Sustainability Strategy Transforms the Enterprise

Topics: Strategic management, Sustainability, Management Pages: 16 (4694 words) Published: December 11, 2012
Balanced Scorecard Report
the strategy execution source
november – december 2011 : vol 13 no 6

Sustainability Strategy Transforms the Enterprise
By David Lubin, Chairman, Esty Sustainability Network, and Director, Palladium Group; Amy Longsworth, Partner, Esty Environmental Partners; and Randall Russell, Director of Research, Palladium Group Capitalism is a dynamic system for creating economic value. It continues to evolve as the world changes. What once were considered externalities in the 20th century (side effects or consequences of industrial or commercial activities that affect other parties without being reflected in the cost of the goods or services involved) are being reconsidered in the 21st century. The focus now is on “shared value”—a new conceptualization defined by Michael Porter as the policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the social, environmental, or economic conditions in the communities in which it operates or is emerging.1 Creating shared value, far from being corporate philanthropy or social obligation, is now becoming understood as a key strategic pathway for revenue growth and durable profitability in the 21st century. Over the past 10 years, the topic of sustainability has emerged as both a fundamental challenge and an important opportunity for strategic differentiation. In a recent study conducted by the United Nations,2 more than 93% of the 750 CEOs surveyed indicated that sustainability is important to their future success. Successful execution of a sustainability-focused strategy can achieve the promise of a triple bottom line: social performance, environmental performance, and financial performance. If Porter and others are correct, the challenge of achieving these outcomes—often referred to as “people, planet, and profits”—represents a business imperative that, inevitably, all organizations must address. Amanco is one of the early successes of the sustainability movement and one of the first companies to successfully execute sustainability strategy using the Balanced Scorecard.3 Latin America’s leading manufacturer of plastic pipes and fittings, Amanco first introduced its sustainability scorecard in 2001. Initially Amanco focused on the social impact of its business on employees and the communities around its factories. But its sustainability scorecard has since been expanded to include conducting continued on the following page

also in this issue:
Combining Hoshin Planning with the Balanced Scorecard to Achieve Breakthrough Results . . . . . . . . . . . . . . . . . . . . . . 7 Does Your Organization Have the Capabilities to Execute Its Strategy? . . . . . . 11

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1 M. Porter and M. Kramer, “Creating Shared Value,” HBR January–February 2011. 2 “A New Era of Sustainability,” UN Global Compact–Accenture CEO Study (2010). 3 “Amanco: Developing the Sustainability Scorecard,” Harvard Business School Case by R. Kaplan and R. R. De Pinho (Rev. January 29, 2008: 9-107-038).

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