The themes of technological innovation, entrepreneurship, and organizing

A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation

David L. Rainey

Rensselaer Polytechnic Institute, USA

ABSTRACT

This chapter presents the foundations of a conceptual model for connecting the key elements necessary for corporations to adopt sustainability in the context of the global economy and strategic innovation. While there are numerous theories and practical methods for managing in a national or even regional markets, most of them lack the sophistication necessary for leading change in a global business envi­ronment. With the advent of globalization, the complexities of doing business on a global basis have increased dramatically over the last two decades. While sustainability involves many perspectives, strategies, actions, and management constructs, the chapter focuses on how global corporations employ strategic innovations in response to the driving forces in the global economy and how they can improve their level of management sophistication in a turbulent business environment. The model incorporates the concepts of sustainability and sustainable development in creating the solutions, systems and structures for doing business in the global economy. It focuses on strategic innovations that provide more positive aspects and fewer negative ones. Sustainability and sustainable development are based on proactive strategies and actions that exceed expectations and outperform peers and competitors alike. Strategic innovations are dramatic changes that have the potential to create dramatic new solutions that create exceptional value and eliminate or reduce negative effects and impacts. Strategic innovations include radical technological innovations, business model innovations, product developments, and organizational developments that are game changers.

DOI: 10.4018/978-1-61350-165-8.ch002

Copyright © 2012, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.

A Model for Improving the Adoption of Sustainability in the Context of Globalization and Innovation

INTRODUCTION

This chapter presents a model for adopting sus­tainability and sustainable development (SD) in business organizations based on the perspectives of globalization and the management constructs associated with strategic innovation. Globaliza­tion involves the development of an integrated global economic system. It is based on fewer time and distance constraints, the reduction in the costs of global communications and logistics, the removal of trade restrictions, and enhancements in information flows and currency exchanges. Today, advanced technologies and sophisticated management methods and practices have dramati­cally improved the efficiency, effectiveness, and benefits of international trade. While incredible improvements have been made over the last decade, there are many more changes necessary to ensure that globalization is a positive force resulting in sustainable outcomes for all of the participants. Given that globalization is still far from a true reality, sustainability and SD are es­sential constructs for achieving positive gains and reducing negative effects and impacts.

Sustainability involves the quest toward more ideal solutions and sustainable success over time. It necessitates more inclusive and innova­tive approaches for collaboration, cooperation, integration, and innovativeness in developing and deploying the best possible solutions for enhancing the well being of people, preserving the natural environment, and ensuring social and economic stability. It requires creating new - to-the-world solutions that are based on clean technologies and innovative products and more efficient, effective, and less polluting systems; ones that provide mostly positive benefits with few defects, burdens, problems, and significantly less pollution and waste. Sustainability involves a transformation to higher levels of sophistication in how business leaders and government officials formulate and implement strategies, policies, and actions plans to achieve such outcomes.

SD is a critical element of sustainability that focuses on developing and deploying strategic in­novations that exceed the expectations customers, stakeholders, and people. SD focuses on protect­ing the natural environment and enhancing the social and economic world as well as achieving superior strategic, market, and financial results by the corporations. SD involves obtaining the best outcomes possible for the present generation and ensuring that future generations can realize their aspirations for social and economic well being in harmony with the natural world. SD originated in 1987 by the World Commission Environment and Development for the General Assembly of the United Nations that prepared the Brundtland Report, entitled Our Common Future. In the report, SD refers to the notion “that it [humankind] meets the needs of the present without compromising the ability of future generations to meet their own needs.” (The World Commission of Environment and Development, 1987, p8)

Strategic innovation refers to technological innovations and high-level product developments that have the potential to change the global com­petitive landscape based on advancements in the benefits provided to customers and stakeholders, and significant reductions in the negative effects and impacts associated with existing technologies and products. Creating, developing and deploying strategic innovations offer bright prospects for an enhanced global business environment with the greater possibilities for more people worldwide to enjoy the solutions provided by businesses.

Specifying precisely what strategic leaders must do to achieve sustainability, SD and stra­tegic innovation is an arduous task. Given that an all-compassing model linking globalization, sustainability, SD and strategic innovation may not be possible in the short term, developing and gaining acceptance of a general model that fits multinational enterprises (MNEs), transnational

corporations, and small and medium sized enter­prises (SMEs) may take years to realize. More­over, as more companies from the developing countries play significant roles in the global busi­ness environment, such a model or models have to accommodate the social, economic, cultural, environmental, technological and ethical realities that exist across the globe. Most importantly, a holistic model pertaining to sustainability and SD has to recognize and incorporate the differences in resources, capabilities and sophistication between the MNEs and the SMEs, between the companies from the developed countries and those from the developing ones, and the between the old line corporations and the emerging companies.

The objective of the chapter is to articulate the basic elements of a holistic model for improving the adoption of sustainability in the context of globalization. The model provides broad guide­lines for what is necessary and beneficial from a global perspective. Such guidelines are intended to provide insights and assistance in developing and implementing the requisite methods and mechanisms. The adoption of the model would be voluntary and offer benefits to corporations, governments, business leaders, political officials, and practitioners alike, since they would have a sense of the underlying specifications so that they can more easily determine what needs to be done going forward. Sustainability and SD involve a continuum in the formulation and implementation of strategies, solutions, actions and innovations that unfold over decades.

The chapter does not provide all of the an­swers. The discussions herein do not include all of the requisite details to fully articulate how to develop and implement the model. Trying to prescribe a single pathway to sustainability and SD would require a model that is so intricate and detailed that it would take several books to spell out all of the variations. The intent herein is to offer insights about what can be done to become more sustainable in a world full of opportunities and challenges.

BACKGROUND

The business world has changed dramatically over the last two decades as the scope of the social, economic, political and environmental forces impacting businesses has broadened to include not just those pertaining to the developed countries, but those affecting developing countries as well. While there has been much discussion about a shrinking world due to the incredible innovations in new technologies and the linkages between businesses and people, it can also be said that the business world has expanded multifold with the inclusion of all people living in the developed and developing countries. This profound change has been supported by numerous strategic inno­vations including the expansion of the internet, the interconnectivity of telecommunications, the digitization of many products, and the improve­ments in affordability. The lowering of the costs of manufactured parts, final products and the related logistical requirements has made the integration of the global economy possible, especially from an economic perspective. Prior to the fall of the Iron Curtain, global corporations generally served approximately one billion people, those living in the developed countries. Today, the business world is not only global, but it is richer in scope, scale, and diversity. Worldwide, there are approximately 6.9 billion people who play a role in the global economy. While some are active participants in the served markets, most are bystanders who might be considered latent customers waiting for the right solutions to meet their needs and circumstances.

Globalization is a complex term that has many meanings from a limited view focusing mainly on the economic exchanges of the global economy to the multi-dimensional perspective involving an interrelated, interactive, innovative and more sustainable business world. Regard­less, globalization includes interconnections and interrelationships between business enterprises, national governments, and non-governmental organizations (NGOs) among many others. Most

importantly, it is based on the context of all of the social, political, economic, technological, environmental and ethical forces.

The limited view ofglobalization is often stated in terms of the merging of national economies into a regional economy and ultimately into a global economy. The European Union (EU) is an example of a regional economy that includes 27 nation states that have linked their economic interests and activities to enjoy economies of scale and more open associations. The intent is to enhance free trade based on a transnational economic system. On a global basis, the limited view pertains to economic exchanges and activi­ties as the primary forces that drive international trade, business investments, and the global eco­nomic system. In the limited perspective, global corporations vie to satisfy customer demand and meet stakeholder expectations based strategic po­sitions and global resources and capabilities. The key factors for achieving success are perceived to be cost-effectiveness, high quality products, and tailored products and services; ones that generate advantages and financial rewards for the entities involved. Economics is perceived to be the overarching factor and markets and custom­ers are viewed as the main driving forces. The underpinnings of the limited view are based on free enterprise and market capitalism.

The multi-dimensional perspective of glo­balization involves sophisticated management systems, proactive strategies, cutting-edge solu­tions, and innovative methods that are developed and deployed to enhance the positive aspects and eliminate the negative aspects of the social, politi­cal, economic, technological, environmental and ethical forces. It is based on advanced information and communications technologies, more cost - effective means and mechanisms for producing and transporting goods from remote locations to the markets across the world, sophisticated man­agement constructs for decision making, and new - to-the-world technologies and products. It is also based on the realization that enduring economic success depends on satisfying all entities and individuals engaged in or impacted by business transactions, notjust customers and stakeholders. It implies that participants and non-participants have to be included in the analysis of what is necessary and appropriate and in the creation of sustainable outcomes. It involves creating, developing, producing and providing innovative solutions for people based on their context and not just the objectives, strategies, and actions of the global corporations. The multi-dimensional perspective also includes a longer time horizon. While most business leaders, economists, and government officials view five to ten years out to be the long term, the long term in the context of the multi-dimensional perspective is measured in decades. The multi-dimensional perspective includes considerations about future generations of people as well. Such considerations are an integral part of true globalization that has yet to be fully developed.

Globalization without sustainability, SD and strategic innovations may be viewed as a continu­ation of the “business usual” mindset that has dominated strategic management thinking over the last half century. The “business as usual” mindset represents the line of strategic thinking, in which the main focus is on growing and expanding busi­nesses without significant concerns about their social and environmental underpinnings, effects and impacts. It presumes that such corporations and their strategic leaders comply with the exist­ing laws and regulations and take due care of their specified environmental responsibilities, but they are not compelled to go beyond such mandates and requirements. The “business as usual” mindset has positives from an economic perspective, but it is generally limited in terms of the social, environmental and ethical aspects. The time horizon is relatively short, usually five years or so. Historically, such perspectives resulted in reasonable outcomes in the developed countries, especially if the social and economic forces were stable and enduring. However, difficulties and discontinuities often arise in the long term. For instance, if the effects of oil depletion are the most profound in latter stages of the life cycle of petroleum, then the next ten years may be relatively stable in terms of conventional energy sources, but chaotic thereafter. Moreover, with the addition of many new participants in the global economy and expanding global energy consump­tion, the business world may become less stable and secure as conflicts arise over obtaining the necessary resources. Under such conditions, there is a significant possibility that the economic and social forces may be overwhelmed by increasing demand for energy; thus, affecting the costs of all materials and goods and leading to significant competition for resources and unsustainable outcomes. Indeed, the current economic recession may be a harbinger of more challenging times ahead, especially if strategic leaders maintain the “business as usual” mindset.

True globalization has to incorporate the con­cepts of sustainability, SD and strategic innovation. They are essential elements in achieving broad - based globalization and providing successful outcomes for all people. Globalization based on sustainability, SD and strategic innovation neces­sitates a mindset shift in strategic thinking from exploiting the prevailing situations and selling the existing products to customers who have the financial wherewithal to developing innovative solutions that fit the needs, expectations and circumstances of people on their basis. Today, many ofthe strategic leaders focus their efforts on the developed countries because people in those countries have money and can afford to buy the branded products and services. Moreover, many of the same strategic leaders pay little attention to people in the least developed countries because most of the people are poor and seemingly do not have the necessary disposable income to buy the existing products. However, such strategic leaders should view the creation of solutions based on the needs and perspectives of people, especially those in the developing countries, as enormous opportunities for translating non-customers into customers.

Daniel Esty (2006) and Andrew S. Winston in their book, Green to Gold, articulate that “suc­cessful, long-lasting companies regularly redefine themselves. Environmental-inspired innovations offer companies new and exciting way to find fresh expressions for their capabilities” (p301). In support of sustainability, Bob Willard (2005) in his book, The Next Sustainability Wave, suggests that “sustainability strategies give corporations the choice of getting ahead of the curve, defining the new rules, and being rewarded by their stakehold­ers for behaving responsibly” (p1). Sustainability is about leading change to create better outcomes and more enduring business value.