von Michael v. Kutzschenbach

The years following the publication of Rachel Carson’s Silent Spring (1962) saw a dramatic increase in regulatory and institutional structures designed to address the environmental problem. In the US, the Environmental Protection Agency was established in December 1972 to “consolidate in one agency a variety of federal research, monitoring, standard-setting and enforcement activities to ensure environmental protection,” (www.EPA.gov/about EPA/EPA – history). Establishing emission standards and having enforcement power through the judicial system dramatically improved the environment in the United States, and similar agencies and regulations have emerged in other parts of the world as well.

From an organization’s perspective, rules and regulations (as well as the possibility of sanctions) is part of the business environment. Although the regulatory system is constantly changing, the basic rules and the slow rate of institutional change enables firms to adapt in a relatively painless manner. Consequently, although “the environment” is not unanimously perceived as the most important issue on the table, it represents a known contingency that establishes constraints on the assumed “real” purpose of business. The rules and regulations approach is an example of a command and control policy that has resulted in significant improvements but which has also had some unintended outcomes. One is that the focus on emission standards contributes to a technology-based approach to environmental management. The strategy has been successful in a broad range of situations but has the effect of creating reliance on technology to solve all environmental problems. The second consequence is that it has encouraged a reactive mindset in organizations. Firms’ environmental strategies are designed to meet the letter of the law, but not necessarily the spirit in which the laws were intended.

Clearly, there are firms which do not fall exactly into this complacent, reactive behavior mode but these tend to be in the minority. However, from the perspective of business, the command and control approach is predictable and open to influence. The slow pace of institutional and regulatory change makes these aspects of the firm’s business environment less volatile and less threatening so that more efforts can be directed towards understanding and countering competitor behavior.

The publication of “Our Common Future” (1987) by the United Nations introduced the concept of sustainable development to a much broader public. The definition offered by book was inspirational but did not provide a solid basis for action. Unlike easily collected physical measurements of emissions and energy consumption, terms such as poverty and intergenerational equity are characterized by many different operationalizations, some of which may be in conflict with each other. An entirely new set of variables was introduced to the discourse on the environment. The playing field may have changed but the rules remained the same. The essence of the sustainability challenge was well captured by Psychologist Donald Schön in Educating the Reflective Practitioner (1987),

In the swampy lowland, messy, confusing problems defy technical solution. The irony of this situation is that the problems of the high ground tend to be relatively unimportant to individuals or society at large, however great their technical interest may be, while in the swamp lie the problems of greatest human concern.”

This quotation identifies the challenge for incorporating “sustainability” into society’s efforts to improve the human condition. A basic question that confronts organizations is that of responsibility. Is it the responsibility of the firm to actively address a much broader set of conditions than simply satisfying shareholders? De Bakker et al. (2005) observed that the literature of corporate social responsibility had expanded dramatically since the 1950s in both the number of articles published and the scope of the issues included in the articles. The concept of sustainable development has influenced the development of alternative performance measurement systems. For example, the triple bottom line (Elkington 1997) and similar frameworks were developed to capture the essence of sustainability’s three traditional dimensions – economic success, environmental protection, and social responsibility. Although a “sustainable” organization was seen to be one that managed to balance all three concerns, Ehrenfeld (2006) points out that reducing unsustainability is not the same as sustainability.

Internally, organizations also face new challenges. These come from several sources: employees have a desire for a “better world” and want to orient their organizations in this direction and “green imperatives” from upper management. These are confronted with powerful obstacles such as established organizational values that reject change, accounting systems that this regard externalities, reward systems that are tied to quarterly profits, and the ongoing reality of meeting the bottom line (see Kerr 1975/1995). Since regulatory change takes time and involves coordination with industry, it is easy to ignore, for the moment, the new challenges imposed on firms by sustainability. Consequently, strategy making tends to proceed along the traditional lines of prediction, aided by the use of well-known strategic analysis tools. The assumption underlying these methodologies is that the future can be predicted. In this perspective, the outcome is a known and generally agreed upon set of performance measures.

The question for management is how to best achieve the desired effects given the selection of possible means. An alternative approach that is better suited for the new sustainability awareness-driven business environment is based on the idea that the future can be created. Thus, traditional control is not applicable (Wiltbank et al. 2006). The approach uses the logic of effectuation, as opposed to the traditional logic of causation, and concentrates on using the available means to create possible outcomes. It is the logic of innovation and offers organizations a more effective way to engage with the issues that characterize sustainability. In the control perspective, managerial prescriptions and recommendations for achieving sustainability are based on simplifying assumptions regarding the business context.

“Sustainability” stretches the limits of human decision making capability and policy makers often retreat to their disciplinary roots for guidance, overlooking potential synergisms with other disciplines (Bilalic and McLeod 2014). There is also a strong bias towards finding “solutions” rather than conducting a proper diagnosis to ascertain the nature of the problem. A classic study of managerial strategic decision making (Mintzberg et al. 1976) documented that the majority of managerial effort was focused on searching for and evaluating solutions, blithely assuming the problem to be solved as given.

While implementing the “usual” initiatives for improved environmental performance is better than doing nothing, we argue that a deeper appreciation of the problem context is required. And, when coupled with problem structuring processes and a learning-based approach to innovation this can result in organizational strategies that are both more effective and responsive to stakeholders’ needs.