Organizational Culture and Sustainability

It is clear that over the last several decades organizations have continuously expanded the application of the principles of sustainable development to the business world and that companies have increasingly focused efforts on introducing or changing policies, products and/or processes to address pollution, minimize resource use, and to improve community and stakeholder relations.[1]  However, while these initiatives are laudable, some critics have argued that they are often largely superficial and not conducive to the creation and maintenance of authentically sustainable organizations and industries.[2]  For them, the only way that an organization can truly and fully respond to environmental and social challenges and become sustainable is to undergo a significant cultural change and transformation that leads to the development and maintenance of a sustainability-oriented organizational culture.[3]  In fact, studies have indicated that there is a strong relationship between organizational culture and corporate sustainability and that sustainability initiatives are more likely to be successful if they are defined and implemented in a way that is aligned with the organizational culture.[4]

A Taxonomy of Organizational Cultures Based on Integration of Sustainability

It has been suggested that it was possible and useful to recognize four types of organizational cultures and then distinguished them based in large part by the degree to which they have integrated sustainability values and principles and the practices they use in approach and managing sustainability-related issues[5]:

• Reactive/Obstructionist: Reactive/Obstructionist organizations do not generally approach items regarding sustainability in their day-to-day work activities and are more concerned with traditional goals such as maximizing the value their stockholders. The focus on economic performance that accrues to the benefit of stockholders and incumbent executives often causes these types of organizations to take what has been referred to as an “obstructionist stance”, which means that they try to block and stop what is going on and avoid corporate social responsibility.  For example, such an organization may crack down on workers striking for better wages and working conditions rather than see their actions as a signal for the need to engage with employees to forge a mutually beneficial working arrangement.
• Defensive: Defensive organizations take actions relating to sustainability only after it finds it to be necessary as a response to legislative and/or community pressures.  Defensive organizations are not particularly responsible with respect to social responsibility and sustainability and typically limit their actions to what is required of them by law and nothing more.  For example, tobacco companies, after fighting proposed regulations to place warning on cigarette packaging, eventually agreed to provide the warnings; however, their goal was to simply fend off legal problems and they generally did little more in terms of providing information to consumers about the dangers of their products.
• Adaptive/Accommodative: Adaptive/Accommodative organizations have begun the process of integrating sustainable development principles into their management processes, but have yet to establish clear goals and objectives with respect to sustainability.  These types of organizations believe that social responsibility is important, perhaps just as important as making a profit, and have exceeded legal minimums in their commitments to groups and individuals in its social environment and publicly accepted responsibility for certain problems and embarked on specific initiatives to develop solutions for those problems.[6]
• Sustainable/Proactive: Sustainable/Proactive organizations have successfully integrated duties to the environment and the community into their goals and actions.  A proactive approach means acting in advance of a future situation rather than responding, or reacting, to a situation or probably that has already happened.  Sustainable/Proactive organizations sincerely embrace the arguments in favor of social responsibility and view themselves as citizens in a society with a duty to seek out opportunities to contribute.  Proactive strategies are frequently seen in areas such as supply chain management, waste reduction and support for innovative programs to benefit the communities in which the organization is operating.

Competing Values Framework: Organizational Culture and Sustainability

Linnenluecke and Griffith set out to explore and discuss the relationship between corporate sustainability and organizational culture using the widely-recognized “competing values” framework of organizational culture that has been used to identify and describe the four types or models of organizational culture (i.e., human relations, open systems, internal process and rational goal), each with its own set of valued outcomes and a coherent managerial ideology about how those outcomes could be achieved, and put forward theoretical propositions with respect to each of the four cultural types with respect to how the ideological underpinnings of the applicable organizational culture were likely to influence how sustainability will be implemented and the outcomes that can be achieved from the sustainability initiatives.  For example, they argued that organizations dominated by human relations values would likely support or attract social entrepreneurship and that leaders of these organizations would likely invest significant time and energy, often at the expense of neglecting business goals and objectives, in advocating corporate sustainability principles within the organization.  As such, the challenge for pursuing sustainability within these organizations would be resolving the tensions between creating a business venture and pursuing a social purpose.  As for organizations dominated by open systems values, which promote growth and resource acquisition through adaptability and change, it was assumed that they would place greater emphasis on innovation for achieving ecological and social sustainability as they pursued corporate sustainability.  Organizations dominated by internal process values which promotes stability and control would likely be more concerned with economic sustainability (i.e., the maximization of profits, production and consumption) rather than overall organizational sustainability.  Finally, organizations dominated by rational goal values could be expected to emphasize resource efficiencies in their pursuit of corporate sustainability, such as by focusing on reducing and eliminating waste; however, efficiency should not be pursued in isolation, since it is also necessary to consider the impact that the steps taken to achieve efficiency may have on the environment and society.[7] 

Frameworks for Embedding Sustainability in Organizational Culture

Bertels prepared a report that was distributed through the Network for Business Sustainability (“NBS”) that proposed a framework for embedding sustainability in organizational culture that was designed for executives and senior human resources and sustainability managers and recommended that these sustainability leaders employ a selection of practices from four different categories: fostering commitment; clarifying expectations; building momentum for change; and instilling capacity for change.[8]  The NBS also collaborated with Canadian Business for Social Responsibility (“CBSR”) on a workshop involving sustainability and human resources professionals that involved the exchange of information on best practices for embedding sustainability into organizational culture.  The workshop led to the creation of a framework that was based on the five elements of organizational design in the well-known “Star Model” developed and popularized by Galbraith and included strategic planning (e.g., incorporating sustainability into mission and vision statements), organizational structure (e.g., creating an executive position with responsibility for sustainability), human resource management (e.g., providing sustainability training to employees), processes (e.g., collecting and reporting data on sustainability performance) and employee rewards and incentives (e.g., incorporating sustainability into financial and non-financial rewards programs).[9]

Understanding Organizational Change to Become a Sustainable Company

Based on their research comparing the organizational models of “sustainable” and “traditional” companies, Eccles et al. concluded that firms seeking to become a sustainable company needed to be prepared to embark on large-scale change in two stages.[10]  The first involves reframing the company’s identity and requires both leadership commitment and external engagement.  Transformation of the company’s organizational culture requires the strong and focused guidance of the leadership team and the organizational leaders are the people who are best situated to drive the necessary engagement relating to sustainability between the company and the diverse range of external stakeholders including investors, community members, regulators, activists and members and representatives of civil society.  The goal at this stage is to strengthen the commitment to sustainability at the top of the organization and redefine the company’s identity to the world as being an organization that has embraced the principles of sustainability and embedded them in its organizational culture, strategy, operational processes and relations with stakeholders.  As the organizational leaders begin to reach out to external stakeholders they gather the information necessary to formulate and execute the company’s sustainability strategy.  As the engagement process expands in the second stage to include employees their interaction with external stakeholders creates opportunities for learning that can be used to make the company more innovative and committed to creating value for itself and society in general.  Leadership commitment and external engagement should continue during the second stage of the process as parallel drivers of the company’s new identity.

The second stage of the process of creating a sustainable company involves building internal support for the new identity developed during the first stage through employee engagement and creating and codifying mechanisms for execution.  Eccles et al. defined employee engagement as the actions that the company takes in order to secure the interest and attention of its employees in the company’s sustainability efforts and the roles that employees are asked to play.  In most cases the transition to becoming a sustainable company will require that employees change their behaviors and behavioral change will not occur unless the employees believe that it will be worth it.  Employees will also need to understand and accept the reasons for the company’s decision to make changes and have a clear picture of the specific individual role that they are expected to play and how their performance will be measured.  The process of employee engagement will not be easy; however, Eccles et al. pointed out that engaged employees are emotionally connected to their work and to their workplace and thus tend to be more productive and more willing to engage in discretionary efforts to achieve company goals.[11] 

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This article is an excerpt from the author’s forthcoming book on Sustainability Management, which will be published by Routledge in late 2020.  For further information, visit the following page on the author’s Sustainable Entrepreneurship Project website: https://alangutterman.com/topics/governance-management/

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About the Author

This article was written by Alan S. Gutterman, whose prolific output of practical guidance and tools for legal and financial professionals, managers, entrepreneurs and investors has made him one of the best-selling individual authors in the global legal publishing marketplace.  His cornerstone work, Business Transactions Solution, is an online-only product available and featured on Thomson Reuters’ Westlaw, the world’s largest legal content platform, which includes almost 200 book-length modules covering the entire lifecycle of a business.  Alan has also authored or edited over 90 books on sustainable entrepreneurship, leadership and management, business law and transactions, international law and business and technology management for a number of publishers including Thomson Reuters, Practical Law, Kluwer, Aspatore, Oxford, Quorum, ABA Press, Aspen, Sweet & Maxwell, Euromoney, Business Expert Press, Harvard Business Publishing, CCH and BNA.  Alan is currently a partner of GCA Law Partners LLP in Mountain View CA (www.gcalaw.com) and has extensive experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions, strategic business alliances, technology transfers and intellectual property, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company.  He has been an adjunct faculty member at several colleges and universities, including Berkeley Law, Golden Gate University, Hastings College of Law, Santa Clara University and the University of San Francisco, teaching classes on corporate finance, venture capital, corporate governance, Japanese business law and law and economic development.  He has also launched and oversees projects relating to sustainable entrepreneurship and ageism.  He received his A.B., M.B.A., and J.D. from the University of California at Berkeley, a D.B.A. from Golden Gate University, and a Ph. D. from the University of Cambridge.  For more information about Alan and his activities, and the services he provides through GCA Law Partners LLP, please contact him directly at alangutterman@gmail.com, follow him on LinkedIn (https://www.linkedin.com/in/alangutterman/) and visit his website at alangutterman.com.

About the Project

The Sustainable Entrepreneurship Project (www.seproject.org) was launched by Alan Gutterman to teach and support individuals and companies, both startups and mature firms, seeking to create and build sustainable businesses based on purpose, innovation, shared value and respect for people and planet.  The Project is a California nonprofit public benefit corporation with tax exempt status under section 501(c)(3) of the Internal Revenue Code dedicated to furthering and promoting sustainable entrepreneurship through education and awareness and supporting entrepreneurs in their efforts to launch and scale innovative sustainable enterprises that will have a material positive environmental or social impact on society as a whole. 

Copyright Matters and Permitted Uses of Work

Copyright © 2020 by Alan S. Gutterman.  All the rights of a copyright owner in this Work are reserved and retained by Alan S. Gutterman; however, the copyright owner grants the public the non-exclusive right to copy, distribute, or display the Work under a Creative Commons Attribution-NonCommercial-ShareAlike (CC BY-NC-SA) 4.0 License, as more fully described at http://creativecommons.org/licenses/by-nc-sa/4.0/legalcode.

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[1] M. Linnenluecke and A. Griffiths, “Corporate sustainability and organizational culture”, Journal of World Business, 45 (2010), 357 (citing A. Crane, “Corporate greening as amoralization”, Organization Studies, 21(4) (2000), 673).

[2] See, e.g., S. Hart and M. Milstein, “Creating sustainable value”, Academy of Management Executive, 17(2) (2000), 56; and P. Senge and G. Carstedt, “Innovating our way to the next industrial revolution”, MIT Sloan Management Review, 42(2) (2001), 24.

[3] M. Linnenluecke and A. Griffiths, “Corporate sustainability and organizational culture”, Journal of World Business, 45 (2010), 357.

[4] M. Tatarusanu, A Onea and A. Cuza, “Organizational Culture and Values for Corporate Sustainability (University of Iasi), http://docplayer.net/11003116-Organizational-culture-and-values-for-corporate-sustainability.html (accessed May 1, 2020). 

[5] Adapted from M. Tatarusanu, A Onea and A. Cuza, “Organizational Culture and Values for Corporate Sustainability (University of Iasi); D. Steege, Powerpoint Presentation retrieved from Colorado Technical University Online, Virtual Campus, MGM110-0803A-12: Principles of Business; http://docplayer.net/11003116-Organizational-culture-and-values-for-corporate-sustainability.html; and Approaches to Social Responsibility (Wednesday, 1 May 2013), http://tafes.blogspot.com/); and B. Kanobi. “What Are the Four Basic Approaches to Social Responsibility?” (1999), http://www.ehow.com/info_8254493_four-basic-approaches-social-responsibility.html (accessed May 1, 2020).

[6] J. VanBaren, Accommodative Social Responsibility (2010).

[7] The article itself can be found at M. Linnenluecke and A. Griffiths, “Corporate sustainability and organizational culture”, Journal of World Business, 45 (2010), 357.  For further discussion and description of the competing values framework of organizational culture, see the chapters on “Dimensions of Organizational Culture” and “Typologies of Organizational Culture” in A. Gutterman: Organizational Culture: Research and Management (Oakland CA: Sustainable Entrepreneurship Project, 2019) available at www.seproject.org.

[8] S. Bertels, Embedding Sustainability in Organizational Culture: A How-to Guide for Executives (London, Ontario CN: Network for Business Sustainability, 2010). 

[9] Network for Business Sustainability and Canadian Business for Social Responsibility, Embedding Sustainability in Organizational Culture: Framework and Best Practices.  For further discussion of the “Star Model”, see A. Gutterman: Organizational Design: Creating an Effective Design for Your Business (Oakland CA: Sustainable Entrepreneurship Project, 2019) available at www.seproject.org. See also J. Galbraith, Organization Design (Reading, Mass.: Addison-Wesley, 1977).

[10] R. Eccles, K. Perkins and G. Serafeim, “How to Become a Sustainable Company”, MIT Sloan Management Review 53(4) (Summer 2012), 43, 44.

[11] Id. at 47.