Futures of the sustainable firm: An evolutionary perspective

Futures 63 (2014) 86–100

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Futures of the sustainable firm: An evolutionary perspective Antonella Zucchella a,*, Sabine Urban b a b

University of Pavia, Italy University of Strasbourg, France

A R T I C L E I N F O

A B S T R A C T

Article history: Available online 19 August 2014

The response of firms to sustainable development issues needs to pass through a deep rethinking of the strategic design, encompassing the entire organization, its functions and re-shaping its business model. This contribution proposes a frame of reference for SD oriented organizations, based on three cornerstones: principles, processes and outcomes. Based on an abductive research approach, an analysis is developed on some case studies. Special attention is devoted to the dynamics of SD oriented organizations in order to understand how firms can evolve towards progressively more challenging models of business which make compatible profitability and growth with respect for the environment and – beyond mere respect – positive proactive action to improve the planet resources. ß 2014 Elsevier Ltd. All rights reserved.

Keywords: Sustainable development Strategy Business model Environmental responsibility

1. Introduction The response of firms to sustainable development issues needs to pass through a deep re-thinking of the strategic design, encompassing the entire organization, its functions and re-shaping its business model. This contribution builds on the recent stream of thought in corporate social responsibility (CSR) and sustainable development (SD), supporting the idea that traditional CSR is failing to deliver (Browne & Nuttal, 2013). We address the call for a stronger engagement of firms’ sustainable development, and a delivery of this engagement to the present and future stakeholders through re-designing products, processes, business models and governance systems (Browne & Nuttal, 2013; Porter & Kramer, 2011; Preuss & Dawson, 2009). There is a research gap in understanding better HOW this aim can be achieved. In this contribution we focus on going green, that is, on the environmental pillar of a sustainability approach. However, we think that similar conclusions may prove valid also for the social pillar and, moreover, successful sustainability-driven companies pursue superior performance in both dimensions, because they tend to be deeply inter-related. We address the futures of sustainable companies in different directions: first, in suggesting an evolutionary path, articulated in three stages, towards a challenging model of firms with positive footprint. This future model of corporation goes beyond regulatory compliance, and beyond zero impact. Second, we suggest that this transition involves not only a rethinking of the company management principles, but also of the relationship between firms, institutions and societies, at a local and global level. This change can affect firms’ strategic design, corporate governance and the system of company partnerships. Third, we identify key drivers of this transformation. Among the main actors of change, we suggest that an important role is played by transformational leaders.

* Corresponding author at: Department of Economics and Management, via S.Felice 5, 27100 Pavia, Italy. Tel.: +39 382986416. E-mail address: [email protected] (A. Zucchella). http://dx.doi.org/10.1016/j.futures.2014.08.003 0016-3287/ß 2014 Elsevier Ltd. All rights reserved.

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The literature on CSR and related topics, has known three main stages in the last decades. First, it needed to gain legitimacy as an issue relevant for profit-oriented firms. Then, it developed constructs and tools to manage and make accountable the CSR efforts of firms. Lately, there is growing recognition that from goals setting to corporate strategizing, firms have to integrate sustainability deeper into a company’s life. Firms need to develop strategies, models of business and organizations to deliver effectively SD to their stakeholders. Generating profit for shareholders should be integrated into the broader, longer-term oriented perspective of delivering value to all stakeholders, because in the long run there is no trade-off between company growth and a sustainable world. We also think that short-term trade-offs are manageable, in the light of deep changes in markets and technologies and through public–private relationships. The transition towards the sustainable company is seldom solely dependent on the firm vision, leadership and resources, though these matter much. The role of institutions is also key in driving this process, like norms, public procurement, public–private partnerships and incentives to sustainable behaviour. In addition, customers, green investors and public opinion increasingly affect the likelihood and effectiveness of sustainability-oriented corporate strategies. On the other hand, the recent global economic crisis has adversely affected the possibility of both governments and firms to commit resources to ‘‘green investing’’. The empirical evidence discussed in this work, supports the idea that for a number of firms it is possible to pursue a sustainable way of doing business without harming profitability and even enhancing the perspectives of firm survival in the long term. Bridging the present to the future through SD-oriented strategies can unleash a huge potential in innovating product, processes, businesses and organizations (Porter & Kramer, 2011). The aim of the cases presented in Section 3 is not, of course, to achieve statistical generalization, but to target analytical generalization (Yin, 2003). They intend to suggest possible paths towards an increasingly sustainable model of firm, under diverse conditions, like, for our topic, the green vision and the green-strategizing will of top managers, the institutional context, ideas and pressures from civil society, business partners or open innovation networks. Not every business is likely to achieve a positive environmental impact, not even in the long run, due to the specific nature of their economic activity. Increasing the number of companies with a positive environmental impact can compensate for a number of negatively impacting activities. Decreasing the latter requires a parallel evolution of consumption styles, of technological innovations and regulations. The focus of this contribution is mostly on the first stage of this change, that is, how a number of companies can realize a transition towards an advanced model of sustainable corporation. Section 2 illustrates a general frame for corporate thinking and acting towards a SD oriented dynamic system. The purpose of the model is to show the systemic inter-relations among the key vectors for integrating SD into a firm’s strategic design and operations and to serve as a frame of reference for the subsequent case analysis. Some companies are analyzed along the constructs of this model, in order to identify in particular how principles have been integrated and translated into operations (Section 3). The observation of these firms also permits to identify differentiated footprint objectives and different postures towards SD integration in business activities. The analysis also sheds light into a possible evolutionary path of SD-oriented strategizing along time. There is a research gap also in understanding how the transition towards the sustainable firm should be managed, and under which transition path. Our research addresses both these gaps, discussing in Section 4 a dynamic model, called Stages of sustainable development strategizing 2. The sustainable firm: one of the answers to humans’ and planet’s future at risk Our contribution fits with an extended resource based view (RBV) framework (Russo & Fouts, 1997). By extended RBV, we mean a view of firm performance and growth based not only on internal resources and capabilities (as the traditional theory postulates) but also dependent on the access to external (environmental) resources. Extant literature in strategic management frequently ignores that competitive advantage is achieved also via the use of resources which are neither owned, nor paid by the firm. These resources are considered as positive externalities. The role of external resources has been only partially acknowledged by those Authors who postulated the role of local and national factors of competitiveness (Porter, 1990), of relationships with other firms (relational-based view, Dyer & Singh, 1998), of relationships with stakeholders (Freeman, 1984). Little is debated about how competitiveness rests on the use of natural resources, which represent both local and global common goods. The actual use/damage of these resources compromises not only relationships with actual stakeholders but also the wealth of future generations, a major but silent stakeholder. Thus, we think that an extended resource-based view frame could reconcile different streams in strategic management theory, encompassing RBV, stakeholder theory and the more recent sustainable modernization theory, which supports the integration of environmental objectives into corporate metrics and into innovation processes (Quaddus & Siddique, 2011). As mentioned in the introduction of this paper we focus our attention on going green (McDonagh & Prothero, 1997) and more precisely on natural capital management (see Box 1). 2.1. General frame for case analysis Maintaining and protecting the natural capital as defined (Box 1) is a concern for the whole socio-economic system; in this contribution we focus our attention mainly on corporate answers, and notably on how firms can contribute to natural capital preservation and also its reconstitution, by developing progressively a model of sustainable company. The firm in most cases is not self-sufficient in tackling the sustainability objectives, because its profit target may be in conflict with a sustainable use of resources – in our case the common good of natural capital. Some industries are not in a condition to be

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Box 1. Sustainability and varieties of capital The first alarming signals concerning the future of a viable planet came from MIT Meadows Report (Meadows, Meadows, Randers, & Behrens, 1972) but the term sustainability was, apparently, first used by the United Nations Environment Programme (UNEP, 1980). The objectives mentioned concerned the conservation of the biosphere (the thin covering of the planet that contains and sustains life). Later on the report of WCED (UN World Commission on Environment and Development), so called Brundtland Report (WCED, 1987) extended significantly the concept of SD, defined as that development that meets the need of the present generation without compromising the ability of future generations to meet their own needs (WCED, 1987, p.43). All kinds of natural resources were concerned, not only natural resources (biodiversity, soils, waters, etc.) but also the responsibility of all actors was included. The industrial sector can actually be considered as the major one because it structures the production processes and the consumption through the offered goods and services. The production process mobilizes different flows of resources (work, natural resources and information) originated in four kinds of capital: tangible capital, intangible capital, human capital (considered as a set of know-how and know-being of a society’s members (Calame, 2009) and natural capital, defined as the planet’s capacity to restore or maintain the ecosystems’ balance (UNEP-IUCN, 1980) and (Calame, 2009). Since the beginning of the industrial revolution developed countries have accumulated an ecological debt due to an excessive use of natural resources like raw materials and fossil energies, not renewable, or on damaging on an irreversible way the quality of soils, oceans, biodiversity, etc. A correct governance (or collective management) for such common goods for present and future generations is not easy to implement in a context of dominant and high competitive global market economy, but an emerging awareness of the urgent necessity to change the mindsets is on the way as it will be shown in Section 3.

sustainable due to the nature of their business, to its hunger of natural resources and to the actual state of productive technologies. In these cases firms should be accompanied towards a sustainable model through public intervention, in the form of norms, penalties and incentives, and shared projects, for examples via public–private partnerships. These solutions are necessary not only to encourage the transition to sustainability of some industries and companies, which cannot alone follow this path. They are also fundamental in order to develop clean technologies and support their widespread adoption in every business. Natural capital is a global common good, the boundaries of which are not always easy to define (oceans, air, etc.). Therefore, also regional and national governments can only partially deal with this issue and may be subject to moral hazards from less virtuous players. A global problem invokes a global governance, which represents the most ambitious frontier for an effective natural capital policy (Ostrom, 1990). In this paper, we concentrate on what firms can and should do to achieve with their own resources and capabilities – or through partnerships – an increasingly sustainable model of business. We also support the idea that sustainability has different degrees and the most ambitious one is represented by a model of firms which does not just target regulatory compliance and good citizenship via reduced environmental impact, but takes the challenge of targeting a positive impact. The SD-oriented innovations are, as all innovations in general, sources of opportunities and of risk; but at the same time they are probably more difficult to handle for diverse reasons, notably because they are implemented in complex institutional and technological contexts, and that the respective responsibility of all the concerned actors is not clearly designed. Fig. 1 synthesizes this issue. The upper triangle refers to the Principles considered as guidelines on the pathway towards a new SD oriented paradigm urgently needed because humans’ and planet’s well-being are at risk (IPCC, 2011; Reeves, 2013; Stern, 2007; UNEP, 2011). The second triangle is concerned with managerial processes going from incremental re-engineering methods to more radical changes of business models. The third triangle introduces a discussion about the Outcomes i.e. the results that can be evaluated in terms of performance indicators. The SD-oriented firm is influenced by and can also proactively influence the more general system it belongs to, for example by developing benchmark good practices of green management and green strategizing, taking action across the value chain and/or supporting local community development. Parrish (2007), who proposes two organizing principles for this type of firm, supports the systemic perspective as applied to the sustainable enterprise. According to the first one the overall value of the enterprise must concord among hierarchical levels, and three levels are identified: the stakeholders, the enterprise and the socio-ecological macro system. All the three system levels are characterized by duality of needs (survival and purpose). Central for this contribution is the concept of business model proposed by the same Author: a business model is the method by which an enterprise solicits and distributes flows of valued resources from and to its operating environment. It is the business model that provides an operational strategy for how the enterprise will meet its survival and purposive needs as a going concern (ibid, p. 856). 2.2. Principles: guidelines for thinking and acting The age of responsibility is supposed to become the new DNA of business (Visser, 2011). It is not only a matter of rationality, it is also a matter of ethic (Nida-Ru¨melin, 2011; von Hauff & Kleine, 2009). Responsibility means also for managers to focus their attention on real value creation (Urban & Zucchella, 2011), as opposed to financial value, which frequently generates financial speculation, misuse of resources and short termism. In this contribution, real value creation also refers to the restitution to the natural system of the resources that has been used, without compromising the resources

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Fig. 1. A three cornerstones model for SD oriented organizations.

available for future generations. Nicola Lamberti, CEO of SevenPixel, a green company in the digital business, says: ‘‘Any individual and any organization needs to give back to the nature and to the society more resources than those utilized. We need to reconstitute a natural capital eagerly exploited. Short termism has caused both financial speculation and natural capital speculation. Both have destroyed value, on one side economic real value of private goods and on the other side natural value of common goods’’. On the other hand, a healthy financial value may be a complement to real value and feed long-term growth opportunities (Raynor & Ahmed, 2013)). However, not so long ago, the mainstream management literature considered SD preoccupations only as costs, induced by bureaucratic rules, and identified as a misuse of corporate financial assets (Friedman, 1970; Levitt, 1958). In modern literature, corporate SD polices tend to be considered as an investment with an interesting return and positive side effects (Elkington, 2012; Lowitt, 2011; Prahalad and Krishnan, 2008; Thomas & Callan, 2007; Visser, 2011). But the objective of a really new paradigm, an ecological–social–market economy (von Hauff & Kleine, 2009), pp. 9–138) is not yet rooted in all minds. An important effort of demonstration and communication has still to be achieved. The role of leaders is fundamental in setting principles, engaging people and driving the entire organization towards them. Few have applied the notion of leadership styles to environmental consideration. Transformational leadership motivates followers to achieve their goals and visions and serves as a vehicle to break the status quo (Du, Swaen, Lindgreen, & Sen, 2012) by focusing on ethical values rather than economic incentives, resulting in the creation of an altruistic culture where self-interests are minimized (Sama & Shoaf, 2008). Transformational leaders might also be more open to collaborate with public institutions and to establish public–private partnerships, because they more easily share a vision based on long-term growth and on common goods preservation. Green principles need to be translated into objectives, which have to be clear, measurable and shared by the entire organization, by its partners and stakeholders. This is a crucial step towards the effective integration of general principles of sustainability into business practices. Such objectives may refer – along with profitability and survival of the organization – to preservation and protection of natural resources (especially non-renewable ones): fossil energy, soft water, etc. and of resources quality; preservation of bio diversity; waste and pollution management (waste limitation, recycling, safe clearing out, reprocessing, etc.). Companies frequently adopt key performance indicators (KPIs) as a metrics for their sustainability objectives. An example of a system of 20 environmental KPIs is provided by DEFRA (2006), which provides different sets of green KPIs according to the industry, its positioning in the value chain and to the type of impact in terms of emissions (on air, water, land) and of resource use. The latter indicator (natural resource use indicator) is generally identified with the ecological footprint, which is a measure of human demand on the Earth ecosystems. It thus represents a measure of demand of natural capital (see Box 1) that can be compared with the planet’s ecological capacity to regenerate (DEFRA, 2006, p. 56).

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The adoption of KPIs as an entry variable among the objectives raises methodological concerns. For example, Schonberger (2008) invites to avoid expressing objectives with static measures and to adopt a process perspective, identifying trends towards dynamic targets and monitoring processes and variables which can be known, managed and controlled by the organization. Ittner and Larcker (2003) suggest the need to define causal relationships and constructs validity, as well as to link the model with the strategy. They also call for attention to potentially conflicting indicators, especially between financial and non-financial ones. The case study analysis conducted later on may help in understanding better how to refine our model from this point of view. 2.3. Processes: a SD oriented business modelling The term processes refers to processes of strategizing and organizing activities in view of the mentioned principles. The choice for the term process highlights its evolving nature, and suggests that activities have to be conceived in the light of a life cycle approach. These approaches, distinguishing three stages of handling: (1) investments in SD-oriented creativity, specific products and process development, testing, (2) life on target sales markets, (3) product’s second or last life, through waste processing, recycling or clearing out, have mainly been proposed for the manufacturing activities, but they should be adopted wherever possible, encompassing the different corporate functions. The mentioned processes of sustainable strategizing involve primarily the business model design, in all its components (cost and revenue model, value chain architecture) and along geographic location of activities and partners involved in value creation. A SD-oriented integrated management should thus encompass all the functional areas, but also the activities carried out along the value chain by partners and suppliers. From this point of view we can observe in a growing number of firms an evolution from traditional corporate CSR towards network social responsibility (Mayrhofer & Urban, 2011) or – according to this contribution terminology – SD-oriented network (supply-chain) management. Among partnerships, which are relevant for pursuing sustainability objectives, public institutions may play a key role. The business model of the sustainable firm is an ‘‘open’’ one, based on a system of strategic partnerships, including public–private partnerships. Finally, the sustainable business model includes a novel approach to marketing products and services and the relationships with customers. Production and consumption should be approached in a similar life-cycle perspective, as Hertwich and Edgar (2005) suggests. The deep change in social and economic conditions in the recent years poses new challenges to sustainable consumption. From this point of view, two possibly conflicting trends have to be reconciled via innovative products, technologies and marketing policies: on one side the preservation of an increasingly exploited natural capital and – on the other side – the new consumption models arising from the financial crisis, with increased price sensitivity. It is also true that the consumption patterns arising from the crisis seem to move towards a more sober approach to purchase behaviour, a process which should be supported by responsible marketing from firms. Kotler and Philip (2011) writes ‘‘The recent financial meltdown has added another layer of concern as consumers adjust their lifestyles to a lower level of income and spending. Companies must balance more carefully their growth goals with the need to pursue sustainability. Increased attention will be paid to employing demarketing and social marketing thinking to meet the new challenges.’’ 2.4. Outcomes: emerging good practices to support, still bad practices to contend Outcomes (the final cornerstone of Fig. 1) measure the achievements of the firm and its model of business in addressing the objectives of the organization and its stakeholders. They represent an integrated set of indicators addressed to the different stakeholders and accounting for the efficient use of the internal and external resources, for the return generated both in the financial and in the social perspective (new activities, jobs creation, quality push, competitive advantages, revenue allocation) and third in the environmental (natural capital) perspective. The outcome metrics should thus correspond to the people–planet–profit frame (Elkington, 1997, 2012; Van Marrewijk & Werre, 2003). In particular, the outcomes should make accountable the impact of the firms’ activities in the use, re-use and renovation of the different sources of capital employed (see Box 1) and how much the company has generated collective (shared) value. A further evolution of performance indicators and standards is required in order to push an increasing number of firms to become aware and account for their impact. Firms need to realize that alternative models of capitalism are possibly emerging, like the circular economy (Andersen, 2007; Lowitt 2011; Visser, 2011). In this framework impacting positively on the environment can become the new standard and accounting for this effort may be the new pillar in performance standards, on which the future growth and prosperity of companies and societies is built. The implementation of the model portrayed in Fig. 1 suggests that it is necessary to pursue a synergic effort of firms (especially the pivots, which can inspire more followers), and institutions (delivering laws, norms, standards, incentives and disincentives), influenced by the cultural contexts (Acemoglu & Robinson, 2012; Duval, 2013; von Hauff & Kleine, 2009) or by ideas flowing from users, partners, or open innovation networks i.e. inter-organizational contexts (Chesbrough, Vanhaverneke, & West, 2006). Among the latter, public-private partnerships may represent a solution for developing joint projects, new green technologies and to favour the adoption of sustainable innovations. In addition, education systems may support the implementation of SD-oriented organizations, through the training of future responsible consumers, employees, entrepreneurs and managers.

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The model provides a general frame of observation for case studies. The firms selected and presented in the two following sections are observed along the three inter-related dimensions commented above. The above comments about Fig. 1 also permit to highlight some gaps both in research and in practice. While we could report a growing shift from generic sustainability principles to effective environmental policies and related KPIs, their integration in the overall system of company KPIs and their implementation inside managerial tools and processes is still rather incomplete (the HOW issue). In relation to the HOW issue, also its dynamics is overlooked. In particular, how is it possible to migrate from actual practices to a fully integrated SD-oriented strategic management? Does the business model evolution also bring changes in governance mechanisms and models of firm? 3. How is SD incorporated in business principles and strategizing: three case studies The research adopts an abductive approach, according to the pioneering ideas of Peirce (in press)Peirce, considering that the two prevailing modes of reasoning using either deductive arguments (based on the idea of necessary inferences) or inductive arguments (probable inferences) were incomplete procedures for seeking truth (that he called the scientific method). Abduction (Bhaskar, 1978) builds on observations, clustering of similarities, elaboration of conjectures (educated guess). Abduction is never necessary inference but it has the character of a plausible explanation. This educated guess or hypothesis has to be tested experimentally, discussed and tested again. Abduction is a method of combined observation and reasoning favourable to the emergence of new ideas. Our analytical procedure rests on observation of case firms, data collection from different sources – both secondary and primary –, and on the contextual analysis of data to find emerging patterns and possible hypotheses. We followed the methodological approach suggested by Magnani (2009), who defines abduction as ‘‘the process of inferring certain facts and/or laws and hypotheses that render some sentences plausible, that explain (and also sometimes discover) some (eventually new) phenomenon or observation; it is the process of reasoning in which explanatory hypotheses are formed and evaluated’’ (ibid. p. 8). The three in depth cases have been selected purposefully, during a broad search for good examples (observations) of environmental sensibility and responsiveness reported by the press (source:LexisNexis) and in general by the media, including the internet (blogs and social media conversations about SD and CSR). We identified a number of firms, which could be good examples of a SD-oriented management, and our final selection was based upon the availability of richer data, interviews, but also on the need of accounting for differences in industry and country of origin. We report some additional illustrative cases, which further support our reasoning and highlight specific issues and drivers of sustainable management in different industrial and institutional contexts. Table 1 shows the three in depth cases along the summarized key dimensions of analysis illustrated above (i.e. Principles, Processes, Outcomes). We selected from all the available sources the relevant information on order to have a picture of the application of the model presented in Fig. 1 in the real life of companies selected for being good examples of environmentally friendly firms. 4. Discussion. Implementing a dynamic SD oriented strategic design: a three stage model The case studies highlight a growing role of sustainable development principles in each organization, which leads to a continually enhanced set of SD-oriented corporate practices and processes. The outcomes of this effort are partially measurable in terms of green KPIs, which do not seem to contrast with the achievement of growth and financial indicators. SD strategizing is an ongoing process, which targets more challenging objectives, based on learning from experience and from increasing stakeholders’ engagement. The abductive approach helped in finding patterns and suggesting plausible hypotheses on the basis of suitably explored data. Building on the above mentioned literature, we inferred a model (illustrated in the next section) following the abductive procedure. Some stylized facts have been extracted from the data available, situations sharing the same stilized facts received particular attention, possible explanations are discussed with reference to extant theories. Finally, only those combinations of deductive chains and inductive plausibility that are both externally and internally coherent are chosen, discarding other possibilities. The analysis supports an evolutionary model of SD-oriented organizations along stages and it also permits to outline some triggers towards an advanced model of SD-oriented company, under which a positive footprint is targeted and environmental KPIs and practices are fully integrated into company strategizing and management. 4.1. The three stages to integrated sustainability The analytical procedure highlights that the three companies are positioned in different stages of sustainable management. It also shows that these companies are undergoing a continual evolution towards better sustainability practices. This evolutions seems driven by the need to go beyond regulatory compliance and to evolve into a truly zero impact firm. Case evidence is interpreted in the light of respective industry specific and institutional frameworks. In one case we could also identify a move towards a positive footprint strategy. This final stage was suggested originally by the mentioned interview with the founder of Seven Pixel, but we needed a more complete and complex case in order to observe the effective working of this hypothetical model. The research protocol requires to constantly compare empirical evidence with theory. The two earlier models developed by Carroll (1979) and Wartick and Cochrane (1985) on corporate social

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92 Table 1 In depth case studies key data.

Size Industry Nationality Foundation Principles Mission statement and declarations about corporate principles about SD Processes

Green KPIs

Guidelines/standards

A SD dynamic system Next steps

Outcomes Financial performance last three years Growth in last 3 years Integrated financial & SD-KPI

Wa¨rtsila¨

Illy

Patagonia

4725 mln euro 18.800 empl. Ca Energy Finnish 1834 ‘‘. . .better technologies that benefit both the customer and the environment’’

342 mln euro 850 empl. Ca Coffee Italian 1933 ‘‘Innovation and responsibility have been in our DNA since foundation’’

- Quality Management System, Environmental Management System, Supplier Management System. - Sustainability management reviews and environmental surveys. - Low impact raw material selection, waste and emissions reduction

- Involvement of key stakeholders - Sustainable supply chain management, from supplies to transport, recyclable packs, R&D, communication - Use of renewable sources, reduced use of energy, water, waste and raw materials consumption, reducing fuel-based transport

Targets for: -Environmental expenditure -Greenhouse gas emissions -Water consumption -Energy consumption -Waste management Regulatory standards and voluntary standards, QHSE policy and Code of Conduct Developing technology to cut emissions, enabling efficient performance without water consumption 20% operating profit

Standards about emissions: zero emissions

415 mln $ 1.275 empl. Outdoor apparel American 1973 ‘‘Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis. There is no business to be done in a dead planet’’ - Involvement of key stakeholders - A Vice-President for environmental initiatives. - 1% revenuers donated to environmental causes. - The footprint chronicle in order to measure accurately the impact of every company activity. - Sustainable value chain, from supplies to recycling/reuse of materials to produce new goods, to manufacturing processes and delivery. - Renewable energy, drive less, reducing grid needs, reducing consumption of materials and natural resources Employees can take off up to two months at full pay and work for environmental groups. Zero or positive impact of all company activities

+12% in 2012 Not yet available

ISO 14001, EMAS, Code of Ethics

Go beyond standards Code of Conduct

Address a positive impact on the environment

Improve positive impact on the environment

15% operating profit

12–15% operating margin

+10–13% Not yet available

+5–7% In progress

responsibility identified four ‘generic’ firm level approaches to corporate social responsibility: reactive, defensive, accommodative, and proactive. Later on (Hart, 1995), building on the resources based view framework, developed four typologies: the end-of-pipe approach, the pollution prevention or total quality management, the product stewardship, and sustainable development. Fig. 2 is based on our case study evidence and partially supports these different contributions, but also adds some new perspectives. It assumes as main perspective the impact on the environment produced by the business activity. In addition to this, it hypothesizes that the positioning of a company depends on industry, country (regulatory frame, level of development) and firm specific issues as well as on the evolution over time of the firm sensitivity to the sustainability issue. The transition from one stage to another can be significantly affected by institutions at different levels (local, national, global) and by a twofold role of public bodies as referees of the game (rule makers, incentives providers) or as active and proactive players via public procurement, participatory schemes and public–private partnerships for sustainability projects. The first stage refers to reducing the impact of the firm activities on the environment. This approach posits a more reactive attitude towards the sustainability challenge and determines limited changes in business practices and models. The focus is on waste, emissions and any activity which has a relevant, clear and immediate impact on the environment. There are two key drivers of corporate decisions: the regulation and the role of stakeholders and public opinion. Regulations on emissions or on waste management is considered by these firms as an additional cost more than an incentive to change and innovation.

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REDUCE NEGATIVE IMPACT

TARGET ZERO IMPACT

PRINCIPLES

PRINCIPLES

Profit first

Profit without harming the planet

Atude: defensive, reacve

Atude: reacve/adapve

Main stakeholders are shareholders (and customers).

Main stakeholders are a broad system of actors

Regulatory compliance

Beyond mere compliance

OUTCOMES Financial KPIs

DESIGN FOR POSITIVE IMPACT

PRINCIPLES Business for a beer world Atude: proacve and visionary Stakeholders include future generaons. New compliance, shared code of conduct

PROCESSES

PROCESSES

PROCESSES Limited change in business pracces

Reducing impact as a cost

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Substanal change in business prcacess

Radical innovaon in business models and product/process design. Radical innovaons in corporate forms

OUTCOMES

OUTCOMES

Zero impact is a cost but also an opportunity

A posive impact is a key opportunity

Financial KPIs plus some green KPIs

An integrated system of KPIs

Fig. 2. Stages of sustainable development strategizing.

In other cases, the impulse comes from the public opinion or from a group of stakeholders, who may feel disappointed by the lack of adequate attention to the environment.

Wa¨rtsila¨: towards the second stage Wa¨rtsila¨ is a Finnish corporation, which manufactures and services power sources and other equipment in the marine and energy markets. The core products of Wa¨rtsila¨ include large combustion engines. It was founded in 1834, in Vartsila. Wa¨rtsila¨’s goal is to improve constantly the environmental performance of its products and services, as well as to maintain technological leadership by utilizing new technologies and collaborating with its customers and other stakeholder groups. Wa¨rtsila¨’s CSR is based on the three interrelated dimensions (Wa¨rtsila¨, Annual Report): Economic: focus on profitability; Environment: develop environmentally sound products and services; Social: implement and maintain responsible business conduct. CSR is present in the majority of the activities of the company, such as: communication & social reporting: the company draws up the Annual Report respecting the transparency towards its stakeholders; the report is prepared according to the GRI (Global Reporting Initiative) sustainability reporting guidelines. The company relies on an integrated stakeholders feedback process in order to achieve long-term relationship by communicating with their stakeholders and acting upon their feedback; supply chain management: Wa¨rtsila¨ has defined its process for choosing suppliers, determining their requirements and developing the supply relationship. Requirements as environmental management, occupational health and safety social responsibility are included in standard supply contracts. Wa¨rtsila¨ controls regularly that suppliers comply with these requirements by using performance indicators and audits; manufacturing: Wa¨rtsila¨ strives to develop environmentally sound, reliable and safe products. It supports its customers throughout the entire service lives, from cradle-to-grave, of Wa¨rtsila¨ products by developing environmentally sound solutions; Wa¨rtsila¨’s engines are manufactured according to the requirements of the European Commission’s Machinery Directive, the Solas Convention and other relevant safety directives; R&D: a substantial proportion of the company’s investments in product development is targeted at reducing environmental impact through ensuring reliability and safety, improving efficiency, reducing emissions and creating new solutions.

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‘‘The environmental expenditures (s7.1 million) may seem to be high, but in reality we spent more for the environment when we started to adopt sustainable policy ten years ago, probably because our company, 179 years old, had not in its strategy environmental sustainability before now; today, and in particular in the last five years, we are getting the benefits from our efforts; in fact, customers really appreciated our performance and our products environmentally sensitive and this is the reason behind the increasing in net sales and net profit, even if the economic scenario is characterized by the crisis.’’ (Source: web site, company reports, press releases, interviews).

The second stage refers to the zero impact company. In this case, the firm needs to plan an impact close to zero of all its business activities and not just to reduce the impact of some of them. In this case, the SD needs to be integrated from the start in the strategic planning and in business modelling, although the effective implementation of this stage requires a long time horizon, especially for large MNEs. The company adopts a more proactive approach that requires substantial changes in business practices along the entire value chain and – according to Hart (1995) – some form of life cycle analysis (LCA) has to be implemented. LCA is used to assess the environmental burden created by a product from ‘cradle to grave’: material selection, production, distribution, packaging, and disposal (Welford & Gouldson, 1993). More precisely, life cycle sustainability assessment (LCSA) can prove a fundamental instrument in this perspective, as supported by ISO 14040 series (Environmental management – Life cycle assessment – Principles and framework). LCSA has the potential to be used by decision-makers in governments, agencies for international cooperation, business and consumers’ associations.

Illy: second stage moving to third Founded in 1933 by a Hungarian immigrant, the company is characterized from its inception by three major traits: an international orientation, a culture of innovation and quality, strong values that from the entrepreneur are transmitted to the organization. Illy is positioned in a niche of very high quality coffee, delivered according to the best technology (the founder was the inventor of the espresso technology) and from the best raw materials. Illy supply chain contributes to product uniqueness: the innovativeness of the firm is a factor which refers both to the value chain management and to the coffee technology. Illy also invented the coffee pressurized package and the coffee pod, which supported the international expansion of espresso coffee sales in countries which might have a limited expertise in this technology. Innovation and sustainability work together in order to deliver top quality coffee experience all over the world while respecting the environment and the labour conditions and economic conditions of farmers. Recently Illy started diversifying its business, investing in companies which share similar values (innovativeness and responsibility in the food and beverage industry). Illy does not use the term CSR, they much prefer sustainability as a founding concept. They have some green objectives which are pursued effectively (100% energy from renewable sources, other objectives will be defined soon regarding their footprint, as a consequence of an agreement with the Ministry of Environment aimed at measuring footprint along the entire value chain). The company has a number of environmentally friendly actions, though a system of green objectives and green KPIs is still missing. Examples of such actions are: a sustainable certified value chain, use of renewable sources, R&D effort in coffee cultivation and coffee beans treatment to reduce the use of water, research in recyclable packages and new materials. The company does not make any cost–benefit analysis of their SD policies, because they think SD is part of the firm DNA from its foundation. SD has always been integrated into the business, and the roots of this approach lies in a strong set of values instilled by the founders into the organization and from the need of finding the best coffee. In order to achieve top quality, it was necessary to establish long-term relationships with farmers, to create SHARED VALUE for both parties and to pay above market prices in order to have the best coffee beans. The quality of coffee is also a matter of training and education of farmers, which again requires long-term relationships. These relationships do not involve exclusive relationships, because the farmer are free to sell coffee also to other firms. According to Illy quality and sustainability are deeply intertwined (our interview with CSR manager). In addition, HR management is part of an overall design with quality and SD at the core (people, planet, profit). Illy plans to include SD in its KPI. Now they have SD objectives only at the Innovation committee. (Source: web site, company reports, press releases, interviews).

The third stage represents the major challenge nowadays. It posits that a firm may provide a positive contribution to the environment, by adopting a highly proactive and innovation-oriented model of business, which contributes to a more general innovative economic model. Firms adopting this approach rethink radically their way of doing business in order to achieve a set of long-term objectives in terms of sustainable growth. Their stakeholders are not only the ones around now but also the future generations and aim at a positive environmental impact in many different ways. They aim at delivering more

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value to the different stakeholders and leverage on resources like talent to conceive and implement their innovative business model. They generate and use different forms of innovation (products, materials, processes, organization, marketing, finance). In order to have a positive footprint, some companies develop research and sell products and services, which contribute to reducing pollution levels (for example, like some new materials and coatings for monuments). Some others compensate their footprint by planting new forests for more than the CO2 produced. A relevant issue for companies targeting zero and positive footprint is represented by ‘‘hidden’’ impact, that is the environmental impact embedded in the product chain. A good example is represented by transportation of goods, which is rarely accounted for in impact measures. More generally, companies in the most advanced stages of sustainable business modelling are challenged to include in corporate sustainability metrics the grey energy used. In modern economies these impacts are unavoidable but they may be substantially reduced and/or compensated with positive environmental action as Patagonia does.

Patagonia: leading third stage Yvon Chouinard, the 73-year-old founder of outdoor apparel brand Patagonia, has published a new book, The Responsible Company: What We’ve Learned From Patagonia’s First 40 Years. Chouinard offers not just a story about how to create a responsible company, it is also a story about creating a company that is known for that responsibility. Patagonia achieved leadership in environmental responsibility by giving it an equal priority to profits. After more than 40 years of investments in sustainability, the company is still steadily growing and profitable. In 1985, the company began donating one percent of its revenue to environmental organizations, a move that has since inspired more than 1400 companies to join its 1% For the Planet initiative. It was also one of the first companies to switch to more environmentally friendly organic cotton, despite its higher costs. Product design is based on SD principles and they have clothes entirely made of recycled plastic bottles. Taking a stance against consumerism, Patagonia even ran a Black Friday ad asking people to buy less of its products. Frugal use of resources, materials and products is one of the company targets. The Wall Street Journal details how even Walmart turned to Chouinard, seeking his advice and working with Patagonia to form the Sustainable Apparel Coalition, which has attracted other top brands. With the Footprint Chronicles, an interactive mini-site to track the impact of specific Patagonia products from design to delivery, it is possible for anyone to examine Patagonia’s life and habits as a company. ‘The idea is to give more of our practices some air and thought, and to change habits often played out on an industrial scale, with concomitant effects. We’ve been in business long enough to know that when we can reduce or eliminate a harm, other businesses will be eager to follow suit.’ (Patagonia web site). The company has a charismatic founder, passionate with the natural environment, and has a Vice President for environmental initiatives. In 2012, Patagonia started its transformation into a benefit company, according to the new Californian regulation. Patagonia is in the final stages of converting the business, environmental and social values laid out by Mr Chouinard into a legally binding corporate credo (Financial Times, June 2012). (Source: web site, company reports, press releases).

The third stage involves that the company views the environmental issue as an opportunity for product and process innovation and as business model innovation. In some cases, this may lead to radical innovation in their corporate form and governance, as the case of Patagonia (see Box) seems to suggest. These companies deliver better value to their stakeholders, from shareholders to customers to the different local communities where their activities take place, as well as to future generations. They may adopt the cradle-to-cradle approach (McDonough & Braungart, 2002). In this framework, products are conceived and designed in order to generate new products at the end of their life cycle. (McDonough & Braungart, 2002). A growing number of companies is moving towards a cradle-to-cradle approach. From a macroeconomic point of view this approach is coherent with the circular economy one postulated by Stahel (2006). As the SD approach becomes more challenging and more integrated in the firm business model and product/process cycle, the call for new models of economic systems correspondingly grows and vice versa. Derbigum is an Italian company specialized in roofs water proofing with an innovative vegetable membrane, based on cradle-to-cradle design. In 2011 the new products rate has reached 34% (over total products sales), demonstrating that new paradigms can coexist with economic growth though product innovation. Recruiting talents is essential for these innovative companies. On the other hand, their ambitious goals and their vision for a sustainable future make these firms highly attractive places to work for these talents. We could observe a similar approach in Patagonia, where employees are paid above market standards and are encouraged to destine part of their working time in environmental movements and associations. Even a more ambitious target is exposed by Norbert Rauch, head of a middle sized German family company, Rauch Landmaschinenfabrik, producing farm machinery equipment, whose Principle is: Work for wellbeing of humans (workers, users, society members) and our Planet Earth through natural capital protection insuring a viable

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future life for all. This is a fantastic guide line making sense at various levels and our responsibility leading to the achievement of a modern Humanism. (Interview with Author, October 2013). These last examples show that small and medium sized firms can interpret convincingly and innovatively the third stage of the sustainable enterprise. This may be due to a number of reasons: first, the presence of more agile organizations, capable of renovating faster and deeper. Second, the effects of transformational leadership in small organizations are greater. However, from the latter point of view, it is important to notice that the cases of Illy and Patagonia both confirm at a larger scale the role of transformative leaders and their capacity to instil values and principles across the entire organization. Now these companies may appear outliers in comparison with a huge number of firms, which do not want or cannot follow a similar path. Their role is to show that the sustainable firm is a viable model, it is compatible with profitability (though it is clearly not compatible with profit maximization tout court), it reduces the risk of doing business and enhances its reputation with positive effects on the attraction of key resources like human talent, loyal customers, good suppliers and financial resources. A case like Patagonia also shows the compatibility of corporate growth and profitability with demarketing, involving the promotion of sober consumption models, in the perspective of a more general model of sustainability encompassing both production and consumption of goods. Finally, transformative leaders tend to establish a constructive dialogue with public administrations, because their objectives are more compatible and involve common attention to local communities and environmental issues, which can lead to shared projects. 4.2. The role of time in managing evolution As we noticed in the Introduction, time is an actor of change. It concerns all the social and economic actors. This is portrayed first in Fig. 1 where the firm is presented in the centre as a dynamic subsystem related through Principles, Processes and Outcomes to all other individual or collective actors (humans, organizations, institutions) of the global system, and after, in Fig. 2 schematizing the three stages of an evolutionary SD strategizing model. Interconnecting procedures, or more or less radical changes, do not occur from one day to another; it takes time. That time depends on unpredictable events (scientific discovery, technological innovation, public political change, hazard, major social events, environmental disaster etc.) that do affect in different ways the firm’s strategy and performance. Insofar, the move to a SD development model is expected not to be homogenous inside a large firm; its different Strategic business units (SBUs) will manage their organizational or paradigm change at different paces (see Lafarge box).

Lafarge: a heterogeneous shift to SD strategizing Lafarge is a global player in building materials, holding top-ranking positions in each of its business lines: cement (world leader n81, (2012), 41,200 collaborators, active in 58 countries, 161 production sites), aggregates and concrete (world leader n8 2 and n84, (2012), 21,800 collaborators, active in 36 countries, 1395 production sites). Lafarge belongs to a very highly polluting industry (dust, mercury, dioxide, NOx, SO2, CO2 emissions, degradation in biodiversity, noise) and using much natural resources (water, energy). Lafarge has an important investment planning engaged in progressive reduction of environmental harm that concerns all geographic areas (Europe, America, Asia, Middle-East and Africa) i.e. developed as well as less developed countries, all concerned with building development and SD challenges. Of course, the cost of new production processes to be implemented is high in a capital-intensive industry (with multiple spread production sites); the financial resources are depending on ROI (return on investment) and financial markets’ good will. Sustainable ambitious targets require long term planning. The change has to be managed step by step, and this is actually the case. Some management decisions are still relevant related to the first pillar of Fig. 2 (Reduce negative impact, through managing of polluting emisssions and piloting water footprint), others are reaching stage 2 (Target zero impact) with the design for energy efficient buildings, and others are joining stage 3 (Design for positive impact). ‘‘We are a resource-based business in a world with limited resources. Therefore, our strategy is to increase our use of recycled fuels and materials to ensure that our long-term business model is more resilient. The use of waste fuels, especially waste biomass, is also consistent with our strategy to reduce greenhouse gas emissions’’ (B.Lafont, CEO Lafarge, 2010) This third stage, especially, is targeted in cooperation with architects, engineering schools and research teams in France, USA, China, India and other countries, international networks of technical centres and laboratories, diverse industry partners, and local communities. What is most important to succeed in tackling the SD construction challenges is not only the timing of new processes implementation, but also the strategic innovation priority, the dialogue with partners (users, suppliers, policy makers and stakeholders, researchers, reporting experts), the demonstration of a coherent SD policy in progress at the whole Lafarge Group level. The Chairman & Chief Executive Officer, Bruno Lafont, is a strong driving force of this essential and ambitious SD mindset leading to a fundamental design change. Lafarge is convinced that the fight against climate change is about reshaping the global economy from the way electricity is generated and products are manufactured, to how buildings and cities are designed and how people are living and working. Since 2008 Lafarge is focusing more than half of its R&D expenses on sustainability. (Lafarge, 2011). Source: company reports, press releases, interviews.

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4.3. The role of pivot firms: a spill-over effect The 5th IPCC (Intergovernmental Panel on Climate Change) (IPCC, 2013), states once again the urgent need for acting worldwide on this crucial problem for humans’ and planet’s future. Effective political will and efforts worked out by enterprises are key driving forces through bottom up and top down mechanisms. The cases mentioned before show that also SMEs are able to participate efficiently on the SD paradigm-change (Fuller & Tian, 2006); but one can expect that the move towards change will have a more powerful impact when it is led by large firms. Such global organizations are able to exercise a structural ascendancy (Perroux, 1983), good or bad, it depends on the values or code of principles (see Fig. 1) carried out. The Saint-Gobain company illustrates such an assertion (see Box).

Saint-Gobain, a very old manufacturer, but a modern SD oriented global leader Saint-Gobain (S-G) was created in 1665 by the French king Louis XIV. Today the company is world leader for flat glass, for glass containers for the food industry, but also for construction products (including acoustic and thermal insulation products, wall facings, roofing products and pipes), building distribution and packaging (No.1 or No.2 worldwide). It is operating (2012) in 64 countries with nearly 193,000 employees. It is both a product producer and a solutions provider (focusing on innovation, contributing to its customers’ performance and good SD-oriented strategies and practices), improving the environment and preserving natural resources, enhancing users’ comfort and well-being. It aims to be a responsible business actor and a socio-economic stakeholder (supporting local economic development and community development). The Innovative materials sector (SD oriented) accounts for almost two-thirds of SG’s total R&D commitment (Saint-Gobain, 2013). Some initiatives, with spill-over effect, to be mentioned in SD strategizing, are: International commitments: By joining the UN Global Compact (in 2003), S-G confirmed its commitment to SD in line with its Principles of conduct and action. In 2009, S-G took its commitment one step further by endorsing the Caring for Climate statement and the CEO Water mandate for Water Resource Protection. Inventing sustainable buildings (design, production and distribution of SD habitat solutions for the renovation and construction of residential, commercial and service-sector buildings). S-G is on the way to conduct systematic Life Cycle Assessments (LCA) for all construction and solar product lines. Eco-innovation training models are developed and deployed for all concerned managers. Promoting energy efficiency is a strategic priority. S-G is sharing its LCA results with external partners, architects, builders and craftsmen, in conformity with Environmental Product Declarations (EPDS). Limiting environmental impacts. The S-G team is focused on achieving the objective of zero environmental accidents and a minimum impact on the environment from its activities (90% of concerned sites are covered with environmental certification. Important efforts are continuously carried out and controlled in order to reduce direct CO2 emissions (climate change effect), water withdrawals (preservation of natural resources) and waste (recycling management). S-G is also focused on heat recovery systems, Taking action across the value chain. S-G size and global scope give it a special responsibility in raising stakeholders’ awareness to the challenges of SD and in promoting exemplary practices. This responsibility is displayed on different ways, for instance: Promotion of sustainable construction through development of active participation in professional associations involved in SD and being partner to the European network of the World Green Building Council; Responsible purchasing (fast growing audited suppliers). Supporting local community development through SD environmental initiatives towards SMEs (providing technical support and training), recycling cooperative partners (encouraging sort-at-source waste collection), job opportunities programme related to habitat and SD professions. Sources: company reports, press releases, interviews.

4.4. Accelerated change pace towards SD thanks to facilitator companies The three stages model, illustrated in Fig. 2, makes it clear that the usage of natural resources and waste management are important pathways towards a viable long-term SD paradigm. The question of sustainability has to be carried out, inside a company, first, in the early stage of the product life cycle i.e. in the period of creativity, search of new products and processes. It must be accountable to SD norms, cooperation or partnering possibilities, acceptable risk definition (Urban & Zucchella, 2011); second, during the manufacturing and distribution phase (putting emphasis on limitation of natural resources’ use or squandering); third, during the second, or last life of products (waste clearing out, reprocessing, recycling). Companies like Saint-Gobain are not only aware of their own corporate environmental responsibility, they try to influence in that virtuous direction other companies and customers/users, S-G, for example, is the leading partner of EPE (Entreprises pour

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l’environnement, an innovative SD oriented network). Saint-Gobain is really aware of the necessity to develop an overall sense of shared responsibility, worldwide, and is willing to be a facilitator or accelerator of continuous change processing (towards stage 3, in Fig. 2). New businesses and refreshed mindsets are on the way to being implemented in our modern socio-economic system. Suez-Environnement is another example supporting this observation. In Suez, partnerships with other organizations at a global level are key to their sustainable model of business (see Box). Partnerships, also with local authorities, are ways to open the model of business and share objectives and sustainable projects. In addition to this, the governance model of Suez is also open, because it adopts consultative structures with stakeholders. Finally, the Suez case questions the idea of adopting a static system of indicators as objectives, and favours the adoption of roadmaps towards sustainability, which are based on a process view, support fast transition, and can be continually monitored and adjusted. The roadmap is based on a set of commitments, grounded on the priority of the circular economy model. The roadmap towards the sustainable model of business passes through the above mentioned innovations in corporate governance and its dialogue with shareholders and institutions.

Suez Environment (SE), a global player in water and waste sectors and SD service provider. SE, former Lyonnaise des Eaux was created in the middle of the 19th century, i.e. at the beginning of the European industrial development wave and the expansion of large cities, in a new age. Both, management of water and waste became crucial. Problematic of that kind became the culture of the company, proud of its useful social activity. The company’s 79,550 employees (2012) work every day to protect natural resources by innovative solutions to public and industrial customers, helping them to become leaders in environmental performance. In fields dominated by technology, but which demand ever greater services and flexibility, SE maintains a culture of partnership that is deeply rooted in its identity. Towards a new model of sustainable prosperity. ‘‘In the first road map (2008–2012) we set four priorities (Conserve resources and engage in the circular economy, Innovate to respond to environmental challenges, Empower our employees as actors of SD, Build our development with all stakeholders) divided into 12 precise commitments to environmental, social and societal performance. All of them were achieved. The road map was also a powerful tool for transforming our business by allowing us to imagine and to define new modes of governance to better engage our customers, regional authorities and other stakeholders in the solutions we offer. Today, these new approaches are competitive assets for the Group. [. . .]. The 2012– 2016 road map underlines the concept of co-production. Our solutions are the practical outcome of a dialogue with our stakeholders that will be systematized and strengthened within the consultative structures in place’’ (J.L. Chaussade, CEO). Sources: company reports, press releases, interviews.

5. Conclusions The future of the sustainable firm rests on an evolution driven by leading firms and by leaders inside the latter, who are capable to interpret possible futures of society at large. This contribution approaches sustainability at the firm level and in a process view, identifying stages towards increasingly challenging standards of management. Futures of the firm needs to be accompanied by futures in the institutional frame, which could move from regulatory compliance to opening new governance models, like in Suez case, and regulating new types of firm, more suitable to the sustainable company objectives. Patagonia provides a good example of transition towards future concepts of firm, also in terms of regulatory status. At the same time, this change can be driven by futures in society, with a transition from occasionally responsible consumption models to environmentally engaged consumption models. The idea of a company supporting demarketing, as Patagonia did, seems counterintuitive. However, successful companies are those who can follow or anticipate market trends and consumer expectations: in this perspective futures of society, and in particular a growing sensibility to environmental issues does not only represent a challenge to corporations but also an opportunity to offer new (and greener) value propositions. In the last decades the growing general interest in the issue of SD, has corresponded to more attention from firms to sustainability issues. In most cases, this attention has led to efforts in reducing the impact of corporate activities on the environment, complying with environmental regulations and to make these activities accountable through environmental, social and sustainability reports. For a number of firms, SD has been managed as separate box from the firm’s general management and strategizing and for some of them it has represented mostly a communication issue, in order to enhance corporate image and reputation. This latter approach to sustainability has sometimes generated green wash policies in corporate management. SD has represented more a cost than an opportunity for many companies, and its immense potential in terms of innovation and growth has been mostly neglected, while some Authors have underlined its trade off with profitability and even its incompatibility with business. We support the case of a full compatibility between long-term profit goals and sustainability for a number of firms. We devote our attention in this contribution to the latter, though we are aware that some businesses, especially in high impact activities, may not be self-sufficient in achieving these targets and require forms of partnerships with public authorities, incentives and more generally forms of public intervention. In general, the

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institutional frame and public authorities have a key role in supporting and addressing firm efforts towards sustainability, while – among the internal drivers – we highlighted the role of transformational leaders and human capital. The innovative and environmentally sustainable models of business are aimed to delivering more value to shareholders, customers and other stakeholders using less non-renewable resources and impacting less (possibly targeting positive impact) on the environment, but at the same time they need to use more renewable resources and more talent, leveraging on the human capital as a key driver of innovation and success. We thus adopt an approach which we labelled ‘‘extended resources-based view’’ which takes into account the natural resources the firm has access to, as part of the resource base which supports its competitiveness. At the same time, the sustainable firm is qualified by the presence of human resources (talent), among which transformative leaders can drive change towards increasingly ambitious sustainability targets and principles. In this frame, the sustainable enterprise is a fundamental tool for the new humanism of the third millennium. This contribution proposes a frame of reference for SD oriented organizations, based on three cornerstones: principles, processes and outcomes. A case like Suez highlights that firms can conceive better alternatives to static KPIs (as a measure of performance, along the triple bottom line dimensions), like for example the idea of a roadmap. For this reason, special attention is devoted in this work to the dynamics of SD oriented organizations in order to understand how firms can evolve towards progressively more challenging models of business, which make compatible profitability and growth with respect for the environment and – beyond mere respect – positive proactive action to improve the planet’s resources. As mentioned above, this evolution is driven contemporarily by the role of leaders inside the firm (we could observe that in companies like Patagonia, Illy and Rauch, the founders had a substantial role in inspiring SD as corporate orientation) and by institutions outside the firm (Warhurst, 2005). The latter should not only provide standards to respect (which aim at reducing footprint, but are perceived as costs), but also new models to embrace for sustainable growth and prosperity, supporting new models of firm governance (like the benefit company for Patagonia, the consultative structures at Suez), incentives, procurement and strategic partnerships.

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