Strategic Thinking for Sustainable Development

Sustainable Development Sust. Dev. 18, 71 75 (2010) Published online in Wiley InterScience (www.interscience.wiley.com).452 Strategic Thinking for Sustainable Development Rupert J. Baumgartner 1 3 * and Jouni Korhonen 1,3, 1 Åbo Akademi University, Turku, Finland 2 University of Leoben, Austria 3 International Sustainable Development Research Society (ISDRS) ABSTRACT The idea of this editorial research article is to start making sense out of the seemingly limitless debate on the environmental dimension of sustainable development. We have evaluated a collection of international peer-reviewed papers. These contributions have been debated at the conferences of the International Sustainable Development Research Society (ISDRS). Our main research objective here is to consider the often posed question of why the progress made in sustainable development has been so slow and the work implemented so unsuccessful. We argue that one of the main explanations is that the approaches used in sustainable development are reductionist and often lead into problem shifting and problem displacement. To address the problem of reductionism, we propose what we call strategic thinking and its incorporation into sustainable development work in general. To open up this argument, we arrive at the discussion of three central dimensions of strategic thinking and the relevance of these dimensions when addressing reductionism. These dimensions are the strategy content, strategy process and strategy context. Copyright 2010 John Wiley & Sons, Ltd and ERP Environment. Keywords: sustainable development; reductionism; problem shifting; strategic sustainable development; strategy content; strategy process; strategy context Introduction: Research Objective ROOME (2001) PRESENTS ENVIRONMENTAL PROBLEMS AS METAPROBLEMS. METAPROBLEMS ARE COMPLEX PROBLEMS and constitute of a set of subproblems that are also complex problems. Solving a metaproblem requires subproblem solution on the micro-level of the system in question without simultaneously creating new problems in other micro-level subsystems or on meso and macro-levels. For this special issue, Strategic Thinking for Sustainable Development, we have gathered a collection of international peer-reviewed papers. Prior to publication, these papers have been debated at the conferences of the International Sustainable Development Research Society (ISDRS). Our main research objective here is to consider the often posed question of why the progress made in sustainable development has been so slow and work implemented so unsuccessful. We argue that one of the main explanations is that the approaches used in sustainable development are reductionist and often lead into problem shifting and problem displacement. To address the problem of reductionism, we propose what we call strategic thinking and its incorporation into sustainable * Correspondence to: Dr. Rupert J. Baumgartner, Åbo Akademi University, Turku, Finland. E-mail: Rupert.Baumgartner@abo.fi The order is alphabetical. Contributions are equal. Copyright 2010 John Wiley & Sons, Ltd and ERP Environment

72 R. J. Baumgartner and J. Korhonen development work in general. To open up this argument, we arrive at the discussion of three central dimensions of strategic thinking derived from the mainstream of strategic management literature and the relevance of these dimensions when addressing the problem of reductionism. These dimensions are the strategy content, strategy process and strategy context. Problems and Shortcomings of Sustainable Development Problem Displacement, Problem Shifting and Reductionism It is amazing how little practical improvement has been achieved in sustainable development in the everyday functioning of various organizations, national, regional and international policies or within different communities. We argue that much could be achieved if all actors and designers of the diverse tools and instruments would pause for a while to (re)consider the basics and the fundamentals of what this work should be all about and what the overall direction of the work is. Management of a complex dynamic system includes many risks, e.g. developing actions and measures that are conflicting with each other and suboptimal in terms of the improvement of the system. Examples of work that is not strategic, i.e. work that does not serve the overall purpose of the work, are many in sustainable development projects. We argue that the main problem in all sustainable development work is what can be called reductionism, problem displacement or problem shifting in terms of space, time and knowledge transfer. The fact that the focus of all sustainable development work, society within a biosphere, is a complex and dynamic system has not been properly understood. This failure can be termed as reductionism (Huesemann, 2001). System-wide cause-and-effect chains are not considered. Isolated cause-and-effect chains between two system components are the focus of study, neglecting connections to other components. Reductionism leads to situations where existing problems are handled within a certain system while new problems are created elsewhere in this system or in its subsystems or in the future of the same system. Sustainable development is a global and long-term challenge. Carbon emissions, regardless of where they are emitted, contribute to climate change effects, which may pertain over many decades (Huesemann, 2001). Energy intensive industries can move from environmentally aware and legally binding locations to locations that are less environmentally aware and legally undeveloped. Until recently, environmental policies were defined based on environmental media. Air, land and waterborne emissions had their own distinct categories. Product-based policies have now replaced these policies that focused on production and on to the individual environmental media where emissions were detected. However, the system boundary problem still persists, e.g. countries, multinational companies or life cycles of products are all very challenging to monitor or to juristically or economically determine and govern in a balanced manner. Problem displacement and problem shifting occur in knowledge transfer, too. More and more new sustainability tools and instruments are developed that provide new information to the tool-user, a business leader or a policymaker. New acronyms such as MFA, SFA, LCA, MIPS, EFP, EMS etc. are presented. This creates confusion: Which tool is the best for my particular problem? (Robèrt et al., 2002). The question should be how to use these well developed tools and instruments/approaches in parallel and together, to serve as each other s complements in the course toward more sustainable global societies. Addressing Reductionism with Strategic Thinking Strategic management was established as an academic field, e.g. with such contributions as the publication of Schendel and Hofer (1979). Strategic management is still characterized through many different definitions (Nag et al., 2007). Nag et al. (2007) identified a consensus definition for strategic management based on an analysis of strategic management journals: The field of strategic management deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the

Strategic Thinking for Sustainable Development 73 performance of firms in their external environments (Nag et al., 2007). Strategy consists of three distinguishable dimensions, the strategy process, the strategy content and the strategy context. The starting point for every strategy is the question of purpose of the whole endeavor. This is the input for strategy activities. The dimension of strategy process is the way to develop the strategy, i.e. the throughput (the how, who and when of strategy). The strategy content is the output of the strategy, i.e. the result of strategy activities. Conditions surrounding strategy activities are the strategy context, which has an influence on the possibilities and restrictions of strategic activities. Strategy process, content and context are not different parts of strategy, but they are distinguishable dimensions (De Wit and Meyer, 2004). We shall later refer to these three interrelated and distinct dimensions of strategic sustainable development. When any work is performed in a strategic manner, all individual activities serve a common purpose, common for the whole set of the activities in this work. All actors and their actions contribute to a common vision, an overall goal. The actors and their activities do not go in different directions, nor are they competing. Two new approaches in the literature have the potential to bring strategic thinking into sustainable development. These approaches are helpful in preventing problem displacement and in designing future problems out of the system. The Framework for Strategic Sustainable Development (FSSD) was proposed by pioneering sustainability scientists (Robèrt et al., 2002). One of the most popular tools in the field of strategic management is the Balanced Scorecard (BSC) introduced by Kaplan and Norton (1992). The BSC has also been adjusted to sustainability (see later on in the paper). Addressing Problem Displacement with Strategic Thinking: FSSD FSSD addresses reductionism by outlining a five-level framework with which all sustainability approaches, activities and practical measures could be judged. All of the five levels in the framework must be considered together; the levels are complementary (yet distinct). The model has a clear definition of the system under consideration (Level 1) and an overall objective and vision to be pursued in the system (Level 2). The model includes strategic principles (Level 3), which guide efforts towards the objective, and practical actions and concrete measures to implement the strategy (Level 4). Indicators and metrics measure the success of the actions (Level 5). The success of practical measures and concrete actions (Level 4) is evaluated with indicators (Level 5) against the strategic principles (Level 3) and the overall objective and vision (Level 2) for their contribution to the system under focus (Level 1). 1 Addressing Problem Displacement with Strategic Thinking: SBSC Business practice has implemented the BSC concept widely and several case studies have showed the usefulness of the BSC for business strategy (for example Butler et al., 1997; Ahn, 2001). The concept has been developed into the Sustainability Balanced Scorecard (SBSC, Figge et al., 2002; Korhonen and Baumgartner, 2009). SBSC tackles problem displacement by dividing the strategy of the project, firm, organization or community into four perspectives. All the perspectives then serve a joint and shared strategic vision, an overall objective. Answering the Research Questions The strategic thinking we propose in this editorial research article could initiate the combining of social science theoretical and conceptual work to natural science tool, indicator, modeling and metrics work. Indeed, it seems that the gap between the social science type of understanding and natural science/engineering has been one of the main causes of fragmentation, reductionism and problem shifting in sustainable development. The practical 1 Since the FSSD theory is among the most often-cited texts in sustainable development research and since it is discussed in the other papers of this special issue, we shall not use space for longer definitions of the concept in this editorial research article.

74 R. J. Baumgartner and J. Korhonen tools and instruments have been designed in natural science/engineering while the theoretical and conceptual basis of sustainability has been developed in social sciences (Binder, 2007). Based on our conceptual and theoretical exploration, we answer our research objective in this section. We find that the complexity of the problem of unsustainable development has not been acknowledged. Individual problems are dealt with separately in isolation from other unsustainability problems. The systems context of sustainable development has not been properly taken into account. What we call strategic thinking seems to be missing from sustainable development work in general. We shall open up strategic thinking deriving from the mainstream of strategic management literature (De Wit and Meyer, 2004). Three dimensions of strategy are particularly helpful when addressing the problem of reductionism and problem shifting: strategy content, strategy process and strategy context. Strategy Content This dimension secures that the framework, approach or project in question contributes to sustainability. What is the substance and the added value in light of sustainable development? Reductionist thinking fails to properly consider this question as the problems and blind alleys described above illustrate. Focusing on strategy content means that one seeks to avoid these pitfalls; one is clear about the contribution attempted. The strategy content is the substance of the constructed framework, approach or project (that is constructed in the process dimension; see below). Strategy Process Strategy process outlines the way in which the entire strategy of the framework, approach or project in question is formulated and constructed to achieve the intended content and purpose. It is important to include all primary stakeholders, e.g. the managers, the tool developers or designers and the actors who implement the approach in practice. Primary stakeholders should all be aware of the expected outcome of the project and they should have a system understanding/awareness, not only understanding of their own subsystems or isolated system components. In reductionist approaches reflected upon above, there seems to be confusion about what actors should actually be included in the category of primary stakeholders. Similarly, system understanding and awareness of the main system in which the subsystem of certain individual actors is embedded is not properly taken into account in reductionist approaches. From system understanding it should follow that actors know how to act and when to act to contribute to the desired outcomes in the system under focus. Strategy Context The dimension of strategy context is about the perception of the secondary stakeholders. It is also important to acknowledge the overall environment of the work in question, which always includes the larger socio-economic environment, i.e. the cultural context, the political context, the regulatory context and the market context under which the work must be performed. Reductionist policies and strategies fail to thoroughly consider this socioeconomic context in which all policies and strategies are embedded. This leads into dead-ends and into suggestions that are not realistic or do not survive over the long term in societal development. Introducing the Papers in the Special Issue We believe that the four selected articles in this special issue, Strategic Thinking for Sustainable Development, of Sustainable Development, which are described below, serve our cause of bridging strategic thinking and sensemaking to sustainable development work in general. Baumgartner and Ebner discuss corporate sustainability strategies and propose a maturity level system. To do this, sustainability aspects relevant for corporate sustainability are identified and grouped into economic, ecological

Strategic Thinking for Sustainable Development 75 and social dimensions of corporate sustainability. Based on this, a four-level maturity system is developed, which is used to evaluate different types of corporate sustainability strategy. Gelbmann discusses strategic CSR in small and medium-sized enterprises. She focuses on the development of an Austrian CSR quality seal, which enables small and medium enterprises (SME) to communicate their sustainability performance effectively and is a visible sign for their stakeholders. This seal was devised to meet objections to the application of standardized CSR tools, especially in SMEs. Wikström differentiates, based on empirical studies, between three different approaches towards business sustainability. This paper explores tensions exhibited within the use of sustainability in relation to organizational activities such as strategic management and measurement or performance. The three different approaches identified are based on different standpoints; the author argues that this might result in misunderstandings and ambiguity. Finally, Dong and Burrit analyze benchmarking practices in the Australian Oil and Gas Industry. They examine the social and environmental disclosures against general and industry benchmarks for the quantity and quality of social and environmental reporting practice. We hope for responses to the argument of this editorial research article and to the message of the special issue as a whole. We encourage your responses for publication in Sustainable Development. References Ahn H. 2001. Applying the balanced scorecard concept: an experience report. Long Range Planning 34: 441 461. Binder C. 2007. From material flow analysis to material flow management part I: social sciences modeling approaches coupled to MFA. Journal of Cleaner Production 15: 1596 1604. Butler A, Letza SR, Neale B. 1997. Linking the Balanced Scorecard to strategy. Long Range Planning 30: 242 253. De Wit B, Meyer R. 2004. Strategy: Process, Content, Context, 3rd edn. ITP Press: London. Figge F, Hahn T, Schaltegger S, Wagner M. 2002. The sustainability balanced scorecard linking sustainability management to business strategy. Business Strategy and the Environment 11: 269 284. Huesemann MH. 2001. Can pollution problems be effectively solved by environmental science and technology? An analysis of critical limitations. Ecological Economics 37(2): 271 287. Kaplan R, Norton D. 1992. The Balanced Scorecard measures that drive performance. Harvard Business Review Jan. Feb.: 71 79. Korhonen J, Baumgartner RJ. 2009. The industrial ecosystem balanced scorecard. International Journal of Innovation and Sustainable Development 4(1): 24 42. Nag R, Hambrick DC, Chen M-J. 2007. What is strategic management, really? Inductive derivation of a consensus definition of the field. Strategic Management Journal 28: 935 955. Robèrt K-H, Schmidt-Bleck B, Aloisi de Laderel J, Basile G, Jansen JL, Kuehr R, Price Thomas P, Suzuki M, Hawken P, Wackernagel M. 2002. Strategic sustainable development selection, design and synergies of applied tools. Journal of Cleaner Production 10(3): 197 214. Roome NJ. 2001. Conceptualizing and studying the contribution of networks in environmental management and sustainable development. Business Strategy and the Environment 10(2): 69 76. Schendel D, Hofer CW. 1979. Strategic Management: a New View of Business Policy and Planning. Little Brown: Boston, MA.