The Henk van Luijk lecture on 28 May 2015 at Nyenrode Business University was about a conceptual revolution for sustainable development. Edward Freeman, professor at Darden School of Business, University of Virginia, and Fokko Wientjes, director sustainability and public-private partnerships of Royal DSM presented their views on this subject.
Freeman told that he already published his first book about the stakeholder approach some thirty years ago. For this lecture about business ethics, his thesis was that we need to change the way we think about ethics. Ethics need to be in the center of what an organisation does. He does not believe that entrepreneurs start a company in order to earn as much money as possible. Entrepreneurs start their enterprise based on a 'sense of purpose'. The best way to achieve this purpose is to create value for all stakeholders, based on the awareness that stakeholders are interdependent.
Ethics: unite stakeholder interests with your purpose
He believes that studying the great philosophers about principles, consequences, rights and values does not make a lot of sense since these are incomplete, and do not help solve the concrete problems of our times. That's why he teaches a pragmatic approach (John Dewey) to handle concrete problems under difficult circumstances. Ethics then becomes a conversation about purpose and how to achieve this and at the same time consider the stakeholders interests. This is quite different from judging in terms of good and evil. 'Every saint has a history and every sinner has a future' was one of his statements in this respect.
Increasing prices of externalities is no solution
He prefers a framework with a set of questions composed by the student serving as a tool for pragmatic excercises. By seeing the problem from the inside and letting in and feeling emotions. The value chain is considered as responsibility chain. A conflict of interest offers also an opportunity to create more value, especially when stakeholders are considered to be complementary. Simply increasing the prices of externalities, for example the costs for CO2 emissions, is not a solution but merely a trigger for innovation and alternative value creation.
Let stakeholders influence role patterns
Wientjes argued that roles determine behavior and that especially the right incentives need to be implemented to stimulate the right behavior. Personal incentives and incentives for stakeholders need to be coherent and consistent. The economic framework has been created by people an can therefore be changed by people as well. Heavy taxation of labour which is so abundantly available and modest taxation on raw materials that are scarce does not provide the right incentive. Another example is pricing of externalities like CO2 emissions. In order to change the economic framework and put the right incentives in place, we need more political leadership, leadership based on a vision and not based on polls.
The fact that the sustainable product line is being increased and delivers higher returns and revenues proves that sustainability works. DSM collaborates with Greenpeace to offer solutions for certain problems. Greenpeace adds trust, DSM provides technical expertise.
Shared business ethics provide cohesion
Another example is their participation in the World Food Program with the purpose to provide higher nutrition. The different stakeholders provide complementary competencies in order to realise the common goals. Business ethics is the glue that keepts the group together. Another trend is that opinion leaders have increasing influence.
Stakeholder-management versus CSR
Freeman only considers groups of people who can voice their interests as stakeholder. This makes the Earth dependent on environmentalists and NGO's who voice the interest of our planet, makes animals dependent on animal activists and makes future generations dependent on people who care for them. This is more similar to sustainable development and corporate social responsiblity than stakeholder-management as presented by Freeman.
Connecting the dots
The Good Governance Monitor connects stakeholder interaction with sustainable development, CSR and Integrity. By interactively assessing the impact of a certain policy on all stakeholders it becomes visible:
for which stakeholders value is created,
which stakeholders will be damaged and to which extent,
which alternatives could prevent damage,
and if damage prevention is impossible, what forms of compensation would be acceptable for the stakeholders concerned.
This process connects the principles of Freeman with the practical experiences of DSM and the actual/literal meaning of integrity: "keeping or making whole". Want to know more? Read further about the GoGoMo-learningprocess. (to be translated in English soon )