The Business (and Politics) of Business Cases

By Esben Rahbek Gjerdrum Pedersen.

Business cases are an important, but often overlooked, tool for pitching CSR/sustainability within the organisation. Failure to meet internal business case requirements for e.g. payback time has a direct, negative impact on the level of CSR/sustainability activity in the organisation. However, the business case tool is also a flexible document which leaves room for a variety of internal politics.

Business Cases in Academia and Business

The academic literature is swamped with references to the “business case” for CSR/sustainability. The ‘business case’ is mostly used as a generic term for all the corporate benefits from ‘doing good’. In the quest to find the business case for CSR/sustainability, a large number of empirical studies have also explored the link between corporate social performance (CSP) and corporate financial performance (CFP) and various factors affecting this relationship (size, industry, R&D, slack resources etc.).

In business, the ‘business case’ has a quite different meaning. The business case is simply a tool for pitching a new investment. For instance, when a factory manager wants to invest in a new energy efficient technology, a proposal (‘business case’) has to be prepared and sent to top management for approval. The proposal often competes head to head with other investment ideas from the organisation. Therefore, even financially sound CSR/sustainability projects may be turned down if there are other projects with a stronger business case.

The Case of Water

The academic literature is not blind to the different meanings and uses of the “business case”. However, research on the practical use of business cases for CSR/sustainability has been largely neglected at the expense of general discussions of hypothetical benefits and CSP-CFP studies based on available database sources.

Evidence from two new studies on water management in the European food sector indicates that business cases have a distinct influence on the level of water management activities. The findings (still work in progress) are showing that growing emphasis on the business case tool has a negative influence on the level of water management activity. Moreover, the maximum acceptable payback time for the investment also has a negative influence on the level of water management activities.

Even though the business case tool influences the level of water management activities, the business case tool is also subject to various types of politics. Evidence from interviews indicates that business cases is sometimes bended, twisted and packed in different ways and that formal and informal negotiations take place before, during and after the formal approval process. As noted by one of the interviewees (our translation):

”If we lumped all our business cases together, then our earnings would exceed our sales. And with faster payback time. I have looked at this almost all my life (…). Anyone can make a business case and say anything”.

A Call for Practice-Based Perspectives

The results show that practitioners use business cases as a “hard” tool to prioritise investments as well as a “soft” instrument for various types of internal politics. Either way, the evidence indicates that researchers need to pay close attention to the tools and frameworks used by businesses, as they have a very direct impact on CSR/sustainability work. Especially practice-based studies could provide a valuable supplement to the existing literature by focusing on how actors actually ‘do’ things, in this case CSR/sustainability.

Esben Rahbek Gjerdrum Pedersen is Professor at the Department of Intercultural Communication and Management at Copenhagen Business School. He researches CSR, Corporate Sustainability, Non-financial Performance Measurement, Supply Chain Management and Process Management.

Pic by Pexels Photo

The Power of Findings

By Dan Kärreman.

One of the biggest irritations with contemporary organization and management studies is the way we are encouraged – indeed, forced –  to chop, slice and mix our empirical findings in ways that support an abstract argument: the holy contribution.

Findings vs. contributions

It is rare to find someone, anyone, that tells a straight story. It is even rarer to find someone that speak out and support the telling of stories from the field in the name of finding out about social phenomenon.

Suffice to say, we can’t avoid abstractions all together. After all, our job is to speak to larger issues, as well as reporting our findings. However, at this moment in time, the larger issues are (mis)-interpreted in ways that clearly overwhelm the reporting of findings. Today we think of larger meaning as more abstract and specialized meaning, as almost devoid of broad meaning and consequence, and as a product for the consumption of a hyper-specialized tribe with its own language, set of beliefs, and rituals.

It is unusual to find a study that ponders the importance of the object under study on its own merits, in contrast to endless jockeying for positions in various hyper-specialized debates. The question hanging over the researcher in organization and management studies is rarely “what is going on here?” but rather “how can I make this to contribute to contemporary micro-debates and nano-controversies in institutional theory, critical management studies, identity theory, entrepreneurship, innovation studies, gender at work, leadership”, and so on, as if social reality neatly reflects today’s division of labor in academic work.

What is a finding?

Put bluntly, it is a fleck of empirical reality that challenges how we expect social reality to work. It is showing that a brand can be more important for organizational members than customers. It is showing subordinates managing their superiors. It is showing workers turning performance measurements to an exciting game. It is showing how cynicism reinforces rather than undermines distrusted systems. It is showing that choosing work before family in certain occupations is rational because here work provides massive material and emotional support while family life is a resource-deprived combat zone.

Showing, rather than telling, is the true advantage of a compelling finding.

In this sense, a finding compels because it is specific and concrete, rather than abstract and general. A finding speaks of larger issues not because it provides a hyper-specialized abstraction, but because it gives insight to the moment and meaning of actual social reality. It speaks to larger issues not because it reveals mechanisms and patterns, but because it shows the layered minutiae of interactions and dynamics in everyday settings. A finding speaks to larger issues not only because it can be used to fire academic controversies – although it certainly is able of doing that – but, more importantly, because it can put them to rest.

We need concepts that are attached to findings.

I think it is clear that we focus far too much on contributions, rather than findings, in organization and management studies. This is not to say that contributions, in the form of abstract concepts, vocabularies and theories, are bad or useless. On the contrary, we need them to do our job. We always should try to trade in poor concepts and theories for better ones.

However, for now we are preoccupied with creating concepts that cover less and less, and reveal almost nothing. We need to move out of this dead end. We need concepts that are attached to findings. We need methods and techniques that provide findings – findings that can give access to and insight in the strange world of business in society.

Dan Kärreman is Professor in Organization and Management Studies at the Department of Intercultural Communication and Management at Copenhagen Business School.

Pic by Pixabay

Universities as a Living Lab for Sustainability

By Jannick Friis Christensen and Kristjan Jespersen.

Thursday 25 August marked the beginning of Professor John Robinson’s adjunct professorship at CBS. To a packed full auditorium, he gave his inaugural lecture about universities as test-beds for regenerative sustainability with the clear advice for CBS: make sustainability a strategic priority.

The social contract between the university sector and society at large is shifting. It is no longer enough for universities simply to educate students and do research. That was one of the main messages that Professor John Robinson wanted to get across as he last Thursday gave his inaugural lecture as part of his adjunct professorship with the CBS Department of Intercultural Communication and Management.

A university or a business school such as CBS is increasingly expected to contribute directly to the big challenges faced by the society in which it exists and is financed. One such challenge is sustainability, and the world is – in the words of the professor – dying to engage with the university sector because it can do things that are hard to do elsewhere.

The reason for this is the shared set of characteristics of universities that make them uniquely qualified to play a living lab role in the sustainability transition, understood as encompassing both environmental and human wellbeing.

Besides educating and conducting research, universities are, by and large, single decision-makers with respect to a significant capital stock at an urban neighbourhood scale, consisting of multiple academic buildings, energy, water and waste systems, and student housing. Most importantly, universities have a public mandate and are, in a Danish context, public institutions, that can be more forgiving on paybacks, and long-sighted on returns.

No other societal institution has this mix of capabilities. Hence, the sustainability challenge is also an opportunity for universities to become test-beds for sustainability, treating their whole campus as a sand box to implement, test, research, and teach sustainability, and in that way to contribute directly to the significant changes required to reach a sustainable future.

CBS in particular has a unique opportunity due to the role of business in the sustainability transition. Professor Robinson, who shares the Nobel Peace Prize of 2007 for his work on the Intergovernmental panel on Climate Change with Al Gore, talked right into the Public-Private Platform as such partnerships are needed to increase human as well as environmental wellbeing.

Such an approach, however, calls for a reframing of the sustainability agenda from being less bad to doing more good. This is what the professor refers to as regenerative sustainability. Instead of placing limits and constraints by telling people to cut back and reduce consumption; a net zero focus, which turns out not to be a super motivating agenda, his focus is on being net positive.

Treating sustainability as a strategic academic and operations opportunity, which was Professor Robinson’s advice to CBS, will not only help to fulfil the terms of a new social contract of responsibility between universities and society, but is also likely to have real benefits to the university in terms of partnerships, funding, not to mention recruitment of students, faculty, and staff.

Click here to watch the lecture.

Jannick Friis Christensen is Research Assistant at the Dept. of Organization and Kristjan Jespersen is Doctoral Fellow at the Deptartment of Intercultural Communication and Management.

Pic by Lise Søstrøm

UN Global Compact Expels More Participants than New Participants Join

By Andreas Rasche.

In October 2015, the UN Global Compact, the UN’s flagship initiative for corporate responsibility and sustainability, has expelled 130 firms for failure to report on implementation progress. During this month only 116 new businesses joined the initiative. This is third month in 2015 that the initiative had to expel more participants than new participants joined (after January and September). Participation in the Global Compact is voluntary and firms commit to ten broad principles in the areas of human and labor rights, the environment, and anti-corruption. Every participant has to report annually on progress made against these ten principles. Non-communicating participants are expelled from the initiative.

The Global Compact seems to grow much slower than anticipated. From January until October 2015, 1,072 new participants joined the initiative, while 984 companies were expelled for failure to meet the basic reporting requirement. This suggests that the total number of business participants may stagnate soon (or even decline). Some years back, UN Secretary-General, Mr. Ban Ki-moon, set the ambitious target of 20,000 participants by 2020. This vision seems to be out of reach.

The high number of expelled companies also calls into the question the current “business model” of the Compact. How useful is it to have around 100 new business participants each month, while, at the same time, having to delist an almost equal number of companies? The mandatory reporting requirement is a basic commitment that firms enter into once they join the initiative. Many firms do not seem to be able (or willing) to even meet this requirement. Since it inception, the Compact had to expel more than 5,800 businesses from the initiative!

One reason for the high turnover of participants is the Compact’s low entry barrier. Companies willing to join just need to write a letter stating their intention to work towards the ten principles and other UN Goals (such as the recently launched Sustainable Development Goals). As we all know, letters are written quickly, while substantive actions usually require significant resource commitments. Higher entry barriers would attract fewer companies. But isn’t it more desirable to have a small pool of a few highly committed firms, than a large pool of businesses with rather low ambitions, or no ambitions at all?

Without doubt, the Global Compact includes some of the world’s sustainability champions, and we should not lump together all participants. Some firms are highly committed leaders; others are in the process of integrating relevant practices into their operations and strategies; and yet others have just started their journey. There is nothing wrong with having such a diverse participant base and to offer guidance to those who want to ratchet up their commitment. But a voluntary initiative that has to expel around 1,000 participants each year, while at the same time accepting 1,000 new companies, may miss the point.

To delist those firms that do not play by the rules is not a bad thing per se. One could argue that the Global Compact is being “cleaned up.” However, delisting turns into a problem when it is not a temporary development but a constant state of affairs. There are many things that could be done to restructure the Compact. However, I believe three issues are particularly important:

  1. Higher Entry Barriers: Reporting should not be an outcome of participation in the Compact but a precondition for entering the initiative. Instead of allowing all interested businesses to join, it would make sense to require new participants to submit a report that outlines how the ten principles are currently addressed in the organization and what plans exist for the future. Such a policy change would ensure that new participants have some experience with reporting before entering the initiative (e.g. become aware of resources that are necessary to issue a report).
  1. Strengthen Value Proposition for SMEs: The vast majority of delisted firms are small or medium-sized enterprises (SMEs) – i.e. firms with less than 250 employees. Either these companies do not have sufficient resources to launch relevant activities and then report on them, or they do not see enough value in the initiative and hence do not assign relevant resources in the first place. Contrary to larger firms, SMEs do not profit much from “legitimacy gains” that are created by being associated with a UN-driven initiative. SMEs are usually strongly embedded in the local communities that surround them. The Compact’s numerous Local Networks should explicitly engage SMEs into smaller regional clusters. Such clusters are more likely to be of value to SMEs than larger, “nation-wide”, networks in which sustainability issues are discussed at a quite general level. This would require more resources to Local Networks, also to directly assist SMEs in writing sustainability reports instead of just sending them reminders.
  1. Reform Governance: The Compact’s governance framework consists of several entities (e.g. the Local Networks and the tri-annual Leaders Summit). In practice, however, the Board of Directors plays the most significant role, as it needs to endorse all major changes to the initiative. Although the Compact takes much pride in being a multi-stakeholder initiative, the current structure of the Board does not necessarily reflect this: there are 17 business representatives, 4 representatives from civil society organizations, 2 representatives from business associations, and 2 representatives from labor organizations. A more balanced representation of stakeholder groups is needed, especially as the Compact works under the umbrella of the United Nations, an organization that promotes inclusiveness. Without changes to the Compact’s governance framework, it will be hard to reform the initiative (e.g. to install higher entry barriers). As a UN entity, the Global Compact is ultimately accountable to the General Assembly (GA). The GA could take the lead in strengthening the Compact’s mandate, while, at the same time, calling for a more balanced representation of stakeholders.

So, what is the bottom line? The Global Compact needs to find ways to balance quantitative growth with qualitative commitment to the ten principles. The current turnover rate of new participants and delisted participants is not sustainable, and this seems to be an important lesson for an initiative focused on sustainability…

The Compact is too good of an idea to give up on. But, it won’t be this version of the Global Compact that changes the practice of corporate sustainability.

Andreas Rasche is Professor at Copenhagen Business School and Director of CBS’s World Class Research Environment Governing Responsible Business. He has collaborated with the UN Global Compact on different projects and served on the initiative’s LEAD Steering Committee from 2012 to 2015. More information on:

Comments byMathias Lund Larsen

Pic by Pixabay

Corporate Governance and Corporate Social Responsibility

By Jeremy Moon, Velux Professor of Corporate Sustainability, CBS —

The relationship between corporate governance (CG) and Corporate Social Responsibility (CSR) is a vexed, yet a vital, one for each of these regulatory logics.  Accordingly, it is a key issue for the business of society.

It seems to me that CSR and CG are not the same thing; nor different things; nor the other side of the same coin.  Rather, they are overlapping; inter-related; potentially mutually tempering or reinforcing.  CG emphasizes external regulation and internal control of the firm by legal means and assumes that the monitoring function is controlled by the board of directors and senior managers.  CSR is about how the firm regulates its own behavior with reference to social norms; now including external, mainly ‘soft’, governance systems (e.g. multi-actor, private codes of conducts, commitments, partnerships, associations).   Yet CG is often at odds with, or pitted against, CSR, notwithstanding their overlaps.  This is true in all business systems, but particularly in the Anglo—American systems.

Here CSR is sometimes seen as a threat to the agent-principal relationship in which the ‘agents’ (managers) should simply serve the assumed priority of their ‘principals’ (shareholders) for short-run profits.  But it seems to me that the agent-principal relationship is itself misguided and misrepresents proper governance of the company.   In short, key corporate governance documents, company law, other regulations pertaining to company responsibility and judicial history confirm that companies do have wider purposes than shareholder’s quarterly profits alone.  The interests of the company itself, of other stakeholders and of society at large have been recognized as appropriate points of managers’ responsibility.  Moreover, there is plenty of evidence that not all shareholders are motivated by quarterly returns.  Many prize long-term stability, and many recognized the company benefits of CSR investments, not least in the face of social and environmental risks.  The voluminous literature on the relationship between financial and social performance finds a modestly positive relationship between the two.   So, I conclude that CSR and CG in Anglo-American systems are not incompatible.

Indeed they are related as many of the CSR innovations in these countries tend to be more likely to reflect market actors and imperatives than CSR in say continental and Scandinavian Europe.  For example, many UK and US CSR initiatives reflect consumer concerns (e.g. fair and ethical trade systems) or investor interests (e.g. the FTSE4Good and Dow Jones Sustainability Indexes, the new stock exchange regulations of the Sarbanes-Oxely and Dodd-Frank Acts).  This contrasts with the CG – CSR links in coordinated market economies (e.g. Denmark, Germany) which yield both greater attention to the labour stakeholders and the collective interest in environmental sustainability.   It also contrasts with the CSR in state-led market economies (e.g. France, Korea) which tend to reflect a CG focus on national development.  It contrasts with CSR in emerging and developing economies which tends to reflect a community orientation reflecting the features of high inter-personal trust and low institutional trust underlying the CG arrangements in many such countries.

But notwithstanding the ways in which CSR has emerged as a feature of business as usual complementary with their respective CG systems, it seems to me that there are often deficits in company level governance of CSR.  CSR is often removed from ‘governance’ departments (in HR, marketing); apart from main business (e.g. financial institutions & crisis); CSR accounting is often in parallel with, rather than integrated with, other management accounting; and there is little measurement of social impacts.

However, CSR commitments increase the imperatives for more conspicuous governance of sourcing, contracts, production, employment, wastes, consumption and so forth.  The challenges here are considerable, including the integration of CG measures for CSR across MNCs whose business units operate under very different CG systems; and particularly for SMEs in emerging and developing countries which have underdeveloped CG systems to start with.

But CSR does not only reflect CG structures it can also shape them.  Thus the fact that an increasing number of companies now fall under new reporting requirements such as come with stock exchange listing (e.g. in the USA, South Africa, China), or with operation in business systems which specify responsibility requirements (e.g. Danish and Swedish non-financial reporting regulations, UK board responsibilities for their companies environmental, social and governance impacts), or sign up to CSR principles and standards should be regarded as a CG opportunity as well as a challenge.  These developments provide precisely the opportunity for CG to reconnect and support its underlying base in social responsibility.

This blog entry is based on a talk I gave on ‘CSR and corporate governance’ at the workshop on ‘Governance, CSR and SMEs in emerging/developing economies’ in the ESRC ‘CSR and SME’ series on 19th November, 8.30-13.00 at ACCA (Association of Chartered Certified Accountants), London.

The Faroe Islands: UNspoiled, UNdiscovered, UNbelievable – The Faroese Oil Industry: UNdisputed, UNquestioned, UNchallenged

By Árni Jóhan Petersen, Ph.d., CBS — Photo and copyright by Stig Nygaard —

The Faroe Islands are economically dependent on a clean environment for their fishing industry but up to now the community has not challenged the potential downsides of the Faroese oil industry. The consequences of the oil industry could have negative effects on the nature and thereby the future of the community in the Faroes. Why do the downsides not concern the local people? Is it ignorance? Is it the hope for a wealthier future? Is the progression within the oil industry an irreversible process? What is your take on this?

Visit Faroe Islands has promoted Faroe Islands as a unique travelling destination. Located in the North Atlantic Ocean between Scotland and Iceland, the islands have a nature, culture, authenticity, remoteness, and openhearted inhabitants unlike any other, that could be summed up in the words; unspoiled, undiscovered, and unbelievable. The Faroese people are proud of their culture and natural environment (Faroe Islands were elected “World´s best islands” to travel to in 2007, National Geographic Traveler, among 111 destinations).

Since the early 90´s the oil industry has flourished in the Faroes. Although the explorations and offshore drillings of the sea bedrock have not been found sufficient yet, the industry is currently evolving because of the Faroese service sector supplying the local and international oil industry. After two offshore drillings in the summer of 2014 an oil rig (platform) found its way into one of the fjords, where it was repaired – and then sent off to Canada for another offshore drilling. The reparation of the oil rig created employment for a great variety of craftsmen and other businesses in the service sector in the Faroes, and the Faroese people are proud to finally see some results – after so many years.

On one hand the oil industry has brought great excitement in the local community, and the media has mainly reported positive stories about the job creation, the learning it involves, future opportunities and development. The reparation of the oil rig has been regarded as a general test to prove major actors in the oil industry, that the Faroes can provide services of this scale. The test will potential make way for future reparations of oil rigs from the oil/gas fields on the British side of the border, because of the shorter trip to the Faroes than to Norway – and at a lower cost of labor. There is also the future opportunity for oil rig and tanker demolitions to take place in the Faroe Islands.

On the other hand there has been no debate in the local community about the possible pollution of the fjords and natural environment. As the Faroese economy is very dependent on fishery they are also dependent on a clean environment. And the islands are been promoted as clean, untouched and beautiful natural environment – but how does this fit with a very big oil rig in that same nature? What are the possible consequences associated with a demolition site and scrap yard? How much can the unspoiled nature tolerate before it becomes spOILed?

Quick facts on Faroe Islands:

  • 50.000 inhabitants
  • 18 islands
  • 1.399 square km
  • 274.000 square km sea area
  • North Atlantic Ocean
  • Self-governed part of the Danish Kingdom
  • Language: Faroese

Photo can be collected here