Corporate responsibility and sustainability: leadership and organizational change

Citation

Lenssen, G., Tyson, S., Pickard, S. and Bevan, D. (2009), "Corporate responsibility and sustainability: leadership and organizational change", Corporate Governance, Vol. 9 No. 4. https://doi.org/10.1108/cg.2009.26809daa.001

Corporate responsibility and sustainability: leadership and organizational change

Article Type: Guest editorial From: Corporate Governance, Volume 9, Issue 4

Each year, the EABIS Annual Colloquium explores a knowledge development and learning agenda on one major dimension of Corporate Responsibility. Its conceptual framework integrates multiple levels of analysis – global, sectoral, regional, national, company and managerial.

The three guiding objectives are to identify the gaps in existing knowledge, to translate current research outputs into practical and accessible resources, and to define the most business- and public policy relevant future research questions.

The EABIS Colloquia 2002-2010 feature the following dimensions of CR:

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  2002 INSEAD/Fontainebleau: Corporate Responsibility: A Business-Relevant Research Agenda. Conference Chairs: Henri Claude de Bettignies and Maurizio Zollo.

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  2003 CBS/Copenhagen: Mainstreaming Corporate Responsibility. Conference Chairs: Peter Pruzan and Mette Morsing.

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  2004 VLERICK/Ghent-Leuven: Responding to Societal Expectations: Implications for Business Functions (*). Conference Chair: Lutgart Van Den Berghe.

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  2005 KOZMINSKI ACADEMY/Warsaw: Corporate Responsibility and Competitiveness (*). Conference Chairs: Wojciech Gasparski and Boleslaw Rok.

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  2006 SDA BOCCONI/Milan: Corporate Responsibility and Strategic Management (*). Conference Chairs: Francesco Perrini and Antonio Tencati.

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  2007 ESADE/Barcelona: Corporate Responsibility and Global Governance (*). Conference Chair: Daniel Arenas.

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  2008 CRANFIELD: Corporate Responsibility, Leadership and Organisational Change (*). Conference Chairs: David Grayson and Andrew Kakabadse.

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  2009 IESE/Barcelona: Corporate Responsibility and the Challenges of Governance. Conference Chairs: Antonio Argandona and Joan Fontrodona.

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  2010 St Petersburg University (planned): Corporate Responsibility in Emerging Markets. Conference Chairs: Valery Katkalo and Yuri Blagov.

(*) followed by a special issue of this Journal.

In the wider context of this series of colloquia and special issue journals, the 2008 Cranfield Colloquium was positioned to turn attention from external engagement to internal leadership and organizational change.

The colloquium model for knowledge exchange

The past four EABIS Colloquia have examined a number of the external dimensions of corporate responsibility: stakeholder management, competitiveness, strategic management, and global governance. The 2008 Colloquium and this special issue focus on the internal dimension of leadership and organizational change that departs from the externally focused CR research (Figure 1).

Figure 1 The colloquium model for knowledge exchange

A series of specialized workshops delved deeper into underlying issues like corporate culture, climate change, quality management, HRM and internal integration. However, four main topics were examined in plenary by a number of senior thought leaders:

“The Journey to Sustainability”. Dexter Dunphy, Emeritus Professor at the University of Technology in Sydney (Australia), delivered a keynote followed by debate on “the cluster of vital knowledge and skills needed to manage the transition to a sustainable economy and society at the corporate level”.

Dunphy highlighted a number of critical steps and actions that need to occur in pursuit of this objective. First, to identify the path towards the creation of sustainable enterprises. Second, to identify the key characteristics of the future-fit organization that can proactively initiate and creatively adapt to change. Third, to develop an organizational capacity for corporate renewal – namely the capability to survive and thrive on change. Fourth, to create a cadre of change leaders – people with vision and courage and with the skills to manage a deep transition. Finally, to be able to evaluate and re-target change to keep it on track and to stimulate a process of organizational learning.

Following Dunphy’s input, “The Critical Challenges for Organizational Change” sought to identify the vital knowledge gaps and research questions that – if addressed – would best facilitate positive change and the integration of CR into processes, systems and culture. Sir Michael Rake (Chairman, BT Group) opened with an analysis of key success factors and barriers to embedding sustainability in a firm’s operations and DNA at the global and local levels.

“Innovation and New Approaches to Leading Change” explored the critical success factors that enable corporate leaders to reposition the firm from an internal resource and systems perspective and drive the mainstreaming agenda. Peter White (Director Corporate Sustainable Development, Procter & Gamble) presented the case study of how P&G has approached the challenge of developing a fully integrated social and environmental strategy, and integrating its objectives throughout the firm at a functional level.

“Executive Development and the Leadership of Organizational Change” questioned the new skills and competences required to manage internal transformation, as well as the implications for the content and methods of traditional executive education and training programs. Robin Blass (VP Global Learning, Unilever) discussed the multi-dimensional and complex sustainability issues that global firms must increasingly factor into their executive development frameworks in order to train and retain responsible future leaders and managers.

The importance of the internal organizational dimension of leadership and change

The critical issues are identified as embedding CR and sustainability into the DNA of the firm, the implied organizational change, innovations or even transformation this takes, and the required instrumental leadership for making this happen. Research and debate on CR and sustainability, however, is very much dominated by external engagement, stakeholder dialogue and issues management.

Organizations as living systems continuously adapt to their external challenges and demands with strategies to shape relationships and positions in the business environment and with external stakeholders.

The key role of leadership is to channel these external adaptations (or aspiration stances) into a strategic capability fit. This implies internal integration into the “hard” organizational dimensions of structures, processes and systems and the “soft” dimensions of purpose, culture and competencies, which in turn determine strategic responses of external adaptation (Figure 2).

Figure 2 A generic model of the firm as a complex adaptive system

Since the work of Alfred Chandler (1969) and his “structure follows strategy” we know that successful strategies are underpinned by organizational design and, more recently by organizational capability. We also know from research since then that successful leadership is geared towards shaping organizations to better respond to external challenges. Resource based approaches to strategy go even further and posit that internal capability and core competencies are the successful drivers for strategy (Barney, 1991). Strategy itself is an outcome of leveraging organizational resources.

Serious research focus on this in the CR and sustainability field has been limited and sporadic

Porter and Kramer (2006) produced a landmark paper on CR and strategy. However, at the very end of his paper he spent only a few paragraphs on the organizational implications of strategic choices of CR.

A 2005 literature review – led by Ashridge as part of the EABIS Project Leadership Skills and Competences for CR – highlighted the dominance of normative approaches to research into CR leadership and organization. It also revealed little insight into organizational complexity and instrumental approaches to strategic change that could better inform leadership development. The review itself can be downloaded directly from the EABIS website www.eabis.org

Strategic approaches to corporate responsibility (e.g. Jackson and Nelson, 2004; Zadek, 2004) emphasize external engagement and only begin to sketch out the need for internal integration with some generalities.

Practitioner literature like Doppelt (2003) focuses on internal integration by providing a systems-based practitioner’s guide to change by shifting goal-setting and information flows and aligning systems, structures and governance and thus seemed more advanced.

The work of Dunphy et al. (2007) draws from the vast literature on organizational change management (see below) and applies this to corporate sustainability, comparing incremental approaches to transformational approaches and the key factors in change agent competency.

Waddock and Bodwell (2007) present a “manager’s manual” based on a Total Quality Control approach to embedding corporate responsibility in the organization.

Lately, the implications of CR for Human Resource Management have also attracted attention. Collier and Esteban (2007) identify two types of factors that have a significant impact on employee CR commitment: organizational culture and identity.

We need to draw from the knowledge on organizational change built up over more than 50 years

It is important to recognize that there is a vast body of literature on understanding and managing organizational change currently available.

Kurt Lewin’s (1947, 1951) work gave rise to the organization development (OD) movement which established itself in the 1960s and 1970s as the dominant (psychological) approach to managing organizational change, based on broad internal consensus and incremental evolution.

During the 1980s and 1990s, organizations were obliged to change in less evolutionary and more transformational ways against a backdrop of wave after wave of profound shifts in the business environment: the “quality revolution”; the “consumer revolution”; technological change giving rise to new production and distribution methods; the “information/knowledge revolution” – all of which deeply influenced organizational dynamics. Firms that swiftly adapted by developing organizational capability flourished; others fell behind, became uncompetitive or perished.

History may well judge the next revolution to be the “sustainability revolution” which – in the foreseeable future – could unleash another Darwinian struggle for adaptation in which only the fittest organizations will survive and thrive. “Fittest” will again imply the strategic and organizational “fit”.

The new research that has been generated on organizational change shares some important characteristics:

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  Interdisciplinary. Beyond psychological approaches, drawing also from economics, sociology, complexity science, anthropology and literary studies

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  Multi-dimensional. Change as planned and emergent, in conscious and unconscious processes, with evolutionary and transformational effects

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  Multi-perspective. Rational-modernist, symbolic-narrative and post-modern critical theory research methodologies are competing for predominance (Hatch and Cunliffe, 2006)

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  Multi-agency perspective. Managers used to be seen as prime change agents – now much more attention is paid to distributive agency by gatekeepers, informal networks, communities of practice, etc. Proponents of the learning organization have rejected the mechanistic idea that organizations need change agents and leaders “who drive change” (Caldwell, 2006).

This literature is highly relevant for organizational change from a CR and Sustainability perspective.

The rational “business case” for CR is often used as a platform for change in companies, but often fails to be embedded in the dominant narrative of the organization, which is not a rational process. The values system of the managerial class, with its tendencies towards “herding”, might reject rational strategic arguments from a logic of responsibility and sustainability.

Rational perspectives also overlook often the nature of organizations as political power arenas. The “harmony model” in organizational systems theory stands opposed to the “parties model” (Lammers, 1990).

The CR agenda in companies forms part of a political struggle within the firm on the purpose, identity and values of the organization.

Corporate responsibility and Sustainability also raise wider questions of social and organizational learning, innovation and change. Specifically, how do organizations co-create change with the systems and communities in which they operate? The implications of this are great, potentially spanning across entire production and consumption systems.

Indeed, one of the major CR-related challenges facing business practice and education today is how to integrate a deeper understanding of organizations as complex systems embedded in the complex ecosystems of the business environment, the industry sector, the network of stakeholder relationships, etc.

The evidence for the need to focus on internal organizational change

Examples from consulting research: McKinsey and Accenture

A 2007 McKinsey survey among 400 CEOs of global companies reported that 70 percent of corporate leaders considered a strategic approach to environmental, social and governance (ESG) issues as a very high or high priority (compared to 33 percent five years previously) (Oppenheim et al., 2007). However, they noted major challenges in the organizational embedding of a strategic approach.

When questioned about the difficulties of delivering an integrated company-wide ESG approach, CEOs identified competing strategic priorities and the complexity of implementation across functions as their two most significant challenges. The executives recognize the business case for embedding corporate responsibility, but are obliged to manage a strategic paradox of conflicting interests that hinder internal action.

Respondents were also asked to compare their company’s aspirations on ESG issues to actual performance. The highest negative gaps all related to organizational change issues: embedding in global supply chains (32 percent), in strategy and operations of subsidiaries (27 percent), in corporate strategy and operations (22 percent), and engagement of the board in ESG oversight (24 percent). Companies are in clear need of better insight and knowledge to address the challenges of practical implementation.

A 2008 Accenture project takes this a step further, aligning sustainability with the achievement of high corporate performance (Berthon et al., 2008). Figure 3 illustrates the view that against a backdrop of global forces reshaping the external business environment, ESG issues will become at least as important as economic ones in delivering long-term value creation.

Figure 3 Trends and expectations are redefining what performance means and are reshaping strategies and operating models

In this context, global companies will need to go beyond corporate strategy alone and develop new, integrated processes that are focused on execution. Combining strategy on ESG issues with operational excellence will have direct implications for factors like competitive advantage, market position and the distinctive capabilities the firm. When organizations are capable of identifying and reacting to these factors, they will be able to redefine the skills and leadership frameworks required to underpin this kind of sustainable value creation and high performance.

Example from academic research: The RESPONSE Project

Project RESPONSE, which was funded through the European Union’s 6th Framework Programme for Social Sciences Research (2004-2007), reveals that companies with superior social performance, balance external stakeholder engagement with internal change initiatives. In fact, internal activities are stronger predictive indicators for performance than external engagement.

The RESPONSE research team studied a wide range of potential enabling factors to find out which ones are associated with the highest levels of corporate social performance. It did so by comparing higher and lower social performers within various industries in order to identify those factors that appear to systematically differentiate the levels of performance.

The analysis shows that among other factors:

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  There is strong evidence that internal CSR change initiatives are associated with high social performance, but no clear evidence that investment in externally focused CSR initiatives is effective in taking corporate responsibility performance to a level of excellence

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  Higher social performers are also those companies where social and environmental issues are more fully integrated into strategic and managerial decision-making.

Examples of the internal factors and change initiatives are highlighted in Table I.

The academic research, practitioner knowledge and consulting proficiency are thus beginning to emerge, yet their relevance is clear and the need for action pressing.

The know-how of systematic implementation through effective change management throughout the organization is perceived as patchy and dispersed. This constitutes a challenge for business organizations large and smaller, and probably has equal relevance to public and voluntary sector organizations as well.

As such, the 2008 EABIS Colloquium looked to identify key directions for future business-relevant research that addresses organizational change and the complexity of markets, firms and processes. It will serve as a knowledge-sharing platform around the vital area of internal integration, thereby adding to the resource base available to those tasked with leading responsible and sustainable change in their organizations.

Identifying the key issues

The emerging research agenda on organizational change – initially shaped by the insights of the Cranfield Colloquium – will address the following key issues:

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  The context of change: the drivers and inhibitors of change (external and internal), strategic choices, market/society/political conditions and organizational responses.

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  The approaches to change: e.g. incremental and transformational change, leadership and change agency, planned and emergent change, organizational learning, competencies development, quality management, managing the paradoxes of change, resistance to change.

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  The dimensions of change: organizational identity and purpose, organizational structure and culture, processes and systems.

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  The areas of change: e.g. in supply and distributions chains, in product and service development, in innovation.

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  The implications of change: e.g. for human resource management, for knowledge management, for management development.

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  The outcomes and effects of change: e.g. on overall organizational capability, organizational effectiveness, organizational performance.

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  The nature and roles of leadership from a hierarchical and distributive perspective, in top-down and bottom up change processes.

The selected papers in a conceptual framework

The conceptual framework can be seen in Figure 4.

Figure 4 The conceptual framework

Conclusions and recommendations for further research

The 2008 Colloquium and this special issue have begun to explore the dynamics of organizational change for corporate responsibility and sustainability. More interdisciplinary work with scholars from the fields of organizational behavior and strategic management will be required. We will need to develop more case studies with practitioners and consultants for research and teaching purposes.

Corporate Responsibility and Sustainability has been researched extensively from an external stakeholder management and an issues management perspective. Some work has been done on developing CR strategies. Regardless, serious efforts must be invested in the delivery of new research on strategic integration and internal organizational change.

More specifically:

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  The role of the board in initiating and supporting organizational change: integrating CR in corporate governance policies, structures and processes.

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  Integration of CR into a comprehensive overall change management project and process. Sumantra Ghoshal’s case study “The Transformation of BP” is a rare example in the literature of how CR became part of a larger and comprehensive culture/structure change management project – in this case along the lines of the learning organization model.

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  Integration in the strategy process – how are market and non-market factors related in diagnosing the business environment and developing integrated strategies, possibly from a scenario planning perspective? Jay Barney makes a strong case for interdisciplinary research in strategic management between economics and sociology. This research is in its very early stages.

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  Integration in organizational structures. The role and the place of the CR department is only a part of this research domain. The broader question is how internal accountability structures fit external accountability pressures. Multinational firms have often dealt with the tension between shareholder and stakeholder accountabilities through a dual structure of global business units (for shareholder value) and regional units (for managing stakeholder relations). But this has only partially worked and has had significant downsides from a business innovation perspective of CR and sustainability.

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  Integration in organizational learning. Few companies manage to develop an “adaptive” culture that continually aligns organizational systems with desired outcomes in a rapidly changing business environment. Equally, they struggle to capture learning experiences from internal interactions as well as external engagement, which has direct relevance to the management of CR issues.

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  We need a better understanding of change agency for CR in organizations. The role of the CR Manager/Director as change agent, the effectiveness of external change management interventions, the role of cross functional change project teams, change experiments, change incubators, the role of organizational narratives, of gender in change agency.

Many of these envisaged research endeavors will require engaged scholarship (academics working closely with practitioners), longitudinal studies and interdisciplinary approaches.

There is a long way to go and the challenges are daunting. But as engaged scholars and practitioners, we cannot escape from our responsibility to shape and apply knowledge to support and facilitate within organizations of what many foresee as the corporate sustainability revolution of the twenty-first century.

Gilbert Lenssen, Shaun Tyson, Simon Pickard, David BevanGilbert Lenssen, Simon Pickard, and David Bevan are all based at EABIS, Brussels, Belgium. Shaun Tyson is based at the Cranfield School of Management, Cranfield University, Cranfield, UK.

Acknowledgements

The papers selected for this special issue were presented at the 7th Annual Colloquium of the European Academy of Business in Society (EABIS), Cranfield University School of Management, 11-12 September 2008.

About the Guest Editors

Gilbert LenssenPresident of EABIS, Professor at Leiden University and Visiting Professor at Henley Management College, former Professor of International Management at the College of Europe (Bruges/Warsaw) and Visiting Fellow at Templeton College, University of Oxford. He is a member of the board of the European Foundation for Management Development (EFMD), the academic advisory boards of several business schools, and the editorial boards of a number of academic journals. Before moving into academia, Gilbert Lenssen enjoyed an international corporate career over 25 years in Belgium, the UK, USA, Germany, Spain and India, culminating in his position as Vice President for BP’s Solar International Division. He is a lifelong fellow of the Royal Society of Arts. Gilbert Lenssen is the corresponding author and can be contacted at: gilbert.lenssen@eabis.org

Shaun TysonEmeritus Professor of Human Resource Management at Cranfield School of Management where he has been a Professor for more than 20 years, and where he founded the Human Resource Research Centre in 1987, conducting research and consultancy assignments in the UK and internationally. He previously held senior management positions in industry, and also spent four years in the UK Civil Service. He studied sociology at London University, and holds a PhD from the London School of Economics, and is a Fellow of the Chartered Institute of Personnel and Development, a Member of the British Psychological Society, and a Lifetime Fellow of The Royal Society of Arts. He was awarded a Doctorate (Honoris Causa) from the University of Lyon, and was a Visiting Professor at the University of Paris for five years. He is currently a Visiting Professor at the University of Westminster, and Chairs the Remuneration Committee of the Law Society of England and Wales. He has published 20 books and over 50 articles on organizational behavior, human resource management and industrial relations.

Simon PickardDirector General of EABIS, responsible for overseeing its portfolio of collaborative knowledge development and learning initiatives. He also manages its coordination team in Brussels and the growing EABIS network of 100+ institutions and 4000+ affiliates spread across 24 countries and five continents. He also represents EABIS in a number of advisory groups and Steering Committees, most notably at the European Commission and United Nations Global Compact. Simon’s professional background is in international education, having worked for eight years in the US, the UK and France on immersion and development programs. He joined EABIS in early 2006 following the completion of his MBA at HEC School of Management in Paris.

David BevanDirector of Academic Affairs at the European Academy of Business in Society. He is a faculty member at the School of Management, Royal Holloway University of London. David’s research interests are framed by largely post-structuralist approaches to management research as indicated between the interdisciplinary interests of critical management studies, and critically reflective practice in issues of accountability, corporate social responsibility, ethics, the political economy and higher education. He is a Senior Visiting Wicklander Fellow at The Institute for Business and Professional Ethics, DePaul University, Chicago. Dr Bevan is an organizational stakeholder for the Global Reporting Initiative (GRI) and a past Chairman (2007/2008) of EBEN UK. Prior to re-training as an academic (PhD King’s College London), he had 30 years commercial experience in private equity and business development in the US and UK.