Wednesday, June 12, 2019

Why is Sustainability / Environmental protection not a strategy for Drucker, Porter or Mintzberg ?

Father of Modern Management theory
Over the years Management thinkers have framed the confines and have been the thought leaders who guided management theory for almost a century now. Peter Drucker in the 50s and 60s spoke of competition on price, of how organisations competed solely on the price at which their products were sold to the customer.

Over time management thinkers of strategy moved from simple competition on price to the Five Forces Porter's model (click here for the link) and Porter's generic strategies model (click here for the link) while Mintzberg provided the emergent strategies model (click here for the link) which stressed on organisations' strategies emerging over time.

What is strategy from a business perspective and how does it define the strategic direction for the business ?
Mission is about what will be achieved; the value network is about with whom value will be created and captured; strategy is about how resources should be allocated to accomplish the mission in the context of the value network; and vision and incentives is about why people in the organization should feel motivated to perform at a high level. Together, the mission, network, strategy, and vision define the strategic direction for a business. They provide the what, who, how, and why necessary to powerfully align action in complex organizations - Micheal Watkins
In all of the above statements and definitions of strategy, we find the environment does not play a role, as these statements came mainly from geographies that cared less about the environment or knew less about the impact of human actions on the environment. The burning question that comes to everyone's mind then is, why was the environment neglected all these years by the industrialised and developing countries ? Is there no salvation for the environment from the wanton destruction we see today ?

Business strategist, propounded the Five Forces model
What is an environmental strategy ? 

Environmental strategies can be defined as a set of initiatives that can reduce the impact of operations on the natural environment through products, processes and corporate policies such as reducing energy consumption and waste, using green sustainable resources and environmental management system implementation. : Hengky Latan et al


It is for the global bodies like United Nations alongside nations to play a major role in environmental protection in reducing environmental pollution. US is a major and significant polluter of the world not signing on the Kyoto Protocol (click here for the link) leading to its failure and the adoption of the new Paris protocol.

The other explanation of the major threat of environmental pollution advanced which we see of late is due to the growth of the major global economies of China and India. Growth inevitably leads to environmental destruction as has been witnessed and recorded during the nineteenth and twentieth centuries with the growth of Europe and North America. Porter while formulating his five forces theory would not have considered environment due to the limited knowledge about sustainability and environment in public domain. But nature is more intelligent and impactful, it works beyond the minds of Porter or Drucker ..

It is a significant opinion that environmental sustainability be included as the sixth force in Porter's 6 forces model (an extension of the Five Forces Model) and redefine strategies for the newly emergent industries and countries of the world.

Henry Mintzberg, Emergent Strategies model
In hindsight, the emergence of sustainability and environmental considerations is nothing but a part of the Mintzberg's Emergent Strategies model where over the past fifty years or so, global corporations and countries have identified and understood the emergent need to preserve the environment facing the threat of imminent global climate change.

Ernest and Young (EY) has come up with this white paper (click here) on why sustainability integration is important to future proof one's business and how environmental sustainability can be incorporated into the organisational strategy.

If this model of environmental inclusion is considered, Africa would emerge as the next hotbed of growth, development and innovation to power the manufacturing world.  The existing nations of US, China, India, Japan, South East Asia nations, Europe and Australia would be catering more to the service oriented economy. The middle east economies would still be somewhere in between service and manufacturing, as oil would still continue to dominate their economies as solar energy utilisation would improve and fossil fuel reserves will exist for a couple more centuries, at the most.

The purpose of this article is to stress on role of environment as part of the growth and sustainability strategy of an organisation. Porters' Five Forces model and the Mintzberg Emergent Strategies model need to integrate Environmental sustainability as a strategy that would emerge as a force to be reckoned with in the coming years.

Ref : 1. Hengky Latan et al, Effects of environmental strategy, environmental uncertainty and top management's commitment on corporate environmental performance: The role of environmental management accounting - , Journal of Cleaner Production, vol. No. 180, April, 2018.
2. Micheal Watkins, Demystifying Strategy : The What, Who, How and Why, HBR, Sept, 2007, 

George ..

2 comments:

  1. Its a well structured eye opening article with awesome content.Business world still thinks that business of business is just business and environmental concerns are for environmentalists,nonprofits , philanthropist and auditors to make compliance adjustments.Environment is the life jacket for human survival.Urban Environment and Social Inclusion Index of Poland use GEO spatial tools to measure tree cover per capita data of the urban eco system.we need to focus on environment based KRAs,scorecards,green GDP for business and policy makers.Equitable access to wilderness,right to breath fresh air,drink fresh water,eat natural food should be made as human right and environmental justice should be taken as responsibility of all governments.

    ReplyDelete
  2. True, Aswathi, environment is not only the lookout for environmentalists, but of all industries and organisations on planet earth, lest we present a crippled and bruised, dying planet earth for our younger generations to make a living and enjoy this planet. More effective metrics to nomitor the environment is the need of the hour.

    ReplyDelete

Recent studies of a nuclear holocaust

Copyright The Sun, UK .. What can happen to the world in case of a nuclear winter. The early study in 2007 was done by NASA which had ...

My popular posts over the last month ..