The second edition of Sustainable Business prepares future business leaders to tackle the most crucial social and environmental issues of our time. This engaging textbook provides students with a comprehensive, balanced introduction to integrating sustainable business policies into all core business functions and processes. The text employs a qualitative-based learning process to help students understand how leadership, finance, accounting, risk management, marketing, supply chain management, and operations can be adapted to meet the sustainability goals of the 21st century.
Looking at sustainable business from the managerial viewpoint, the fully-updated new edition explains how and why business is evolving due to increased consumer and regulatory pressure for sustainable performance. Business topics are first introduced in the same manner as traditional MBA programs, and then examined through the lens of sustainably. The text incorporates real-life examples of social and environmental leadership to demonstrate the efficacy of good sustainable business decisions, and illustrates the negative ramifications of outdated, purely economic-driven managerial decision-making. Influential concepts based on interdisciplinary research in sustainability are discussed in detail, and practical insights address how to turn policy into practice in the workplace.
Preface viii Part I Introduction 1 Introduction to Sustainable Business 3 Sustainable Companies Gain the Upper Hand 1.1 What Do We Mean By “Sustainability”? 4 1.1.1 Sustainability is a Loaded Word 4 1.1.2 Running Out of Space 6 1.1.3 The New Global Trend: Doing Bad and More Good 10 1.1.4 The Unsustainable Status Quo: Fisheries 11 1.2 Causes and Consensus Around Sustainable Business 13 1.2.1 What Do Externalities Have to Do with It? 13 1.2.2 Shareholder Pressure 15 1.2.3 Multiple Drivers, One Destination 15 1.2.4 Baseline Shift Toward Sustainability 16 1.3 The Forms and Stages of Sustainable Business 18 1.3.1 Sustainability Marginalized 18 1.3.2 Sustainability Grows Up 19 1.3.3 Sustainability Gears Up 22 1.4 The Business Case for Sustainability 23 1.4.1 There is Actually Just One Bottom Line 23 1.4.2 Environmental Changes and Business Implications 24 1.4.3 Green Shoots and Blue Oceans 25 1.4.4 Overview of the Textbook 28 Key Terms 29 Discussion Questions 29 Case 1: BMW Pioneers Sustainable Automotive Technology 29 Case 2: Greening the Game of Golf 30 Further Research 31 Endnotes 31 2 Perspectives 35 Ecosystem Services 2.1 Introduction: Perspectives on Sustainability 36 2.2 Social Perspectives 37 2.2.1 Stakeholder Engagement 37 2.2.2 Corporate Social Responsibility 38 2.2.3 Human Rights 41 2.2.4 Laws and Regulations 42 2.2.5 Ethics and Environmental Justice 43 2.3 Economic Perspectives 45 2.3.1 Globalization and its Discontents 45 2.3.2 Environmental Kuznets Curve and its Criticism 47 2.3.3 Natural Capital Accounting and Sustainable Land Use 49 2.3.4 Sustainable Engineering 52 2.4 Environmental Perspectives 53 2.4.1 Regenerative Capacity 54 2.4.2 Biomimicry 54 2.4.3 Cradle-to-Cradle 55 2.4.4 Human Ecology 56 Conclusion 57 Key Terms 57 Discussion Questions 58 Case 1: Emerging Drinking Water Contaminants 58 Additional Material 59 Endnotes 60 3 Leadership, Change Management, and Corporate Governance 63 Sustainable Leadership, Corporate Governance, and Innovation at Unilever 3.1 Introduction: Leadership as Antidote to Collective Action Problems 64 3.1.1 What is a Collective Action Problem? 66 3.1.2 What is a Tragedy of the Commons? 66 3.1.3 Sustainability through Self-Regulation 67 3.1.4 The Sustainable Leadership Gap 69 3.2 Leadership 70 3.2.1 What is Sustainable Business Leadership? 70 3.2.2 New Competencies of Sustainable Business Leaders 70 3.2.3 Sustainable Leadership Strategy 73 3.3 Change Management 75 3.3.1 Entrepreneurialism and Innovation 75 3.3.2 Developing a Sustainable Business Strategy 77 3.3.3 Change Management 78 3.3.4 Hiring Strategy and Employee Engagement 79 3.4 Strategic Alignment for Sustainability Through Corporate Governance 81 3.4.1 Strategic Alignment: Integrating Sustainability into Corporate Strategy 81 3.4.2 Sustainable Corporate Governance 81 3.4.3 Corporate Governance Mechanisms 83 3.4.4 Resolving Conflicts Between Shareholders and Stakeholders: Rise of the B-Corp 86 3.4.5 Executive Compensation 87 3.4.6 Rise of the Chief Sustainability Officer 89 Key Terms 91 Discussion Questions 91 Case 1: Corporate Leadership Amidst Turbulent Times 91 Case 2: Drilling Down on Corporate Governance 93 Further Research 93 Endnotes 93 Part II Accountability 4 Legal Frameworks for Sustainability 99 Climate Change Divides Corporate Lobbying Efforts 4.1 The Role of Law in Corporate Sustainability 100 4.1.1 Hard Law, Soft Law, Legal Hierarchy, International Law 103 4.1.2 The Legal Environment of Business 106 4.1.3 Incentives for Legal Compliance 106 4.2 Law and Sustainability by Business Area 108 4.2.1 Design, Production, and Pollution 109 4.2.2 Supply Chain, Marketing, and Consumer Protection 112 4.2.3 Packaging, Waste, and Disposal 118 4.2.4 Land Use Planning 119 4.3 Limits of the Law 121 4.3.1 Legal Compliance vs. Sustainable Performance 121 4.3.2 Lobbying for Lax Laws 121 4.3.3 Under-Enforcement of Good Laws 123 Key Terms 123 Discussion Questions 124 Case 1: Can Litigation Set Public Policy on the Use of Drugs in Industrial Agriculture? 124 Case 2: The American Legislative Exchange Council and So-Called Ag Gag Rules 125 Further Research 126 Endnotes 126 5 Metrics, Tools, and Reporting: The Role of Finance and Accounting 129 Nature’s Invoice 5.1 Introduction: Why Measure and Report? 130 5.1.1 The Role of Finance & Accounting 130 5.1.2 Information-Driven Sustainable Business Model 132 5.1.3 (Almost) Everyone is Doing It 134 5.1.4 What are the Benefits of Monitoring and Reporting? 135 5.1.5 Drivers of Sustainability Reporting 137 5.2 Metrics 138 5.2.1 What are Metrics? 138 5.2.2 The Triple Bottom Line 140 5.2.3 Sustainability Performance Metrics 140 5.2.4 What to Look for in a Metric 142 5.3 Tools 142 5.3.1 Natural Capital Accounting 143 5.3.2 Life Cycle Assessment 143 5.3.3 Environmental Footprinting 145 5.4 Reporting 147 5.4.1 Leadership and Reporting 148 5.4.2 Threshold for Reporting: Materiality 148 5.4.3 Sharing Sustainability Information with End Consumers 150 5.4.4 ISO Standards For Sustainability Reporting 151 5.4.5 Global Reporting Initiative 151 Key Terms 153 Discussion Questions 154 Case 1: Chocolate Crusaders 154 Case 2: Suede Shoe Blues 155 Further Research 156 Endnotes 156 6 Risk Management 159 Happy Meals Dodge Tainted Toys 6.1 Risk Management and Sustainable Business 160 6.1.1 The Role of Risk Management in Sustainable Business 161 6.1.2 The Risky Environment of Business 163 6.1.3 The Moral Psychology of Risky Business Decisions 164 6.1.4 The Enterprise Risk Management Continuum 165 6.2 Risk Identification 169 6.2.1 Business Risks Managed by Sustainability 169 6.2.2 Preventable Versus Uncontrollable Risk 172 6.2.3 Water-Related Business Risks 173 6.2.4 Climate Change-Related Business Risks 174 6.3 Risk Assessment 174 6.3.1 Scenario Planning 175 6.3.2 Measuring the Materiality of Risk 176 6.3.3 Vulnerability 178 6.3.4 Putting It All Together 180 6.4 Risk Response 180 6.4.1 Bearing Risk 181 6.4.2 Avoiding Risk 181 6.4.3 Mitigating Risk 181 6.4.4 Sharing Risk: Insurance 183 6.5 Risk Management Strategies in Business 185 6.5.1 Business Continuity Planning 185 6.5.2 Resilience 186 Key Terms 187 Discussion Questions 187 Case 1: Managing a Hospital’s Fight Against an Epic Flu 188 Further Research 188 Endnotes 189 Part III Implementation 7 Marketing 193 From Superbowl Ads to Viral Videos 7.1 Introduction: Marketing Sustainability 194 7.1.1 Conventional Marketing versus Marketing Sustainability 195 7.1.2 Segmenting the Market for Sustainable Products 196 7.1.3 Trends In Marketing Sustainability: Avenues for SMEs 198 7.1.4 Rewards of Sustainable Marketing 200 7.2 Legal and Ethical Boundaries 202 7.2.1 Truth-In-Advertising Rules 202 7.2.2 Guidelines for Marketing Environmental Attributes 203 7.2.3 Product/Process Information Distinction 204 7.2.4 What is Greenwashing? 206 7.3 Strategy for Marketing Sustainability 207 7.3.1 Sustainability Marketing Principles 207 7.3.2 Brand Development 208 7.3.3 Stages of Marketing Sustainability 209 7.3.4 International Marketing 210 7.3.5 Challenges to Marketing Sustainability 211 7.4 Certification Programs 216 7.4.1 Guidelines for Third-Party Certification Programs 216 7.4.2 Types of Certification Programs 217 7.4.3 Certification Design 218 7.4.4 Challenges to Sustainable Certification 220 Key Terms 221 Discussion Questions 221 Case 1: Marketing Sustainable Dinner Ware 221 Case 2: Nike, Inc. v. Kasky 222 Further Research 223 Endnotes 224 8 Supply Chain Management 227 Building a Sustainable Supply Chain: Lessons from Starbucks 8.1 Sustainable Supply Chain Management in Context 228 8.1.1 The Role of SCM in Sustainability 229 8.1.2 Managing Supply Chain Risks: Going Beyond the First Tier 231 8.1.3 Traceability and Increased Supply Chain Transparency 232 8.1.4 Business Benefits of Sustainable SCM 233 8.1.5 Water-Related Supply Chain Risks 234 8.1.6 Human Rights, Child Labor, and Occupational Safety in Global Supply Chains 234 8.2 Managing the Entire Product Life Cycle 236 8.2.1 Life Cycle Assessment and Cradle-to-Cradle Design 237 8.2.2 Product Design 237 8.2.3 Packaging 238 8.2.4 Sourcing 240 8.2.5 Process Design 241 8.3 Managing the Supply Chain Infrastructure 242 8.3.1 Logistics 242 8.3.2 Reverse Logistics 243 8.3.3 Transportation 244 8.3.4 Facility Location 246 8.4 Managing Supply Chain Stakeholders 248 8.4.1 Suppliers 248 8.4.2 Consumers 249 8.4.3 Non-Governmental Organizations (NGOs) and Nonprofits 251 8.4.4 Governmental Agencies and Regulation 251 8.4.5 Competitors 252 8.4.6 Communities 253 Key Terms 255 Discussion Questions 255 Case 1: Gone Fishing: Human Trafficking on the High Seas 255 Case 2: iSlave: Labor Conditions at Consumer Technology Parts Suppliers 256 Further Research 257 Endnotes 257 9 Operations Management 261 Ancient Air Conditioning in Modern Building Design 9.1 The Role of Operations Management in Sustainability 262 9.1.1 The OM Function 262 9.1.2 How OM Impacts Sustainability 264 9.1.3 Water-Related Operations Management Risks 265 9.2 Operations Strategy 266 9.2.1 Sustainable Operations as a Competitive Priority 267 9.2.2 Sustainable OM Strategy 267 9.2.3 Stakeholder View of Operational Output 269 9.2.4 Striking the Right Balance through Quality Management 269 9.3 Operations Design 270 9.3.1 Product Design 270 9.3.2 Process Design 274 9.3.3 Process Performance Metrics 275 9.4 Operations Planning & Control 277 9.4.1 Inventory Management 277 9.4.2 Work System Design 278 9.4.3 Enterprise Resource Planning: Using Big Data Analytics 279 9.4.4 Healthy, Productive Employees: Scheduling 280 9.5 Facility Management, Layout, & Design 282 9.5.1 Facility Management 282 9.5.2 Facility Layout 284 9.5.3 Facility Design 284 Key Terms 286 Discussion Questions 286 Case 1: Too Little or Too Much: Inventory Management During Environmental Crises 287 Further Research 287 Endnotes 288 Glossary 291 Index 315
Nada R. Sanders is an internationally recognized thought leader and expert in forecasting and supply chain management. She is author of the book Supply Chain Management: A Global Perspective and is co-author of Operations Management, in its 7th edition. She was ranked in the top 8 percent of individuals in the field of operations management from a pool of 738 authors and 237 different schools by a study of research productivity in U.S. business schools, is a Fellow of the Decision Sciences Institute, and has served on the Board of Directors of the International Institute of Forecasters (IIF), Decision Sciences Institute (DSI), and the Production Operations Management Society (POMS), where in 2019 she became the President of POMS. Dr. Sanders has authored over one hundred scholarly works and has served on the editorial boards of prominent journals in her field, including the Journal of Operations Management, Production and Operations Management, Decision Sciences Journal, Journal of Business Logistics, and International Institute of Forecasting. She is co-editor for the Journal of Business Logistics' special issue on interdisciplinary research and was co-founder and Associate Editor of Foresight: The International Journal of Applied Forecasting. In 2008 she was invited to serve as a participant at The Gordon Cook Conversations at Windsor Castle, UK. This retreat brought together a small, diverse group of international leaders identified to have ""star quality"" in the development of strategies that will impact society in the coming decade. John D. Wood is a Member of the New York State Bar, the Texas State Bar, founder of The Law Firm of John D. Wood, PLLC, and Executive Director of Econautics Sustainability Institute (ESI), a 501(c)(3) non-profit dedicated to promoting sustainability in the private sector through research, education, and advising. Wood also serves as Administrator for Suncoast Claims, Inc., a public insurance adjusting firm that represents commercial and industrial property owners in making insurance claims in the wake of environmental catastrophes in the Atlantic and Gulf Coast regions. He has served as an Adjunct Professor of Green Business in the Environmental Studies Program at Lasell College, and has lectured on sustainable business at SUNY, George Mason, and Northeastern University. Wood has taught continuing professional education programs on the subject of ""Taking Insurance Claims Green,"" approved by the New York Department of Financial Services, the Texas Department of Insurance, and the Florida Department of Business and Professional Regulation. Wood is a legal scholar with publications in the Environmental Law Reporter, the NYU Environmental Law Journal, the NYU Journal of Law and Liberty, The New York Environmental Lawyer, and the Torts, Insurance, and Compensation Law Journal. He is an expert in risk management, corporate sustainability strategy, and insurance law. Wood earned his J.D. from New York University School of Law and his B.A., summa cum laude, in English and Philosophy from Texas Christian University.
