Sustainability Defined

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Hector R RodriguezDirector of Sustainability at Biogen IdecAdjunct Professor, School of Business at Mount Ida College

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Objectives of this Talk – An Overview of…

What is Sustainability?

What is Sustainability Management?

Review of tools that assist in developing and implementing a Sustainability Strategy

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Challenges of this DefinitionDoes not address resource consumption issues, nor the distinction between

renewable resources and non-renewable resources. Does not really answer the question of what sustainability means and also leaves it to our imagination to

determine which “needs” are legitimate and which ones are not. 2

Part I - What is Sustainability?

Traditional DefinitionSustainable development is development that meets the needs of the

present without compromising the ability of future generations to meet their own needs.1

Philosophically, Sustainability could be thought of as the goal and Sustainable Development one of the requirements needed to achieve it…

1. “Our Common Future.” World Commission on Environment and Development. Aug. 1987. 2. “Re-Casting the Triple Bottom Line.” Center for Sustainable Innovation. Jun. 2007

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Addresses questions such as: 3

A Better Definition of Sustainability…

1. Is it possible for the rate of human use of renewable resources to exceed the rate at which such resources are renewed or replenished?

3. Daly H., Beyond Growth: The Economics of Sustainable Development. 253 pp. Boston: Beacon Press, 1996.

2. Is it possible for the rate of human use of non-renewable resources to exceed the rate at which renewable replacements for such resources are developed?

3. Is it possible for the rate of waste emissions by humans to exceed the rate at which the environment can assimilate such wastes?

4. Is it possible for the rate of human, social, constructed and economic needs to exceed the rate at which they are being created?

YES… Freshwater… fisheries… clean soil

YES… e.g. Minerals… Oil… Subsidies required for renewable resources

YES… e.g. Superfund sites… Contaminated rivers… Smog

YES… Healthcare in Africa… Education in the US… Infrastructure in Mexico…

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As the answers to the questions on the previous slide can be yes, we can say that the

human activities associated with them are unsustainable.

A Better Definition of Sustainability… (cont)

In order to be sustainable, we must therefore address the impacts of human activity on the quality and sufficiency of vital capitals (renewable, non-renewable and societal) in the world.

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What is Capital?

“Capital” is a stock of anything that yields a flow of valuable goods or services to people who need them.

Sustainability must therefore address and manage the impacts of human activity on the quality and

sufficiency of vital capitals in the world…

Linking Vital Capitals and Well-Being…

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This is the capitals-based theory of sustainability, the foundation for most of what passes for mainstream practice in Sustainability Management.

Vital Capitals and Well-Being

Economic Capital

Social Capital

Environmental Capital

Available flows of beneficial goods and services

Appropriated by individuals and collectives

Resulting in levels of individual and collective well-being

CAPITAL FLOWS

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Is the extension of the economic notion of capital to environmental goods and services. Environmental capital is thus

the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future. For example, a

stock of trees or fish provides a flow of new trees or fish, a flow which can be sustainable indefinitely. Environmental capital may

also provide services like recycling wastes, water treatment and removal of air contaminants.

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Social Capital

• Social capitals required for human well-being include:– Human capital - Individual knowledge, skills, and

other assets (including human rights) required to take effective individual action.

– Community capital - Shared knowledge and cooperative networks of people committed to achieving common goals (schools, hospitals, government, etc.)

– Constructed capital - The material world that humans produce such as roads, utilities, etc.

• Also known as anthropogenic capital, because these capitals are produced by humans

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Should not to be confused with financial capital“So, while the economic component of the triple bottom line

is often assumed to be synonymous with financial performance [i.e., with the financial bottom line], in fact, there are significant differences between the two….[E]conomics

extends beyond the boundaries of a single organization….A company’s investment in a community can

serve as an engine of growth in the economy through employment, boosting local supply chains and developing a new skills base. The goods and services that companies produce can also contribute to a higher quality of life.” 4

Economic Capital

4. Henriques A., Richardson J. The Triple Bottom Line: Does It All Add Up? London: Earthscan Publications Ltd.., 2004.

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Economic Capital

• There are many, and could be considered variants of social capital:

–Employment rates–Employees’ wealth–Owners’ wealth–Local, regional and global commerce–Trading partners–Customers–Community economic affairs–Etc.

This diagram depicts an outdated model… Economic Capital is not just

about profit…

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Sustainability is the subject of a social or management science that studies and manages the impacts of human activity on

the quality and sufficiency of vital capitals in the world, as required to ensure human well-being. 5

What is then Sustainability?

5. McElroy, M. Social Footprints – Measuring the Social Sustainability Performance of Organizations. Dissertation, 2008

The Sustainability Professional studies and manages the impacts of an organizations’ activities on the quality and

sufficiency of vital capitals wherever it operates, as required to ensure human well-being.

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Part II - What is Sustainability Management (SM)?

Sustainability ManagementSustainability Management

Enterprise OrientationEnterprise Orientation

Social Benevolence

Social Benevolence

Eco-efficiency

Eco-efficiency

Triple Bottom-Line

Triple Bottom-Line

Context Based OrientationContext Based Orientation

Life Cycle OrientationLife Cycle Orientation



Economic Capital

Economic Capital Social CapitalSocial Capital

LCA’s of Products and Services

LCA’s of Products and Services



Social Capital (Emerging)

Social Capital (Emerging)

Refresher: to achieve Sustainability, SM must address all three vital capitals

1 2 3 4

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Life-Cycle Orientation

As here defined, LCA’s form an important element of Sustainability Management

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• Product- and life-cycle-based• Takes the position that it is more important to influence the environmental impact of a

product throughout its entire life cycle• This approach examines the impact of a product from its inception as a raw material to

its ultimate disposal following consumer use

Emerging UNEP-driven initiative

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Eco-efficiency

Social Benevolence

Triple Bottom Line

Context-based Sustainability

Enterprise Orientation – Four Schools of Thought

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“Industry is moving toward ‘demanufacturing’ and ‘remanufacturing’ — that is, recycling the materials in their products and thus limiting the use of raw materials and of

energy to convert those raw materials…It is the more competitive and successful companies that are in the forefront

of what we call ‘eco-efficiency’ ” 6

Arguably the basis of the “green” movement; also the basis of LCAs. As eco-efficiency narrowly

evaluates economic implications (profit only), and tends to ignore social concerns, it could at most

be considered an element of Sustainability Management.

Eco-Efficiency

6. Schmidheiny S., Changing Course, The MIT Press, Boston: Apr. 1992

2

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Social benevolence views sustainability in terms of social responsibility and

philanthropy. Companies that adhere to this view tend to focus on social and

economic impacts, and less in terms of environmental performance. As such,

social benevolence can be considered an element of Sustainability Management.

…“is the continuing commitment by business to behave ethically and contribute to economic development while

improving the quality of life of the workforce and their families as well as of the local community and society at large”

(WBCSD, 1999)

Social Benevolence (Corporate Social Responsibility)3

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“Today we think in terms of a ‘triple bottom line,’ focusing on economic

prosperity, environmental quality, and social justice.” 7

Explicitly pluralistic in its orientation: social, economic, and environmental. Arguably the dominant sustainability

paradigm in use today, including reporting requirements under the GRI.

Triple Bottom Line

7. Elkington J., Cannibals with Forks, Capstone Publishing LTD. Sep.1999.

4

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Context-Based Sustainability 8

8. McElroy M., “Sustainability Measurement and Reporting.” Deloitte. Weston, MA. 2010

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• An approach that quantitatively express sustainability performance in the form of a quotient

• Numerators represent actual impacts on vital capitals• Denominators represent normative impacts on the same vital

capitals– Most mainstream tools and methods have been

numerator only in scope– While denominators are normative, they are usually

grounded in factual claims about the world• Ecological limits• Minimal social and/or economic conditions required for

human well-being

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Freshwater Use Report for Company X

2.3

2.4

2.5

2.6

2.7

2.8

2.9

3

3.1

2003 2004 2005 2006 2007 2008 2009

Gal

lons

/Cap

ita/Y

ear (

Mill

ions

)

Gallons/Capita/Year (Millions)

Here’s the Company X performance with context missing

Context-Based vs. Context-Free Example

Source: Center for Sustainable Innovation

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Ecological Quotient of Freshwater Use for Company X

0

0.5

1

1.5

2

2.5

3

3.5

2003 2004 2005 2006 2007 2008 2009

Gal

lons

/Cap

ita/Y

ear (

Mill

ions

)

Gallons/Capita/YearUsed by Company X(Millions)

Gallons/Capita/YearAvailable on Earth(Millions)

Sustainability Threshold

Sustainability Threshold (performance above

threshold is unsustainable)

Here’s the Company X performance with context added

Context-Based vs. Context-Free Example (cont.)


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Another hypothetical scenario

Context-Based vs. Context-Free Example (cont.)

Ecological Quotient of Freshwater Use for Company X

0

0.5

1

1.5

2

2.5

3

3.5

2003 2004 2005 2006 2007 2008 2009

Gal

lons

/Cap

ita/Y

ear (

Mill

ions

)

Gallons/Capita/YearUsed by Company X(Millions)

Gallons/Capita/YearAvailable on Earth(Millions)

Sustainability Threshold


Sustainability Threshold (performance above

threshold is unsustainable)

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The Sustainability Quotient


The Sustainability QuotientA formula for Measuring and

Reporting Corporate Sustainability Performance

S = A/NWhere:S = Sustainability Performance*A = Net Actual Impacts on the Carrying Capacities of Vital CapitalsN = Net Normative Impacts on the Carrying Capacities of Vital Capitals

*For Ecological Quotients, S scores of ≤ 1 are sustainable, ≥ 1 unsustainable; for Societal Quotients, S scores of ≥ 1 are sustainable, <1 are unsustainable


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Sample of Context-Based Metrics

Areas of Impact Example/Description*

Environmental

- Water Use A metric that measures an organization’s use of water resources against an allocated and proportionate share of locally renewable supplies.

- Solid Waste A metric that measures an organization’s use of local landfill resources against an allocated and proportionate share of available capacity.

Social

- Work/Life Balance A metric that measures an organization’s impacts on employee work/life balance against standards grounded in employee family well-being.

- Community Involvement

A metric that measures an organization’s contributions to community well-being against a standard expressed as a percentage of profits.

Economic

- Livable Wages A metric that measures an organization’s compensation practices against locally-relevant livable wage standards.

- Economic Institutions

A metric that measures an organization’s contributions to economic institutions (e.g., regulatory bodies) as a percentage of profits.

*Note: All standards of performance must be grounded in levels required to ensure human well-being.

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What is then the Right Framework?

As Sustainability Management concerns itself with managing the impacts of human activity on the quality and sufficiency of our vital

capitals as required to ensure human well-being, it follows that:

Only the Triple Bottom Line, implemented in context, allows us to appropriately manage the impacts of human activity on all vital capitals

as required to guarantee human well-being.

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Part III – Developing a Sustainability Strategy 9

Objectives

• Specific targets

Mission

• Fundamental purpose

• Values

Strategy

• Prioritizes initiatives

SupportingOrganizationalArrangements

• Structure• Rewards• People• Systems

Strategic Analysis

• Benchmarking• Assessment of

impacts on vital capitals

• Assessment of internal strengths and weaknesses

9. Hambrick D., Fredrickson J., “Are You Sure You Have a Strategy.” Academy of Management Executive. 2001. Vol 15, No. 4.

Basic and formulaic in nature; the models used on this and

the next slide are just examples of available tools

which could help in the development of a sustainability

strategy.

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Infrastructure

Human Resource Management

Technology Development

ProcurementInboundLogistics

Operations OutboundLogistics

Marketing& Sales

Service

Support Activities

Primary Activities

Education and job trainingDiversity and discrimination

PhilanthropyWork-Life Balance

Transportation impactsPricing practices

Marketing practicesProduct Safety

TransparencyLobbying

Tax PlanningStakeholder Alliances

Supply chain practicesUtilization of natural resources

Trading PracticesCommerce Impacts

Emissions and wasteEnergy and water usage

Worker safety and labor relationsHazardous materials

Packaging useTransportation impacts

Customer AssistanceQuality of Life

Relationships with universitiesEthical research practices

Conservation of raw materialsRecycling

Assessing Vital Capital Impacts – Value Chain 10

10. Porter, M. E., “Strategy & Society.” Harvard Business Review, Dec. 2006

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Porter’s Model Hambrick & Fredrickson

Other Useful Business Frameworks

McKinsey’s 7-S

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Prioritizing Initiatives - Materiality Assessment 11

11. Global Reporting Initiative. Sustainability Reporting Guidelines. Amsterdam: 2006.

Organization should concentrate its efforts on those activities that:

1. Significantly impact vital capitals, and / or

2. Are of great importance to its stakeholder community

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Summary and Conclusion

Sustainability is defined as that subject of management science that studies the impacts of human activity on the quality and sufficiency of vital capitals in the world as required to ensure human well-being.

The Sustainability Professional studies and manages the impacts of corporate activities on the quality and sufficiency of vital capitals wherever it operates.

Vital capitals include Social, Environmental and Economic capitals. The Triple Bottom Line approach, together with Context-Based Sustainability, is the Sustainability Management framework which most appropriately studies and manages those vital capitals

Management frameworks such as the “Value Chain,” Hambrick and Fredrickson’s model, “McKinsey’s 7-S,” “Five Forces” and SWOT’s are of help in developing a Sustainability Strategy.

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1. “Our Common Future.” World Commission on Environment and Development. Aug. 1987.2. “Re-Casting the Triple Bottom Line.” Center for Sustainable Innovation. Jun. 2007 3. Daly H., Beyond Growth: The Economics of Sustainable Development. 253 pp. Boston:

Beacon Press, 1996.4. Henriques A., Richardson J. The Triple Bottom Line: Does It All Add Up? London:

Earthscan Publications Ltd.., 2004.5. McElroy, M. Social Footprints – Measuring the Social Sustainability Performance of

Organizations. Dissertation, 20086. Schmidheiny S., Changing Course, The MIT Press, Boston: Apr. 19927. Elkington J., Cannibals with Forks, Capstone Publishing LTD. Sep.1999.8. McElroy M., “Sustainability Measurement and Reporting.” Deloitte. Weston, MA. 2010 9. Hambrick D., Fredrickson J., “Are You Sure You Have a Strategy.” Academy of

Management Executive. 2001. Vol 15, No. 4. 10. Porter, M. E., “Strategy & Society.” Harvard Business Review, Dec. 2006 11. Global Reporting Initiative. Sustainability Reporting Guidelines. Amsterdam: 2006.

References

Sustainability Defined

Technology

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