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Strategic management and sustainability

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 STRATEGIC MANAGEMENT AND SUSTAINABILITY

Timothy Galpin
Saïd Business School, University of Oxford, Oxford, UK

Julia Hebard
Colorado Mountain College, Colorado, USA

Galpin, T.J., and Hebard, J., 2018. Strategic Management and Sustainability, in Borland,
Lindgreen, Vanhamme, Maon, Ambrosini, and Palacios Florencio (Ed.), Business Strategies for
Sustainability: A Research Anthology. (pp. 165-178). New York, NY: Routhledge.

Keywords: strategy, sustainability, strategic management, sustainability drivers

Abstract

In this chapter we offer an evidence-based framework that illustrates how external drivers

provide imperatives for a firm’s strategic management approach to sustainability, and how a firm

can respond to external drivers by incorporating sustainability into its internal strategic

management components. Moreover, content alignment among a firm’s internal strategic

management components helps create consistency in a firm’s sustainability communication to

various stakeholders. While management may view the fluid nature of a diverse set of external

sustainability drivers with concern, our framework provides them with an adaptive and context-

related approach to strategic sustainability management that can be tailored, as ever-changing

external sustainability drivers require.

Strategic Management and Sustainability Page 1

Introduction

Sustainability is creating a profound shift in people’s awareness and worldview, and now

appears to be the business imperative for firms of all sizes (Elliot and Webster, 2017). However,

management teams often fail to connect sustainability to business strategy (Porter and Kramer,

2006). Therefore, this chapter proposes an evidence-based framework (see Figure 1) to help

management:

1) Analyze and evaluate external strategic drivers to shape a firm’s strategic approach to

sustainability,

2) Respond to external strategic drivers by incorporating sustainability into a firm’s

internal strategic management components,

3) Create alignment among a firm’s internal strategic management components, and

4) Clearly communicate a firm’s sustainability agenda to various stakeholders.

Before embarking on this discussion, we should clarify our use of the term sustainability,

as the concept of sustainability is evolving and a single globally accepted definition for the term

does not yet exist.1 The phrases Sustainability, Corporate Social Responsibility (CSR), Corporate

Social Performance (CSP), Going Green, and the “Triple Bottom Line” all refer to organizations

enhancing their long-term economic, social, and environmental performance. For purposes of our

discussion, throughout this chapter we will use the term sustainability to refer to the concept

generally and all of its related constructs.

----------------------------------------------------

INSERT FIGURE 1 ABOUT HERE

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Strategic Management and Sustainability Page 2

 There is an ever-expanding volume of literature underscoring the importance of

sustainability to organizations and its positive impact on firm financial and environmental

performance, as well as employee job satisfaction and organizational commitment (Asrar-ul-

Haq, Kuchinke, and Iqbal, 2017; Huang and Watson, 2015). However, the practice of integrating

sustainability into a firm’s strategy is not well understood. The preponderance of writing on the

topic provides broad guidance about how firms can include sustainability as part of their business

strategy (see for example Basu and Palazzo, 2008; Porter and Kramer, 2011and 2006). In this

chapter we attempt to provide more specific guidance by presenting a framework that can help

management integrate external sustainability drivers into their firm’s internal strategic

management components.

Strategy should precede action (Mintzberg, 1990). Therefore, a firm’s sustainability

efforts should begin at the organization-wide strategic management level. Strategic management

is not just the organization’s strategic plan. Rather, it is the total sum of a firm’s plans, goals,

capabilities, resources, and actions leading to measurable results (Galpin, Whittington, and Bell,

2015). This more integrated view of the firm is in contrast to traditional strategic planning, which

is characterized by the systematic formulation of strategies geared toward the achievement of

organizational goals (Mintzberg, 1987). Research has demonstrated that firms which put strategic

management into practice typically outperform those organizations that do not, with strategic

management providing: 1) a clearer direction for the company, 2) a sharper focus on what is

strategically important, and 3) an improved understanding of a rapidly changing environment

(Wilson, 1994).

Strategic Management and Sustainability Page 3

External Sustainability Drivers

As Figure 1 illustrates, there are a number of external sustainability drivers that should be

analyzed and evaluated to determine the sustainability imperatives each driver may create for the

firm. This analysis helps determine each driver’s potential impact on the firm, and how the

drivers might be incorporated into a firm’s internal strategic management components. The

drivers identified in Figure 1 were selected based on the pervasiveness of each driver appearing

in the available literature about sustainability and its relationship to strategic management. The

external drivers illustrated in Figure 1 are:

• Customer demands

• Demographics

• Geographic Markets

• Competition

• Regulations

• Non-governmental Organizations (NGOs)

• Investor desires

• Ecological issues and natural resource availability

Each of these drivers on their own can create a compelling case for a firm to implement

sustainability into its strategic management approach. Together, they present a firm with an

imperative to pursue a sustainability agenda. Due to the need for brevity, the following

discussion of each of the sustainability drivers merely provides a brief overview of each driver

and their potential effect on a firm’s strategic sustainability agenda.

It should be noted that the drivers listed above are diverse and each driver is fluid. The

diversity of the drivers can create conflicting sustainability imperatives for a firm (Laurenti,

Strategic Management and Sustainability Page 4

Sinha, Singh, and Frostell, 2016). For example, customers’ may want to purchase

environmentally safe products, which might be more expensive for the firm to produce. While at

the same time, investors may demand the firm’s sustainability efforts focus on maximizing profit

through cost reduction by the firm using less energy and/or producing less waste. Beyond

conflicts, similarities can also exist among the sustainability drivers, such as regulators, NGOs,

and investors all demanding safe working conditions for employees. Analysis of the set of

sustainability drivers should highlight these similarities and conflicts, allowing management to

evaluate the relative impact on the firm from each driver in an attempt to balance the

sustainability imperatives across the set of drivers and/or prioritize which of the drivers is most

impactful to the firm’s brand, finances, and future growth.

The fluid nature of each sustainability driver creates uncertainty about the potential

changing sustainability demands placed up a firm. Regulations are often updated, new NGOs are

formed, consumer demands change, competition introduces new products, services, and

methods, and natural resources become scarcer. This uncertainty can be a cause for concern on

the part of management (Sharma and Sharma, 2011). However, regularly analyzing and

evaluating each driver for changes in content will help management adjust how sustainability is

included in the firm’s strategic management approach.

Consumer demands for sustainability

Customers are demanding sustainable practices from the companies they patronize. For

example, in a recent survey, when considering a new beauty product, 70% of women indicated

they are more likely to buy a product from a company that supports a social issue. Moreover, the

same survey found that 58% are willing to pay more for products that support a social mission

(61% of women are willing to pay 10% more for socially conscious products; 26% between 11%

Strategic Management and Sustainability Page 5

and 20% more) (Herich, 2017). Another study revealed that consumers’ perceived legal and

ethical responsibilities of brands improve brand loyalty (He and Lai, 2014).

Demographics and sustainability

As an extension of consumer demands, firms also need to address the growing demand

for sustainability being created by demographic trends. In a study polling more than 30,000

consumers in 60 countries throughout Asia-Pacific, Europe, Latin America, the Middle East,

Africa, and North America, almost two-thirds (66%) of consumers are willing to pay extra for

products and services that come from companies who are committed to positive social and

environmental impact. When sorting by age, the study revealed that almost three-quarters of

Millennials (age 20-34) stated they would pay more for sustainable products. Furthermore, 72%

of respondents under 20 (known as Gen Z) were willing to pay more. In comparison, 51% of

Baby Boomers (ages 50-64) said that they would pay a premium for sustainable products

(MarketingCharts staff, 2015).

The same study found that female Millennials appear to be some of the most strident

supporters of companies’ sustainability programs. Among the various Millennial segments

identified in the study (by age, gender, affluence and parenthood), female Millennials emerged as

the most likely to:

• Buy a product with a social and/or environmental benefit, given the opportunity (90%,

versus the 83% adult average);

• Tell their friends and family about a company’s sustainability efforts (86%, versus the

72% adult average); and

• Be more loyal to a company that supports a social or environmental issue (91%, versus

the 87% adult average).

Strategic Management and Sustainability Page 6

Geographic market drivers of sustainability

Another extension of customer demands is the rising demand across global geographic

markets. Starting in 2008, National Geographic partnered with GlobeScan to develop an

international research approach to measure and monitor consumer progress toward sustainability

called the “Greendex” survey. The first, 2008, survey encompassed 14 countries, 17 countries in

2009 through 2012, and 18 countries including 18,000 consumers in 2014. Respondents were

asked about behaviors such as the relative use of sustainable versus conventional products,

attitudes toward sustainability, and knowledge of sustainability issues. Their findings indicate

that, compared to the study's 2008 baseline levels, sustainable consumer behavior has increased

in all countries tracked since the first study, with the exception of Brazil. Consumers in the large

developing economies of India and China have scored highest on their sustainability measures.

Canadians and Americans, with their relatively massive environmental footprints as individuals,

continued to score lowest (National Geographic, 2014).

In addition to the results of the National Geographic Greendex survey, Nielsen’s 2015

global sustainability survey polled more than 30,000 consumers in 60 countries throughout Asia-

Pacific, Europe, Latin America, the Middle East, Africa and North America. According to the

survey, 55% of the respondents indicated they are willing to pay more for products and services

provided by companies that are committed to sustainability. The propensity to buy socially

responsible brands is strongest in Asia-Pacific (64%), Latin America (63%) and Middle

East/Africa (63%). The numbers for North America and Europe are 42 and 40 percent,

respectively. Amy Fenton, Global Leader of Public Development and Sustainability at Nielsen

states, “Consumers around the world are saying loud and clear that a brand’s social purpose is

among the factors that influence purchase decisions” (Nielsen, 2015).

Strategic Management and Sustainability Page 7

Competition and sustainability

Beyond consumers of various demographics and locations, competition compels

companies to become more sustainable. Research has found that a competitive advantage can be

accomplished through the inclusion of sustainability into a firm’s operating model (Bernal-

Conesa, de Nieves-Nieto and Briones-Peñalver, 2016). In addition to research, numerous

examples exist of innovation driven by industry competition leading to sustainable solutions. In

their supply chains several companies are working on innovative solutions to sustainable

agriculture. Examples include Diageo and SAB Miller with barley production in Africa, Nestlé

with milk supplies in Pakistan, and Cadbury's (now Kraft's) Cocoa Partnership to preserve vital

supply chains in Ghana. In the distribution chain Coca-Cola's micro-distribution centers in Africa

have developed new ways to employ local entrepreneurs to get their products "the last mile" to

small urban and rural outlets. While companies like these may be willing to share their initiatives

outside the competitive context, with NGOs and companies outside their sector for example, in

almost every case, these sustainability business models have been developed to improve the

competitive positioning of each company, improve their brand value, and increase quality and

quantity of sales (Baxter, 2013).

Regulation as a motivator for sustainability

Regulatory trends also drive companies towards sustainability. For example, in 2001,

France implemented a requirement for sustainability reporting among all firms operating with the

country. However, initial compliance with the statute was low. But, in an examination of the

change in CSR disclosure from 2004 in comparison to 2010 for a sample of 81 publicly traded

French firms, researchers found significant increases in the space allocated for sustainability

reporting within company documents, as well as an increase in quality of the reporting due to

Strategic Management and Sustainability Page 8

stricter enforcement of the regulatory requirement (Chauvey, Giordano-Spring, Cho, and Patten,

2015).

Regulatory compliance concerning sustainability is complex, with regulations varying by

country, state, and often by city. For example, in 2007 San Francisco banned supermarkets from

using plastic bags at checkout, while many other major cities have not. However, firms have

found that there are competitive advantages to adhering to and even anticipating sustainability

regulations. For example, companies that focus on emerging regulation gain time to experiment

with materials, technologies, and processes, before the regulations are put in place. Furthermore,

regulatory compliance can actually save companies money. When complying with the least

stringent standards, firms must manage sourcing, production, and logistics separately for each

market, because rules vary by country. However, Cisco, HP and other firms enforce a single

standard across each of their facilities globally, gaining from economies of scale and optimizing

their supply chains. To be successful with this approach, a firm’s worldwide norm must be the

strictest standard that the firm will encounter globally (Nidumolu, Prahalad and Rangaswami,

(2009).

NGOs drive sustainability

It is claimed that NGOs help bring a multiplicity of perspectives, and principally the

interests of the less powerful, to business regulation and new governance systems (Grosser,

2016). Firm’s often partner with NGOs to enhance their sustainability and improve their

corporate image (Grolleau, Ibanez and Lavoie, 2016). Sustainability research has extensively

explored the role of NGOs’ relationships with corporations (Rasche, De Bakker and Moon,

2013), and it is argued that NGOs, at least partially, compensate for the diminishing power of the

nation-state in relation to corporations that operate transnationally (Burchell and Cook, 2013).

Strategic Management and Sustainability Page 9

Research has demonstrated that NGOs have had an impact on firms’ approaches to sustainability

with regard to environmental issues, labor rights and human rights, and gender equality (Grosser,

2016; Hoffman, 1999; Vogel, 2008).

Investor desires for sustainability

Investors are increasingly considering a firm’s sustainability important enough that they

are influencing firms towards more sustainable business models through their investing choices

(Rajagopal, Dyaram and Ganuthula, 2016). Moreover, a study comparing Socially Responsible

Investment (SRI) funds and conventional funds with regard to the impact of the global financial

crisis of 2008 found that SRI funds better resisted the bankruptcy of the financial crisis than

conventional funds (Nakai, Yamaguchi and Takeuchi, 2016). Interestingly, when examining the

tactics of various groups in demanding firms' social change researchers found that different

activists rely on different tactics. For example, NGOs rely upon boycotts and protests, whereas

activist investors rely on lawsuits and proxy votes (Eesley, Decelles and Lenox, 2016).

Ecological issues and natural resource availability drive sustainability

Finally, firms are finding that they can no longer continue to exploit environmental

resources and shirk their responsibilities by acting as separate entities regardless of the interest of

the society (Krishna Murthy and Pitty, 2013). A number of ecological issues and resource

scarcity are driving firms’ sustainability agendas including climate change and greenhouse gas

emissions, air and water pollution, limitations of oil and gas supplies, water scarcity, loss of

natural areas, threatened species, and toxic spills (Adamowicz and Olewiler, 2016; Brelsford and

Abbott, 2017). Firms in various industries are responding to these issues by developing

sustainability agendas based on their particular resource uses (Kajzer Mitchell and Walinga,

2017).

Strategic Management and Sustainability Page 10

Internal Strategic Management Components

The external strategic drivers described above create a persuasive argument for firms to

include sustainability as part of their overall strategic management. Consequently, the second

step identified in Figure 1 – incorporating sustainability into the firm’s internal strategic

management components – will be addressed in this section. The internal strategic management

components illustrated in Figure 1 are the firm’s mission, values, goals, strategies, and

capabilities and resources. Although seemingly straightforward, it should be noted that

incorporating sustainability into a firm’s strategic management components is often problematic.

The difficulty is due to the fact that attitudes and actions regarding sustainability can vary widely

among company leadership. Some leaders may identify sustainability as an important strategic

imperative for a firm, while others may not. Likewise, even if they agree on sustainability as a

priority, company executives’ often hold conflicting views about how best to incorporate

sustainability into the firm’s strategic management components (Sharma and Sharma, 2011).

Building sustainability into the firm’s Mission

In general, a mission identifies how a firm defines its purpose and establishes the

priorities of the organization. Furthermore, a well-designed mission statement can help

differentiate a firm from other similar organizations. Mission statements are a powerful tool for

setting the strategic direction and tactical actions of the company (Dermol, 2012; Jacopin and

Fontrodona, 2009). Considerable research has shown that a well-articulated mission statement

provides critical signals to organizational stakeholders regarding the aims of the organization and

can ultimately lead to positive outcomes that benefit the entire firm (Atrill, Omran and Pointon,

2005; Desmidt, Prinzie and Decramer, 2011).

Strategic Management and Sustainability Page 11

 Initiating a company’s sustainability efforts begins with a mission statement that strikes a

balance between financial performance, social performance (e.g. workers’ and women’s rights,

working conditions, fair pay, and so forth) and environmental performance; and seeks to achieve

high performance in terms of each of these areas. When addressing sustainability, it is important

that a mission convey the role of the organization in relation to society to the various

stakeholders identified in Figure 1, including employees, customers, investors, and so forth

(Castello and Lozano, 2009; Quinn and Dalton, 2009). Mission statements that adopt this

balanced posture will convey to both internal and external stakeholders that the firm does not

consider success in terms of the “triple bottom line” (i.e. people, profit, and planet) to be

mutually exclusive. Instead, top managers will lead the organization in a way that reflects

success in financial, societal, and environmental terms. Examples of firms that have adopted a

sustainability perspective in their missions include Patagonia – Build the best product, cause no

unnecessary harm, use business to inspire and implement solutions to the environmental crisis

(Patagonia, 2017a), and Whole Foods – Whole People, Whole Planet (Whole Foods Market,

2017a).

While including sustainability in a firm’s mission statement is necessary to initiate

sustainability efforts, it is far from sufficient. Indeed, if a firm that changes its mission to

symbolize becoming more sustainable without subsequent efforts that are substantive in nature,

they run the risk of being accused by external stakeholders of superficially employing

sustainability merely as a marketing tactic. Therefore, to earnestly pursue their sustainability

aspirations, firms should begin with their mission statements, and then proceed with instilling

sustainability in their organizational value systems, goals, business strategy, and capabilities.

Strategic Management and Sustainability Page 12

Building sustainability into the firm’s Values

The mission statement is an effective tool for articulating the organization’s values to the

various external stakeholders identified in Figure 1, as well as setting expectations for the

behavior of internal stakeholders (i.e. management and employees) to align with those values

(Klemm, Stuart and Luffman, 1991; Swales and Rogers, 1995). Organizational values refer to

beliefs about the types of goals firm members should pursue, as well as ideas regarding standards

of behavior organizational members should use to achieve those goals. Values are the basis for

the development of the organizational norms and expectations that define appropriate behavior

by employees in particular situations. Shared values can also provide a source of motivation and

commitment among organizational members (Schein, 2010). A firm’s values answer the question

– Who are we as an organization? Shared values have been found to be a key component of

aligning management and employee decision-making and behaviors with a firm’s sustainability

efforts (Hargett and Williams, 2009; Morsing and Oswald, 2009). A firm’s sustainability values

have also been found to have a positive impact on perceptions of other stakeholders including

customers, NGOs, and investors (Bhattacharya, 2016; Rajagopal et al, 2016; Rasche et al, 2013).

Examples of companies that have incorporated sustainability into their corporate values

include Whole Foods – Caring about our communities & our environment (Whole Foods

Market, 2017b), and Pacific Gas and Electric – We are accountable for all of our own actions:

these include safety, protecting the environment, and supporting our communities (Pacific Gas &

Electric, 2017).

Building sustainability into the firm’s Goals

Organizational sustainability goals should complement sustainability-centered missions

and values. Goal setting provides the foundation for developing a roadmap of organizational

Strategic Management and Sustainability Page 13

activity (i.e. the company’s strategy), as well as provides the basis for establishing the metrics

which will be used to measure progress (Locke and Latham, 2012; Smith and Locke, 1990). A

firm’s goals answer the question – What will the organization achieve? Goals communicate to all

stakeholders the direction the company is headed and the priorities of the firm. For example, Vail

Resorts committed to “Target 10” in 2008, a 10% reduction in energy use by 2012. Hitting that

number ahead of schedule in 2011, the company committed to “The Next Ten”, a program aimed

at yet another 10% by 2020 (Vail Resorts, 2017).

As important as organizational level goals are, they are not adequate in themselves to

create a comprehensive approach to sustainability. In order to insure that the firm’s commitment

to sustainability permeates the entire organization, it must be extended into the development of

its business strategy.

Building sustainability into the firm’s Strategy

A global survey of more than 1,500 corporate executives found that a majority of

respondents believe sustainability is becoming increasingly important to business strategy, and

that the risks of failing to act on sustainability are growing (Berns et al, 2009). If a firm’s

sustainability efforts are to provide long-term value to both the company and society,

sustainability must be integrated into the firm’s strategy in a way that complements the firm’s

goals and overall mission. The link between a firm’s strategy and its performance is well

established, with additional empirical evidence demonstrating a strong link between an

organization’s strategy and the firm’s performance in terms of social responsibility (Beard and

Dess, 1981; Galbreath, 2010). Moreover, embedding sustainability in organizational strategy has

the twin benefit of providing value to society as well as distinguishing the firm from competitors

(Castello and Lozano, 2009; Siegel, 2009). Examples of firms that have adopted sustainability

Strategic Management and Sustainability Page 14

strategies include Patagonia’s “activist company” strategy (Patagonia, 2017b) and Coca Cola’s

“water stewardship and replenishment” strategy (Coca Cola, 2017).

Building Sustainability into the Firm’s Capabilities and Resources

Although it is necessary to instill sustainability into a firm’s mission, values, strategies,

and goals, doing so is not sufficient to fully establish sustainability as a key element of a firm’s

strategic management. Strategic capabilities, those that differentiate a firm from its competitors,

involve the patterning of activity, and investments are typically required to create and sustain

such patterning; for example, in a firm’s supply chain design, product development process, or

manufacturing methods. Consequently, capabilities cannot easily be bought and must instead be

built (Winter, 2003). The reconfiguration of firm resources and capabilities enable the

implementation of sustainability innovations. For example, Unilever recently undertook a

product redesign and introduced compressed deodorant cans. The existing organizational

processes to produce the deodorant can were reassessed and reconfigured, which made the

deodorant cans half of their previous size. This resulted in each deodorant can using

approximately 25% less aluminum, requiring approximately 33% less fuel for transportation and

reducing the associated carbon footprint by 25% (CanTech International, 2013).

Content Alignment

Before being able to communicate a consistent purpose and direction to all stakeholders

the content of a firm’s mission, values, goals, strategy and capabilities should be in alignment

with one another. Misalignment of the firm’s strategic management components identified in

Figure 1 can create confusion among both internal and external firm stakeholders about the

firm’s sustainability agenda. Whereas, it has been found that aligning the content of a firm’s

strategic management components creates consistency among management and employee

Strategic Management and Sustainability Page 15

behaviors (Longoni and Cagliano, 2015). Moreover, research has indicated that the overall

alignment of strategic management components leads to improved firm performance (Wu et al,

2014). Examples of firms that have aligned their sustainability agenda across the strategic

management components identified in Figure 1 include Patagonia (Patagonia, 2017a and b) and

Whole Foods (Whole Foods, 2017a and b).

Communication of the Firm’s Sustainability Agenda

As Figure 1 indicates, once management has consistently embedded sustainability into

the firm’s strategic management components, the next step is communicating the firm’s

sustainability agenda to various internal and external stakeholders. Indeed, the increasing global

awareness of sustainability has led to a significant proliferation in the publishing of firms’

sustainability reports around the world (Guidry and Patten, 2010). Firms disclosing sustainability

information are able to signal superior sustainability performance, which positively affects the

market’s view of the firm and potential future value (Prado-Lorenzo and Garcia-Sanchez, 2010).

The positive effect of sustainability reporting on firm value can be explained by stakeholder

theory. Stakeholder theory posits that business success lies in a firm’s ability to maintain trustful

and mutually respectful relationships with the various stakeholders identified in Figure 1

(Freeman, 2010). Interestingly, firms that publish sustainability reports have been found to

possess higher market valuations than firms that do not provide sustainability reporting.

Moreover, the same researchers found that among the firms that publish sustainability reports,

those with high sustainability reporting quality and perceived credibility have higher market

valuations than firms with low sustainability reporting quality and perceived credibility of

sustainability reporting (Wang and Li, 2016). Examples of firms who regularly report

sustainability results include Vail Resorts (Vail Resorts, 2017) and Pepsico (Pepsico (2017).

Strategic Management and Sustainability Page 16

 Lastly, as illustrated in Figure 1, communicating a firm’s sustainability agenda also

influences external drivers; many of which are external stakeholders. Examples of firms’

influencing various sustainability drivers include, lobbying regulators (Funk and Hirschman,

2017), partnering with NGOs (Calveras and Ganuza, 2016), demonstrating ethical behavior that

in turn drives competitors to emulate ethical behaviors (Carson, Hagen and Sethi, 2015), and

advertising sustainable practices which influences customer desires (Ülkü and Hsuan, 2017).

Implications for Management

The framework we present implies several key actions enabling management to take an

adaptive and context-related approach to strategic sustainability management that can be tailored,

as ever-changing external sustainability drivers require.

The first step is to conduct an external drivers analysis, collecting both quantitative and

qualitative data, for each of the key external sustainability drivers. This external analysis will

help management determine the sustainability requirements and constraints of the firm’s

customers, geographic markets, competitors, regulators, investors, and natural resources. Data

from the external analysis should then be used to incorporate sustainability into each component

of the firm’s internal strategic management, initially by clearly articulating sustainability as part

of the firm’s mission. Then, by developing organizational values that include sustainability,

followed by establishing organizational goals focused on sustainability, incorporating

sustainability into the firm’s business strategy, and developing the firm’s capabilities and

resources to implement desired sustainability efforts. Once sustainability is incorporated into the

internal strategic management components, the firm’s sustainability agenda can then be clearly

communicated to various stakeholders including customers, investors, suppliers, partners,

regulators, the public, and NGOs. Communication of a firm’s sustainability agenda also enables

Strategic Management and Sustainability Page 17

management to proactively influence various external drivers, from lobbying regulators to

partnering with NGOs, to influencing customer desires. Finally, management should continually

monitor the external sustainability drivers, and regularly adapt the firm’s internal strategic

management components as sustainability imperatives change.

Summary

The evidence-based framework we offer illustrates how external drivers provide

imperatives for a firm’s strategic management approach to sustainability, and how a firm can

respond to external drivers by incorporating sustainability into its internal strategic management

components. Moreover, content alignment among a firm’s internal strategic management

components helps create consistency in a firm’s sustainability communication to various

stakeholders. While management may view the fluid nature of a diverse set of external

sustainability drivers with concern, our framework provides them with an adaptive and context-

related approach to strategic sustainability management that can be tailored, as ever-changing

external sustainability drivers require.

Strategic Management and Sustainability Page 18

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 Figure 1 Incorporating Sustainability into a Firm’s Strategic Management

Strategic Management and Sustainability Page 25

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