Why doesn't a sustainable leader necessarily lead to a sustainable organization?

Details

Supervisors

Bréchet, Thierry

Faculty

Louvain School of Management

Degree label

Master [120] en Ingénieur de gestion

Abstract

The main contribution of this paper is to have pointed out some key obstacles brought by stakeholders that business leaders are facing when building sustainable organizations. Three of these barriers were analyzed to uncover their origins. The first obstacle business leaders are faced with is the short-term maximization of profits that shareholders could ask for. This demand can sometimes be in direct opposition to the implementation of the strategy put in place by the leader, and the long-term benefits that it could bring to the company and society. We have discovered that this demand for profit maximization could be linked to the increasing globalization the world has faced over the past three decades. Indeed, the coincidence of international political, economic and technological events created the perfect breeding ground for globalization to accelerate and connectivity to increase in a scale never seen before. These connections are more complex, numerous, and are taking an increasingly important place in our daily lives. They have created complex systems that have blurred the link between an organization’s actions and its impacts. Since the causal link between these two elements is unclear, and under the liability model that seeks to attribute guilt or fault for harm, it is difficult to incriminate organizations for their impacts or force them to resolve them. This has led authors such as Friedman to legitimize profit maximization for corporations as their sole responsibility. Indeed, Friedman considers that business leaders are not experts at solving environmental and social impacts, and therefore this burden should be shifted to governments and experts. Using shareholder’s money for other purposes than maximizing their profits would be, according to Friedman, the same as imposing a tax which is the role of governments, not of a business leader. The second obstacle we analyzed was the difficulty to convince stakeholders of the sincerity of the leader’s vision. Indeed, business leaders can have trouble communicating their vision credibly, and can be sometimes met with skepticism and disbelief. As ensuring the support of stakeholders is essential to ensuring the survival of the firm, communicating their vision in a credible manner is key. We discovered in this paper that one issue lied in the way social impacts were communicated. Indeed, it has been found that an emphasis was put on disclosure of environmental impacts but less on social ones. As social impacts are part of the definition of sustainable development, it is understandable that stakeholders who would have in mind this definition would be skeptical of the leader’s discourse. However, there are reasons why these social impacts are less communicated. Social impacts can be very difficult to measure, and the approaches used to assess them are often regarded as technical and difficult to implement. The technical difficulties especially arise when deciding which indicators will be used to evaluate the social impact, when collecting data, analyzing, and evaluating it. Organizational challenges also appear when measuring social impacts as changing processes to facilitate data collection and analysis can lead to employee resistance to change. The third and final barrier we analyzed in this report is employee resistance to change. Indeed, transforming a business into a sustainable organization involves changing many processes and, as a result, may lead employees to resist that change. Employees resist change for four main reasons: a refusal to lose something of value, a lack of understanding of what change means and its consequences, a belief that change makes no sense to the organization and, ultimately, a low tolerance for change. These four elements led to the creation of areas of resistance in the implementation of change process. First, change seemed to not take place unless a sense of urgency was put in place by someone with sufficient legitimacy, as lower-level employees alone do not seem to have the power to convince the rest of the organization. Second, if employees were not involved in the process of implementing the vision, there seemed to be resistance. And last, change seemed to fail without a continuous effort to keep employees involved in the change.