Creating sustainable value

Academy of Management Executive

Volumn 17, Issue 2, 2003, Pages 56-69

  Hart, Stuart L ^b   Milstein, Mark B ^a   Caggiano, Joseph ^b  

^a UNIVERSITY OF NORTH CAROLINA   (United States)

^b NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0038269808     PISSN: 10795545     EISSN: None     Source Type: Journal    
DOI: 10.5465/ame.2003.10025194     Document Type: Review

References (91)

1. See Stiglitz, J. 2002. Globalization and its discontents. New York: W. W. Norton.
2. See the National Research Council. 1999. Our common journey. Washington, DC: National Academy Press.
3. Soros, G. 2002. George Soros on globalization. New York: Public Affairs.
4. Protests at the World Trade Organization, World Bank, World Economic Forum, G8, and other meetings in places like Seattle, Washington, DC, Davos, and Rome have become the most visible examples of the frustration felt by many who view globalization as inequitable exploitation. See, Nye, J. 2001. Globalization's democratic deficit. Foreign Affairs, 80(4): 2-6.
5. World Commission on Environment and Development. 1987. Our common future. Oxford: Oxford University Press, p. 8.
6. Gladwin, T., Kennelly, J., & Krause, T. 1995. Shifting paradigms for sustainable development: Implications for management theory and research. Academy of Management Review, 20(4): 878-907.
7. See Elkington, J. 1994. Towards the sustainable corporation: Win-win-win business strategies for sustainable development. California Management Review, 36(3): 90-100.
8. We use the terms "global sustainability," "sustainable world," and "sustainable development" interchangeably to refer to the global-scale drivers of sustainability. Similarly, we use the terms "sustainable enterprise," "corporate sustainability," and "enterprise sustainability" interchangeably to refer to firm-level strategies and practices to build value by moving toward a more sustainable world.
9. See, Holliday, C. 2001. Sustainable growth, the DuPont way. Harvard Business Review, 79(8): 129-132.
10. See Friedman, M. The social responsibility of business is to increase profits. The New York Times Magazine 13 September 1970, for the classic argument representing this point of view.
11. See Christensen, C. 1998. The innovator's dilemma. Boston, MA: Harvard Business School Press for a detailed discussion of the paradox of focusing on short- versus long-term value. The concept of "creative destruction" was first introduced by Joseph Schumpeter (1942) in Capitalism, socialism and democracy. New York: Harper Torchbooks, More recently, the growing importance of creative destruction to competitive success has been persuasively argued in Foster, R., & Kaplan, S. 2001. Creative destruction. New York: Doubleday.
12. See Christensen, C. 1998. The innovator's dilemma. Boston, MA: Harvard Business School Press for a detailed discussion of the paradox of focusing on short- versus long-term value. The concept of "creative destruction" was first introduced by Joseph Schumpeter (1942) in Capitalism, socialism and democracy. New York: Harper Torchbooks, More recently, the growing importance of creative destruction to competitive success has been persuasively argued in Foster, R., & Kaplan, S. 2001. Creative destruction. New York: Doubleday.
13. See Christensen, C. 1998. The innovator's dilemma. Boston, MA: Harvard Business School Press for a detailed discussion of the paradox of focusing on short- versus long-term value. The concept of "creative destruction" was first introduced by Joseph Schumpeter (1942) in Capitalism, socialism and democracy. New York: Harper Torchbooks, More recently, the growing importance of creative destruction to competitive success has been persuasively argued in Foster, R., & Kaplan, S. 2001. Creative destruction. New York: Doubleday.
14. See Thompson, J. 1967. Organizations in action, New York: McGraw Hill for the classic discussion of balancing the need both to sustain and destroy the technological core underlying a firm's business model. More recently, these ideas have received growing attention in the form of work on "core rigidities" (e.g., Leonard-Barton, D. 1992. Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13(SSI): 111-125) and "dynamic capabilities" (e.g., Teece, D., Pisano, G., & Shuen, A. 1997. Dynamic capabilities and strategic management. Strategic Management Journal, 18(7): 509-533).
15. See Thompson, J. 1967. Organizations in action, New York: McGraw Hill for the classic discussion of balancing the need both to sustain and destroy the technological core underlying a firm's business model. More recently, these ideas have received growing attention in the form of work on "core rigidities" (e.g., Leonard-Barton, D. 1992. Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13(SSI): 111-125) and "dynamic capabilities" (e.g., Teece, D., Pisano, G., & Shuen, A. 1997. Dynamic capabilities and strategic management. Strategic Management Journal, 18(7): 509-533).
16. See Thompson, J. 1967. Organizations in action, New York: McGraw Hill for the classic discussion of balancing the need both to sustain and destroy the technological core underlying a firm's business model. More recently, these ideas have received growing attention in the form of work on "core rigidities" (e.g., Leonard-Barton, D. 1992. Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13(SSI): 111-125) and "dynamic capabilities" (e.g., Teece, D., Pisano, G., & Shuen, A. 1997. Dynamic capabilities and strategic management. Strategic Management Journal, 18(7): 509-533).
17. This idea is similar to the balanced scorecard (see Kaplan, R., & Norton, D. 1992. The balanced scorecard - measures that drive performance. Harvard Business Review 72(1): 71-79) and other tools that emphasize the need to balance a portfolio of actions to drive firm value over time.
18. Christensen, C., op. cit.
19. The experiences of Enron and the numerous dot-bombs of the tech wreck serve as the most recent illustrations that while it can be very glamorous to be viewed as on the cutting edge of the business world, bankruptcy provides a particularly ineffective platform from which to generate future growth.
20. See Hamel, G., & Prahalad, C. K. 1991. Corporate imagination and expeditionary marketing. Harvard Business Review, 69(4): 81-92.
21. See Rugman, A. M., & Verbeke, A. 1998. Corporate strategies and environmental regulations: An organizing framework. Strategic Management Journal, 19(4): 363-375, which notes that most managerial approaches to environmental issues take a very simple, static view of the problem.
22. National Research Council, op. cit.; and Daily, G. 1997. Nature's services: Societal dependence on natural ecosystems. Washington, DC: Island Press.
23. National Research Council, op. cit.; and Daily, G. 1997. Nature's services: Societal dependence on natural ecosystems. Washington, DC: Island Press.
24. See Hawken, P., Lovins, A., & Lovins, H. 1999. Natural capitalism: Creating the next industrial revolution. Boston, MA: Little Brown & Company.
25. Florini, A. (Ed.). 2000. The third force: The rise of transnational civil society. Washington, DC: Carnegie Endowment for International Peace.
26. Rheingold, H. 2002. Smart mobs: The next social revolution. Cambridge, MA: Perseus Publishing.
27. See, for example, Hart, S., & Milstein, M. 1999. Global sustainability and the creative destruction of industries. Sloan Management Review, 41(1): 23-33.
28. To be sure, there are many new problems that these technologies may create, making their ultimate contribution to sustainability more unknowable; witness the problems Monsanto encountered in pursuing its agricultural biotechnology strategy in the mid to late 1990s.
29. Drexler, E. 1986. Engines of creation. Garden City, NY: Anchor Press.
30. See Benyus, J. 1997. Biomimicry: Innovation inspired by nature. New York: Morrow.
31. Christensen, C., Craig, T., & Hart, S. 2001. The great disruption. Foreign Affairs, 80(2): 80-95.
32. Coyle, D. 2001. Paradoxes of prosperity. New York: Texere Publishing.
33. See World Bank. 2000. World development report; Attacking poverty. New York: Oxford University Press.
34. Easterly, W. 2001. The elusive quest for growth. Cambridge, MA: MIT Press.
35. National Research Council, op, cit. See also Hammond, A. 1998. Which world? Scenarios for the 21st century, Washington, DC: Island Press.
36. National Research Council, op, cit. See also Hammond, A. 1998. Which world? Scenarios for the 21st century, Washington, DC: Island Press.
37. See Prahalad, C. K., & Hart, S. 2002. The fortune at the bottom of the pyramid. Strategy - Business, Issue 26: 54-67.
38. Von Dieren, W. (Ed.). 1995. Taking nature into account. New York: Copernicus.
39. The four strategies developed in this section were first articulated in: Hart, S. 1997. Beyond greening: Strategies for a sustainable world, Harvard Business Review, 75(1): 66-76. We would also like to thank our colleagues at the Sustainable Enterprise Academy - in particular, Brian Kelly, David Wheeler, Bryan Smith, John Ehrenfeld, Chris Galea, Art Hanson, David Bell, Nigel Roome, Jim Leslie and Pat Delbridge - for helping us to clarify our thinking regarding how the drivers of sustainability, viewed through the proper set of business lenses, influence shareholder value.
40. The most comprehensive treatment of eco-efficiency was done by the World Business Council for Sustainable Development in: DeSimone, L., & Popoff, F. 1997. Eco-efficiency: The business link to sustainable development. Cambridge: MIT Press. See also James, P., & Bennett, M. 1994. Environment-related performance measurement in business: From emissions to profit and sustainability? Ashridge Management Group Publication.
41. The most comprehensive treatment of eco-efficiency was done by the World Business Council for Sustainable Development in: DeSimone, L., & Popoff, F. 1997. Eco-efficiency: The business link to sustainable development. Cambridge: MIT Press. See also James, P., & Bennett, M. 1994. Environment-related performance measurement in business: From emissions to profit and sustainability? Ashridge Management Group Publication.
42. Hart, S. 1995. A natural resource-based view of the firm. Academy of Management Review, 20(4): 986-1014.
43. Darnall, N. 2002. Why firms signal green: Environmental management system certification in the United States. Unpublished Ph.D. dissertation, University of North Carolina, Chapel Hill.
44. See Marcus, A. 2002. Reinventing environmental regulation. Washington, DC: RFF Press. For more information on European pollution prevention programs, see European Integrated Pollution Prevention and Control Bureau (http://eippcb.jrc.es/), the UK government's Enviro Wise Programme (http://www.envirowise.gov.uk/), and the Implementation and Enforcement of Environmental Law (IMPEL) at http://europa.eu.inf/comm/environment/impel/index.htm). U.S. pollution-prevention programs are documented by the U.S. Environmental Protection Agency (http://www.epa.gov/epahome/p2pgram.htm).
45. See Marcus, A. 2002. Reinventing environmental regulation. Washington, DC: RFF Press. For more information on European pollution prevention programs, see European Integrated Pollution Prevention and Control Bureau (http://eippcb.jrc.es/), the UK government's Enviro Wise Programme (http://www.envirowise.gov.uk/), and the Implementation and Enforcement of Environmental Law (IMPEL) at http://europa.eu.inf/comm/environment/impel/index.htm). U.S. pollution-prevention programs are documented by the U.S. Environmental Protection Agency (http://www.epa.gov/epahome/p2pgram.htm).
46. See Marcus, A. 2002. Reinventing environmental regulation. Washington, DC: RFF Press. For more information on European pollution prevention programs, see European Integrated Pollution Prevention and Control Bureau (http://eippcb.jrc.es/), the UK government's Enviro Wise Programme (http://www.envirowise.gov.uk/), and the Implementation and Enforcement of Environmental Law (IMPEL) at http://europa.eu.inf/comm/environment/impel/index.htm). U.S. pollution-prevention programs are documented by the U.S. Environmental Protection Agency (http://www.epa.gov/epahome/p2pgram.htm).
47. See Marcus, A. 2002. Reinventing environmental regulation. Washington, DC: RFF Press. For more information on European pollution prevention programs, see European Integrated Pollution Prevention and Control Bureau (http://eippcb.jrc.es/), the UK government's Enviro Wise Programme (http://www.envirowise.gov.uk/), and the Implementation and Enforcement of Environmental Law (IMPEL) at http://europa.eu.inf/comm/environment/impel/index.htm). U.S. pollution-prevention programs are documented by the U.S. Environmental Protection Agency (http://www.epa.gov/epahome/p2pgram.htm).
48. See Marcus, A. 2002. Reinventing environmental regulation. Washington, DC: RFF Press. For more information on European pollution prevention programs, see European Integrated Pollution Prevention and Control Bureau (http://eippcb.jrc.es/), the UK government's Enviro Wise Programme (http://www.envirowise.gov.uk/), and the Implementation and Enforcement of Environmental Law (IMPEL) at http://europa.eu.inf/comm/environment/impel/index.htm). U.S. pollution-prevention programs are documented by the U.S. Environmental Protection Agency (http://www.epa.gov/epahome/p2pgram.htm).
49. For more information on these and other programs, see Smart, B. 1992. Beyond compliance: A new industry view of the environment. Washington, DC: World Resources Institute.
50. 3M Company, 1992. Pollution prevention pays, videotape.
51. See, for example, Christmann, P. 1998. Effects of 'best practices' of environmental management on cost advantage: The role of complementary assets. Academy of Management Journal, 43(4): 663-680; and Sharma, S., & Vredenburg, H. 1998. Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strategic Management Journal, 19(8): 729-753.
52. See, for example, Christmann, P. 1998. Effects of 'best practices' of environmental management on cost advantage: The role of complementary assets. Academy of Management Journal, 43(4): 663-680; and Sharma, S., & Vredenburg, H. 1998. Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strategic Management Journal, 19(8): 729-753.
53. Through early adoption of extended producer responsibility requirements, European governments and firms have pioneered efforts in product stewardship. See, for example, Roome, N., & Hinnells, M. 1993. Environmental factors in the management of new product development. Business Strategy and the Environment, 2(1): 12-27; Welford, R. 1995. Environmental strategy and sustainable development. London: Routledge; and Steger, U. 1996. Managerial issues in closing the loop. Business Strategy and the Environment, 5(4): 252-268.
54. Through early adoption of extended producer responsibility requirements, European governments and firms have pioneered efforts in product stewardship. See, for example, Roome, N., & Hinnells, M. 1993. Environmental factors in the management of new product development. Business Strategy and the Environment, 2(1): 12-27; Welford, R. 1995. Environmental strategy and sustainable development. London: Routledge; and Steger, U. 1996. Managerial issues in closing the loop. Business Strategy and the Environment, 5(4): 252-268.
55. Through early adoption of extended producer responsibility requirements, European governments and firms have pioneered efforts in product stewardship. See, for example, Roome, N., & Hinnells, M. 1993. Environmental factors in the management of new product development. Business Strategy and the Environment, 2(1): 12-27; Welford, R. 1995. Environmental strategy and sustainable development. London: Routledge; and Steger, U. 1996. Managerial issues in closing the loop. Business Strategy and the Environment, 5(4): 252-268.
56. Wheeler, D., & Sillanpaa, M. 1997. The stakeholder corporation. London: Pittman Publishing.
57. Elkington, J. 1998. Cannibals with forks, Gabriola Island: New Society Publishing.
58. Hoeffler, S., & Keller, K. 2002. Building brand equity through corporate societal marketing. Journal of Public Policy and Marketing, 21(1): 78-89.
59. Fiksel, J. 1995. Design for environment; Creating eco-efficient products and processes. New York: McGraw-Hill.
60. For a leading example of industrial ecology, refer to Graedel, T., & Allenby, B. 1995. Industrial ecology. Englewood Cliffs: Prentice Hall.
61. Buffington, J., Hart, S., and Milstein, M. 2002. Tandus 2010: Race to sustainability. Center for Sustainable Enterprise, University of North Carolina, Chapel Hill.
62. See Proposal For a Directive of the European Parliament and of the Council on Waste Electrical and Electronic Equipment and on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment, COM #(2000)347 available at http://europa.eu.int/comm/environment/docum/00347_en.htm.
63. McDonald, H., London, T., & Hart, S. 2002. Expanding the playing field: Nike's World Shoe project. Washington, DC: World Resources Institute.
64. I b i d.
65. See, for example, Vergragt, P., & van Grootveld, G. 1994. Sustainable technology development in the Netherlands: The first phase of the Dutch STD programme. Journal of Cleaner Production, 2(3/4): 133-139; Fussler, C. 1996. Driving eco-innovation. London: Pittman Publishing; and von Weizsacker, E., Lovins, A., & Lovins, H. 1997. Factor four. London: Earthscan Publishing.
66. See, for example, Vergragt, P., & van Grootveld, G. 1994. Sustainable technology development in the Netherlands: The first phase of the Dutch STD programme. Journal of Cleaner Production, 2(3/4): 133-139; Fussler, C. 1996. Driving eco-innovation. London: Pittman Publishing; and von Weizsacker, E., Lovins, A., & Lovins, H. 1997. Factor four. London: Earthscan Publishing.
67. See, for example, Vergragt, P., & van Grootveld, G. 1994. Sustainable technology development in the Netherlands: The first phase of the Dutch STD programme. Journal of Cleaner Production, 2(3/4): 133-139; Fussler, C. 1996. Driving eco-innovation. London: Pittman Publishing; and von Weizsacker, E., Lovins, A., & Lovins, H. 1997. Factor four. London: Earthscan Publishing.
68. See Hart, S., & Milstein, M., op. cit.
69. McDonough, W., & Braungart, M. 2002. Cradle to cradle. New York: North Point Press.
70. 54 Baum, D. 2002. GM's billion-dollar bet. Wired.com. www. wired.com/wired/archive/10.08/fuelcellcars.html>
71. Holliday, C., op. cit.
72. Hamel, G. 2000. Leading the revolution. Boston: Harvard Business School Press; Poster, R., & Kaplan, S., op. cit; and Christensen, C., Craig, T., & Hart, S., op. cit.
73. Hamel, G. 2000. Leading the revolution. Boston: Harvard Business School Press; Poster, R., & Kaplan, S., op. cit; and Christensen, C., Craig, T., & Hart, S., op. cit.
74. Hamel, G. 2000. Leading the revolution. Boston: Harvard Business School Press; Poster, R., & Kaplan, S., op. cit; and Christensen, C., Craig, T., & Hart, S., op. cit.
75. See von Dieren, W., op. cit.; Prahalad, C. K., & Hart, S., op. cit.; and Prahalad, C. K., & Hammond, A. 2002. Serving the world's poor, profitably. Harvard Business Review, 80(9): 4-11.
76. See von Dieren, W., op. cit.; Prahalad, C. K., & Hart, S., op. cit.; and Prahalad, C. K., & Hammond, A. 2002. Serving the world's poor, profitably. Harvard Business Review, 80(9): 4-11.
77. See von Dieren, W., op. cit.; Prahalad, C. K., & Hart, S., op. cit.; and Prahalad, C. K., & Hammond, A. 2002. Serving the world's poor, profitably. Harvard Business Review, 80(9): 4-11.
78. Hart, S., & Sharma, S. 2002. Radical transactiveness and competitive imagination. Presented at the Academy of Management Annual Meeting, Denver, CO, August 2002.
79. Counts, A. 1996. Give us credit. New York: Times Books.
80. Balu, R. 2002. Strategic innovation: Hindustan Lever. Fast Company, 47: 120-125.
81. Prahalad, C. K., & Hart, S., op. cit.
82. Prahalad, C. K., & Hammond, A., op. cit.
83. See de Soto, H. 2000. The mystery of capital. New York: Basic, for a discussion about the value that resides in informal economies.
84. These companies and others including Hewlett-Packard and Ford have joined the Base of the Pyramid Learning Laboratory at the University of North Carolina's Kenan-Flagler Business School to explore ways to enter the underserved markets of the world in ways that are culturally appropriate and environmentally sustainable.
85. Hart, S., & Christensen, C. 2002. The great leap: Driving innovation from the base of the pyramid. Sloan Management Review, 44(1): 51-56.
86. Hart, S., & Milstein, M., op. cit.
87. Hart, S., & Christensen, C., op. cit.
88. See Amram, M., & Kulatilaka, N. 1999. Real options. Boston: Harvard Business School Press; and Milstein, M., & Alessandri, T. New tools for new times: Using real options to identify value in strategies for sustainable development. Presented at the Academy of Management Annual Meeting, Toronto, Canada, August 2000.
89. See Amram, M., & Kulatilaka, N. 1999. Real options. Boston: Harvard Business School Press; and Milstein, M., & Alessandri, T. New tools for new times: Using real options to identify value in strategies for sustainable development. Presented at the Academy of Management Annual Meeting, Toronto, Canada, August 2000.
90. Foster, R., & Kaplan, S., op. cit.
91. Christensen, C., op. cit.