New Zealand Engineering 1998 May

Sustainability and the Corporates

Ron McDowall is a registered and chartered professional engineer and director of the IPENZ Centre for Sustainable Management (ICSM)

The ICSM is a partnership venture between UNITEC, University of Auckland and IPENZ.

Since the unprecedented Rio declaration (Earth Summit) and the publishing of Agenda 21, governments have been more focused on the critical global aspects and a regulatory revolution has occurred in the environmental area. Many countries now have a clearer vision of the role they have to play to achieve a sustainable world. Without doubt the concept of sustainability has captivated the entire world of governments, business, trade organisations, NGOs and the like. It is a concept that as we read more about it has provided a defining point in history. For many corporates in New Zealand the concept of sustainability is long on words and short on practical advice and methodologies. Indeed for many of this country's people there is a feeling of disbelief that the concept is rational and can be readily applied.

Inherent in the definition of sustainable development is a demand that businesses have the capacity and the ability to fully analyse their current business activity and to substantially modify its processes in order to achieve sustainability. This demand will place a significant burden on corporate management systems with managers who are sceptical about the benefits of sustainable management, and in many cases believe that the driver of this new paradigm is hysteria.

In order for a business to apply the principles of sustainability and to reorient its business strategy, it will require a level of general manager stewardship that may not currently exist in many New Zealand companies.

Sustainability is a strategic management issue but with many New Zealand managers unable to grasp the most basic strategic issues and work them into the business plan, the very idea that sustainability can be woven into the corporate fabric is almost an unattainable goal.

The idea that a corporate level manager within a New Zealand company can take the message and principles of sustainability and convert them into a working business system is unlikely. In my opinion, this is because many companies are still in the "No Regrets" phase and have not developed the practice of corporate governance, yet it is often argued that it is the corporates which will provide the emphasis for change and the adaptation of society to sustainability.

Sustainable development is a strategic issue and in order to understand the process of adoption, within companies, of a new strategic idea it is essential to understand how the company develops its corporate capabilities and competencies.

Companies, whether they understand the process or not, compete on the basis of their management of internalised knowledge. How they use that knowledge in a strategic manner will determine the success of their venture. Such knowledge is gained from the experience and expertise of staff, from in-house engineering departments and the ability of the servicing teams to do the work.

Outsourcing

During the eighties in New Zealand there was significant fallout among companies which did not believe that internalised knowledge was all that important. The phrase often heard was "stick to the knitting and get out of everything else by outsourcing and contracting". While it was necessary for many companies to do just that in order to survive, it is also important to note that when downsizing, companies also ran the real risk of defaulting their internalised knowledge and the ability to do the work to others and the transition to an outsourced company was often not likely to be successful.

Without a refocus on the protection of knowledge assets and the reincarnation of core competency and the establishment of a strategic system that nurtures core competencies by continuing to develop and strengthen them, then there is little hope that a concept such as sustainability will ever gain corporate acceptance.

Sustainability is a strategic concept and unless the corporation has internalised the ideas of nurturing core competencies, there can be little hope that the application of the concept of sustainability can be successful. This is because of the fragmentation of corporate intention that is the result of the lack of cohesion of core competencies coupled with the nature of sustainable development requiring a company with a strong edict of corporate intention delivery. Without an all pervading atmosphere of integration of the corporate mission, strategic intention and a cultivation of core competencies to achieve delivery, then you cannot apply sustainability in the manner that is necessary for a successful adaptation.

For sustainability to be effectively applied it must be defined as all pervading business philosophy, and as such, must be defined as a set of principles that form the strategic platform for adoption by a company as its method for doing business. For many companies that operate within their comfort zone this is an impossible task, and one wonders if it will ever be acceptable to assume that companies can apply a company-wide business philosophy that affects all sectors of the business, that has its roots within a concept that a few years ago would have been described as eco-fundamentalism.

For those that study the planet, in particular its biodiversity and longevity, insist that business must adopt the principles of sustainability and apply real change as the alternative is too frightening to contemplate. Be that as it may, companies have often proven in the past that global business practice philosophies are generally resisted as unworkable or unnecessary.

Beyond no regrets

In order that companies can create a climate within their organisations that will be receptive to the principles of sustainability, top management need to understand the dynamics of their core competency. To do this they need to be able to practise the principles of corporate governance. In years past the pervading attitude to resource use and waste management was the "no regrets" principle. Then came corporate governance where good housekeeping and best practices became the norm. Now, the practice of sustainability. Those companies that are in the phase of good corporate governance can easily move to sustainability. Those that are still in the no regrets phase may find it nearly impossible to adopt the principles of sustainability as the first step.

The path towards sustainability is one that involves a set of specific activities. These activities must be conducted in sequence according to the position the company is in when the process is commenced. In order to understand the sequence an understanding of the principles of sustainability is required.

Principles of sustainability as perceived by the public are interrelated with four perceptions. These are public concerns about the future, involvement of the public, the poor, and the environment. This closely follows the Agenda 21 principles especially that related to the poor and disadvantaged. The model also indicates that each of the principles of sustainability are interdependent.

The challenge for corporate New Zealand is to be able to define at which level companies are operating at and then to develop a plan that takes them to the next level and then onto sustainability, rather than wholesale adoption of a set of difficult principles that are likely to fall into decline as the corporate culture is unwilling or unable to adapt. The challenge for managers and engineers is to understand the difference between stewardship and sustainability, for one precedes the other. Without stewardship you cannot have sustainability. By adopting stewardship first and then sustainability the company will make money out of becoming green.

For the professional engineer the application of sustainability starts with the adoption of the all pervading philosophy within the firm he or she manages. Engineers deliver sustainability. By understanding not only the prescriptions of sustainability but how to apply them within corporate strategy provides the professional with the opportunity to deliver on clause 2 of the IPENZ code of ethics. Professional engineers have perhaps the most pivotal role in the adaptation of sustainability by companies in New Zealand.

Engineering's objective is sustainability, it cannot be anything else. Engineers must adopt the philosophy of sustainability in all their activity especially where they have an influencing role within companies. Young engineers currently at tertiary institutions must engage in probing questions of their tutors about aspects of sustainability. When viewing the application of sustainability in the sceptical corporate world one is reminded of a recent statement from FIDIC ¹.

"Securing the Future. Let us step out of the shadows of anonymity and exercise leadership in the challenges facing the world in the 21st century. We must become authoritative voices to plead the case for sustainability and prudent resource utilisation. Let's quit talking to ourselves and communicate with those who can restore our image. But our voices will not be heard unless we step out of the crowd and up to the podium. Will the invisible profession please step forward."

1. FIDIC - International Federation of National Associations of Independent Consulting Engineers.