Principles of Responsible Management: Oliver Laasch, Roger N. Conaway

PRINCIPLES OF RESPONSIBLE MANAGEMENT
Oliver Laasch,
Center for Responsible Management Education (CRME)
and
Roger N. Conaway,
Tecnologico de Monterrey (ITESM)
Laasch/Conway, Principles of Responsible Management, 1st Edition. © 2015 Cengage. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
Chapter 3
Sustainability: Managing for
the Triple Bottom Line
After reading this chapter…
You will be able to…
1 …know and understand the history of sustainable

development.
2 …know the central tools you need to
manage business sustainability.
3 …manage your business for the triple bottom line.
4 …understand the ideal goal of a sustainable business.
Laasch/Conway, Principles of Responsible Management, 1st Edition. © 2015 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Introduction
Each of the 7 billion global citizens in 2010 used an average of 1.7 earths.
Global population is excepted to increase to 9 billion people by 2050.
Ninety-three percent of CEOs believe that sustainability issues will be critical to
the future success of theirbusiness.
Over half of high-level managers (53%) believe that their companies’
investment into sustainability will increase between 2012 and 2015; thirty-nine
percent expect it to stay at least on the same level.
“Climbing Mount Sustainability”: Mission Zero at
InterfaceFLOR
• Mission Zero
• No negative social,environmental, or economic impact by the year 2020; become a
restorative business
• Life-cycle management initiatives
• “ReEntry” (recycling)
• “Cool Carpet” (carbon offsetting)
• The „Intelliveyor“ (eco-efficiency)
• „Environmental Product Declaration“ (impact reporting)
• Results
• Waste reduction by 78 percent since 1994, reduced energy usage by 44 percent, diverted
100,000 tons of raw material from landfills, and saved $433 million in waste costs.
• Discussion
• How about the social and economic impacts?
SUSTAINABILITY: MANAGING FOR THE TRIPLE
BOTTOM LINE: ILLUSTRATED
ORIGINS OF BUSINESS SUSTAINABILITY
Food for Thought
Expert Corner Dig Deeper Dig Deeper

Björn Stigson, Past President Dig for Stories! Forests and Sustainability
of WBCSD
Q: Do you believe that we will achieve the goals Look up additional information Probably one of the earliest
laid out in your Vision 2050 agenda?
A: Yes, I believe this is entirely possible, on the ancient stories of theoretical texts on sustainability
provided the suggestions the report makes are sustainable and unsustainable was published in 1713 by Hans
followed. Vision 2050 is a consensus piece
outlining initiatives we hope organizations will behavior online, and try to find Carl von Carlowitz, who was
consider putting in place. And if the detailed information about concerned about the state of
developments it advocates are implemented,
then a steady course toward global sustainability indigenous practices. Then German forests. In his book,
in business will be set. What makes Vision 2050 make a list of the five most Sylvicultura Oeconomica, he
unique is that the ambitious pathwayt lays out— developed a strategy for socially,
to a world in which 9 billion people can live well, important things, demonstrated
and within the planet’s resources, by mid-century through the stories, that environmentally, and
—is both realistic and achievable. The report
was compiled by 29 leading global companies humanity can do to achieve economically sustainable
from 14 industries who strongly believe that the sustainable world development. forestry.
world already has the knowledge, science,
technologies, skills, and financial resources Source: Carlowitz, 1713/2000, as cited in
needed to achieve Vision 2050. The next step is Kloepffer, W. (2008). Life cycle sustainability
to build the foundations at speed and scale assessment of products. International Journal
during this decade.Source: Stigson, B. (2011, April 10). Björn Stigson: of Life Cycle Assessment, 13(2), 89–95.
Short interview. N. Tolhurst, Interviewer)
Table 3.1 Historic Milestones in the Development of
Sustainability
Milestone Facts
Roots Ancient examples: aboriginal laws for sustainability; Easter Islands and Tikopia
Historic causes: colonialism, industrial revolutions, green revolution
Ancient warning: Cree Indian prophecy
Theory Foreboders: Malthus’s limited growth; Carson’s Silent Spring; limits of growth by the
Club of Rome
Analysis: ecology; external effects and Coase theorem; Barbier’s Venn diagram of
sustainable development; pillar model of sustainable development
Solutions: sustainable development through the Brundtland Report, life-cycle
assessment, footprinting
Institutionalization Pioneering: Club of Rome

Political: United Nations conferences; Millennium Development Goals (MDGs);
Kyoto Protocol
Business: World Business Council for Sustainable Development (WBCSD)
Status quo and Globe: humanity’s footprint

future Issues: social and environmental challenges
Theory: four scenarios
Practice: WBCSD’s Vision 2050
Roots: Indigenous Sustainability
• The Australian Nhunggabarra

• “Law stories” constituting social, economic, and ecological rules
• Polynesian Maori people in New Zealand
• Kaitiakitanga system of penalties and rewards
• “Guardianship” realized through resource management system
• Declaration of “Rahui” or untouchable, death sentence for violators
• Easter Islands versus Tikopia
• Overharvesting trees on the Easter Islands
• Consequences: Soil and sweet water loss, resource wars, reduction two thirds reduction of
population
• Tikopia hits resource limits
• Consequences: Practices sustainable agriculture, take measures to control human population,
and species affecting the ecosystem (pigs).
Historical Beginnings of Unsustainability
• Age of discovery and colonialism

• North-south divide
• “Outsourcing” of resource limitations
• First industrial revolution
• Factories
• Population explosion
• Second industrial revolution
• Petroleum-based production
• Dependence on fossil fuels
• Green revolution
• Monoculture, chemical fertilizers, and pesticides
Theoretical Advances
• Warnings
• Malthus versus Condorcet, Cree-Prophecy, The Limits
to Growth, Silent Spring
• Concepts
• Ecology, external effects and social costs, sustainable
development
• Management tools
• Life-cycle assessment, triple bottom line, cradle-to-
cradle
Figure 3.2 Figureheads and Central Ideas of
Sustainability
Thomas Malthus (1789) Rachel Carson (1962)
World population will “outgrow” the natural resources (food) The “green revolution” will lead to a loss in biodiversity and
needed for survival. destruction of ecosystems.
Marquis De Condorcet (1794) Edward Barbier (1987)
Population growth will automatically stop through the free will Sustainable development can be subdivided into social,
of enlightened individuals and families. environmental, and economic development.
Chief Seattle (Aprox. 1850) Gro Harlem Brundtland (1987)
Mankind will cause itself to become extinct through pollution Sustainable development must meet the needs of current
and abuse of natural resources. generations without compromising future generations needs.
Ernst Haeckel (1866)
John Elkington (1999)
Ecology is the science of the interdependencies of
environmental and social systems. Businesses must pay attention to a triple bottom line of
social, environmental, and economic performance.
Alfred C. Pigou (1920)
William McDonough & Michael Braungarth (2002)
Economic activity has internal and external costs, so called
social costs. Economic activity must become a closed loop, which
eliminates waste “from cradle to cradle.”
Institutionalization of Sustainability
• Conference on the Human Environment (UNCHE), 1972

• Rio Earth Summit, 1992
• Kyoto Protocol, 1997
• World Business Council for Sustainable Development
(WBCSD), 1990
• Global Reporting Initiative (GRI), 1999
• Milennium Development Goals (MDG), 2005
Status Quo and the Future
• Human Footprint
• In 1975: 1 Earth (=sustainable)
• In 2010: 1,5 Earths (=unsustainable)
• World population growth
• In 2011: 7 Billion people
• In 2050: 9 Billion people
Global Development Scenarios
• Scenario 1: Society and environment win

• Scenario 2: Society wins and environment loses
• Scenario 3: Society loses and environment wins
• Scenario 4: Society and environment lose
CONCEPTS OF SUSTAINABILITY
Food for Thought 2
In Practice In Practice In Practice

Radical Industrialists Modeling Sustainable Systems How Good Was This Year?
InterfaceFLOR takes a rather
Lynedoch EcoVillage in South Africa is a “2011 has been our best year ever in
extreme perspective on small-scale role model for the integration terms of business activity,” said Rami
sustainability. A blog featuring the of sustainable living, governance, and Branitzky, senior vice president of
company’s sustainability leaders is business. The village comprises twenty- sustainability at the enterprise
five families, a primary school, organic
called “Radical Industrialists.” software company SAP in early 2012.
gardening and waste treatment facilities,
and the Sustainability Institute. It is almost The company had a record economic
self-sufficient revenue growth of 25 percent.
In Practice in food, waste, and energy usage. As a The downside of those numbers is
concrete example, the village’s “swop that SAP was not able to keep de-
So Who Are You? Evaluate shop” combines social and environmental coupling economic growth from their
yourself: Are you a proponent of sustainability, as children from low-income environmental impact. SAP’s absolute
families can swap recyclable waste they emissions had increased 7.4 percent
strong or of weak sustainability? have collected for points, which they can in in 2011. In 2010, emissions had fallen
Review the four categoriesof turn exchange for necessary goods such 5.7 percent despite a
polarized views, and try to define as school books, shoes, and toothpaste.
your personal stance on each of Source: Cain, J. (2010). Lynedoch EcoVillage: A A journey towards sustain-able living . Retrieved April 1, 2012, from You
17 percent rise in revenue.
utube.com/ watch?v=OFrZXe_MTT4; Day, M. (2009). The Swop Shop kids, 3-minute cut. Retrieved April 1, 2012, from Source: O’Connor, M. C. (2012). SAP sustainability update: Energy usegrew with revenue in 2011.
them.
Vimeo: http://vimeo.com/7859730; Sustainability Institute. (2005). Lynedoch EcoVillage development.Retrieved April 1,
Retrieved April 1, 2012, from www.greenbiz.com/blog/2012/03/23/sap-sustainability-update-energy-use-
2012, from The Sustainability Institute: ww sustainabilityinstitute.net/lynedoch-ecovillage/detailed-story
grewrevenue-2011?utm_source=GreenBuzz&utm_campaign=40bbaef46f-GreenBuzz-2012-03-
23&utm_medium=email
Defining Sustainability
• Sustainable development is a development that meets the

needs of the present, without compromising the needs of
future generations.
• Intergenerational justice means that what we do today must
both meet our needs and not interfere with the needs of coming
generations
Figure 3.3 Models of the Three Dimensions of
Sustainable Development
Three Types of Capital
• Social capital
• is any qualitative value directly embodied in human beings.
• Environmental capital
• (often called natural capital) quantitatively comprises the
amount of both renewable and nonrenewable natural
resources.
• Economic capital
• is expressed in monetary terms.
Weak versus Strong Sustainability
• Weak sustainability
• is a conformist, conservative, and uncritical approach to
sustainable development.
• Strong sustainability
• takes unconventional stances and approaches to
criticize, challenge, and change existing beliefs and
structures.
Weak versus Strong Sustainability Compare
Weak Sustainability Strong Sustainability

• Fragmentation • Holism
• Substitution • Complementation
• Status quo • Change
• Masters • Equals
Figure 3.4 Weak and Strong Sustainability
Approaches
Interpreting Sustainability
• Process or outcome
• Intergenerational or intragenerational
• Short- or long-term thinking
• Well-having or well-being
• Growth or de-growth
Figure 3.5 Sustainability Kuznets Curve and
Country Developmental Stages
Footprints
• A footprint
• sums up one or several types of environmental, social, or
economic impacts for one predefined entity.
• Exemplary footprints
• Water footprint of a product
• Triple bottom line of a company
• Global footprint of humanity
Degrees of Sustainability
• A situation in which resource usage exceeds the global resource

reproduction rate is unsustainable.
• When both correspond exactly, the situation is neutrally
sustainable.
• When fewer resources are used up than are reproduced, the
situation is termed restorative or restoratively sustainable.
Figure 3.6 Sectorial Contributions to Sustainability
MANAGING BUSINESS SUSTAINABILITY
Food for Thought 3
In Practice In Practice
Sustainability Progress or Regress at Apple? And the Winner Is: Strawberry

Joghurt “Now you can understand the
In 2011, Apple began to provide a detailed life- cycle report, embedded carbon in strawberry yogurt
accounting for the environmental impacts caused by its versus banana yogurt versus strawberry-
products in sales. This was an important step toward
banana yogurt,” says Scott Bolick, vice
impact transparency. The Spanish edition of The Economist
president of sustainability solutions at
compared the impacts of the iPad2 and its new version, the
SAP, who co-developed the dairy-
iPad3, and presented the results: “The new iPad3
product company Danone’s new product
increases its environmental impact by 38 percent.” Social
sustainability also may be challenged. carbon footprint information system.
Over time, Apple was forced to admit to problems, including The footprint is a centerpiece of
suicides, at the factories of its main production Danone’s plan to reduce CO2emissions
subcontractor, Foxconn. In the economic dimension, by 30 percent in only four years (2008–
however, the iPad3 isexpected to be a commercial 2012). Thirty percent of the company’s
success. 1,400 global managers’ bonuses is tiedto
their progress in shrinking the carbon
Sources: Apple. (2011). iPad 2: Environmental report; Apple. (201
foot prints in their areas of influence.
Product Environmental reports and the Environment: www.apple.com/environment/reports/; Economista España
. (2012). El nuevo ipad3 incrementa en un 38 por ciento su impacto medioambiental. Retrieved April 1, 2012, from El Source: Bardelline, J. (2012). Greenbiz. How Danone is pushing carbon
Economista España: http://ecodiario.eleconomista.es/empresas-finanzas/ noticias further down its ingredients list. Retrieved April 1, 2012, from
/3806203/03/12/rsc-el-nuevo-ipad3-incrementa-en-un-38-por- ciento-su-impacto-medioambiental.html; Vascellaro
, J. E. (2012). Audit faults Apple supplier: Outside audit finds health, safety violations at Foxconn www.greenbiz.com/blog/2012/03/29/danone-reduces-carbon?utm_source=E-
. Retrieved April 1, 2012, from Wall Street Journal Technology: http://online.wsj.co News+from+GreenBiz&utm GreenBuzz-2012-03-30&utm_medium=email
303404704577311943943416560.html
Managing Sustainability
• Sustainability management
• is the process of managing a business and every single one of
its activities in a way that makes it reach a neutral or positive
triple bottom line.
• Central terms
• Sustainable business
• Triple bottom line
• Impacts
Figure 3.7 Process and Outcome of Sustainability
Management
Triple Bottom Line, Impact and Sustainable
Business
• The triple bottom line
• is the social, environmental, and economic performance of an
organization or single activities. It is calculated by summing up all impacts.
• An impact
• is a negative or positive value created through business activity. Impacts
may be categorized as social, environmental, or economic.
• A sustainable business
• is one that has reached a neutral or even positive triple bottom line and
sustains social, environmental, and economic capital in the long run.
Sustainable Business
• Below-average unsustainable business
• exerts a net negative triple bottom line impact on economy, society, and environment that is below
the impacts of peer businesses.
• Average unsustainable business
• exerts a net negative triple bottom line impact on economy, society, and environment that
corresponds to the impact of a majority of its industry peers.
• Sustainable business
• exerts a small net negative triple bottom line impact that does not exceed the planetary system’s
restorative capacity.
• Neutral impact business
• exerts a net neutral triple bottom line impact on economy, society, and environment.
• Restorative business
• exerts a net positive triple bottom line impact, which means it replenishes at least one type of
capital while not depleting any of the others.
Figure 3.8 The Product Life-Cycle Model
Table 3.2 Samsung Electronics: Company Life-
Cycle Impact Portfolio
Social Environmental Economic
Production Employee education in Reduction in GHG emission Direct economic value
2010 of 29,300 people, (relative to sales) creation of $130 billion
with an average of by 31 percent from the out of which $99 billion
87 hours per person level in 2008, resulting have been redistributed
and an education cost of 5.11 tons of CO2 per to suppliers, $12 billion
$977 per person $88,800 (100,000 KRW) to employees, and the
revenue remainder reinvested
or distributed to other
stakeholders
Use Total customer inquiries Ratio of ecoproducts: Economic savings for

and complaints: 91 percent of company clients:
57 million products were classified Energy savings—between
as ecoproducts, with 17 and 88 percent
above-average performance Reduced repairs and
in material reduction, longer product usage—
energy usage, and price ceiling on repairs of
toxicity products provides incentives
and savings
End-of-useful lifetime Laptop models from Recovery of 1.06 million In-kind donations of used
2011 on 100% free cell phones in Korea electronic products for
of PVC/BFR (chemical through end-of-life, takeback low-income communities
substances scheme; company
that cause has collected more than
toxic waste and harm 2,000 collection points in
human health) 61 countries
Figure 3.9 Stages of the Life-Cycle Assessment
Process
Figure 3.10 Interconnectedness of Supply Chain
and a Life Cycle´s Product System
Figure 3.11 Application of Impact Assessment,
Life-Cycle Management, and Footprints
Impact Management Recommenations
• Balance (optimize)
• triple bottom line impacts to move toward sustainability.
• Eliminate
• waste in whatever form.
• Scale
• your sustainability management practices to have a larger
impact.
Principles of Sustainability: Managing for the
Triple Bottom Line (1/2)
I. Sustainable development is a development that meets the needs of present
generations without compromising the needs of future generations.
II. Sectorial sustainability is a necessary precondition to reaching sustainable
development. The three sectorial sustainability goals are sustainable business,
sustainable living, and sustainable governance.
III. Three types of capital have to be sustained and balanced in order to reach sustainable
development: social, environmental, and economic capital. Those three capitals
comprise the elements measured by the triple bottom line.
IV. The triple bottom line sums up all social, environmental, and economic impacts of an
activity.
V. An unsustainable business is one with a negative triple bottom line; a sustainable
business is one with a neutral one; and a restorative business has a positive triple
bottom line.
Principles of Sustainability: Managing for the
Triple Bottom Line (2/2)
VI. Sustainability management is the process of managing a business and every one of its
activities in a way that reaches a neutral or positive triple bottom line.
VII. The sustainability management process is based on the tool of product life-cycle
impact management and can be subdivided into two main activities: impact accounting
and impact management.
VIII. Product life-cycle impact management administers all social, environmental, and
economic impacts of a product through the stages of production, use, and end-of-useful
product life.
IX. The stages of life-cycle impact management are (1) goal and scope definition, (2) life-
cycle inventory, (3) life-cycle impact assessment, and (4) life-cycle interpretation.
People in Sustainability, Managing for the Triple Bottom Line
Pioneer Interview with John Elkington Practioner Profile: Judith Ruppert
Employer organization: 360
John Elkington is probably the
single most influential writer and Environmental is a Western
thought leader in sustainable Australian environmental man-
business. His triple bottom line agement consultancy, providing a
concept of people, planet, and wide range of environmental
profit has become sustainability services, including carbon and
professionals’ mantra. energy management; impact, site,
and contamination assess- ments;
flora and fauna surveys; compliance
reporting; and environmental
monitoring and training.
Job title: Environmental Consultant
Education: Bachelor of Business,
Goethe University, Frankfurt,
Germany; Master of Environmental
Policy and Management, Lincoln
University, Christchurch,New
Zealand
Laasch/Conway, Principles of Responsible Management, 1 st Edition. © 2015 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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PRINCIPLES OF RESPONSIBLE MANAGEMENT

1 …know and understand the history of sustainable

Expert Corner Dig Deeper Dig Deeper

Institutionalization Pioneering: Club of Rome

Status quo and Globe: humanity’s footprint

• The Australian Nhunggabarra

• Age of discovery and colonialism

• Conference on the Human Environment (UNCHE), 1972

• Scenario 1: Society and environment win

In Practice In Practice In Practice

• Sustainable development is a development that meets the

Weak Sustainability Strong Sustainability

• A situation in which resource usage exceeds the global resource

Sustainability Progress or Regress at Apple? And the Winner Is: Strawberry

Use Total customer inquiries Ratio of ecoproducts: Economic savings for

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