The road to Sustainability and CSR

Sustainability is derived from the Latin “Sustinere,” which means “Support.” Generally, Sustainability refers to the ability to remain at the same level or a certain level. But in Modern times, the term Sustainability is often associated with Environmental and Social elements.

Sustainability is meeting the needs of the present without compromising the ability of future generations to meet their needs. This definition was derived from our common future – Brundtland report in 1987.

Sustainability focuses on three main pillars, which are commonly known as the Triple bottom line. These pillars are Profit ( Economy), People ( Society), and Planet( Environment).

Corporate social responsibility (CSR) is the responsibility of enterprises for their impact on society. The European Commission presented this definition in 2011. CSR is a concept in which Companies combine their environmental and societal concerns into their business processes and interactions with stakeholders on a voluntary basis.

Both Sustainability and CSR are considered Umbrella constructs that serve a similar purpose. Sustainability focuses on present and long-term concerns, while CSR mainly focuses on present responsibility towards society.

Nowadays, there is a huge ongoing debate on whether modern corporations benefit society or not. Some major studies, such as the Pew study in 2010, have discovered that the majority of people do not perceive large corporations as having a positive impact on society. Hence, Sustainability and CSR can be used to construct a forum and a language to engage in this conversation.

Further, Professor Ed Freeman’s stakeholder theory reconfirms the importance of Sustainability and CSR. The stakeholder theory simply describes that a good business needs to create value for each stakeholder, which emphasizes the significance of adopting Sustainability and CSR into business practice.

It is noted that Scandinavian culture and institutional factors have heavily impacted Scandinavian firms’ sustainability and CSR practices.

Scandinavian culture encompasses some distinguishing features such as Low power distance, Appreciation of equality and democracy, Encouragement of participation in the decision-making process, Promotion of critical dialogue, Humility, Rejection of the saving-face attitude, and Lagom life( Balanced and harmonized lifestyle).

Scandinavian leadership and management are shaped by their cultural values, such as Encouraging participation, cooperation, and Consensus building. According to Mads Ovlisen, the former CEO of the most sustainable company on earth and known as the father of CSR in Denmark, the cultural aspects that shaped the Sustainability and CSR practices in Novo Nordisk were Low power distance, the corporate movement in Denmark back then, the Rejecting of the saving face attitude, and promoting critical dialogue.

As he further describes, Honesty and Openness are the most important values for a Company. When he first launched CSR practices in Novo Nordisk, he thought it was the right way to do business.

As per the Vice president of corporate Sustainability, Novo Nordisk, some reasons for Novo Nordisk to become a sustainable leader are being a value-based business, being responsible for employees and society, and possessing a value-embedded leadership. Scandinavian cultural aspects, such as being responsible towards scarce resources and considering employees as the most critical asset of the company and being responsible towards them as well as Protestant Christian values, such as responsibility towards society and nature, have affected Novo Nordisk’s culture and its sustainability and CSR practices.

A flat organizational structure, which leads to negotiation and critical dialogue and discovers the most aspiring ideas and opportunities, also contributes to enhanced Sustainability and CSR practices in Scandinavian firms.

Not only culture but also Scandinavian Institutional factors highly affect the sustainability and CSR practices in Scandinavian companies.

Scandinavian Corporate governance is shaped by Scandinavian culture and based on the stakeholder model. It is needed to control and direct companies. Most Scandinavian companies are owned by “The Industrial Foundation,” which usually owns 1/3 of shares and ¾ of voting power. These Industrial foundations hold the shares for longer periods and encourage the company to engage in sustainable activities.

In Scandinavia, employee representation on company boards is mandatory, and it enhances stakeholder engagement in the company decision-making process. Unlike in US firms, the incentive system in Scandinavian firms is not profit-focused. The idea behind this unique incentive system in Scandinavian firms is not to entirely focus on short-term financial rewards but on long-run aspects.

Hence, the overall Ownership structure, Board structure, and Incentive system in Scandinavian firms are highly concentrated on achieving long-term Sustainability.

Other factors influencing Scandinavian Sustainability and CSR practices are Political Democracy, Low-income disparity, high sensitivity to the company’s reputation, and encouraging women’s participation in company boards.

Hence, it is obvious that Scandinavian culture and Institutional factors massively impact the Sustainability and CSR practices in Scandinavian Companies such as Novo Nordisk.

What lessons are particularly promising to attempt to apply in our local context?

So many valuable Sustainability and CSR practices in Scandinavia can be adopted in other contexts, as any economy or society could benefit from these unique practices. Even though there might be cultural differences between societies or countries, culture can be shaped by taking accountability and responsibility to create sustainable development.

Our motherland, Sri Lanka, is a developing middle-income economy. It is abundant in natural resources, and tourism, tea exports, apparel, and agricultural products are the country’s primary income sources. While moving fast towards economic development, Sri Lanka has not forgotten its responsibility to the environment and society. There is an ongoing nationwide awakening about Sustainability and CSR in Sri Lanka, and the government has recently taken some steps to reduce environmental pollution.

For example, In 2017, the Srilankan government imposed a partial polythene ban islandwide.

 Nevertheless, Sri Lanka is still in the early stages of Sustainability and CSR practices. Out of a number of Scandinavian practices that can be adopted in the Srilankan context, below are the most prominent and promising inspirations that could shape Srilankan culture to achieve true sustainability.

• We have a Sustainability purpose as the primary motivator for businesses.

Most Sri Lankan businesses and corporations are primarily profit-driven entities, and their main focus is short-term and long-term monetary benefits. Most business entities do not consider adopting sustainability business practices as essential to growing their business, as their primary concern is mere profits. Profit-based incentives and target-based scorecards are popular in the Sri Lankan private sector, and there is sharp competition between industry peers.

Mere profits-based business practices may be beneficial in the short run. Still, in the long run, businesses should adopt a strategy that integrates sustainability to sustainability further. A huge attitude drift is needed in Sri Lanka to change the business context from profit-driven to purpose-driven. As a developing country, there are so many unmet needs in the society in which businesses operate. Businesses must focus on serving the unmet needs of society and derive their Purpose from it. Srilankan businesses must make the Purpose their primary motivator and let profits earn while companies operate sustainably.

• We are introducing value-embedded humble leadership.

In many Sri Lankan Organizations, leaders are perceived as authoritative, bureaucratic, and flexible. Sometimes, leaders violate company values, act as they please, and expect employees to adhere to company values and ethics. “Leadership by example” is limited to mere words. In Srilanka there are more “Bosses” than “Leaders”. “Most so-called leaders” embrace the saving face concept, and it is a fact that there are fewer opportunities to discover new ideas and opportunities within employees to do business the right way. (Sustainable way)

Changing the leadership style to a humble, consensus-building one that encourages participation and critical dialogue would enhance stakeholder engagement in company decision-making. Eventually, it will lead the company toward sustainability. Sustainable leadership must be promoted actively in the Srilankan context, at least in emerging blooming businesses. Scandinavian leadership concept should be added to the national educational system to train young leaders in making.

• We are enhancing women’s representation on company boards.

Out of the total population in Sri Lanka, around 52% is represented by women. Still, females are not adequately represented in influential positions nationwide, especially on company director boards. Basically, there is not enough gender equality in Sri Lankan society, and often, women are treated less than men in the same occupation/position. The irony is that the World’s first female prime minister was elected in Sri Lanka in 1960, and still, Sri Lankan women are struggling to cope with social injustice and inequality.

Some studies conclude that women are more concerned about sustainability. Sustainabilitye, Norway mandated female representation in company boards. If Sri Lanka could impose a law to make female representation in company director boards and government influential positions such as parliament and ministries, there would be an opportunity to implement more sustainability-related business and social practices in Sri Lanka.

Further, virtues such as Openness and honesty, responsibility towards the environment and society, actively promoting democracy, and tolerating each other are extremely important to cultivate in the Srilankan context as they will bring massive benefits to Srilanka’s move towards a more sustainable society.