Organisation for sustainability
Jyoti Prasad Deka
Mitigating climate change through research / strategy in sustainability and energy transition
(This article is inspired by the international bestseller “Competing for the Future” by @Gary Hamel and C. K. Prahalad. A section called - Thinking Differently - in this book measures organizational structures for the futurity of strategy so that future markets or businesses can be capitalized by a company. This article applies those concepts to think differently about an organization when it considers sustainability as a business strategy)
Organizations are either “big” or “small” in business, resources, and offerings contexts. The bigger the organisation deeper is the hierarchy to achieve a decision outcome. Bureaucracy and centralized control often are synonymous with large firms.
There are two other theses where big and small nimble firms vary on a scale of duality. The first thesis is cloning. On one end of this duality is a herd of sheep who gaze around and are brought back to cumulative at the end of the day by the shepherd. The other end is the pack of wolves who are a purpose-driven group looking to hunt, where the responsibility of each member is defined and sacrosanct. Firms, small or big, may constitute a group of units (or individuals) that are self-driven. Their purpose is self but see that purpose realized in the collective pursuit – just like the pack of wolves. Sometimes, big firms reduce to a group of units or individuals who act as a cog in the wheel. These individuals or units do not have a self-driven agenda and simply imitate the collective order – they are like the herd of sheep grazing on a green pasture under the rules of the shepherd.
The second thesis of diversification is, size bred. Big conglomerate firms often diversify their sources of income through multiple business footprints. Small firms stick to their core business alone or at times try diverse things organically if not too taxing on their resources.
What we discussed in the above paras is a number of dualities in organizational structures of business, big or small. When a new opportunity to make the future such as the theme of sustainability arises, organizations often tackle it with a strategy on a fulcrum that begets from such dualities (Exhibit 1).
So naturally, a question arises – should anything be done differently to internalize sustainability as a business strategy? Thinking about organizations cannot be divorced from strategy. Sustainability as a business strategy can be posed as an opportunity for a new way of thinking about the organization itself, from inward and not just outward.
Corporate versus BU
Corporate teams and business units (BU) often work in tandem to resolve shareholders’ and future business priorities. Often Corporate team takes the wholesome responsibility of executing a business strategy that builds on BU managerial foresight in a particular market. Most large firms are not well equipped for this bottom-up versus top-down trade-off challenge as far as taking sustainability as a business is concerned.
The reason for this is in difference in temporal motivation of the corporate team to BU managers. The corporate team is most concerned about short-term ESG and sustainability reporting metrics as reporting and footprint of business when it takes into account the strategy for sustainability. Often the goal is to reduce the emission footprint of the business or achieve net zero status by a definite timeline. BU managers on the other hand are task-oriented when they tackle sustainability in their long-term strategic action plan. The BU needs to achieve a product or service life cycle with reduced emission intensity and the focus is on strategic decisions around future design and processes.
The golden rule to address the above top-to-bottom dichotomy is to find interlinkages among the BU that collectively contribute towards the corporate agenda. Interlinkages among BU often discover white space opportunities and sustainability should be no different. This also addresses the balance of having a centralized approach towards sustainability in business strategy that is intertwined with decentralized unit-level commitments.
Bureaucratic versus Empowered
Hierarchies are often instituted in the management of an organization – be it large or small. Large firms often obfuscate the channels of hierarchies into the mire of bureaucracy. Initiatives like sustainability as a strategy often result in processes that entangle themselves into the hands of bureaucracy. As a result, strategic intent remains but operationalizing the intent into action becomes a struggle.
Small firms grant an individual to freedom to design her own process and hustle her way out to accomplish what lies in the path toward strategy implementation. This at first glance appears empowering but runs a high risk of indiscipline. So, empowerment with complete ignorance of procedures is no solution either.
When we consider sustainability as a business strategy, the critical point to remember is that it is a shared goal of survival and hence, needs a shared sense of direction. The metrics of sustainable outcome are net zero, tons of CO2 or water saved, hundreds of jobs created, or thousands pulled out of poverty, etc. Without a singular sense of direction within the firm, large or small, it is very hard to come true on those outcome metrics.
Case study: Water sense in Coca-Cola
Water is a primary ingredient in nearly all of Coca-Cola’s products and is a key source for its bottlers or suppliers. In 2014, Coca-Cola came under severe criticism from local communities and the Government in India for depleting the local supply of groundwater. It became the wake-up call for the company to look beyond its corporate quarters and into the supply chain. The brand quickly pledged to be a neutral consumer of water to maintain its image. The water replenishment agenda set a sense of direction in Coca-Cola’s corporate room and the company over the course of a year claimed to have replenished all its water usage, ahead of its 5-year long target level. Part of the success story was that Coca-Cola galvanized its supply and procurement teams to handle local communities of farmers in promoting more sustainable practices that reduced the usage of water. Although such achievement towards a common cause does not entirely reveal a structural organization change within Coca-Cola or perhaps, it is a matter of investigation by Organisation Theory students at a business school; nonetheless, the response to crisis reveals the impact of having a common sense of direction in a highly networked complex global organization.
Clones versus Renegades
Companies often like to compare their teams with a pack of wolves. Sure, there is a supreme leader in the organization – the leader of the wolf pack, but every member of the pack is aware and discharging her own capability and strength to the hunt. Not all parts of the organization, like the wolf pack, are equal; neither they are equally capable. Every member has self-interest in the greater good.
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The opposite of this axis is an organization sleeping over as a herd of sheep. One sheep wanders far and it needs to be brought back to the herd. But all sheep behave uniformly and hence, the word - clones - to describe them.
We argue that neither a group of self-interested greater good-driven renegades nor a homogenous bunch of cloned sheep are on course to internalize sustainability. Contradictory notions of individual freedom and common cause are unlikely to erode the friction of sustainability initiatives in an organization unless there is a group of activists who provide the necessary sense of community. This activist group questions and vetoes the status quo and embraces sustainability for the organization with individual as well as communal desires.
Case study: Activists Ensuring Checks on Patagonia’s Footprint
Patagonia, the widely known US outdoor and adventure-wear brand for its transparent sustainability communication, has made some resounding commitment to the activist model. At COP26 in 2014, the company announced it would stop calling itself a sustainable brand because it was very much part of the problem.
Since then, Patagonia has launched an internal activist group within its organization – its Social and Environmental Responsibility (SER) team, which can veto a decision to work with a new factory or not. Patagonia’s activist team makes sure the company stays out of factories in offshore locations that do not meet its social and environmental values. This veto approach is presently one of its kind in sustainability designs in the entire apparel industry.
Core Business
Businesses diversify through organic or inorganic ways. Big firms often diversify through acquisitions, but small firms may find themselves short on this kind of aspiration. Instead, small firm often stick to their core business or try to diversify organically if resource need is limited. There are pros and cons to both diversification and core business stickiness.
Diversification is often an effort to better allocate capital into contiguous businesses, as least as purported by the organization leading it. However, on the flip side, it is often found that organizations try to cover up anemic growth in the existing business through bold acquisitions.
Core business on the other hand sometimes limits its interpretation to a small range of products or markets rather than skills. Organizations that narrow down their strategies to narrow ranges of products or markets often risk missing out on opportunities for expansion and creating new competitive spaces.
Between successful diversification and robust core business there lies a bridge called core competencies. Core competencies allow firms to retain a composite or uniform vision over-diversification. Similarly, core competencies, when identified across core business units, can act as a glue to internalize sustainability by transferring knowledge and insights within an organization. Reliance on core competencies reduces risks of investments and broadens boundaries of innovation in sustainable practices through accumulated knowledge and exploration.
Case study: Core competency behind Google’s carbon-free computing platform
Google is the world’s first cloud company to match 100% of its energy needs from renewable energy. The company achieved its primary goal of making its data centers – that power the massive cloud engine – in 2017. This is an astounding feat for a technology company that is neither an energy market player in the traditional sense nor diversified enough into electricity or energy networks. Google achieves this feat by identifying its core competency in computing and algorithms. The technology giant devised an intelligent platform to divert its computing tasks to data center locations with high penetration of solar or wind at a given hour. For e.g., if a query in the search engine triggers a compute task in its different data centers, Google has found its way to shift the movable compute task to different data centers based on regional hourly carbon-free energy availability. Orchestrating demand response based on regional electricity supply patterns is not what one would have called Google’s core business. It is neither a diversified territory for the technology company. But Google’s core competency in computing and cloud has enabled an intelligent carbon-reducing platform that is hard for others to replicate, gives it access to wide regional electricity markets, and enables it to serve customer queries in carbon carbon-neutral manner.
Conclusion
This article attempts to see organizations, big or small, in a new light such that their structures may internalize sustainability as an inherent business strategy.
We looked at dualities created by hierarchical, control, and business processes to find that when organizations deal with the futurity of strategy it is bound to look inwards. This inward-looking often manifests in coordinating the strategy at corporate as well as BU levels. In terms of structures, there may be bureaucracies and upon reflecting on its limitations, organizations sometimes empower its parts to overcome the red tape. These structures render the ingredients – the units and resources of the organizations – into either clones or self-motivated renegades. Finally, often in search of future business, organizations diversify or expand the reach of their core products or offerings.
We argue that organizations that are successful in internalizing and executing sustainability as a business strategy find somewhat synthesized versions of these theses and antitheses (Exhibit 2). After dwelling on the syntheses, we tried to look at the case studies of Coca-Cola, Patagonia, and Google in their respective journeys in sustainability business strategy adoption. These synthesized versions of the organizations are not much discussed in corporate strategy parlance. The focus of sustainability discussion has rather been outward – i.e., what organizations are trying to achieve to reach sustainability goals. Therefore, this article makes an attempt to look at organizations’ inherent structures such that the futurity of sustainability strategy can be adopted, executed, and realized within.
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