Today we're going to tackle a number of questions related to the integration of corporation sustainability in business strategy. If you recall, strategy is a set of decisions and actions that any organization puts in place in order to achieve their purpose, their mission. Now, the way in which we are going to tackle the set of issues is by going through the notion of sustainability from a strategic standpoint. So we will look at sustainability as a strategic choice, and we will see how it interacts with other strategic choices and with the overall performance of the organization as the firm tries to enact and execute those strategic choices with the support of the stakeholders. The first point to understand is that sustainability actually is a strategic choice. Any organization, by the way, whether it's a business enterprise or an NGO or a public administration, they have the choice between engaging with the stakeholders in a more or less intense way. Essentially, on one hand, the standard approach would be to essentially enact a transactional type of logic. So employees would be hired and developed on the basis of their skills, you know, and in exchange for their skills they would be compensated and motivated with compensation, additional compensations or awards of different kinds. Same thing with suppliers, with costumers, of course with shareholders, and, you know, communities might actually not even enter that much into the picture. On the other hand, the other extreme, if you want, of this continuum, of this strategic choice, you have a highly engaged set of stakeholders that actually are called upon, are involved in the process itself of making decisions, and of course in the contents of the strategic choices, their interests, their needs and their inputs, obviously, are taken into account in a significant way. Now, both alternatives are actually feasible. There are a lot of examples of successful companies that engage stakeholders at very different levels. So with either an arm's length type of engagement, so very low, or a complete, much more complete and high level of engagement. But the important point here is let us consider strategic engagement of stakeholders as a choice, and let us understand this choice, not only for its direct consequences on firm performance, for example, but also in terms of its interdependencies with other strategic choices. So, it is pretty clear that the higher the level of engagement of stakeholders, the higher the likelihood that a company would be able to create value for its stakeholders. The problem from a strategic standpoint is not so much the direct effects on value creation for stakeholders but actually the interactions, the interdependencies between the decision to engage more stakeholders and the other strategic decisions on how to compete, for example, in terms of cost leaderships or innovation and differentiation, and how to grow, typically the choice of organic growth or acquisitive growth, for example. And now the important point to take into consideration here is that, the higher the amount of engagement, the more the organization invests in engaging stakeholders, the higher the likelihood that some of the other strategic choices would become more effective, and others will become less effective. So essentially, if you take the strategy problem in its all complexity, you would generate bundles of choices, some of which are more coherent and others that are less coherent. That is a really important point that needs to be evaluated in order to make sense of the fundamental strategic choice related to corporate sustainability, i.e. the extent to which the organization, the enterprise wants to invest in stakeholder engagement, in the involvement of stakeholders in the content and the practice of strategy. So let us consider these bundles of strategic choices. Let’s make it rather simple, let’s consider three of them, three key strategies. One has to do with the way the firm competes, the competitive strategy in the choice there typically is between a cost leadership versus a more innovation and differentiation driven strategy. The second has to do with growth. How do I grow my organization, do I grow it organically or do I grow it through acquisitions, so faster than what I would be able to do with my own resources and capabilities. And the third one is the stakeholder orientation, so the sustainability oriented investments that are necessary in order to engage the various type of stakeholders that we want to bring on board in order to grow the organization. All of those are strategic choices, and all of those choices have their own direct implications on the performance of the organization and on the likelihood of the creation of different forms of value. Now, in a recent article that we published in Strategic Management Journal, we show that there are essentially two bundles of these strategic choices. And the two bundles are characterized by significantly different approaches in terms of stakeholder orientation, growth and competition. On one hand, we have a bundle which is, by the way, both bundles are equally performant, right, so we expect companies to be able to create value with either of the two alternative combinations of strategy. One hand, a low level of stakeholder engagement. So an arm’s length, normal type of relationship with stakeholders, which would mix very well with a cost leadership strategy and an acquisitive growth strategy. On the other hand, a high level of stakeholder engagement, so a strong, high level of involvement and investment in engagement of stakeholders would mix very well, would be coherent with a differentiation and innovation strategy, as well as with an organic growth strategy. So the choice is yours. Both are equally coherent internally. They are expected to create value. Which one would you prefer?
