The dominant paradigm for business is now that it pays to be sustainable and socially responsible, and that there are untapped economic opportunities. That has created a hierarchy in which only social problems that fit with profit-making are addressed. Dominant thinking focusses on business opportunities. There are, however, conflicting social goals around poverty and climate change, especially in so far as structural changes involve reallocating resources. That that reason, the tension and friction in sustainability are long-standing, and many ideas cannot be implemented because of constraints.
That was the message from a talk by Tobias Hahn from Kedge, France’s leading centre for business research, yesterday (See the video above for an interview with Hahn on the topic). Time constraints and levels of problems also are in tension. For example, biodiversity is a long-term issue, and it is naïve to think that sustainability can be assured with a business case approach. As a result, we need to find ways to handle these seemingly contradictory conflicts.
Academic literature gives us some ideas about paradoxes. Right now, CSR is in a deadlock, and major changes towards greater sustainability cannot happen unless the mental framework for managerial understanding of sustainability can shift. Managers have a selective understanding of the world around them. Prior experience and training give us structure and filters for everyday life. We try to make reality fit our prior frameworks and confirm our worldview. This confirmatory bias is strong even if the information challenging us is substantial. We make sense of issues by scanning and responding using our current tools. Managers with different tools thus respond differently, since their different mindsets lead to the collection of different information and different responses.
So, how do these different frames influence discussions about sustainability? There are some clear extremes: one in which a business case is used to resolve contradictions by using financial outcomes to focus understanding of the problem. Categories like cost, revenue and customer value are prioritised and those which do not fit into the financial and economic toolset are put to one side. The advantage of this approach is that managers are given a very clear orientation to outcomes.
On the other hand, a paradoxical framework allows us to embrace the tensions, to accept them and not try to resolve them. Not all the tensions can be resolved. Thus other environmental, social and economic attributes need to be used, and the relationship between them does not need to be causal. This more complex approach prevents the over-determination of one factor but does not give clear findings.
How do these differ in the scanning-interpretation-responding stages of managerial decision-making?
The business case approach has clear observational goals: the outcomes with clear business goals, and perhaps the use of established tools for identifying new business opportunities and markets, rather than new issues like biodiversity. How can an environmental issue pay off: that is the direction of the first approach, towards a deep and narrow focus on a financial payoff.
On the other hand, the complex approach is broadly gathering data from more sources and is inclusive of contradictory information. This less detailed browsing offers less detailed and more superficial. Managers with an eye for paradoxical information will notice more, but be less well prepared to act. Their values and sense of control will be more important: in the business case approach, managers have a high sense of control and a clear direct and a clearly positive or negative orientation towards whether the data fits a business case with clear benefits. Business case managers have a higher feeling of a sense of control, for example, about Arctic drilling if they focus on the capacity to drill profitably. Paradoxical managers have a more mixed reality: they might feel that they have a complete understanding, and thus a greater sense of control for some, however their awareness of unintended side effects that cannot be fully resolved means that the situation cannot be easily controlled. As a result, clear-cut interpretations and ambivalent information means that there are threats and opportunities being presented, which challenge business models and regulatory challenges. In practise, these managers have less sense of control and are more ambivalent.
The sense-making stage centres on reviewing the data, and understanding whether it is sufficient. With the business case approach, established solutions, routines and tools can be applied in familiar ways to develop incremental changes with less risk and innovation. The use of more established methods allows fairly rapid, workable and pragmatic implantation, which can be done in a reasonable time horizon. For example, Volkswagen’s BlueMotion produces offered incremental changes rather than a big leap into hybrid cards. The paradoxical approach shows situations as being unique and needed bold solutions with innovative responses. The conflicts and unintended side-effects are exposed and discussed, meaning that concrete actions are taken slowly and perhaps even reluctantly and prudently.
These two approaches are neither fully right nor wrong in themselves. Their implications are perhaps clear, however. Researchers have the opportunity to understand better the role of individual cognition, through offering alternative cognitive frames for time orientation, the responsibilities to act and dealing with ambivalence. These methods could allow us to move beyond the focus on the business case. However, managers are reluctant to do so because their current business case thinking allowing things to get done, and thus made an immediate impact that cannot be discounted. However, the greening of existing technologies might delay the development and implementation of new technologies that can make a greater impact.
Most organisations need both sort of thinkers: complex thinking to understand the opportunities, and business case thinking to get things done. The literature on creativity flows in this way, saying that cognitive complexity needs to be used by less complicated implementation approaches. Missed teams can produce more awareness, but also identify workable strategies to develop new opportunities.