Part Of The Solution

For many firms in the Western world, sustainability can sometimes seem like a “pie in the sky” notion. But for companies in Africa, it’s a down-to-earth reality that touches day-to-day lives.

Ivey Professor Mike Valente looks at how companies build sustainability into their corporate strategies. Much of his research has taken place in sub-Saharan Africa, where firms are finding innovative ways to grapple with these issues.

Sustainability has been generally understood as a western-centric concept. Yet firms in developing countries are creating their own versions of sustainability. “Sustainability issues are very critical in these countries,” says Valente. “Because of gaps in government, there tends to be a blurring between the private and public sectors. Companies are often forced to reconcile voids in public welfare, and that sometimes means the incorporation of sustainability into their operations.”

In African companies, the contradictions between maximizing profit and taking on a public role can be very stark. Employees may lack basic health care, housing, or schooling for their children. The operations of a firm might have a degrading effect on local water systems, or even displace people from their homes.  Because environmental regulation and standards are typically very weak, some companies end up playing a lead role in understanding their place in business. “I found that the firms who were quite progressive in incorporating sustainability were also very effective in understanding and dealing with the complexity of these contradictions,” says Valente.

Progressive firms in developing countries rely on their employees for ideas about sustainability. Employees recognize the firm’s economic interests, and are also very rooted in the community.  They work closely with local farmers, community members, and employees of NGOs.

One of the ways that companies engage employees in sustainability is by expanding their job descriptions to include roles in the broader community. For example, part of the job description of an engineer in a mining company might be to help install solar panels in local schools.

Another way that companies build sustainability into their business models is through dialogue with their stakeholders. In Western companies, there still tends to be an “us versus them” approach to stakeholder engagement. In Africa, it’s a much more collaborative approach. For example, an eco-tourism company works with local NGOs to improve the community to make it an added destination for tourists, and community groups help prevent poaching on company lands. “One of the key findings of my research is that different actors who might typically be at odds with one another are collectively implementing the business model for sustainability,” says Valente.

Valente also found that firms in developing countries come up with creative ways to make sustainability a source of value creation. “The more that sustainability represented a differentiating factor from competitors, the more incentive there was to build it into the core business,” he says.

For example, an international steel company with regional headquarters in Kenya was approached by an NGO in the Sudan to help rebuild homes in the wake of the civil conflict. Although the project at first seemed philanthropic, the steel company considered it as part of a larger market diversification strategy. “The company relied on the NGO for the social capital necessary to go into areas that its competitors saw as hostile environments,” says Valente.

Valente’s research has important implications for managers. Many Western companies have sustainability or corporate social responsibility departments, but Valente suggests that these are not enough. The sustainability agenda should be the responsibility of all employees, even if it means rewriting their job descriptions and widening their knowledge base.

Firms in the developed world tend to listen to criticisms from environmentalists and NGOs and governments, and then go away to figure out their response. This is very different from the much more collaborative approach of companies in the developing world, where the stakeholders work together to come up with the solutions that ultimately inform the business model. “Companies in the western world must recognize that these stakeholders can actually provide competencies that complement their own, and that the tension between them is healthy,” says Valente.

Many firms have difficulty defining sustainability. They tend to take stabs at various issues rather than approaching sustainability in a context that’s relevant to them. Valente says that it’s important to connect with all the different stakeholders in a firm’s context to figure out what sustainability means to them. “The outcome is a community that is by definition sustainable, because the actors who represent those different social and environmental interests are part of the solution.”

Professor Mike Valente

Reprint from Ivey Business Journal
[© Reprinted and used by permission of the Ivey Business School]