The road to Sustainability and CSR

What is sustainability and corporate social responsibility (CSR)?

Sustainability is derived from the Latin word “Sustinere” which means the “Support”. Generally, Sustainability refers to the ability of remaining in the same level/ certain level. But Modern day, the term Sustainability often tied up 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 Triple bottom line. These pillars are Profit ( Economy), People ( Society) and Planet( Environment).

Corporate social responsibility (CSR) is the responsibility of the enterprises for their impact on society. This definition was presented by the European commission in 2011. CSR is a concept in which Companies combine their environmental and societal concerns in to their business processes as well as in to their interactions with stakeholders in voluntary basis.

Both Sustainability and CSR are considered as Umbrella constructs which serve for a similar purpose. Sustainability has its focus on present as well as long term concerns and CSR mainly focuses on present responsibility towards the society.

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

Further, the importance of Sustainability and CSR has been reconfirmed by the Stakeholder theory by Professor Ed Freeman. Stakeholder theory simply describes that a good business needs to create value for its each stakeholder which emphasizes the significance of adopting Sustainability and CSR in to the business practice.

How cultural and institutional factors in a Scandinavian context have impacted the sustainability and CSR practices of Scandinavian companies like Novo Nordisk?

It is noted that Scandinavian culture and Institutional factors have heavily impacted on the Sustainability and CSR practices in Scandinavian firms.

Scandinavian culture encompasses some distinguish features such as Low power distance, Appreciating equality and democracy, Encouraging participation in decision making process, Promoting critical dialogue, Humility, Rejecting saving face attitude and Lagom life( Balanced and harmonized life style).

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 the earth and known as the father of CSR in Denmark, the cultural aspects which shaped the Sustainability and CSR practices in Novo Nordisk are Low power distance, corporate movement in Denmark back then, Rejecting 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 of doing a business.

As per the Vice president of corporate sustainability, Novo Nordisk, some of the reasons for Novo Nordisk to become the sustainable leader are being 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, considering employees and the most important asset of the company and being responsible towards them as well as Protestant Christian values such as responsibility towards the society and nature have been affected Novo Nordisk culture and its sustainable and CSR practices.

Flat Organizational structure which leads to negotiate and Critical dialogue which discover most aspiring ideas and opportunities are also contributed to the enhanced sustainability and CSR practices in Scandinavian firms.

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

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

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

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

Some of the other factors influencing Scandinavian sustainability and CSR practices are Political Democracy, Low income disparity, high sensitivity for reputation of the company and encouraging women participation in company boards.

Hence, it is obvious that Scandinavian culture and Institutional factors have a massive impact on the sustainability and CSR practices in Scandinavian Companies such as Novo Nordisk.

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

There are so many valuable sustainability and CSR practices in Scandinavia which can be adopted in other contexts as any economy/ society could be benefited by these unique practices. Even though there might be cultural differences between the societies/ countries, culture can be shaped by taking the accountability and responsibility in order to create sustainable development.

Our motherland Srilanka is a developing and a middle income earning economy. Srilanka is abundant with natural resources and Tourism, Tea Export, Apparel and Agricultural products are the main income sources of the country. While moving fast towards economic development, Srilanka has not forgotten its responsibility towards Environment and Society. There is an ongoing nationwide awakening about sustainability and CSR in Srilanka and Government has taken some steps to reduce environment pollution recently.

Eg: In 2017, Srilankan government imposed a partial polythene ban islandwide.

 Nevertheless, it is obvious that Srilanka is still in its early stages of Sustainability and CSR practices. Out of a number of Scandinavian practices which can be adopted in Srilankan context, below are the most prominent and promising inspirations that could shape Srilankan culture in order to archive true sustainability.

  • Establishing Purpose as the primary motivator of Businesses.

Most of the Srilankan businesses and Corporations are primarily profits driven entities and their main focus is short term and long term monetary benefits. Most of the business entities do not consider adopting sustainability business practices are essential to grow their business as their main concern is mere profits. Profit based incentives, Target based score cards are popular in Srilankan private sector and there is a sharp competition between industry peers.

Mere profits based business practices may beneficial in short run but in long run businesses should adopt a strategy which integrates sustainability in it, in order to survive and grow further. A huge drift of attitude is much needed in Srilanka in order to change the business contexts from profit driven to purpose driven. As a developing country there are so many unmet needs in the society which businesses operate. Businesses must focus on serving unmet needs of the society and derive their purpose from it. Srilankan businesses must make the purpose as their main motivator and let profits earn while businesses are operating in sustainable manner.

  • Introducing value embedded humble leadership.

In many Srilankan Organizations, leaders are perceived as authoritative, bureaucratic and in flexible characters. There are some instances that leaders are violating company values and 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 saving face concept and it is a fact that there is lesser opportunities to discover new ideas and opportunities within employees in order to do the business right way. (Sustainable way)

Changing leadership style to a humble, consensus building leadership style which encourage participation and encourage critical dialogue would enhance the stakeholder engagement of company decision making and eventually it will be leading the company towards sustainability. Humility and value embedded leadership must be promoted actively in Srilankan context at least in emerging blooming businesses. Scandinavian leadership concept should be added to the national educational system in order to train young leaders in making.

  • Enhancing women representation in company boards.

Out of the total population in Srilanka, around 52% is represented by women and still there is no adequate female representation in nation wise influential positions especially in company director boards. Basically there is not enough gender equality in srilankan society and often women are treated less than men in the same occupation/position. The irony is World’s first female prime minister was elected in Srilanka in 1960 and still Srilankan women are struggling to cope with social injustice and inequality.

Some of the studies conducted conclude that women are more concern towards sustainability rather than men. Hence, as Norway mandated female representation in company boards, If Srilanka could impose a law in order to make female representation in company director boards and government influential positions such as parliament, ministries, there is an opportunity to implement more sustainability related business and social practices in Srilanka.

Further, the virtues such as Openness and honesty, being responsible towards the environment and society, actively promoting democracy and tolerating each other are extremely important to cultivate in Srilankan context as it will be bringing massive benefits to Srilanka to move towards a more sustainable society.

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