Sustainable Development and Changes in Firm Conduct

Many will have seen the critically acclaimed documentary called The Corporation. One of the key points that stuck with me was that whilst the corporation is considered a legal person, just like any other biological person, it is not accountable in the same way. The biological person will be held accountable for her actions in court on a very personal note. With the corporation, pointing out accountability is decidedly more complex, as the actions of the legal persons with the corporation and the corporation itself are legally severed. One sues the corporation, but not the people working within the corporation, no matter how much the obvious points to a situation of personal accountability: remember this guy?

Now back to sustainable development. If you would want to see the firm change its behavior to a more sustainable manner of conduct, then given what The Corporation documentary highlighted, playing the accountability card is a difficult one. You can delve into the details of Harvard Professor John Ruggie’s walk on the tightrope between corporate accountability and “sphere of influence” in safeguarding human rights for waking to the complexity of the accountability issue at hand, be my guest. But, holding the firm accountable is hard, as is concisely taking up responsibility and influence for the firm, for that matter.

The high road of holding firms accountable to a principle is thus difficult if not impossible. The alternative is to take a pragmatic perspective, taking an open view, looking at at ways for positive encouragement. Publicly funded initiatives for certification of value chains is such an approach promoting higher trade standards. But the inherent design flaw in certification schemes is already starting to show a declining growth rate. The picture below shows where it has led us till now

In all, a next step is needed to take us beyond what funding of certification programs alone can realize. That next step could well be to look at the business model, promoting discovery of new ways forward by using business model analysis to:

  • scope for impact caused by certification to the existing business model, and
  • describe how certification could incentify changes to the business model to adapt itself to (properly) internalize the standards set by certification in the firm’s activity system.

The effects of using the business model could be tremendous, setting examples of successful models and failures, and kicking in a process of  economic selection on competing models on integrating sustainability standards. Could this be a way forward in altering firm conduct to better behavior? The low road if you will.

Science and Progress

One of my main peeves with science is that it pretends to equal progress, yet it often lags it. Case in point is this recent article in Nature on the bicycle. Even though humans have been riding bikes for the last 150 odd years, humanity has only recently discovered how the bike actually works. Scientists from Cornell University were able to design a to wheeled prototype, which was able to keep itself in balance, and correct its’ balance when nudged. An interesting find!

Of course there is a lesson in this for value chain development. We tend to over-rely on science to tell us whether interventions in value chains work or not. Certification is such an intervention, and very important one as a lot of public value chain development money is pumped into the certification tool.

The business case for certification is a meek one. Certification by design is a construct which above all enables the lead firm to capture value. It leaves the onus of compliance with its suppliers, who remain only with permission to supply. Just check out the following variation on Business Model Zen: obvious why this will never work, isn’t it.

Science is currently very actively busy in creating impact assessment methodologies to obtain proof how the certification system works. But just by observing the design of certification as a tool for achieving sustainability progress in business as in the figure above, it is evident that science is actually working on providing an answer why and how certification is not working. A valuable insight, but it feels like the bike.

The point is that VCGen moves a step ahead in pace from science:

  • We take from science what we can use to design ways forward.
  • We work on the basis of inspiration gained through business and value chain problem solving.
  • We work on the next ideas, which move beyond certification, but are able to deliver on the same ambitions: transparency, sustainability performance standards, and greater equity in value chain relations.
  • We bridge the gap with science by providing access to the data we are able to register in working on problem solving.