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Possible but not easy: Decision making for corporate sustainability

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Corporate sustainability is a formidable organisational journey; however, like all things worthwhile, it is not an easy one. Organisations which strive for corporate sustainability recognise that economic, social and environmental aspects are systemically interdependent and that they need to be integrated. Instead of making unilateral decisions that affect multiple stakeholders, they integrate the interests of multiple and diverse stakeholders into their decision-making processes. As such, they 'zoom out' and exchange a narrow focus on satisfying shareholders and key stakeholders for a bigger picture – a wider frame – that incorporates and seeks to satisfy diverse stakeholders that are affected by corporate decisions.  

Decisions that have corporate sustainability in mind need to integrate three often-conflicting dimensions: economic development, social development and environmental protection. Integrating these dimensions requires an understanding of their interrelatedness over time. Corporate decisions, however, are often made under significant time and budgetary pressures, leaving little time to explore the interdependence of economic and social-ecological dimensions. As a result, decision makers minimise decision inputs by focusing on their most important – primarily economic – priorities.

Instead of searching for a better understanding of how economic and social-ecological dimensions are interrelated in order to satisfy a broad range of stakeholders, decision makers narrow the search to satisfy their most important, direct stakeholders and shareholders in order to adhere to strict time and budgetary requirements. Consequently, rather than making satisfying decisions, they tend to make satisficing decisions – a term used by Herbert Simon, author of one of the first books on business administration.

Simon argued that instead of searching for the best alternative in decision-making processes, we often settle for the first option that will do (satisfice). Time, budget and other pressures often limit the exploration of diverse sources of information and prohibit the search for alternative options during decision-making processes. In practice, decision makers are faced with a tension between focus and integrating diversity. While collaborating only with those individuals and departments which are like-minded will successfully reduce the complexity, time and cost of a decision, the consequences and impacts of not integrating diverse stakeholder interests are often underestimated. 

Therefore, in for-profit organisations, the persistent pressure concerning time and money influences decision-making processes to prioritise economic dimensions at the expense of social-ecological dimensions. Furthermore, stakeholders who are indirectly involved in organisational transactions are often not present, or are under-represented in the decision-making process. As a result, the interdependence of different dimensions is often not well understood at the time decisions are made. In a relationship where two or more aspects are interrelated, the consistent prioritisation of one side at the expense of the other will eventually lead to a negative response – even if one side is very patient. Eventual responses often have devastating consequences, including significant financial implications.

Therefore, decision-making processes that appear to satisfy only a small group of direct stakeholders and shareholders, but have not considered the interdependence between these and other interrelated dimensions, may eventually lead to negative consequences. These consequences tend to be destructive for all three dimensions of sustainability.

Despite significant advances in sustainable development in South Africa and beyond, many corporations seem to prioritise economic dimensions at the expense of social-ecological ones and risk falling into the same "integrated spin" that BP was accused of after the BP oil spill in the Gulf of Mexico in 2010. Although BP was applauded for its sustainability efforts prior to this incident, a report found that the catastrophe was a result of consistent prioritisation of profit at the expense of social-ecological dimensions.

Integrating diverse and often competing aspects in corporate decision-making processes is not easy. It is not simply a statement of intent, a change in values or a commitment to sustainability. It is not merely setting up a sustainability department, giving a percentage of profit to social-ecological causes, or producing a sustainability or integrated report. Although these things are important, they are only the beginning. Integration also involves identity and cultural shifts, followed by uncomfortable changes in day-to-day procedures within the organisation and within the individuals who form part of it. These changes take time: they involve leading people to understand a different reality and managing processes to enable such understanding. 

Why shift from satisficing to more satisfying decision-making processes when the process involves such an uphill and costly journey? In the past, organisations could choose an easier, low road with little resistance and significant rewards for speed and efficiency. Today, the landscape is changing. Society has a heightened social-ecological awareness empowered by access to information through the Internet; stakeholder 'voices' are heard in public places through social media; legal requirements are proliferating and taken-for-granted assumptions about the firm's purpose are being challenged. In this context, the seemingly faster and easier low road offers limited visibility and leaves organisations vulnerable and unable to respond adequately to the complex and fast-changing environment. The high road offers the benefits of better visibility, including early identification of unfamiliar business risks, preventative rather than remedial action and solutions that cater for fast-changing societal expectations – all of which have significant financial implications over time. Although the high road is more costly and time-consuming at the outset, the benefits of greater visibility and foresight leave organisations less vulnerable and better prepared for circumstances that may adversely affect expected outcomes and financial results.

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Nadine Mayers recently completed her doctoral dissertation on the integration of economic and social-ecological dimensions in corporate decision making. She teaches the integration of leadership, sustainability and decision making on the USB's MBA programme and facilitates executive education as part of USB-ED's virtual faculty.



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