CHAPTER THREE – SUSTAINABLE STRATEGY

Learning outcomes for this chapter:

1. Describe what sustainable strategies are.

2. Differentiate between profit and wealth maximisation as measures of strategic success.
3. Explain the difference between a shareholder perspective and a stakeholder perspective.
4. Explain the role of the board of directors.
5. Differentiate between roles of the board of directors and top managers in an organisation.
6. Explain the role of corporate governance frameworks in enabling sustainable strategies.
7. Evaluate an organisation’s strategy from a sustainability perspective.

Key terms in this chapter: competitive advantage, wealth maximisation, sustainability,

stakeholders, business ethics, and governance

SAB example of Sustainable Development priorities:

 Accelerate growth and social development in our value chains (eg: support SMME’s)
 Make beer the natural choice for moderate and responsible drinker (safe drinking)
 Secure shared water resources for our business and local communities (especially in those
countries that have water shortages, eg: India)
 Create value through reducing waste and carbon emissions, eg: lighting, cooling
 Support responsible, sustainable use of land for brewing crops (help local farmers to
produce)

Sustainable strategies consider the following elements and seek to strike a balance between them:
ethical profits, healthy environment and healthy communities

Competitive advantage focuses on profitability and being better than your competitors whilst
sustainability focuses on survival in the long term.

The benefits of focusing on long term sustainability include:

 Improve company or brand image

 Often create cost savings
 Lead to competitive advantage
 Improve employee satisfaction, morale and retention
 Create product, service or market innovations
 Create business model or process innovation
 Generate new sources of revenue or cash flow
 Lead to effective risk management in the long term
 Enhance stakeholder relations

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The holistic business model for sustainable strategies includes 6 elements:

1. Environmental context – strategies should not harm the environment, this incorporates
ecological impacts, environmental awareness, quality of local environments, and adhering to
environmental legislations and regulations
2. Social context – strategies should contribute positively to the community, this includes
setting new standards and behaviours, community involvement and social inclusion and
community safety
3. Strategic fit – ensure long term strategies are aligned the internal and external
environments in which the organisation operates
4. Economic context – refers to profit generation, wealth creation, and ethical and legal
profitability
5. Organisational context – this refers to how strategy is carried out in the organisation,
through who and in what manner (ie: organisation structures), includes board of directors
(ie: governance structures), management (that is, leadership), employee effectiveness,
corporate governance etc.
6. Stakeholders – includes all creditors, shareholders, directors, employees, government
departments, suppliers, unions, the community etc. Power, legitimacy and urgency drive
stakeholder salience (latent stakeholders have one attribute, such as the environment has
legitimacy but not power or urgency; expectant stakeholders have 2 attributes such as
government may have power and urgency but does not have a high level of legitimacy as
they are not directly affected by organisations decision and lastly, salient stakeholders have
three attributes such as unions or shareholders)

Other important aspects of this chapter:

Corporate social responsibility (CSR), falls under the social context and is defined as the continuous
commitment by business to behave ethically and contribute to economic development while
improving the quality of life of the workforce and their families as well as of the local community and
society at large

Corporate governance is described as the system by which organisations are directed and controlled

Board of directors in a company are appointed by the shareholders to represent them in the
company’s strategic decision making, the board is the focal point of corporate governance