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Espacios. Vol. 37 (Nº 25) Año 2016. Pág. 29

Diagnostic of corporate sustainability maturity levels: a case study

Diagnóstico de los niveles de madurez de la sustentabilidad corporativa: un estudio de caso

Mauricio Johnny LOOS 1; Carlos Manuel TABOADA Rodriguez 2

Recibido: 23/04/16 • Aprobado: 29/05/2016

Contenido

1. Introduction

2. Theoretical Framework

3. Research Methods and Techniques

4. Results From Empirical Study

5. Conclusions

References

1. Introduction

Worldwide leaders in business, particularly those in developed countries, are currently promoting sustainability initiatives and practices within their respective companies as they perceive the importance of a platform upon which they might survive in light of the demands of global competition. It can be argued that this stance is an indication that business leaders have incorporated social and environmental aspects into their otherwise traditionally financial focus (Drumwright et al., 2004). Despite the fact that environmental management models display a great variety of characteristics, many stages or phases that describe development across time consist of a greater integration of environmental considerations in business policies and strategies. Over time, a range of typologies that truly characterize companies' positions, without assuming a growth in their capacity to respond to related inquiries, has also come to be (Kolk and Mauser, 2002). Currently, sustainability is a topic of increasing importance in every aspect of organizational life. More and more, companies and managers are thinking of ways to incorporate a balance between economic, ecologic, social and cultural factors into the creation of value of their business models (Porter and Derry, 2012).

Given these circumstances, the objective of the present work is to create a diagnostic of which aspects of corporate sustainability are used in a textile company, and at which levels of maturity they are in effect. The study seeks to provide a response to the question of as to how the company frames the aspects of corporate sustainability that it integrates into its activities, as well as gain a perspective as to in which of these it is more, or less, developed. Beside this, the work aims to associate decisions made concerning corporate sustainability with the related literature. The study was carried out in a textile company, given the need for a greater understanding of corporate sustainability in the textile industry specifically, which is justified by the lack of existing studies both on this topic and in this sector –one that is in constant development, and responsible for a large portion of the Brazilian economy: 3.5% of the GDP (Abit, 2011). We hope, for the purposes of the study, to have a better understanding of corporate sustainability in the textile industry, which might go on to contribute to additional studies in the future. For the purposes of data collection, a questionnaire soliciting responses from the manufacturing director of the company was applied, which will be further explained later on. In order to attain its objectives, the work first establishes a theoretical framework, followed by an explanation of the methods and techniques adopted during the research process, the results of the empirical study, and finally, its conclusions.

2. Theoretical Framework

Following, a greater explanation of the theoretical framework related to corporate sustainability will be presented, as well as its aspects and maturity levels, in order to establish a general perspective based in the literature and serving the purpose of subsequent comparative analysis with the practices observed in the object of the study.

2.1. Corporate Sustainability

Corporate sustainability is considered an approach for joining economic, ecological, and social interests within a coherent business strategy. The impetus for the implementation of this approach at the business level varies between ones that are personal to the owners or managers and economic considerations, presuming a `business case` for corporate sustainability and social responsibility (Laufer, 2003). Today, the scope of a brand is not based solely on the product: it also includes the way in which the product is made, the suppliers, and how it is delivered (Mulani, 2009). A general recognition that companies can play a significant role in the reduction of damages to the quality of the environment, poverty, and inequality as well as in society's steps toward more sustainable development exists (Harris and Crane, 2002).

Corporate sustainability deals with strategies and practices that strive to meet the current needs of stakeholders while also protecting, supporting, and appreciating both human and natural resources that will be necessary in the future (Ketola, 2010). As such, corporations, especially those that operate on a global level, are obligated to commit themselves to sustainability strategies and practices as a means for expressing their support and commitment to the nation (Eweje, 2011).

Those companies that refuse to reconsider their environmental and sociocultural unsustainability will either be constrained by the increasingly rigorous pressures of their respective stakeholders or bring ruin to civilization with their irresponsible business practices. In the case of the former, societies around the world unite to combat the environmental and sociocultural challenges in order to curb the devastating trend. Along with this, companies can work together in order to survive and prosper in a more holistic manner. However, in the second scenario, societies allow corporations to continue to govern the world in accordance with the rules of the market economy. This brings about exponential environmental and sociocultural catastrophes that will eventually be the ruin of humanity and many animal species (Ketola, 2010). Sustainability goals attest that the private sector should not simply create economic value, providing goods and services that improve the overall quality of life, but that it must also actively endeavor to mitigate the different social and environmental problems that it causes alongside their operations (Hahn and Scheermesser, 2006).

Global societies are currently in the midst of a series of challenges: (1) the application of both current and emerging juridical instruments, ranging between flexible and unbending; (2) the degradation of natural resources; (3) an inadequate global mechanism to confront environmental and social responsibilities via the international community; (5) unethical and unsustainable business practices; (6) consequent unethical practices and unsustainable consumption; (7) rich countries' selective application of ethical principles, and (8) the absence of good conduct norms in terms of sustainable development on part of rich and powerful nations (Ahmad et al., 2012). As such, corporate environmental strategy must reflect traits –business and social responsibility, and a commitment to the environment- that demonstrate its capacity to face these challenges (Menguc and Ozanne, 2005).

2.2 Maturity Levels and Aspects of Corporate Sustainability

It bears mentioning that the maturity levels and corporate sustainability aspects upon which this study expands are based in part on the proposal of Baumgarter and Ebner (2010), who sought to bridge the gap between sustainability characteristics and strategies, and competitive strategies. This was done by way of the development of specific profiles for an approach to the same, combining these aspects to clarify the relationship between business activities and the integration of sustainability aspects. According to the above-cited authors, corporate sustainability maturity levels are the following:

Level 1: Rudimentary - a beginning consideration of the sustainability aspect in the company, which means that – if existing – only mandatory rules and laws are respected;

Level 2: Elementary - an elementary integration of this aspect is focused on compliance with sustainability-related laws, but going slightly further (e.g. due to environmental technology, reduction and consideration of impacts of their business activities);

Level 3: Satisfactory - represents a satisfying consideration and maturity of the specific sustainability aspect (often, one above the industry average).

Level 4: Sophisticated - denotes an outstanding effort towards sustainability.

Regarding corporate sustainability aspects, as per Baumgartner e Ebner (2010), these can be categorized in economic, ecological, and social (internal and external) terms. The authors summarize these categories, using the following explanations:

Economic Dimension of Corporate Sustainability: encompasses general aspects of an organization that have to be considered in order to remain in the market over time. Good outcomes in terms of these aspects stand to lead to good financial and sustainability results for the company. Thus, management should regard such aspects in order to obtain economic success rather than concentrating on those that lead to solely financial results. Hence, the aspects of the economic dimension of corporate sustainability are 'innovation and technology', 'collaboration', 'knowledge management', 'processes', 'purchasing' and 'sustainability reporting' (Baumgartner e Ebner, 2010).

In concerns to the economic aspects of corporate sustainability, the following explanations are provided (Baumgartner e Ebner, 2010):

1. Innovation and technology: Efforts toward sustainability-related research and development, in order to reduce environmental impacts in new products and in business activities. Use of BAT (Best Available Techniques) and integrated environmental technologies, concentrating on cleaner production and zero-emission technologies;
2. Collaboration: Good cooperation and active collaboration with various business partners (e.g. suppliers, R&D institutions, universities, etc.). Working in common programs and networks on innovative products and technologies. Exchange of information and knowledge;
3. Knowledge management: Activities and approaches to keep sustainability-related knowledge in the organization. Methods to plan, develop, organize, maintain, transfer, apply and measure specific knowledge and to improve the organizational knowledge base;
4. Processes: Clear processes and roles are defined so that business activities are efficiently conducted and that every employee knows what the organization expects from him or her, including in sustainability terms. Adaptation of process management on sustainability necessities to implement corporate sustainability systematically. Integration of sustainability into daily business life;
5. Purchasing: Consideration of sustainability issues in purchases. Awareness and consideration of sustainability-related issues in the organization as well as across the supply chain. Relationship with suppliers focusing also on sustainability, and
6. Sustainability reporting: Consideration toward and reporting on sustainability issues in company reports, whether as a separate sustainability report or integrated into the annual report.

Ecological Dimension of Corporate Sustainability: This dimension deals with environmental impacts resulting from corporate activities, caused by the use of  ´resources´, ´emissions into the air´ , ´water`, or `ground`, as well as damage to the environment resulting from ´hazardous waste´. Further, the impacts on biodiversity and environmental issues of the product over its life cycle are of importance. This dimension is generally gauged in terms of impacts, but within corporate sustainability strategies focus has to be placed on the effects causing these impacts, e.g., the higher the maturity levels, the more attention must be concentrated on causes rather than on effects (Baumgartner e Ebner, 2010).

The authors provide the following explanations of each of the ecological aspects of corporate sustainability:

1. Resources: (materials, energy) including recycling. Use of renewable and non-renewable resources and energy by the company, including recycled resources;
2. Emissions into the air: Emissions into the air resulting from corporate activities;
3. Emissions into the water: Water-based emissions resulting from corporate activities;
4. Emissions into the ground: Emissions into the ground resulting corporate activities;
5. Waste and hazardous waste: Waste and hazardous waste produced by corporate activities;
6. Biodiversity: Impact on biodiversity stemming from corporate activities;
7. Product environmental issues: Environmental aspects of the product over its entire life cycle.

Social Dimension of Corporate Sustainability: This dimension deals with a consciousness of the responsibility the that company bears for its actions, as well as a genuine commitment to all stakeholders in every commercial activity carried out, with the objective of holding a successful position in the market over time. The internal aspects falling under this dimension are `corporate governance´, ´motivation and incentives´, ´health and safety´, and ´human capital development´. The external aspects of this dimension are ´ethical behavior and human rights´, ´no controversial activities´, ´no corruption/participation in cartel´, and ´corporate citizenship´ (Baumgartner e Ebner, 2010).

The following explanations of each of the internal social aspects of corporate sustainability are provide (Baumgartner e Ebner, 2010): 

1. Corporate governance: Transparency in all of its activities, in order to strengthen relationships with its stakeholders. Giving insight into all relevant data; following rules of (stock)markets on corporate governance and defining responsibilities and behavior of the board;
2. Motivation and incentives: Active involvement and exemplary function of management on sustainability topics for employees. Awareness of employee needs, claims and motivation factors in order to implement sustainability sufficiently into the organization by way of management support toward acting in sustainable way (e.g. time, money, resources). Development of incentives and reward systems (monetary, non-monetary);
3. Health and safety: Guarantee that no health and safety risks occur when working in nor for the organization. No negative impact on employees' physical health at any time. Program operations ensuring that employees prevent danger and stay fit and healthy, in general (e.g. in developing countries);
4. Human capital development: Development of human capital for sustainability-related issues through specific programs such as permanent education, mentoring or training. Broad cross-working education (job enrichment, job enlargement) in order to become aware of the different challenges and issues of corporate sustainability.
5. The authors also provide the following explanations of each of the external social aspects of corporate sustainability (Baumgartner e Ebner, 2010):
6. Ethical behavior and human rights: Ethical behavior towards sustainability consisting of well-established, basic assumptions and principles relating the cooperation within an organization and the behavior towards (external) stakeholders. Regarding sustainability, important elements are a culture of respect, fair rules and behavior within an organization (and between its subsidiaries) and fair wealth or profit allocation, as well as a serious consideration for stakeholders' ideals and needs. No harm to employees, whether concerning their religious beliefs, gender, nationality or race, or concerning old or handicapped persons.
7. No controversial activities: No holding shares of organizations that are generally seen as not sustainable (e.g. uranium mining). No use or sale of own assets and goods for non-sustainable activities;
8. No corruption/participation in cartel: Behaving fairly in the market and avoiding manipulative business practices. This includes no rule breaking, no price-fixing or joining of a cartel, nor corruption as a means for gaining an advantage;
9. Corporate citizenship: Being a good corporate citizen on a national level; conservation of in-country subsidiaries and contributing to national economic power, as well as an increase in society's quality of life. Supporting stakeholders (and others) and their issues on the regional level; participation in or creation of sustainability-related activities for the local community. Contributing to future generations without exploiting the present nor environment.

The authors affirm that, in order to attain a comprehensive corporate sustainability strategy, it is necessary to consider each dimension, as well as its impacts and inter-relations. External factors also affect a company's position on sustainability. Besides this, corporate sustainability yields positive effects in society over the long term.

3. Research Methods and Techniques

The main source used for data collection was a questionnaire provided to the industrial director of each company, seeking to establish the maturity level at which the company´s corporate sustainability aspects are in effect. The questionnaire was partially based on the model proposed by Baumgartner e Ebner (2010), which classified said aspects and maturity levels, as shown in Figure 1.

Figure 1 – Corporate sustainability aspects and maturity levels. Adapted from Baumgartner and Ebner (2010).

Within each of the dimensions of corporate sustainability, the corresponding aspects were classified by maturity level. Each of these maturity levels were assigned a different weight, which are as follows: Rudimentary Level – 25%; Elementary Level – 50%; Satisfactory Level – 75%; Sophisticated Level – 100%. This is to say, the higher the stage of sustainability displayed by the company, the higher weight it will receive. The data, themselves predominantly qualitative in nature, were interpreted using the primary data source, seeking divergence and convergence to compare the theory in place with the reality of the company. This data collection went on to make up the case study, which is explained below.  

4. Results From Empirical Study

Below, the results of the study are shown, in accordance with the objectives established in prior sections of this work, in order to elaborate on corporate sustainability aspects observed in the study as well as the significance of each one´s maturity level.

4.1 Diagnostic of Economic Aspects of Corporate Sustainability

Figure 2 shows the level at which the company displays each economic aspect of corporate sustainability. Following this, further descriptive analysis is provided regarding each of these aspects.

Figure 2 – Economic aspects of corporate sustainability and respective maturity levels in the company examined.

- Innovation and technology – Elementary Level: Initial efforts towards sustainability in relation to R&D (Research and Development). Compliance with laws and guidelines regarding existing technologies. Environmental technology integrated and in partial use.

- Collaboration - Satisfactory Level: communication and collaboration with stakeholders (including partners, NGOs, R&D institutions, etc.) regarding environmental issues.

- Knowledge management - Satisfactory Level: guidance and activities towards sustainability, dealing with knowledge management, integrated intangible assets (resource: human capital). Several activities are organized with organization-wide learning in mind.

- Processes - Elementary Level: the majority of sustainability issues are considered in key business processes.

- Purchasing - Satisfactory Level: social and environmental criteria (based on, for example, human rights) are well defined, and also considered across the entire supply chain.

- Sustainability reporting - Elementary Level: the most relevant sustainability issues are regarded in corporate communication channels (one-way communication) or in an annual sustainability report.

4.2 Diagnostic of Ecological Aspects of Corporate Sustainability

Figure 3 shows the level at which the company displays each ecological aspect of corporate sustainability. Following this, further descriptive analysis is provided regarding each of these aspects.

Figure 3 – Ecological aspects of corporate sustainability and respective maturity levels in the company examined.

- Resources (materials, energy) including recycling – Satisfactory Level: economic, technical, and/or environmental/social criteria are applied to the use of resources. Resource efficiency is measured in business processes; goals for resource management are established. Sustainability principles are considered somewhat.

- Emissions into the air – Satisfactory Level: compliance with laws and guidelines regarding emissions into the air. Goals for reduction of the majority of such emissions are set. Clean production technologies are in use.

- Emissions into the water – Satisfactory Level: compliance with laws and guidelines regarding water-based emissions. Goals for reduction of the majority of such emissions are set. Clean production technologies are in use.

- Emissions into the ground – Satisfactory Level: compliance with laws and guidelines regarding emissions into the ground. Goals for reduction of the majority of such emissions are set. Clean production technologies are in use.

- Waste and hazardous waste – Sophisticated Level: compliance with laws and guidelines regarding waste. Ambitious goals for waste stream reduction are set. Hazardous wastes are avoided due to zero-emissions activities.

- Biodiversity – Satisfactory Level: biodiversity and a detailing of its impacts in organization-wide strategy, policies, and processes are considered.

- Product environmental issues - Elementary Level: Environmental impacts and identified methods for reduction in certain product lines.

4.3 Diagnostic of internal social aspects of corporate sustainability

Figure 4 shows the level at which the company displays each internal social aspect of corporate sustainability. Following this, further descriptive analysis is provided regarding each of these aspects.

Figure 4 – Internal social aspects of corporate sustainability and respective maturity levels in the company examined.

- Corporate governance – Sophisticated Level: focus on mandatory and voluntary structures in corporate governance guidance. Additionally, measures for ensuring corporate transparency are in place. Proactive commitments in relation to stronger rules are stated.

- Motivation and incentives – Satisfactory Level: in most sectors of the company, incentives measures meant for improving motivation are set with sustainability in mind. The highest manager sets an example in terms of environmental issues.

- Health and safety – Satisfactory Level: health and safety are systematically planned and developed across company sectors. Activities for avoiding risks to health and safety in the long term are in place.

- Human capital development – Satisfactory Level: various educational programs and measures are offered. A large portion of employees are trained on environmental issues.

4.4 Diagnostic of external social aspects of corporate sustainability

Figure 5 shows the level at which the company displays each external social aspect of corporate sustainability. Following this, further descriptive analysis is provided regarding each of these aspects.

Figure 5 – External social aspects of corporate sustainability and respective maturity levels in the company examined.

- Ethical behavior and human rights – Satisfactory Level: corporate codes and structures regarding (internal) behavior are defined across the entire organization.

- No controversial activities – Sophisticated Level: the company is known for only legal activities, showing credibility in its offer and following strategies to prevent negative use of its products, as based on stakeholder needs.

- No corruption/participation in cartel – Sophisticated Level: impacts stemming from corrupt practices are completely identified. Distinct rules are in place to demonstrate all of the types and (internal) consequences of corrupt practices, as well as measures for the identification and avoidance of each.

- Corporate citizenship – Sophisticated Level: corporate citizenship is systematically planned and conducted (including monetary and non-monetary commitments), focusing on long-term commitments. The majority of employees make up these processes. The links between corporate citizenship projects and business activities are generally provided.

4.5 Analysis of Results – Diagnostic using radar graphing

Observing the emphasis first placed on each aspect of corporate sustainability and later translated into practice, while also constructing a weighted average for each dimensions´ respective weights (economic, ecological, and internal and external social), Figure 6 demonstrates that the company in question is more developed in external social aspects (94%), and less developed in economic aspects (63%).

Figure 6 – Corporate sustainability aspects and respective maturity levels in the company examined – Plotted by dimension in radar graph.

Figure 7 shows said emphasis on and application of each of the aspects. Of the total of 21 (six economic, seven ecological, four internal social and four external social), the following can be gathered: five aspects (24%) are classified as sophisticated in terms of maturity (one ecological, one internal social, and three social external); twelve aspects (57%) fell into the satisfactory maturity category (three economic, five ecological, three internal social and one external social); four aspects (19%) display an elementary level of maturity (three economic and one ecological); and not one aspect met only the criteria of the rudimentary level.

Figure 7 – Corporate sustainability aspects and respective maturity levels in the company examied – Plotted individually in radar graph.

Sustainability evaluation is important for companies seeking to conduct sustainable business as well as the entire range of stakeholders concerned with the same for a variety of reasons. As such, any sustainability evaluation is shaped by a number of factors. First, the definition of sustainability in place for evaluation by either an external agent or the organization itself is of crucial importance. Along with this, said agent´s ability to collect different types of information and inputs stands to alter the way that corporate sustainability is evaluated. Finally, the overlying objective of the evaluation of corporate sustainability can bear an influence on the way in which that evaluation is carried out (Schneider and Meins, 2012).

5. Conclusions

It can be stated that the tool employed here for diagnostics purposes is informative and efficient, contributing to a measurement of aspects of corporate sustainability, as well as the maturity levels at which they are in effect, due to the fact that it is comprised of well-structured and detailed definitions of each of them.

The results show that the company examined displays considerable corporate sustainability maturity levels, with a greater degree of the same shown in relation to external social aspects, while also confronted with the need for improvements in terms of economic aspects. By way of this diagnostic, actions tailored to each aspect can later be enacted with the goal of a greater consistency between the dimensions. Efforts toward sophisticated maturity levels already in place might serve as examples and starting points for lower-scoring aspects, and so on.

The importance of implementing regular measurement of economic, ecological, and social dimensions of corporate sustainability is widely known. This allows for subsequent reflection on related issues and planning for necessary improvements, which is especially important in today´s business environment, given that stakeholders apply more and more pressure, as well the natural reactions on part of society on the whole, which, though uncommon in the past, generally stem from irresponsible activities and operations.

Regarding opportunities for further studies, this tool might be applied to companies operating in diverse fields, as well as a group of companies in a single industry, which could serve as a diagnosis of sustainability levels in a given sector.

References

ABIT – Associação Brasileira da Indústria Têxtil e de Confecção. São Paulo, 2011. Provides information on the profile of the textile sector. Available in <http://www.abit.org.br/site/navegacao.asp?id_menu=1&id_sub=4&idioma=PT>. [07 july 2012].

Ahmad, W., Soskolne, C. L., & Ahmed, T. (2012). Strategic thinking on sustainability: challenges and sectoral roles. Environment, development and sustainability, 14(1), 67-83.

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Ketola, T. (2010). Five leaps to corporate sustainability through a corporate responsibility portfolio matrix. Corporate Social Responsibility and Environmental Management, 17(6), 320-336.

Kolk, A., & Mauser, A. (2002). The evolution of environmental management: from stage models to performance evaluation. Business strategy and the environment, 11(1), 14.

Laufer, W. S. (2003). Social accountability and corporate greenwashing.Journal of Business Ethics, 43(3), 253-261.

Menguc, B., & Ozanne, L. K. (2005). Challenges of the "green imperative": a natural resource-based approach to the environmental orientation–business performance relationship. Journal of Business Research, 58(4), 430-438.

Mulani, N. (2009). Sustainability: your role as a supply chain leader. Logistics Management, 23(5).

Porter, T., & Derry, R. (2012). Sustainability and business in a complex world. Business and Society Review, 117(1), 33-53.

Schneider, A., & Meins, E. (2012). Two dimensions of corporate sustainability assessment: Towards a comprehensive framework. Business Strategy and the Environment, 21(4), 211-222.

1. Doctorate Candidate in Production Engineering – Federal University of Santa Catarina (UFSC). (E-mail: mauricioloos@hotmail.com)
2. PhD – Technical University of Madrid (UPM), and Professor at the Federal University of Santa Catarina (UFSC). (E-mail: taboada@deps.ufsc.br)