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.

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