1. Embedding sustainability into strategy II:
Out on the sustainability safari
Dr. Miles Weaver,
School of Management,
Edinburgh Napier University
m.weaver@napier.ac.uk
@DrMilesWeaver

2. Before we begin, back to last
week canvas: Picasso ….
You are a consultant
You are addressing the Chair of the
university court (what do they need to
know, know already?)
You are paid to offer an interpretation
(findings) and offer some
recommendations
Clarity of line argument
Credibility of evidence (research)
Rigour underpinning argument
(application of theory / analysis)

3. Learning outcomes
After this lecture and independent study
you should be able to:-
• Evaluate the generic strategic
responses to sustainability (getting
deeper and towards the „how‟)
• Discuss the difference between a
„bolt-on‟ and „embed‟ sustainability
strategy
• Understand how corporate and
business-level strategies are
devised for the environment

4. Sketching today‟s canvas:
To begin …
• We are off on a
safari, get your
binoculars ready.
• Write down three
animals and what
they may represent
on the sustainability
debate

5. We are making tracks ….
But where?

6. On those tracks … (I)
• Discussed the different levels of Discussed „value‟ from a
response to environmentalism sustainability perspective
– A normal part of doing business ….
Or?
• Suggested that environmental policies
can be used „strategically‟ (e.g. to
gain competitive advantage)
• Noted that competitive advantage
derives from the distinctiveness of
an organisation‟s capabilities
– Their resources or competences
permit
• production at lower cost
or
• generation of superior Sustainable Value = both + to
product or service at shareholder & stakeholder
standard cost (Laszlo and Zhexembayeva, 2011)
6

7. Pre-departure checks (I):
On the natural based view of the firm
(Hart, 2005)
• Central to Hart‟s proposition is that one of the most important drivers of new
resources and capability development for firms will be the constraints and
challenges posed by the natural environment (NB. greening debate)
• Competitive advantage, is to be rooted in capabilities that facilitate
environmentally sustainable activity
Strategic Environmental Key Competitive
capability driving force resource advantage
Pollution Minimise emissions, effluents & Continuous Lower
prevention waste improvement costs
Product Minimise life-cycle cost of Stakeholder Pre-empt
stewardship products integration competitors
Sustainable Minimise environmental burden Shared vision Future
development of firm growth and development position

8. Pre-departure checks (II): Safari begins
with a pair of binoculars, wide panorama
& need to focus!
• Mañana?
– Radical (!!!) vs. Incremental (???) Johnson, Scholes & Whittington (2010)

10. Some stops at crossings points:
The not so „black‟ and „white‟ (a bit „grey‟)
• Source of competitive advantage
– All (yes, umm but?) or some (yes, but „how‟?)?
(i.e. grey = „bolt-on‟ to improve positioning
Dark green = embed to be environmental
leader)
• Normal part of doing business?
– [Differentiation and/or cost advantage]
and/or level playing field leads to raising the
standard
Neutral green = underpin strategic capability
• Understanding our resources and
competences critical
– Unique / threshold
– Barriers to imitation

11. Ask Kermit:
Is being „green‟ a source of competitive
advantage?

12. Deep side tracks (I):
Is being „green‟ a source of competitive
advantage?
• Sustainability as a source
of cost leadership
• Sustainability as a source
of differentiation
• Utilising sustainability for
market segmentation
(focus)
Porter (1990)

13. Deep side tracks (II):
Is being „green‟ a source of competitive
advantage?
• L&Z (2011) argue that pursuing
social and environmental
performance can strengthen (or
weaken if done inappropriately)
strategic positioning.
• Sustainability-driven initiatives
to:
– Reduce costs
– Differentiate products
– Enter new markets
– Enhance reputation (should be
seen in the context of reinforcing
the company‟s existing strategy
and business priorities) Laszlo (2008)

14. In this weeks tutorial:
Is being „green‟ a source of competitive
advantage?
• This will lead into a general discussion on assignment 1
for the HE sector (for different types of customer)
• List the „yes - totally‟, „yes, if but, no but …‟ and „don‟t
bother‟ arguments for at least three organisations.
Pursuing a competitive advantage based on:
– lower costs (e.g. Asda) with a strategic capability in
pollution prevention (a form of „waste‟)
– Differentiation (e.g. M&S, Lush, Bodyshop,
Edinburgh organic food supermarket)
• To pre-empt competitors - with a strategic
capability in product stewardship
• Future position – with a strategic capability in
sustainable development

15. The „blind men and the elephant‟ problem
…. „Bolt on‟
…. „embed‟

16. „Bolt-on‟ or „embed sustainability (I)
(Laszlo and Zhexembayeva, 2011)
Bolt-on sustainability Embedded sustainability
Goal Pursue shareholder value Pursue sustainable value
Scope Add symbolic wins at the Transform core business activities
margins
Customer Offer “green” and “socially Offer “smarter” solutions with no
responsible” products at trade-off in quality and no social
premium prices or with or green premium
diminished quality
Value Focus on risk mitigation and Reach across all seven levels of
capture improved efficiencies sustainable value creation
Value Manage company‟s own Manage across the product or
chain activities service life cycle value chain

17. „Bolt-on‟ or „embed sustainability (II)
(Laszlo and Zhexembayeva, 2011)
Bolt-on sustainability Embedded sustainability
Relationships Leverage transactional Build transformative relationships.
relationship. Stakeholders Co-develop solutions with all key
such as customers, stakeholders including NGOs and
employees, and suppliers are regulators to build system-level
resources to be managed change
and sources of input
Competitor Operate only in win-lose Add cooperation with competitors
mode in which any gain is as potential sources of gain
competitor‟s loss
Organisation Create a “scapegoat” Make sustainability everyone‟s
department of sustainability job

18. „Bolt-on‟ or „embed sustainability (III)
(Laszlo and Zhexembayeva, 2011)
Bolt-on sustainability Embedded sustainability
Competencies Focus on data analysis, Add new competencies in design,
planning, and project inquiry, appreciation, and
management skills wholeness
Visibility Make green and social Make sustainability performance
responsibility highly visible largely invisible but capable of
and try to manage the aligning and motivating everyone
resulting scepticism and
confusion

20. Addressing environmental issues
• Organisations can develop and implement a range of strategies to address
environmental issues (e.g. complying with regulations; pro-activity to
gain competitive advantage)
Three important questions:
– How might an organisation turn the key global social and
environmental issues into strategic business opportunities…?
• … through igniting innovation into new processes and products
• To open new, unexpected markets
– how to incorporate environmental concerns into strategy?
– level at which environmental strategies should be integrated?

21. Miles Weaver 1-21

22. A good starting question …
• How might an • To create consumer
organisation turn the passion and loyalty
key global social and • To energise the
environmental issues workforce and build its
into strategic business loyalty
opportunities …? • To build sustainable
supply chains
– …through igniting
• To radically bring down
innovation into new
processes and products energy costs and waste
production …
– To open new, unexpected … and, at the same time,
markets
build a safer, more
secure, better world ?

23. Takes us more towards the
„How‟ and a single track
Operationalising these strategic • What are the new sources of
questions means addressing sustainable value (i.e. those
them in the following ways: in which shareholder value is
not created at the expense of
• What is our sustainable other stakeholders)?
value vision? • What capabilities do we need
• How can we address these to realise the sustainability
social and environmental vision?
issues while advancing • How do we measure the
existing business priorities? success of our sustainability?
• How do we identify and
manage emerging
(Adapted from Laszlo, 2008,
stakeholder issues ?
p.182)

24. Levels of strategic response (I)
Banerjee (2001) differentiates between
four levels of strategic response:
• Enterprise strategy - concerned with the
role a firm plays in society; its
fundamental mission. Suggests not much
evidence of this except in environmental
organisations
• Corporate strategy - the kinds of
businesses a firm should enter to meet its
enterprise strategy. Includes decisions on
business portfolios, markets, technologies
• Business strategy - allocating
organisational resources to achieve
competitive advantage and integrating
different business functions
• Functional strategy -planning operations
for different functions (e.g. marketing, Above figure relates strategy level to strategy type
purchasing, distribution) and desired outcome

25. Devising corporate strategies for the
environment
• Firms seeking to improve their environmental performance ideally need a
corporate strategy for the environment
• Roberts (1995) argues that process of strategy formulation in this area is
basically same as standard approach except for weight given to ecological
environment relative to competitive environment

26. Devising corporate strategies for the environment (II)
Roberts (1995) suggests a number of key
issues need to be considered prior to
building an environmental strategy:
• Time horizon - especially for investment
decisions and „payback‟ requirements;
current and future requirements?
• Priorities - what are most significant factors
to take into account both now and in future?
• Autonomy - how far should the various
branches of an enterprise have discretion
over behaviour/decisions?
• Internal culture - to what extent is this
conducive to change?

27. Devising corporate strategies for the environment (II)
• Roberts (1995) goes on to outline a basic linear model of the
corporate strategy process
• Suggests it should begin with a „scoping report‟ (e.g. initial
environmental review) to provide baseline upon which policy
can be constructed, supported by appraisal of external
factors
• Subsequent steps could involve scenario building for
alternative futures, development of a mission statement,
setting priorities, identification of resources, action plans,
communication, implementation, monitoring and review
• Wide range of policies and actions possible - tend to vary
from firm to firm, industry to industry (detail next week)

28. Creating sustainable value I:
The six levels of strategic focus
• Laszlo considers “The six levels
of strategic focus” to be an
important tool for identifying value
creation
• “Many companies have made
great strides in mitigating risk and
process cost reduction through
minimising waste and improving
energy efficiencies …
• few(er) have focussed on top-line
growth through product or brand
differentiation.
• Even fewer have used stakeholder
value creation (levels 4 and 6) to
drive new sustainable strategies”
(Laszlo, 2008, p. 155)
Laszlo (2008)

29. Creating sustainable value II:
Across the supply, process and demand chains
(more next week)
Laszlo (2008)

30. M&S: The story in 2009 …
Take a look at their website to see progress to date
8-30

31. Are managerial attitudes changing?
Banerjee (2001) Cross-sector/industry – variations in environmental activity
study assessed managerial attitudes according to industry (e.g. chemical,
pharmaceutical, and utilities firms had
(250 firms) towards environmental
wider range of environmental activities -
strategies. Findings suggested: higher impact businesses - and greater
corporate focus)
– recycling was most commonly
performed activity
– regulatory forces appeared to be
major factor influencing company
– most actions focused around environmental strategy
manufacturing ( especially where cost
advantage possible)
– evidence of perception that link existed
between environmental action and
– evidence of focus at other levels competitive gains - (especially in high
including corporate strategy level environmental impact industries)
(e.g. R&D)
– today?

32. Key influencers: the levers for change I
Study by Ghobadian et al (1995) of environmental strategy among top UK corporations
suggests that key influences on adoption of corporate environmental policies were:
– legal compliance
– public perception of organisation
With regard to the latter point, study points to three
emergent themes amongst managers:
– environmental issues were a source of business
opportunity and could lead to competitive advantage
– both market and non-market forces important in
shaping environmental strategies (e.g. customers,
regulatory agencies)
– link between concepts of „quality‟ and environmental
action

33. Key influencers: the levers for change II
Authors argue that motivations tend to
be largely reactive and dependent on
expected development of environmental
legislation. Not much evidence of
seeking environmental leadership
positions
Moreover while competitive advantage
was a concern, primacy given to
questions of waste reduction and
resource utilisation

34. The Laszlo sustainability model
To be cont ..
Next week

35. Next week … Thus, our safari continues …. But we
will need to follow those elephants on
• Getting more stuck into the „how‟ their journey
• Next week we will detail the
Laszlo sustainability model by
considering design for
sustainability
• We shall focus on the
organisation but also propose that
the “supply chain is the new
value chain” recognising
Christopher (2011) claim that it is:
“Supply chain‟s that COMPETE
NOT companies”