributed values. This is based on an extended understanding of ownership. Here, the concept of ownership refers not only to material goods or financial resources, but also to intangible issues such as knowledge and experience. With their knowledge and experience, stakeholders provide property for a company in a broader sense. Like the financial owners, they have therefore the right to be adequately involved in processes regarding their property and to be informed accordingly.

-         Commitment: In a purely economic view, profit distribution (residual profit) primarily targets shareholders. This is also predominantly reported on. Especially because the management has to make discretionary decisions about the shareholders’ compensations, e.g. how much of the profit is being distributed and how much is being retained (pay-out-ratio). When other stakeholders, in the sense of a broader concept of ownership, contribute significantly to the corporate value creation process, these stakeholders should also be a compulsory part of the distribution of tangible and intangible values as well as receive information accordingly.

 A sustainability reporting based on these principles suggests that companies can create more values with and for stakeholders.

 Sybille Sachs

 

Caring about the customer

 

 

In stakeholder management customers are regarded as primary stakeholders of the firm but also many a firm not pursuing general stakeholder management, does think it should be customer oriented. “Usability”, “ergonomics” and “human centred design” are no longer exceptions in strategic considerations. The customers are moving toward the core focus of business, which I think is a good development, because traditional customer orientation is not enough. A deeper and more honest relationship to the people who are buying your goods is necessary. As I see it, the primary focus should not be on how to sell more of a company’s products, but on what the person buying the product really wants (also resulting in selling more products).

I would like to illustrate this think shift: Many people like to eat healthy food. A snack company spots this customer need, puts some milk into the product and praises it as being a healthy snack, even though most nutritionists would assess the product to be of the contrary (heavily sugared and fatty). So just by recognizing and addressing the consumer need doesn’t make a customer centred firm. Another example: Consumers like the look of dark red meat (not grayish meat) because they have built the mental shortcut (heuristic) that intense color in food is a sign of freshness. This is why market research study participants would prefer the dark red meat to a grayish meat product. A company that follows what the consumer actually wants, will not sell the consumer a meat that was treated with a gas that keeps it red (but doesn’t keep it fresh), it will sell the consumer fresh meat. This is not only a shift in strategy, this will have wide implications for a company’s daily business in distribution, packaging, communication and so on.

 

We use these mental shortcuts (here: intense color equals fresh food) because they mostly lead us to making good decisions (read publications by Gerd Gigerenzer for more on this topic). Shortcuts make life easier; especially in this fast paced, information-overloaded environment. These heuristics are good because they are often based on experience and implicit knowledge. But the shortcut only works if it is not tampered with by others. Robert Cialdini, a social psychologist, wrote several books on persuasion, summarizing his findings based on many experiments he had made in his research on e.g. selling tactics. But he states “Just because a given [powerful psychological] principle is successful does not mean we are ethically entitled to commission its persuasive power to create change.” I think this misusing psychological mechanisms such as heuristics is not only unethical it is also a strategy that won’t lead to sustainable business success. A company that shares its purpose (the “why” of a company) with its customers and therefore wants the same thing, will be able to engage the people they call their customers and conquer the challenges (such as resource scarcity) together in an innovative way, and of course sell their products.

 

Vanessa McSorley

In search for positive narratives of leadership

Within the context of our new research project “Towards positive narratives of leadership”, we have recently been in contact with numerous professional colleagues, leaders in firms and public enterprises. In this process we have seen that a large number of managers are looking for new paths for reliable and sustainably successful leadership behavior, after the many years of crisis as well as market and management failure. They don’t believe that yesterday’s mindset can solve the problems of tomorrow.

For many leaders the negative headlines have clouded the view of positive role models. However a positive role model is just what we were able to witness at the beginning of the New Year: hardly anyone believed in the end that the US would be able to negotiate the fiscal cliff. Thanks to their joint positive effort, Biden and McConnell managed to find a solution. Clearly what we need most are positive narratives for leaders that they are able to develop mutual solutions.

What do we mean by “positive narratives for leadership”? Five ideas come to mind:
First, it means that the firm is not understood as a selfish fighter against all other individuals or institutions in markets as well as in society, trying to reap profit from others by every legal and not so legal means. The firm is not outside but part of society, for which it must have positive regard and from which it must accept limitations and regulations. In a positive perspective, firms are required to act as economic and societal institutions. Thereby not only the leaders in firms are challenged but also those in society.

Second, leaders have to be aware that in a global and knowledge intensive society, the interactions with highly qualified and indispensable stakeholders are the key to superior value creation. These stakeholders are always human beings and have to be accepted and treated as such. They have to be accepted with their distinct knowledge, experience, values etc. All stakeholders, not only selected managers or shareholders, deserve respect and trust in providing firm specific engagement.

Third, short term profit maximization has to be replaced by the principle of economic and social value creation with and for stakeholders. This includes that contributing stakeholders get a fair share of the value created. The one-sided consideration of selected investors or managers in value distribution has to be avoided.

Fourth, the firm is always part of a complex and dynamic network of contributors and not the dominator. This embeddedness in a stakeholder network opens opportunities for mutual stimulation and positive developments for both the firm and the stakeholders.

Fifth, we also have to take a fresh look at competition. Gaining and maintaining a monopolistic competitive advantage towards others is not part of a positive mindset. The real values created for all relevant stakeholders must be transparent so that customers, investors, ranking agencies etc. can decide which firm creates the most value in an economic and social dimension.

It is a fascinating but also an urgently needed requirement to search for positive narratives of leadership that can serve as role models for leaders.

Sybille Sachs

 The Class Room as an Advertising Zone

The newspaper “Sonntag” published last weekend an article on Apple’s marketing strategy at schools (http://snipurl.com/227ahrp). And sure enough, Apple knows how to promote its products.

Apple has got a 70.4 percent share of the market at Swiss schools. But it seems that the company’s goal is to have an even stronger monopolistic role in this very important market. To reach its aim Apple launches new marketing projects. Its marketing strategy focuses on the teachers. “Apple Distinguished Educators” (ADEs) is a worldwide community of visionary educators whose goal is to make a difference in the future of education. ADEs teach students, share their expertise with other educators and advise Apple on the realities of integrating technology into learning environments (http://snipurl.com/227apep). One has to admit that this idea is a great example of stakeholder involvement in the development and innovation of products. Educators have to apply for being a member of this worldwide community. Already 28 Swiss teachers have got the honor to be ADEs.

Additionally the Education-Team at Apple Switzerland is implementing the global “Apple Professional Development Program”. It should complement the offers of the University of Teacher Education in information and communication technology (ICT). Teachers teach teachers how to use Apple products in the class room.

Furthermore regional training centers are built, a pilot project allocates iPads for schools and Apple is developing school books in all four national languages for iPads. Apple pursuits a pretty offensive marketing strategy, but also Microsoft tries to bind schools to its products, what already caused differences with the Swiss government (http://snipurl.com/227b86u).

These examples show that the education market is very important for tech companies and therefore highly competitive. As education is part of the public sector the companies role in this area should be controversially discussed.

The critical aspects of the mentioned marketing strategies are multifarious.

Both enterprises try to consolidate their market position by their campaigns at schools. As the knowhow of using technology is very important for nowadays education and schools only have limited financial resources, these “public-private partnerships” are actually important. But the problem is that these examples aren’t real public-private partnerships. And so we have to ask ourselves who gains more profit out of these collaborations.

As this kind of products and especially the brand behind the product have got an emotional component and want to influence the attitude to life, it becomes very important for the companies to win young customers. Therefore the campaigns at schools are part of a very clever marketing strategy. But do we want ad men to teach our children? Or shouldn’t class rooms rather be commercial-free?!

If the public reacts skeptical on companies that sponsor professorships, then Apple’s behavior has to provoke skeptic too. The given examples raise the issue of independency of the educators or institutions to a certain extent. Teachers who simultaneously operate as Apple-ambassadors will find themselves in a conflict of interest. But independent education is one of the most important aspects for the development of knowledge.

Sustainable solutions are important to reduce our dependency on these companies. We should care about the sustainable education at our schools and not about sustainable volume of sales for Apple and Co.

Sabrina Stucki