Environmental Management Leadership Symposium May 2 & 3, 2011

1. Environmental Management Leadership Symposium May 2 & 3, 2011 Eco-efficiency, growth and the nature of corporate sustainability Stefano Pogutz and Valerio Micale Università Bocconi

2. Market growth Environmental manageability Growth rate, size, evolution stage, consumption pattern Ecosystem complexity and organizational structure Goal • Understanding under whichconditions firms can realistically target environmental sustainability • How far individual companies can contribute to environmental sustainability? • How much are companies prisoners of the system and dominated by exogenous forces that limit the real possibility to pursue sustainable business models?

3. The notion of CES: Literature Review • Late 80s → WCED • The term sustainable development is defined… • Early 90s → Greening of Industry & ONE Interest Group • Diffusion of concepts like greening and natural environment • “Organizational theories cannot adequately address environmental concerns because of their limited ideas of 'organizational environment‘”(Shrivastava, OS 1994) • “Organizations studies have de-naturalized the environment” (Shrivastava, OS 1994) • Knowledge and theory develops “… as if as if organizations lack biophysical foundations” (Gladwin et al., AMR 1995) • 1995 → Academy of Management Review special Issue on “ecologically sustainable organizations” • Developing the theoretical roots /Starik and Rand, Hart, Gladwin, Kennelly and Krause, Jennings and Zandbergen, Purser, Park and Montuori, Shrivastava, etc.) • Critics to the dominant organizational paradigms

4. Mainly incremental with dominant org. theories Opportunity for more disruptive contributions Rich and rigorous body of research The notion of CES: Literature Review • After 1995 → two main streams of research Firm level studies • Resources and capabilities for the greening of companies • “business case”: environmental performance, competitiveness and financial performance Relations with the actors of the organizational environment • Institutional and stakeholder theories • The State of the Art → (Bansal & Gao, 2006; Berchicci and King, 2007; Etzion, 2007; Kallio & Nordberg, 2006)

5. Eco-efficiency • The attempt to combine ecological and economic efficiency while allowing the delivery of goods and services, and while progressively reducing the environmental impacts and the resource intensity throughout the life cycle of the product • Integrates environmental concerns into companies' existing business models • Produces win-win solutions, reducing relative impact and production costs But … • Focus on relative improvements • … and preserves dominant business practices Corporate environmental sustainability

6. Economy Environment Society Triple Bottom Line • Balancing economic goals with social and environmental goals • Increasingly adopted by companies But … • Trade-offs among the three variables and absence of a methodology Corporate environmental sustainability • Environmental sustainability is not concerned with relative improvements, but it depends on absolute thresholds and on the capacity of ecosystems to absorb external shocks and emission releases (Arrow et al., 1995).

7. Market growth Environmental manageability Conditions of unbalance … • Managerial practices have ultimately proved to be partially effective, with sustainability-driven strategies only marginally mitigating the firm impact on nature • The large majority of firms has continued staying protected in the current dominant business framework • Two conditions: • only partially controllable by the single firm • strongly influence and limit the possibility to stabilize its relation with ecosystems dynamics

8. Market growth … • Growing consumption pattern and primary demand • Geographical extension of markets (emerging economies …) • New market opportunities intercepting unsatisfied needs • The attractiveness of business is driven by its rate of development • Firms use market growth as a strategic option to maintain or increase competitiveness • Market growth is a partially exogenous variable But … • Market growth negatively influences corporate environmental sustainability…

9. Firm Ecosystem Mass balance: input and output Harm Manageability … • The possibility, for the individual firm, to effectively manage the harm caused to the natural environment by its processes and products • Complex nature of ecosystems • Complex adaptive systems • Non-linear, variety of species, different flows • Resilience of ecosystem depends on factors exogenous to the company • Ecosystems time-scales and spatial-scales do not match the companies' ones • Structure of the firm and company position on the supply chain

10. High Market growth Low High Low Manageability of the environmental impact Four scenarios for corporate env. sust.

11. Implications • Companies • attention to the effectiveness of environmental strategies • learning about the complexity of the ecosystems • environmental sustainability goals must intercept the relation between the individual firms and the environmental thresholds • new environmental knowledge and competencies to manage ecosystem complexity • … • Policy makers • strong governance • involvement of agencies and organizations operating at several hierarchical levels • links between system environmental indicators and corporate environmental indicators • …

12. Implications • Future research • understand the linkages between competitiveness, growth and the possibility to develop alternative business models, that evolve in balance with ecosystem functions and ecosystem dynamics • exploring innovative ways to challenge dominant consumption patterns • exploring emerging economies and the trade-offs with local/global environmental aspects, and social issues • acknowledging the complexity of ecosystems where organizations are embedded • … • bridging the disciplinary distance between ecology and management theory

13. Thanks!!!