Week 3 Flashcards
What 3 things should sustainability goals have?
Specific
Measurable
Time-bound
2 types of goals
Absolute goals: which take only the KPI into account
Relative goals: which compare the KPI to a unit of output
Absolute goals best express the expected impact on society but do not take company growth into account. Relative goals measure performance per unit of output more accurately but the impact the goal will have is unsure.
Outside in vs inside out
Looking at the environment surrounding the business and see what is needed instead of looking what the business can achieve
Different sustainability strategies
- Introverted (Risk Mitigation)
- Extroverted (Legitimization) - Conventional vs. Transformative
- Conservative (Efficiency)
- Visionary (Holistic) - Conventional vs. Systemic
Introverted strategy
risk mitigation strategy: focus on legal and other external standards concerning environmental and social aspects in order to avoid risks for the company
Extroverted strategy
legitimating strategy: focus on external relationships, license to operate
Extroverted strategy can be transformative: interacts with the market and tries to change market conditions actively.
Conservitive strategy
efficiency strategy: focus on eco-efficiency and cleaner production
Visionary strategy
holistic sustainability strategy: focus on sustainability issues within all business activities; competitive advantages are derived from differentiation and innovation, offering customers and stakeholders’ unique advantages.
2 types of visionary strategies
- Conventional: based in market opportunities in an opportunistic manner (outside in perspective)
- Systemic: the market based view is supplemented with a resource based view and sustainable development is deep seated in the normative level of the company (inside-out perspective)
Maturity levels
- Stands for a rudimentary level, maybe beginning consideration of the sustainability aspect in the company, which means that – if existing – only mandatory rules and laws are respected.
- Marks that 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).
- Represents a satisfying consideration and maturity of the specific sustainability aspect (often above the industry average).
- Sophisticated maturity, which implicates an outstanding effort towards sustainability
SBSC
Sustainability scorecard
4 perspectives in SBSC
- financial
- customer
- internal process
- learning and growth
Financial perspective
whether the transformation of a strategy lead to improved economic success
- Revenue
- expenses
- ROI
- Net income
Customer perspective
defines the customer/market segments in which the business competes
- Customer satisfaction
- Customer retention
Internal process perspective
identifies those internal business processes that enable the firm to meet the expectations of customers in the target markets
- inventory
- quality control
- product lead time
Learning and growth perspective
infrastructure necessary for the achievement of the objective from the other perspectives
- employee skills
- employee training
- employee retention
- satisfaction
Advantages by implementing sustainability
- Firms that are sustainable will in times of crisis not throw away sustainable actions just because they are more expensive
- Connecting social and ecological with economic can help gain an competitive advantage compared to their competitors
- It is most favorable for businesses to implement strategies across all 3 dimensions
3 ways to integrate environmental and social aspects in SBSC
- Environmental and social aspects can be integrated in the existing four standard perspectives (subsumption)
- An additional perspective can be added to take environmental and social aspects into account (addition)
- A specific environmental and/or social scorecard can be formulated
3 stages of strategic relevance
- Strategic core issues with lagging indicators
- Performance drivers as represented by leading indicators
- Hygienic factors, reflected by diagnostic indicators (necessary changes but do not represent a competitive advantage)
Corporate strategy 6 components
Mission
Strategic issues
Markets
Customer needs
Resourcers
Competitive advantage
What is a vision?
the desired end-goal
What is a mission?
what the firm is trying to achieve
Sufficiency
individuals and companies living on needs rather than wants
Ways how sufficiency driven businesses curb demand (5)
- education and consumer engagement
- making products that last longer and avoiding built -in obsolescence
- focusing on satisfying ‘needs’ rather than promoting ‘wants’ and fast – fashion
- conscious sales and marketing techniques
- new revenue models or innovative technology solutions
2 criteria for strategy
Cost of sustainability strategy
Benefits of sustainability strategy
Gaining a competitive strategy
- Lower price
- Differentiation
- Though focus
4 outcomes when looking at the fit of a strategy
- Force
- Pressure
- Option
- Forbidden
Characteristics of a good target (5)
- Meaningful
- Material
- Complete
- Consistent
- Ambitious
Characteristics of good KPI (4)
- Accessible
- Relevant
- Responsive
- Comparable
What time scale?
Bold end goal far in the future is seen as implausible.
Annual target fails to provide long-term direction and ambition.
–> Set some longer-term stretch goals that contain interim targets.
