sustainability and increased value creation
Samuel B. Moore a, Susan L. Manring b
a Ouroboros Holdings, LLC. 4003 Birkdale Ct. Elon, NC 27244-2020, USA b Martha and Spencer Love School of Business, Elon University, Elon, NC 27244-2020, USA
Keywords: Sustainability, Small and medium sized enterprises (SMEs), Sustainable supply chain management, Resilience, Industrial ecology Abstract
Sustainability strategies create many synergistic effects for SMEs working collaboratively, as well as systemic benefits for the commons. After setting forth the business case for sustainable SMEs, and considering SME sustainability advantages in contrast to MNEs, this paper discusses several different incentives for SMEs to optimize sustainability: (1) becoming valuable sustainable investment targets for larger firms; (2) creating highly competitive networks of sustainable SMEs in market spaces where larg eenterprises are less successful; (3) becoming highly efficient suppliers in global supply chains through sustainable practices.
While several successful models of the sustainable SME are evolving, it may be that networks of SMEs will become essential for addressing the systemic problems that underlie industrial ecology, enterprise resilience, and global supply chain sustainability. SMEs represent the majority of all enterprises, and rapidly evolving communication technologies allow for various routes of network formation.
1. Introduction
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Since the 1990s, environmental and social factors have become increasingly important strategic considerations for enterprises of any size. Emerging 21st century market conditions are now creating truly new lenses through which the world must be viewed [1].By ignoring the ??hidden connection‘‘ between business and the environment, business is missing many new sustainable development(SD) opportunities that may prevent the threat of an inevitable collapse of society [2]. As more companies recognize our ??Common Journey‘‘ [3], which underscores the necessity of creating sustainable development, firms worldwide are intentionally developing strategic plans to make their companies competitive sustainably. Hart and Milstein have insisted that creating a sustainable enterprise should be viewed as just another factor in the modern business environment and should be addressed as such within the planning process by 21st century business strategists [4]. However, even this view may no longer be adequate.
Modern business plans should include both ??the limits and opportunities‘‘ presented by changes in global social and environmental circumstances, as limitations of future growth may occur if the global and environmental perspectives for sustainable societies are ignored. Paradoxically, the global economy grows more rapidly as companies become more resource efficient. Ecological footprint analysis indicates that with this ??rebound effect‘‘ [5], humanity‘s ecological demands already exceed what nature can supply [6]. This ??ecological overshoot‘‘ means that we are depleting the stock of natural environmental capital rather than ??living off the interest‘‘ [6]. In spite of limits to growth, just as is true for all living organisms, business enterprises need to grow at least enough to keep pace with the economy, but defining growth and the ways and means of ??growth‘‘ need to change [7]. Sustainable enterprise resilience is the ??capacity for an enterprise to survive, adapt, and grow in the face of turbulent change,‘‘ and at the same time, ??to increase shareholder value without increasing material throughput‘‘ [5]. Sustainable enterprise resilience within the framework of industrial ecology creates multiple business opportunities through green technologies, reduction of raw material and energy use, and ??discovering innovative pathways for recovery and reuse of waste streams in place of virgin
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resources‘‘ [5]. This redefines growth in a more sustainable context, a context that is not foreign to SMEs, who have been operating for centuries within the context of limited local markets, and adapting to those conditions successfully [8].
The strategy of a sustainable enterprise has been defined as ??the process of aligning an enterprise with the business environment to maintain a dynamic balance‘‘ [9]. By adding a sustainability lens within the framework of SME strategic planning, SME development seeks to balance resilience and growth so as to align the creation of abundance: economically, environmentally, and socially, and to conserve that value for future generations [10]. Integrating sustainability into their competitive strategy, and thereby obtaining greater profitability for SMEs through adoption of intentional sustainable strategies, can help them to optimize their rate of sustainable change.
??It is becoming apparent that voluntary, incremental environmental improvements by individual companies will be inadequate to significantly offset the growth of the global economy, and that the rapid growth of China, India, and other Asian economies will likely exacerbate this problem‘‘ [5].
Sustainability strategies create many synergistic effects for SMEs working collaboratively, as well as systemic benefits for the commons. After setting forth the business case for sustainable SMEs, and considering SMEs sustainability advantages in contrast to MNEs, this paper discusses several different scenarios for SMEs to optimize and use sustainability to create competitive advantages rather than simply focusing on reducing unsustainability [5]:
? become valuable sustainable investment targets for larger firms;
? create networked SMEs in sustainable market spaces where MNEs are less successful;
? become sustainable suppliers in global supply chains.
Through this exploration, there is a critical underlying question, which will require fuller investigations; which of these scenarios, or combinations of scenarios, can provide the best alignment for SMEs with the principles of industrial ecology, enterprise resilience, and global sustainability?
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2. Why do SMEs need to articulate and use SD business plans for integrating factors of globalization within social and ecological limits to growth?
Ignoring the possibilities offered by sustainability can produce an artificially narrow vision, with even small firms being constrained as they attempt to operate in a global marketplace, if an expanding vision of sustainability is not included in planning and benchmarking performance [11,12]. SMEs have a vital role to play in managing limited global environmental and social resources. A broad, multidimensional, multi-stakeholder perspective that is formed based on emerging ideas and trends should be the basis of a system approach towards an intentional, proactive situational analysis. A thoughtful, situational analysis, as the basis for developing enterprise strategy, must incorporate new global stakeholders and should not be stagnant or reactionary [13]. Such analyses can culminate in development of scenarios leading to sound strategic plans, based on foreshortened learning cycles that benefit from the time and efforts spent in the planning process [14].
Recognition of the use of sustainability to promote expeditious planning dialogues to create competitive advantages are described by Senge et al. [15]:
People creating together work in different ways. They are anchored in the future rather than in the past, drawn forward by images of what they truly want to see exist in the world. They learn how to work with a distinctive source of energy that animates the creative process, the creative tension that exists whenever a genuine vision exists in concert with people telling the truth about what exists now. They learn how to let go of having to have everything worked out in advance and to step forth with boldness into immense uncertainty. The organizations that truly lead in the profound (sustainable) changes starting now to unfold around the world, who do not get stranded in just being ??less bad‘‘, will be those who convert sustainability challenges into compelling strategic opportunities.
A number of forces underscore the emerging opportunities [16,17] for SMEs to become proactively involved in sustainable practices: ? accelerating cycles of technological innovation;
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? rapid globalization of networked communications; ? extended and interconnected supply chains; ? rapidly changing markets.
A further important factor to bear in mind is the fact that at least 80% of all global enterprises are considered SMEs, having less than 250 employees [18]; SME‘s constitute 85t% of USA business [16]; 99% of the European Union business [19]; over 99% of enterprises in the UK [20]; and SMEs account for at least 70% of the world‘s production [21]. Possible scenarios of the future should be part of any lens for incorporating sustainable development within a planning process [13,22–25]. Such lenses have led to the conception of ??sustainable enterprises‘‘ [26]: i.e., enterprises that are robust and resilient in face of anticipated and unanticipated economic, environmental and social challenges [27]. Scenarios anticipating future market conditions predict that a sustainable enterprise growth will be enhanced by: (a) adapting to and diminishing the risk of exceeding social and environmental limits, and (b) meeting currently unmet market needs for the 2t billion potential consumers that do not currently participate in the global marketplace [28–34].
3. Differences between large and small firms that result in sustainability advantages to SMEs
A major facet of corporate planning among leading manufacturers in every industrial sector is the emphasis on sustainability in ??internal business processes, external stakeholders and investor relations, and customer value propositions‘‘ [5]. It appears that global multinational enterprises are taking actions towards becoming more sustainable and they feel strongly enough about the importance of their efforts to report on their progress through various avenues [29]. An entire lexicon and specific techniques have been developed to define and measure ??sustainability‘‘ [35].
The following indicators of MNE‘s strategic plans and actions towards sustainability reveal that the concept of the sustainable enterprise as a successful business paradigm has become a reality:
? The development of the World Business Council for Sustainable Development
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