443455 2012

OSS33410.1177/0170840612443455ValenteOrganization Studies

Article

Theorizing Firm Adoption of Sustaincentrism

Organization Studies 33(4) 563­–591 © The Author(s) 2012 Reprints and permission: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/0170840612443455 www.egosnet.org/os

Mike Valente

University of Western Ontario, Canada

Abstract In the midst of a fundamental gap between theoretical assertions of a sustaincentric business paradigm and any rigorous empirical examination of its adoption at the firm level, I set out to answer the following two interrelated research questions: (1) How can we identify firms that adopt a sustaincentric paradigm and (2) What explains firm adoption of this paradigm? Based on cross-case comparisons of 12 African firms adopting a reactive, proactive, or sustaincentric orientation to sustainability, I develop a conceptual framework comprised of three interrelated constructs informed by descriptive observations across individual, organizational and interorganizational levels of analysis. Unlike their reactive and proactive counterparts, sustaincentric firms exhibited critical multilevel characteristics that demonstrated capacity for cognitive complexity and linked them closely to a highly interconnected network of external actors, the combination of which enabled the achievement of competitive advantage based on sustaincentrism.

Keywords Africa, cognitive complexity, competitive advantage, network building, reactive and proactive orientation, sustaincentrism

Introduction The field of business has recently come under an unprecedented level of criticism in light of its role in a number of social, ecological, and economic issues present in today’s society. The contribution of business to issues of climate change, social inequity, and the latest economic recession has led some to question the fundamental assumptions guiding business and their commensurability with a more sustainable form of development (Broughton, 2009). Although this criticism has grown in popularity in recent years, it is hardly new. Since the mid-1990s, management scholars have advocated a fundamental shift in underlying worldview of the private sector (Waddock & McIntosh, 2009), introducing alternative approaches meant to harmonize economic, ecological, and social endeavors (e.g. see Colby, 1989; Egri & Pinfield, 1996; Gladwin, Kennelly, & Krause, 1995; Hart, 1995; Purser, Park, & Montuori, 1995; Shrivastava, 1995; Starkey & Crane, 2003). One worldview coined by Gladwin et al. (1995) is sustaincentrism, defined as the equitable inclusion of a highly Corresponding author: Mike Valente, Richard Ivey School of Business, University of Western Ontario, London N6A 3K7, Canada Email: [email protected]

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interconnected set of social, ecological, and economic systems (Banerjee, 2003; Bansal, 2002; Fergus & Rowney, 2005; Hoffman, 2003; Hoffman & Ehrenfeld, 2000; Sharma & Vredenburg, 1998; Starik & Rands, 1995). Despite this early normative focus, scholars have since followed a much more empirical route exploring and uncovering a number of antecedents to, correlates and consequences of the dichotomous reactive and proactive orientations to sustainability (e.g. Aragón-Correa, 1998; Henriques & Sadorsky, 1999; McWilliams & Siegel, 2000; Orlitzky, Schmidt & Rynes, 2003; Waddock & Graves, 1997). While insightful, these studies left abandoned the broader phenomenon of a firm-level paradigmatic orientation of sustaincentrism where firm commitment to social and ecological issues is not just manifested in a firm’s voluntary environmental practices or its proactive attention to stakeholder claims but represents an organizational way of life (Hoffman & Ehrenfeld, 2000; Sharma & Henriques, 2005). In the spirit of this gap and in light of the persistence of the anthropocentric worldview in business, management scholars and practitioners have recently reignited the normative discourse of the past through discussions of organizational paradigm change (e.g. Dyke & Schroeder, 2005; Hoffman & Sandelands, 2005; Jermier, 2008; Lamberton, 2005; Margolis & Walsh, 2003; Valente, 2010). Perhaps not by coincidence, anecdotal evidence of innovative business models and practices that seem to resonate with the sustaincentric worldview has emerged as a new and growing phenomenon of business activity (e.g. see Elkington & Hartigan, 2008; Hart, 2005; Mair & Seelos, 2004; Prahalad, 2005; UNDP, 2008; Yunus, 2007). Yet there are a number of limitations associated with the sustaincentrism literature. First, the concept suffers from definitional ambiguity, leaving open to interpretation what its adoption means at the firm level and how its operationalization is different from the well-established reactive and proactive orientations. As a consequence, fundamental gaps persist between theoretical assertions of sustaincentrism and any rigorous empirical confirmation that it exists at the firm level (Fergus & Rowney, 2005; Kallio & Nordberg, 2006). Second, in the backdrop of a growing number of firms that demonstrate sustaincentric behavior, little empirical work has uncovered the conditions that explain enactment of this orientation. It is in the spirit of these gaps that I focus my attention in this paper and thus propose the following two interconnected research questions: (1) How can we identify firms that adopt a sustaincentric paradigm and (2) what explains firm adoption of this paradigm? These research questions were answered consecutively over two research phases. In the first exploratory phase, I identified three distinct firm-level orientations to principles of sustaincentrism, two of which aligned closely with extant literature’s reactive and proactive dichotomy while one elicited a firm-wide adoption level. With preliminary operationalizations of these orientations, I tackled the second research question using a comparative case-study method (Eisenhardt, 1989; Eisenhardt & Graebner, 2007; Yin, 2003), theoretically sampling 12 cases with at least one case occupying each orientation across three diverse sectors of agriculture, manufacturing, and tourism. The objective in the second phase was to search for mechanisms that explained variation across the three case orientations. I chose Africa as the empirical setting because it represents an extreme context (Eisenhardt, 1989) where firms operate in regions of poor institutional infrastructure (Idahosa, 2004; Idahosa & Shenton, 2002) and are forced to respond to significant and highly interrelated social and ecological challenges that illuminate very observable and diverse adoption levels of sustainability. Through the data analysis, I develop a conceptual framework that presents three interrelated constructs informed by descriptive observations across three levels of analysis: individual, organizational, and interorganizational. In particular, unlike their reactive and proactive counterparts, sustaincentric firms exhibited critical multilevel characteristics that (1) demonstrated capacity for cognitive complexity and (2) linked them closely to a highly interconnected network of actors, the combination of which (3) enabled the achievement of a sustainable competitive advantage based on sustaincentrism.

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Theoretical Background Since the mid-1990s, many management scholars have pushed for a fundamental change in the underlying anthropocentric worldview of the private sector (e.g. Gladwin et al., 1995; Hart, 1995; Purser et al., 1995; Shrivastava, 1995). Paradigms or worldviews represent the ‘constellation of beliefs, values, assumptions, and concepts that organize language, thoughts, perceptions, and actions to give shape and meaning to the world a person experiences and acts within’ (Norton, 1991, p. 75). An anthropocentric worldview of business possesses a set of beliefs and assumptions of human centeredness where self-interested agents work to optimize and exploit the social and natural environment (Gladwin et al., 1995; Purser et al., 1995; Shrivastava, 1995). Under this worldview, development is corralled under the dominant economic discourse (Banerjee, 2003; Egri & Pinfield, 1996; Fergus & Rowney, 2005; Kallio, Nordberg & Ahonen, 2007; Lele, 1991) where social, ecological and governance challenges are only considered to the extent that they align with the firm’s economic interests (Newton, 2002). Sustainable business practice will therefore only take place when organizations learn to challenge and overcome these anthropocentric institutional and cognitive influences (Hart, 2005; Margolis & Walsh, 2003; Prahalad, 2005) by undergoing a deep-seated transition in culture or paradigm shift (Egri & Herman, 2000; Gladwin et al., 1995; Haugh & Talwar, 2010; Hoffman & Ehrenfeld, 2000; Jermier, 2008; Shrivastava, 1995; Starkey & Crane, 2003; Waddock & McIntosh, 2009). In response, scholars introduced concepts such as radical environmentalism (Egri & Pinfield, 1996), new environmental paradigm (NEP) (Catton & Dunlap, 1980), deep ecology (Colby, 1989), and ecocentric paradigm (Purser et al., 1995; Shrivastava, 1995), all of which represent a fundamental counterpoint to the anthropocentric paradigm. This worldview considers ecosystems to have inherent worth independent of human value judgments (Hoffman & Ehrenfeld, 2000) and asserts that economic advancement should be foregone for harmony with nature (Devall & Sessions, 1985). Yet scholars have doubted the potential of the ecocentric discourse to bring change at all due to the ‘risk of being written off as more irrelevant rhetoric’ (Hanna, 1995, p. 798; Newton, 2002). Moreover, the paradigm has been recently criticized for overemphasizing the physical environment at the expense of the social environment. These scholars advocate the need to preserve the cultural and spiritual traditions and socioeconomic systems of those indigenous communities most vulnerable to the broader engine of international economic development and the Western-centric environmental movement (Banerjee, 2003; Bansal, 2002; Collier, 2010; Navarro, 2010; Pfeffer, 2010). Several scholars have sought to ease the tension inherent in this contemporary ideological dichotomy by proposing a new paradigm that synthesizes these worldviews (e.g. Dyke & Schroeder, 2005; Hoffman & Ehrenfeld, 2000; Jermier, 2008; Lamberton, 2005). Egri and Pinfield (1996) introduced reform environmentalism as a compromise between the dominant social and radical environmentalism paradigms, while Colby (1989) introduced ecodevelopment as a synthesis to frontier economics and deep ecology, shifting from ‘economizing ecology to ecologyzing the economy’ (Colby, 1989, p. 23). Most popular is Gladwin et al.’s (1995) sustaincentrism where human behavior is guided by constraints imposed by the ecological environment and a moral compass meant to preserve spirituality and cultural values within and across generations (Kallio & Nordberg, 2006). While a formal definition of sustaincentrism is not available, scholars have referred to principles that guide the concept (Starik & Marcus, 2000). First, sustaincentrism requires the inclusion of multiple systems across both space and time (Bateson, 1972; Hoffman, 2003; Purser et al., 1995; Shrivastava, 1995; Starik & Rands, 1995). As Gladwin et al. (1995) explained, moral monism of both anthropocentrism and ecocentrism is rejected in favor of moral pluralism where the human constituency transcends traditional alliances and includes broad blocks

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of society (Hoffman & Ehrenfeld, 2000) by embracing the full conceptualization of political, civil, social, ecological, and economic rights and systems (Bansal, 2005; Gladwin et al., 1995). Second, inclusiveness is insufficient unless it acknowledges the interconnectedness of these systems (Hoffman, 2003; Montiel, 2008; Rolston, 1994; Shrivastava, 1995; Starik & Rands, 1995). Unlike reductionism, where systems are considered independently, sustaincentrism requires the mastery of understanding interrelationships of causality and predicting the diverse effects of decisions on ecological cycles (Bateson, 1972), sociocultural ways of life (Barbier, 1987; Hart, 2005; Hawken, 2007), and economic systems. Finally, including multiple systems in an interconnected way is insufficient unless these systems are incorporated equitably. The equity principle replaces any position of privilege typically afforded to certain systems (Livesey, 2002) with equality through the fair distribution of resources, opportunities, basic needs, and property rights (Des Jardins, 1993; Stiglitz, 2002; Yunus, 2007). It also acknowledges that nature has intrinsic worth (Kallio et al., 2007; Purser et al., 1995) and requires that humanity’s freedom and rights to self-determination operate within the limits of Earth’s carrying capacity (Bansal, 2005; Gladwin et al., 1995; Hart, 2005; Starik & Rands, 1995; Stubbs & Cocklin, 2008). While scholars tend to agree on the need for a synthesis of worldviews, important limitations remain in our understanding of this paradigm (herein called sustaincentrism). First and foremost, scholars have struggled to articulate how to define firm adoption of sustaincentrism as a distinct orientation from the popular reactive and proactive adoption levels. Whereas a reactive orientation is defined as ‘a response to changes in environmental regulations and stakeholder pressures via defensive lobbying and investments in end-of-pipe pollution control measures’, a proactive orientation is defined as ‘anticipating future regulations and social trends and designing or altering operations, processes, and products to prevent (rather than merely ameliorate) negative environmental impacts’ (Aragón-Correa & Sharma, 2003, p. 73). Existing operationalizations of a proactive orientation such as an environmental management functional area, internal and external reporting, employee environmental training, environmental communication or board environmental committees hardly represent proxies for sustaincentric adoption levels (Hoffman, 2003). For instance, Sharma and Henriques (2005) operationalized ‘business redefinition’ in the Canadian forestry industry through firm use of alternative fibers, which only represents a specific initiative for one ecological system housed in a particular department of the firm, rather than any measure of whether sustaincentrism has permeated throughout the firm. Indeed, Hoffman (2003) explained that environmental management initiatives, however proactive, tend to involve technical equations and numerical analyses that neglect social aspects of transformational change such as community acceptance of a new industrial facility. Amplifying this limitation is the general wave of firm behavior that has abandoned a reactive orientation to voluntarily or proactively pursue social and environmental practices. More than 80% of businesses report sustainability information online, more than one-third use the voluntary Global Reporting Initiative (GRI) standards, 86% of companies have sustainability websites (up from 58% in 2005) and 49% produced a sustainability report in 2007 (Blackwell, 2008; SIRAN, 2010). Grouping together all non-compulsory activities under the proactive orientation may mask important nuances that delineate isolated initiatives that create tradeoffs from those that conform to the principles of sustaincentrism. Consider PepsiCo’s launch of its SunChips compostable bag, an initiative that proactively anticipates potential future regulations and social trends and represents a redesign of a product component meant to prevent negative environmental impacts. This initiative, however, overlooks the greater health and ecological effects of the contents in the bag – intense processing, use of chemicals and fortified ingredients, nutrient stripping – thereby lacking the complex interconnectedness of multiple social and ecological systems. Extant literature associated

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with a proactive orientation is therefore insufficient in capturing the original intent of those scholars who discussed broader paradigmatic change where sustaincentrism permeates the organization as a legitimate and well-accepted approach to business. Second, paradigmatic discussions remain theoretical and, in light of little substantial change in capitalist approaches (Egri & Herman, 2000), doubts persist about whether these ‘new orders’ (Newton, 2002) are even feasible at the firm level (Kallio & Nordberg, 2006). Although Gladwin explained that sustaincentrism articulates a way to move towards reconciling the chasm between business and the environment, we know very little about what firms need to do to make this happen. Yet there is growing evidence of firms that have incorporated sustaincentrism as a legitimate and well-accepted approach to business (e.g. Elkington & Hartigan, 2008; Hart, 2005; Mair & Seelos, 2004; Prahalad, 2005; UNDP, 2008; Yunus, 2007). Companies such as Grameen Bank, SEKEM Group, and Interface Inc. are part of a growing repository of cases with orientations that go beyond established definitions of a proactive orientation. Thus, while there is modest agreement on the aforementioned principles that guide sustaincentrism, extant literature is limited in empirical work that explains firm adoption of these principles (Shrivastava, 1995; Starkey & Crane, 2003). As already mentioned, any empirical work is limited to antecedents to and consequences of a reactive and proactive orientation (e.g. Aragón-Correa & Sharma, 2003; McWilliams & Siegel, 2000; Orlitzky et al., 2003; Waddock & Graves, 1997; Winn & Angell, 2000). But, as highlighted by Sharma and Henriques (2005, p. 175), scholars examining firms in a proactive orientation tend to neglect ‘organizational sustainability holistically or at multiple levels’ and instead focus their attention on ‘operational elements of sustainability practices of individual firms’ (Christmann, 2000; Shrivastava, 1995) such as eco-efficient strategies for reducing waste, materials or energy use (Hart & Ahuja, 1996) or preventing pollution at the source (King & Lenox, 2001; Russo & Fouts, 1997) via redesign of particular processes and products (Klassen & Whybard, 1999). Explanatory variables predicting a firm’s proactive orientation are therefore inappropriate in our understanding of how firms adopt a more paradigmatic shift in orientation. Taken together, the definitional ambiguity of what sustaincentrism means at the firm level as well as gaps in our understanding of what explains firm adoption of the paradigm suggest that the field is ripe for a comprehensive empirical examination of sustaincentrism. I therefore propose the following two research questions: (1) How can we identify firms that adopt a sustaincentric paradigm and (2) what explains firm adoption of this paradigm? The findings of this study point to three interrelated dimensions that have relevance across three levels of analysis, the combination of which contribute to our understanding of how sustaincentrism is manifested in the firm.

Methods To best answer the two research questions posed, I used a qualitative, inductive, comparative case research design that followed a replication logic; that is, cases were treated as a series of experiments, each serving to confirm or disconfirm the inferences drawn from the others (Eisenhardt, 1989; Yin, 2003). I chose a qualitative approach because the phenomenon of interest is largely unknown in the management field and theoretical testing done using a quantitative study may overlook the rich and highly complex variables that explain sustaincentric adoption levels by the firm. Consequently, my goal here was to build theory through in-depth interviews and observations rather than to test theory.

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I chose the African context as my research setting for three reasons. First and foremost, the operating environments of firms in developed countries do not exhibit the same level of environmental degradation, social inequity, corruption, disease, and other inter-system issues as those business environments in the South (Idahosa, 2004; Idahosa & Shenton, 2002; Scherer & Palazzo, 2007; Valente & Crane, 2010). Moreover, these issues are highly interconnected (Idahosa & Shenton, 2002), which means that a serious and effective response to any one issue requires that firms develop some level of capacity to understand the interconnectedness of this issue with other seemingly diverse issues. Second, business environments in the South, particularly Africa, tend to lack strong regulatory structures to address social and ecological issues (Valente & Crane, 2009). This creates a setting where for-profit firms take on public welfare responsibilities (Matten & Crane, 2005; Scherer & Palazzo, 2007) in ways that range from philanthropic contributions to their incorporation in core operations and business models predicated on addressing these public welfare gaps (UNDP, 2008; Valente & Crane, 2009, 2010). Finally, conducting this study in the South helped to escape the Western ideology that has arguably plagued the sustainable development concept in its imposition of a rationalistic tone to managerial decisions that neglects unique variants of developing countries (Banerjee, 2003). Consequently, nuances that more accurately represent a sustaincentric approach might best be uncovered in contexts where logics of the West are ill-suited to deal with these issues (London & Hart, 2004). I divided the research process into two major phases, one for each research question. Because the sustaincentric orientation was not identified a priori, the first exploratory phase was instrumental in uncovering the different ways firms incorporate the aforementioned sustaincentric principles. Over a six-week period, I interviewed internal and external stakeholders of six firms – three in agriculture and three in manufacturing. Preliminary data analysis revealed that, while four of these cases aligned closely with characteristics of a reactive or proactive orientation (two for each), the remaining two exhibited behavior that was unexplained by the literature’s proactive orientation. Drawing on the sustaincentrism literature, I found that the behavior of these latter two firms demonstrated a firmwide adoption of the sustaincentrism principles. By comparing and contrasting the data from these six businesses, I conceptualized three orientations in Table 1. The first resonated with a reactive orientation whereby any consideration of social and ecological systems are fractured in nature in response to regulatory constraints or industry norms, with little or no significant relevance to the firm’s purpose and core operations. The second resonated with a proactive orientation where firms voluntarily incorporate independent social and ecological systems in pockets of the firm as a legitimate organizational activity yet not collectively in their overarching purpose and core operations. The third is a sustaincentric orientation, which reflected a firm-wide adoption of sustaincentric principles where the integrity of multiple social and ecological systems is embedded equitably and interdependently in the overarching purpose and core operations of the firm. With these orientations discovered, I theoretically sampled the remaining cases so that I had a representation of firms across three diverse sectors – agriculture, manufacturing, and tourism – with at least one firm in each of the three orientations. The three orientations are described for each sector in Table 2. A total of 12 cases were sampled (see Table 3). The second phase of the research process involved over 120 interviews with informants inside and outside the 12 firms to understand what explained firm adoption of their respective orientations. Interviews were conducted with a range of stakeholders including employees, middle and senior managers, non-governmental organizations, community groups, community leaders, multiple levels of government, and farmers. Interviews with external stakeholders were important in uncovering the relevant social and environmental challenges of the context while gaining their impressions of the firm’s response to these issues, and, if applicable, their role in this response. Internal firm interviews

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Valente Table 1.  Sustainable Development Principles and Case Adoption Orientations Dimension

Reactive

Proactive

Sustaincentric

Inclusiveness

Exclusive short-term focus on financial systems. Considers social and ecological systems as required by law and/or sector norms (Aragón-Correa & Sharma, 2003)

Ensure the inclusion and balance of social, ecological, and economic systems across space and time (Gladwin et al., 1995; Purser et al., 1995; Starik & Rands, 1995)

Interconnectedness

Fractured worldview separating out social, ecological, and economic systems through simplified reductionism (Gladwin et al., 1995; Purser et al., 1995)

Isolated part(s) of the firm go(es) beyond legal and industry norms and demonstrate(s) inclusion and balance of social, ecological, and economic systems across space and time (Aragón-Correa & Sharma, 2003) Isolated part(s) of firm adopt(s) a systems thinking approach (Aragón-Correa & Sharma, 2003; Sharma & Vredenburg, 1998)

Equity

Firm-centered approach that weakens social and ecological systems over space and time with the exception of legal requirements and industry norms (Fergus & Rowney, 2005; Purser et al., 1995)

Isolated part(s) of the firm contribute(s) to a healthy, equitable, ecological, social, and economic context beyond legal requirements and industry norms (Hoffman & Ehrenfeld, 2000; Sharma & Henriques, 2005)

Adopt a systems thinking approach by considering social, ecological, and economic systems as interconnected and interdependent (Gladwin et al., 1995; Hoffman, 2003) Ensure a healthy and equitable ecological, social, and economic context (Gladwin et al., 1995; Hoffman, 2003)

revolved around understanding the relationship between these challenges and the firm and how they responded. I spent anywhere between three and fifteen days at each firm, which allowed me to supplement interview data with observations and informal conversations. For instance, conversations over meals, speaking with staff while waiting for interviews, transportation to and from meetings, and social outings with employees and managers allowed for a more congenial environment to understand how firms responded to social and ecological issues. Also, staying in the vicinity of the firm allowed me to understand some of the social and ecological issues interviewees referred to. These observations were very helpful in confirming or disconfirming claims made in the interviews, while providing me with a richer account of what explained firm adoption levels. As expected then, interview time represented a relatively small percentage of onsite field time. Table 3 provides background and data collection information for each case. Data analysis ran concurrently with data collection (Eisenhardt & Graebner, 2007; Yin, 2003). At the conclusion of a given day of interviews and observations, I would reflect on the day by developing contact summary sheets for each interview, noting key observations and messages from the interview. I would also write field notes at the conclusion of each day to summarize the collection of interviews and observations while identifying emerging questions to ask later (Miles & Huberman, 1994). Upon returning from the field, I transcribed all the formal interviews and coded important observations that explained how and why each firm was responding to social and

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Table 2.  Firm Orientation by Sector Reactive Agriculture

Short-term financial return clear priority at the expense of future system degradation. Farmers are perceived as independent to the business model; little farmer support and development; poor training, inefficient payment systems, and small margins. ‘Government’s job to provide support.’ Farmers struggle to access public services on an ongoing basis. Use of fertilizers and pesticides degrade ecological systems.

Proactive

Isolated sections of the firm demonstrate farmer inclusion and community development, although ecological systems still compromised through fertilizer and pesticide use. Department sees connection between firm welfare and farmer/community livelihood. Isolated public services provided insofar as they assist in increasing farmer yield (e.g. mobile health care). Manufacturing Short-term economic ambitions Isolated sections of of firm perceived as separate the firm demonstrate from community social, connectivity with and economic and ecological sustained response systems. Regard for community to individual social, comes through fractured topeconomic or ecological down philanthropic activities systems (e.g. HIV/AIDS based on industry norms while policy, environmental ecological efforts comply with rehabilitation) beyond regulation. Public services industry norms. are unsustainable and do not Community remains address core community needs. dependent on firm Community dependency and yet public service tense relationships with firm responses fill system result. deficits (health care, education). Tourism Protectionist and exclusionary The lodge division (not approach. Communities, hotel) demonstrates development, and tourism not sustained response perceived as compatible or to multiple social, interconnected. Local people economic and remain compliant receivers of ecological systems. tax revenue (that are rarely Deliberate protection paid) or philanthropy, resulting of community welfare in inequitable circumstances and ecological systems and a chronic absence of with ad hoc initiatives. public services while ecological Public welfare gaps systems are compromised. are therefore tackled Community poaches wildlife independently with the and deforests the surrounding firm taking the dominant landscape for survival. role, resulting in dependence on the firm.

Sustaincentric Prevalence of women as income earners resulting in access to education and health care. Defies industry norms of farmer exploitation and provides fair margins, training, finance, and acts as the key intermediary to the market. Farmer incomes increase by up to 100% and gain access to credit through intangible collateral. Organic business practices mend ecological system issues (Kenyan deforestation, Egyptian biodiversity loss). Self-sustained provision of public services in the company’s rural environment. Income-generating and local business development opportunities. Community develops capacity for selfsufficiency to respond to system-level issues as they arise through localized governance platform. Represents model for community development for district and national governments. Influences international standards on CSR. Maintenance and building of the integrity of social, economic, and ecological systems through eco-tourism. Community welfare, financial sustainability, and environmental sustainability are perceived as interconnected. Firm operates within the limits of ecological systems while upholding community systems for the provision of life-supporting services. Community leverages ecological resources for sustained income alongside company business model.

Sustaincentric Honey 1998 Private Kenya

Orientation Subsector Year founded Structure Home country Employees Research visits Total visit days Senior mgt. Middle mgt. Employees IFIs* Government NGOs Communities Farmers Total interviews Interview time Onsite time

5

4 4 2 0 0 1 2 1 18

24 hours 140 hours

8

5 2 2 1 1 3 1 2 17

24 hours 160 hours

*International finance institutions

100 1

45 2

Sustaincentric Produce 1977 Private Egypt

Kenya Honey Egyptian Organics

 

Agriculture

15 hours 80 hours

4 2 0 1 0 1 2 1 11

5

3500 1

Proactive Sugarcane 1998 Subsidiary S. Africa

6 1 2 1 1 1 4 0 16

18

500 3

Sustaincentric Minerals 1911 Subsidiary India

14 hours 70 hours

2 1 3 0 0 1 3 0 10

4

100 1

Proactive Cement 1951 Subsidiary India

Kenya Mining Kenya Cement

Manufacturing

16 hours 24 hours 75 hours 240 hours

2 1 1 0 0 0 1 1 11

4

900 2

Reactive Tea 1964 Coop Kenya

Tanzania Kenya Sugarcane Tea

Table 3.  Case Background and Data Collection Information

3 1 1 1 0 2 2 0 10

6

600 2

Reactive Steel 1961 Subsidiary India

Kenya Steel

16 hours 15 hours 80 hours 96 hours

3 4 2 0 0 2 2 0 13

4

2300 1

Proactive Forestry 2001 Private S. Africa

SA Forestry

24 hours 140 hours

5 3 2 1 0 2 3 0 16

7

1000 1

Sustaincentric Eco-tourism 1990 Private S. Africa

SA EcoTourism

Tourism

13 hours 75 hours

3 2 1 0 0 1 1 0 8

5

2000 1

Proactive Hospitality 1971 Private Kenya

15 hours 55 hours

4 1 2 0 0 0 2 0 9

3

300 1

Reactive Hotel 1997 Private S. Africa

10 hours 18 hours

4 2 1 0 0 1 0 0 7

2

3400 1

Reactive Hotel 1977 Public Kenya

Kenya SA Kenya Hospitality Hospitality Tourism

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ecological challenges (within-case analysis). I focused particularly on those factors that explained variation in the firm’s ability to enact the three sustaincentric principles of inclusiveness, interconnectedness, and equity. I then compared these observations across the three orientations for each sector (agriculture, manufacturing, and tourism) to identify nuances that were evident in the sustaincentric firms but not in the other two orientations, and vice versa. I used a replication logic where preliminary descriptors from one case were verified, amended, or dropped based on comparisons with other cases (Eisenhardt & Graebner, 2007). With descriptive observations emerging at the sector level, I conducted a similar replication strategy across the sectors to verify, further amend, or drop emerging observations. The final stage of the analysis involved understanding how the observations, now representative across the three sectors, hung together and represented critical subthemes making up a conceptual framework (Pratt, 2009).

Findings The results from the data analysis pointed to a highly interrelated set of descriptive observations, from which two important points of intersection emerged. First, observations were located in one of three levels of analysis: individual, organizational, and interorganizational. Second, each level of analysis and their corresponding observations informed three conceptual subthemes that explained firm adoption of a sustaincentric paradigm. In what follows, I discuss the role of each level of analysis across the three horizontal constructs of building cognitive complexity, operating as a network, and achieving competitive advantage.

Building cognitive complexity In describing the firm’s struggles to embed sustaincentrism, the CEO of a reactive firm referred to the organization’s inability to cognitively integrate diverse social, economic and ecological issues: The biggest obstacle was to break that distinction … where … we focus on our business and then to the extent that we can do stuff for the society and the environment, that’s great … But … lacking is a real integrated understanding of how these issues interplay in the business. (SA Hospitality)

Sustaincentric firms, on the other hand, demonstrated a greater ability to understand how these seemingly diverse systems are integrated in their immediate environment. As reflected in Table 4, the data pointed to three multilevel mechanisms that explained why the three sets of firms varied in this regard. I discuss each in turn.

Individual level: enacting dual roles Employees of sustaincentric firms occupied dual roles as members of the surrounding community. In the following quotation, a sustaincentric firm employee describes how closely connected his role as an employee is with his role as a community member: When we go back to our communities at the end of a day’s work, we walk past the clinic, we walk past the schools. My children are in the very classrooms that [South Africa Ecotourism] supported.

Here, the employee is predisposed to the challenges of the local environment and exhibits a deeper cognitive understanding of the interconnectedness of the business and the community. In a similar

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Valente Table 4.  Building Cognitive Complexity Level of analysis

Building cognitive complexity

Reactive orientation

Proactive orientation

Sustaincentric orientation

Individual level

Enacting multiple roles

No enactment Employees tend not to be from around here. They lack the skills needed to work here. (Kenya Tourism)

Isolated enactment And then we employed Patricia from the community to [implement the HIV/AIDS program], and she’s doing a really stunning job. (Kenya Cement)

Organizational level

Frame building identity

Anthropocentric identity As an organization, we’re not there yet. Our involvement in the community, school projects, and other community things are perceived as outside the realm of why we exist. It’s not yet in our culture, we’re still operating in a financial or economically based outlook. (CEO, Kenya Steel)

Interorganizational level

Tension elicits frames

No tension (parental role) Well it’s quite simple, the community comes to us with a need and we decide whether we can help them. (Kenya Steel)

Split identity I’m not sure I’d call us an environmental company. We do some good things with the [rehabilitation projects] and we get some good feedback on that but you feel kind of odd when you know that a majority of what we do isn’t very good for the community and the environment. (Kenya Cement) Hostile tension We have a position as the outgrower association and we will fight the company for what we want. That’s how it’s always been. (Tanzania Sugarcane)

Diffused enactment Our employees at the end of the day go back home and they are part of the community. We can’t address the employee issues without dealing with the community in which the company operates. (Kenya Mining) Sustaincentric identity We all believe that the cultural and social activities are essential to increase the efficiency in the economical part. So it’s something related to the other. (Egyptian Organics)

Constructive tension I think we all felt [some tension]. I mean farmers weren’t used to trusting us. [The NGO director] was able to put his NGO hat aside and think from a business perspective. I’m sure that created some tension within his organization and from donors funding them, even us, I mean this was completely different from the regular model. (Kenya Honey)

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vein, Kenya Mining hired a Maasai from the surrounding community because of his highly valuable knowledge of the Maasai way of life, while Kenya Honey’s project officers were hired from farmer communities because they understood the challenges that could impact farmers’ honey yields: The project officer is the key … They play an important role in knowing what is happening on the ground. Because most of [the project officers] are from the local community and speak the language and know the culture, they are able to continuously gather the right information about the … farmers. They act as a link between [Kenya Honey] and the community.

Employees who carried the perspective of the surrounding community possessed greater capacity for considering social, ecological, and economic systems in an integrative way. In those instances where employees were not predisposed to this alternative role, they developed a deep understanding of stakeholders by enacting their perspective. The former managing director of Kenya Mining explained the importance of living in the community to understand community needs and how to best work to assist them. In contrast, middle and senior managers of Kenya Steel, a reactive firm, commute 20 miles to and from the plant location and the surrounding community on a daily basis. While extant literature has discussed the importance of incorporating different perspectives and input (Aragón-Correa & Sharma, 2003; Hart, 1995, 2005), the data here revealed that hearing these perspectives was not as effective as enacting them. Sustaincentric firm employees enacted a wider variety of perspectives through which to comprehend the interconnectedness of seemingly divergent and incompatible social, economic, and ecological systems.

Organization level: sustaincentrism as a frame building identity Surfacing consistently in the sustaincentric firms was reference to a common identity, which entails the central, distinctive, and enduring organizational attributes that define how organization members answer the question ‘Who are we?’ (Whetten, 2006). Scholars have explained that identity claims originate from an engrained composition of beliefs that subsequently influence the number and type of cognitive frames or lenses organizational members use to make sense of external phenomena (Reger, Gustafson, Demarie & Mullane, 1994). Egyptian Organics discussed how their belief system nurtures a way of thinking that incorporates multiple systems across the supply chain: The culture here at [Egyptian Organics] makes people think a bit differently. Employees see that we have an agreement to foster close relationships in our supply chain.

But in the same way that a sustaincentric identity can foster cognitive frames that allow for the consideration of multiple systems, an alternative identity can present barriers to an alternative paradigm. Despite the willingness of a local non-governmental organization (NGO) to share their expertise and knowledge of the Sudanese market, Kenya Steel’s existing identity inhibited the appropriation of these capabilities for expansion into Sudan. In the quotation below, an employee of an NGO expressed her frustration: We struggle to get a more systematic involvement in infrastructure development. Steel is an important material for rural areas, but [Kenya Steel] hasn’t shown interest. This is where we struggle. (NGO representative)

When asked why such a strategy was not pursued, the CEO of the reactive firm responded:

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As an organization, we’re not there yet. Our involvement in the community, school projects, and other community things are perceived as outside the realm of why we exist. This is something I need to work on. It’s not yet in our culture, we’re still operating in a financial or economically based outlook. (Kenya Steel)

Although the informants above used the word ‘culture’, they do so with the intent of making ‘legitimate identity claims’ (e.g. ‘that’s who we are’) (Whetten, 2006, p. 228). Battilana and Dorado (2010) found that adopting a new hybrid organization that synthesizes market and development logics requires the creation of a common identity that strikes a balance between those logics. Sharma (2000) similarly found that organizational context represents a significant influence in the framing of managerial interpretations of environmental issues. He explained that only when environmental issues represent an integral part of the corporate identity do they represent opportunities. While the results presented here corroborate these findings, they also emphasize the role of an identity in influencing the cognitive frames through which firms make sense of their environment (Reger et al., 1994). These frames allow for the consideration of multiple systems and an understanding of how these systems are interconnected. Moreover, the frames do not consider any system to be superior over the other. Important internal structures played an important role in subduing, isolating, or diffusing this identity across the three orientations respectively. Reactive firms had corporate social responsibility (CSR) departments that were typically created for PR purposes to reconcile stakeholder pressure and to reductively ‘take care of’ social and ecological issues. Kenya Steel had a dedicated public relations person who handled any and all community-based initiatives, while Kenya Tourism had a CSR department to handle charity initiatives. Proactive firms had formal groups or departments to address particular social or ecological issues. These were not philanthropic in nature but meant to address negative externalities associated with their operations or issues associated with their competitive context. Tanzania Sugarcane, for example, had a department that was responsible for improving the ability of farmers to transport their sugarcane to the firm. These isolated structures align closely with Battilana and Dorado’s (2010) assertion that, without a common identity, subgroup identities emerge and as a consequence the firm is unable to address system issues in an integrative manner. In contrast, sustaincentric firm structures were meant to diffuse the belief systems just described. Kenya Mining’s community liaison officer was tasked with building greater connectivity between the company and the community, while SA Ecotourism’s sustainability officer, because of his substantial history with the firm, was tasked with maintaining the sustaincentric identity throughout the organization: I’m the custodian of the vision. So I’ll … thank the staff in Tanzania for helping reintroduce the black rhino … thank them for fighting through the traffic every day to make a difference for elephant management at [a particular lodge]. So people feel like they’re working here because they make a difference.

These observations suggest that a common identity accompanied by an enabling internal structure is essential to cope with the complexity of a sustaincentric paradigm. ‘Sustainability is 3000 people’s jobs’, remarked a senior manager at SA Ecotourism in highlighting the need for increased cognitive understanding at every corner of the organization to deal with the multitude of interconnected systems in an equitable manner.

Interorganizational level: tension elicits frames Informants of sustaincentric cases spoke of the need to create and draw upon tension with stakeholders in their decision-making processes to incorporate multiple and seemingly divergent

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perspectives. Kenya Honey, for instance, used their relationship with an NGO to incorporate a development perspective: [The NGO Director] keeps us on the straight and narrow. It’s good to have somebody out there who comes from a little more on the social side of the spectrum than you are. Then we come in slightly more on the business side of the spectrum. (Kenya Honey)

The same is true for the stakeholders who concurrently incorporated a business frame into their decision-making. Notice in the following quotation how farmers in Egypt began to see things from the perspective of the firm and their European consumers: We also try to keep the supply chain very tight so that the farmer sees that he’s not just a supplier. We bring farmers in one day per week to the pack house so they can see how packing is done. [The farmer] meets the customer and hears about their complaints. So it’s important that the farmer understands the demand side of the supply chain.

So long as the balance of power was shared among actors representing multiple systems, interaction between the firm and stakeholders played an important role in infusing alternative frames of reference, which enabled firms and their stakeholders to better acknowledge and incorporate multiple systems in an equitable manner (Scherer & Palazzo, 2007): We have regular meetings with agronomists from the university, smallholder farmers, larger farms, [company] engineers, and European customers to openly discuss ideas and challenges about organic farming. They represent different cultures but once we start to trust each other, the solutions start to come. (Egyptian Organics)

Although proactive firms exhibited tension, it was primarily negative, non-inclusive, and related to a specific problem rather than to issues that had broader implications for the organizations’ purposes. As reflected in the following quotation, Tanzania Sugarcane discussed how its isolated department continued to implement projects in response to farmer public service issues such as health care: ‘[The department] meets regularly with the outgrowers association to decide where we should allocate our funds next’. In this example, farmers’ social systems are considered independent of firm economic issues or broader ecological issues. Because these departments are isolated, any equitable distribution of firm attention is hindered by anticipated power dynamics between departments. Reactive firms played a parental role, allowing for no tension with stakeholders. The firms’ dominating role in these projects suppressed any potential healthy tension that would have enabled any consideration of unfamiliar social and ecological systems. Diversity of actors is essential to question existing assumptions of the dominant worldview (Flood, 1990). Anderson (1999) explained that homeostasis in a given system collapses ‘when networks are more densely connected, so that each agent’s behaviour is influenced by the outputs of several agents’ (p. 222). The tension just described allowed firms to go beyond existing organizational narratives (Starkey & Crane, 2003) and equipped them with the frames necessary to integrate multiple systems in decision-making. When asked how they were able to adopt a sustaincentric paradigm, the CEO of Egyptian Organics described the fundamental need to integrate with stakeholders if the firm was going to effectively understand the complexity of such an orientation: We want to make this very, very clear – this is a joint task and nobody can do it alone. Some don’t want anyone to interfere. But then you start to lose track and fall back to the old mindset. If we don’t integrate, we won’t survive in this type of business. So we have to work on these relationships. (Egyptian Organics)

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Cognitive psychologists define cognitive complexity as the number of frames or lenses an individual (or organization) brings to bear in describing a particular phenomenon (Scott, 1962). A higher degree of cognitive complexity is associated with a higher ability to comprehend the complexities of the environment. Because the neoclassical economic worldview is the dominant paradigm today (Stubbs & Cocklin, 2008), individuals and organizations are not cognitively equipped to accumulate and make sense of the information required to equitably include multiple systems interdependently (Jelinek & Litterer, 1994; Kahneman & Smith, 2002; Tversky & Kahneman, 1981). The three multilevel characteristics just described enable greater cognitive complexity of sustaincentric firms, the result of which infuses alternative frames that have a fundamental effect on the way a decision is viewed and hence the course of action taken (Kahneman & Smith, 2002; Tversky & Kahneman, 1981; Wright & Goodwin, 2002). In effect, employee dual roles, a common sustaincentric identity, and interorganizational tension afford the firm with a greater ability to equitably absorb and make sense of information across multiple interconnected systems.

Operating as a network Firms across the three orientations varied significantly by the degree to which they were formally connected with their surrounding context. Employee job functions breached the boundaries (Bowker & Star, 1999; Carlile, 2002) that distinguish firm functions from those of community-based and non-governmental organizations, while important firm structural mechanisms solidified the link with these external stakeholders. In addition, interorganizational interdependence was instrumental in the implementation of core operations. These findings suggest, as illustrated in Table 5, that sustaincentric firms tended to operate as a network with stakeholders in the surrounding environment, working collaboratively towards a broader set of objectives.

Employee level: job functions transcend boundaries Employees of firms in the sustaincentric orientation viewed social and ecological issues as part of their daily routines, while proactive firm employees were limited to seeing this connection in isolated parts, products or projects of the firm. For example, employees of Kenya Cement, a proactive firm, who understood the relevance of social and ecological issues, were isolated in specific departments such as limestone extraction and human resources, two departments linked with quarry rehabilitation and HIV/AIDS programs respectively. This was different from sustaincentric firms where a majority, if not all, employees extended their job function boundaries to include social and ecological activities that would typically fall under other groups or organizations. For instance, SA Ecotourism game drivers – those taking consumers on excursions around the game reserve – provided knowledge and expertise beyond the common ecological education expected and included information about surrounding communities: ‘We expect our staff to talk about the bigger picture with the guest, which means talking about the communities surrounding the game reserves’. In a similar vein, Kenya Mining employees extended their expertise to community-based initiatives not as a voluntary gesture but as an assumed role extension. Civil engineers recognized that part of their responsibility included addressing technical issues with community infrastructure such as the installation and subsequent maintenance of solar panels on a secondary school co-funded by the community and the company. Likewise, the director of transportation for mining operations explained, ‘I provide transport to everyone, be it the community, be it senior management … the whole community requires transport, not just the company’.

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Table 5.  Operating as a Network Level of analysis

Operating as a network

Reactive orientation

Proactive orientation

Sustaincentric orientation

Individual level

Job functions transcend boundaries

Voluntary role Our employees do these sorts of things on a voluntary basis. (Kenya Tourism)

Organizational level

Anchoring the network

Structure isolates firm We have a department that looks after the CSR stuff. That’s why they’re there. There’s no need to involve others. (Kenya Tourism)

Organization-wide extension of job functions My staff and I are responsible for any activities associated with the surrounding communities. I meet with the senior chiefs on a regular basis … it’s a huge part of my job. (SA Ecotourism) Structure emulates a network The [sustainable development committee] is viewed as a big part of what we do … it impacts everyone. (Kenya Mining)

Interorganizational level

Network interdependence

Pressure firms to act Well, it’s up to [the community] to contact us. They send us a proposal for funding a project. (Kenya Steel)

Specific employees carry out functions Dr [Heber], who was a very results oriented guy and a very pragmatic guy, tried and tried until he succeeded at rehabilitating this land. (Kenya Cement) Structure allows isolated linkages We instituted the [department] which was a defining moment because we now had our own supply of funds to address farmer issues. (Tanzania Sugarcane) Interdependence for ad hoc isolated projects We have been talking with Global Fund and CARE [NGO] to try and work together on an ongoing basis. So far we haven’t been very successful. (Kenya Hospitality)

Network-level accountability I don’t think we would have been able to build in micro-leasing if it wasn’t for the relationship with [the NGO]. (Kenya Honey) The farmer really understands the demand side and the supply side. (Egyptian Organics)

Organization level: anchoring the network Unlike reactive firms, proactive and sustaincentric firms were unique in that they formalized structural linkages with external stakeholders. Yet whereas proactive firms created structures that linked firms with stakeholders for ad hoc projects at peripheral locations of the firm, sustaincentric firm structures represented a symbol of the interdependence of the firm’s core operations with stakeholders on an ongoing basis. For instance, Kenya Honey and SA Ecotourism launched a ‘tripartite

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model’ to institutionalize the interdependencies among farmers/communities, NGOs, and the business. In describing the need for this structure, the co-founder of Kenya Honey explained: ‘The tripartite model is really a division of expertise. It helped us to formalize our relationships with [the NGO] and with [farmers]’. In a similar vein, Kenya Mining created a committee to institutionalize the process by which the company, community, and NGOs could identify and implement community projects. In contrast to a more central structure, Kenya Cement, a proactive firm, created an isolated linkage between the company’s HR department and a women’s group in a local community to assist in the execution of an HIV/AIDS program. Reactive firms had broadly defined CSR departments that ambiguously linked the firm to its external stakeholders in a way that separated their role from the firm’s central operations. Scholars have referred to various structural mechanisms to denote a firm’s proactive orientation including policies (Henriques & Sadorsky, 1999), internal assessment tools (Nash & Ehrenfeld, 1997), and performance goals and compensation schemes (Hart, 2005; Welford, 1998). Sustaincentric firms, in contrast, institutionalized internal structures that solidified a network-level relationship with various stakeholders that more naturally resulted in decisions and actions that enacted the three principles of sustaincentrism.

Interorganizational level: network interdependence Examining differences between sustaincentric and proactive firms revealed that stakeholders represented critical actors or partners either in the execution of the business model itself or in support of core activities for the business model. External stakeholders were involved in supplier recruitment and retention, general operational assistance, making decisions for the entire supply chain, promoting the business model, firm decision-making, connecting the firm with critical stakeholders, and providing key resources. While proactive firm stakeholders provided such support for ad hoc projects, sustaincentric firm stakeholders provided this support as a fundamental and ongoing component of the firm’s business model. For instance, communities surrounding SA Ecotourism lodges represented critical stakeholders in policing poachers of the game reserves. Members of local stakeholders (e.g. farmer group, community, NGOs) ultimately extended their role to encompass firm-level ambitions in the same way that the firm employees extended roles as described earlier. NGOs at Kenya Honey played essential operating roles alongside firm employees in the training of farmers, collection of honey, and payment to farmers, while the farmers themselves assisted in building loyalty of neighboring farmers to Kenya Honey: There was one [farmer] who was not being cooperative and well he was thinking of selling his honey somewhere else. We told him that we’ll not deal with him. If he thinks of looking for a market anywhere else, then we won’t deal with him as a community. (Kenya Honey farmer)

In the same way that firms recognized the pivotal role of the stakeholder in the execution of their core operations, the stakeholder recognized the pivotal role of the firm in the execution of their objectives. For instance, the NGO director working with Kenya Honey explained: As an NGO, we could help improve [farmer] beekeeping skills, but neither we nor the farmers had the business acumen to market the honey. That’s where [Kenya Honey] came in. (NGO representative)

Extant literature has focused predominately at the firm level when understanding how stakeholders influence and assist the firm in their social and ecological aspirations (e.g. Hart & Sharma, 2004; Sharma & Vredenburg, 1998). But critical in this study was the reciprocal recognition by the

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stakeholder of the importance of the private sector in the achievement of their own objectives and those of all actors in the network. This second set of multi-level findings suggests that, while the sustaincentric firm and its stakeholders were independently concerned about their own welfare, they believed that these objectives would be better met by operating as a network or system of actors working collaboratively to a common end. Egyptian Organics spoke of this exact scenario when describing the need to take collective ownership of the supply chain: The supply chain management concept of the past was that companies negotiated with suppliers or farmers on the basis of their purchase power and the suppliers’ weakness. This was a concept where profit maximization of each [actor] in the supply chain was the cradle. But that concept is not sustainable in this type of business. We all must be working for a common end.

SA Ecotourism similarly referred to the need to consider the community, the environment, the animals, and the survival of the firm as part of a bigger objective. Building a network structure enabled the sustaincentric firms and its stakeholders to not only understand and acknowledge the relevance of multiple systems but to include each other as essential components of their respective operations. Moreover, because of the interconnected nature of the network, decisions incorporated the interdependence of different systems while assuring equitable representation in the decisionmaking process. In contrast, reactive and proactive firms, operating exclusively at the firm level, made decisions that unknowingly had potentially negative consequences for other actors in the system (Anderson, 1999).

Achieving competitive advantage The third and final source of variation – achieving competitive advantage – emerged in the data as a direct consequence of the previous two findings. In particular, sustaincentric firms effectively leveraged their cognitive complexity and network to build sources of sustainable competitive advantage based on the principles of sustaincentrism (see Table 6). Employee dual roles, inter-boundary job functions and awareness of the connection of their job to sustaincentrism elicited valuable and rare knowledge and commitment to social and ecological issues. Organizationally, firms drew upon their sustaincentric identity and stakeholder relationships as dynamic capabilities while positioning themselves as a leader in sustainable development. Finally, the interface among actors in the network led to a portfolio of complementary and highly inimitable capabilities.

Individual level: employee relation to business model Sustaincentric firms consistently spoke of the need to help employees relate personally to the firm’s sustaincentric business model. For instance, an Egyptian Organics middle manager explained, We show them the big picture. [We] take them for an orientation at the farm to see the little kids, to see the school, and to see the medical centre.

Kenya Honey similarly discussed the importance of educating employees about the connection between their role in manufacturing the beehives and the contribution this has on the livelihoods of their kin as users of the beehives in rural areas.

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Achieving competitive advantage

Reactive orientation

Proactive orientation

Individual level

Relation to sustaincentric business model

No connection to social/ecological issues We have to go out and experience … some initiatives with local communities … We haven’t done this yet. (SA Hospitality)

Pockets see relation to business To actually expose people to what’s been happening. Just having them visit projects of what we’ve been involved in. That makes a huge difference. (Kenya Hospitality)

Organizational level

Sustaincentric positioning

 

Sustaincentric capability development

Not a positioning strategy [Our community programs] are not strategic. But it is something that we have to do … the money that we spend, it’s not very significant in relation to our total revenues. (Kenya Tourism) No sustaincentric capabilities Well, there’s really nothing to it. We don’t do the project, we hire contractors. So our contribution is typically money. (Kenya Steel)

Interorganizational level

Complementary Non-existent resources and It’s tricky in the capabilities airline industry. Unless all the airlines come together, what are you going to do? (Kenya Tourism)

Sustaincentric orientation

Explicit connections with sustaincentrism It was important to help [employees] relate to the business model. So the makers of the beehives were educated about the fact that these hives are going to the communities where they are from. (Kenya Honey) Product/project positioning Orientation is [Kenya Cement] positioning strategy has become known We want to be for its rehabilitation positioned as the project, now a tourism sustainable tourist destination at [. . .] Park. destination where But that is of course [our company] is the separate from other obvious place to go. parts of our business. (SA Ecotourism) (Kenya Cement)

Operational capabilities only But you see, the thing is, you cannot actually copy the [rehabilitation] system … I’m sure it would be great if someone could come along and copy this but they can’t. It’s not possible. (Kenya Cement) Stakeholders not involved But we were already doing this. And that’s my job so we don’t see the need to dump this on NGOs. (Tanzania Sugarcane)

Dynamic capabilities At the end of the day, our strength lies in the relationships we have with our farmers – full stop. Whatever we do, we must preserve these relationships. (Kenya Honey) Complementary across actors The community plays an important security role and [the NGO] is best equipped to lead community projects. This is all part of the service to the consumer. (SA Ecotourism)

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It was important to help [employees] relate to the business model. So the makers of the beehives were educated about the fact that these hives are going to the communities where they are from … their grandfathers may actually be the ones using these hives. (Kenya Honey)

Peterson (2004) found that employee commitment is stronger among employees who believe highly in the importance of social responsibility in business, while Bhattacharya, Sankar and Korschum (2008) explained that connecting employees to the firm’s sustainability strategies improves loyalty, productivity and commitment levels. Hiring employees with values who can more easily identify this connection is critical for the CEO of a sustaincentric firm: For me, interviewing is that first 15, 20 seconds … I can realize at that point whether the person shares the same values as our company. And that’s pivotal. (SA Ecotourism)

In effect, employees of sustaincentric firms have a better understanding of how social and ecological systems are tied to their daily activities and the economic success of the firm. Moreover, with knowledge of a greater purpose associated with these activities, employee morale, loyalty, and productivity levels represent a source of competitive advantage.

Organizational level: strategic positioning and capability development At the organizational level, sustaincentric firms considered their ability to equitably incorporate multiple social and ecological systems as a means of differentiation from competitors. SA Ecotourism, for instance, positions itself in the minds of the consumer as a leading ecotourism company that integrates the broader complexity of the social and ecological environments: There’s a growing niche market out there right now. The traveler wants to know where they’re going, what’s being done for the surrounding communities, and what’s being done for the environment. So we realize that it’ll become more and more important to the guests that where they’re staying is a responsible eco-tourism operator. (SA Ecotourism)

Kenya Honey and Egyptian Organics, through their innovative farmer-inclusive practices, each carved out a competitive niche related to sustainable and inclusive forms of agriculture. Reactive firms, on the other hand, used their philanthropic activities as a public relations strategy that precluded any opportunity for sustained competitive differentiation in the marketplace. As mentioned, Kenya Steel was particularly reluctant to pursue a positioning strategy in the Sudanese market as a leader in post-war infrastructure development: [Kenya Steel] doesn’t deal with the community directly. Last year in March, they donated [material] worth 100,000 Kenyan Shillings. It was great for them because they gained a lot of publicity out of it … But we struggled to get a more systematic involvement in infrastructure development. (NGO representative)

Although Kenya Tea, a reactive firm, needed the buy-in from tea farmers for success of their business model, the incorporation of fair-trade practices was non-existent, implying little perceived value associated with positioning the company in this way to the market. In a discussion of ecologically sustainable differentiation strategies, Shrivastava (1995) explained that products can be positioned based on ecological features such as ingredients and packaging. This closely aligns with the proactive orientation examined in the present study where firms positioned a particular process or product/service line in the marketplace, such as Kenya Hospitality’s group of

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rural lodges or Kenya Cement’s quarry rehabilitation processes, both positioned as sustainability features of the business. Sustaincentric firm differentiation extended beyond the product or service to a way of operating or purpose that encompassed supporting activities and processes that collectively challenged the taken-for-granted approaches of competitors. Note in the following quotation that the firm is positioned based on its business model, not by the product it is producing: Going forward, it’s important to remember that the model is now more valuable than the product we’re producing. Clearly it’s all about small-scale producers, development organizations and private enterprise. . . that’s how we’ve been able to compete successfully. Our customers like the story and the [product] is good too. (Kenya Honey)

This means that the generation of cognitive complexity required to comprehend multiple systems in an interconnected way is insufficient unless the firm is able to translate this achievement into a means of differentiation from competitors. When informants were asked to identify activities that represented sources of success, reactive firms did not refer to any social or ecological activities. Proactive firms, on the other hand, referred to particular operational activities such as expertise in quarry rehabilitation practices, reforestation practices, and knowledge of public service provision such as health care and education. Sustaincentric firms also possessed these sorts of operational abilities but they were not defined as core competencies. Sustaincentric firms were consistent in identifying stakeholder relationships and organizational identity as their two sources of success. As already discussed, these two activities were partly responsible for building the operational components necessary to incorporate the principles of sustaincentrism. For instance, Kenya Honey’s relationship with NGOs early on afforded them contact with farmers, access to patient capital to run a pilot project, use of office space in strategic locations around Kenya, access to staff to ensure consistency of honey collection, contact with a microfinance institution and training expertise. In a similar vein, Egyptian Organics continually referred to their belief system and identity in attracting critical resources such as patient capital from German investors, European customer sharing of expertise, farmer commitment of time to convert their land, and the successful implementation of cultural and social initiatives on the mother farm. Whereas proactive firms gained these sorts of operational resources and activities in isolation, sustaincentric firms appeared to acquire or develop them as a result of these two broader competencies. This very discrepancy is akin to the difference between operational and dynamic capabilities where these two dynamic capabilities helped the firm acquire, reconfigure, and/or redeploy resources to incorporate principles of sustaincentrism (Eisenhardt & Martin, 2000). Whereas proactive firms were only able to generate ad hoc strategic responses to social and ecological issues, sustaincentric firms were able to draw upon these two dynamic capabilities to build or acquire multiple operational capabilities to respond to social and ecological systems in an interconnected and equitable manner. This finding extends the work of scholars who have examined the role of the resource-based view in proactive orientations (Aragón-Correa & Sharma, 2003; Hart, 1995; Russo & Fouts, 1997; Sharma & Vredenburg, 1998) by suggesting that specific dynamic capabilities are required to assist firms in responding on an ongoing basis to the challenges of incorporating principles of sustaincentrism.

Interorganizational level: complementary resources and capabilities As previously discussed, the data revealed the importance of an interdependent network-based relationship between the firm and its contextual stakeholders. Pushing the data further revealed that the roles played by actors in the network made up a portfolio of complementary capabilities

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where the total value created by the network far exceeded the independent sum of these capabilities. Notice in the following quotation that the stakeholders determined roles based on strengths that they brought to the network. One of the key success factors of the model was getting the strengths of each of the partners identified and to then determine the role of [Kenya Honey], the role of the development agency, and the role of the farmer.

SA Ecotourism similarly remarked on the need to combine resources in ways that drew upon the competencies of tribal communities and NGOs. The community’s knowledge of the behavior of indigenous people in the region was instrumental for understanding community issues and ways of life, while NGOs were instrumental in implementing community projects. As consumers entered the game reserves, the communities, NGOs, and the firm brought critical capabilities that collectively made up the service to the consumer: ‘As [the NGO], we were best equipped to lead these community projects. So we deal directly with the customer too’. Proactive firms, in contrast, did not combine complementary capabilities across a network of external stakeholders and instead built their own capabilities in isolation. Tanzania Sugarcane chose to address social issues through an allocated department: ‘But we were already doing this. And that’s my job so we don’t see the need to dump this on NGOs.’ Reactive firms did not demonstrate any development of value-laden capabilities associated with sustaincentrism and instead considered their role as financial providers for specific projects. To adopt sustaincentrism, firms therefore needed to draw upon the expertise of external stakeholders in a way that complements their own capabilities. This is important for three reasons. First, stakeholders possess critical competencies related to unfamiliar social and ecological systems. Second, the portfolio of capabilities ultimately reflects the interconnectedness and equity of systems, meaning that NGO capabilities, for example, are insufficient unless the network of external stakeholders figures out how to integrate them with capabilities of actors that reflect economic, ecological and other social systems. Third, unlike proactive firms that took on the arduous task of building new capabilities, sustaincentric firms were able to leverage these stakeholder capabilities as a source of differentiation relative to other firms in the industry. In sum, sustaincentric firms were effective at linking cognitive complexity and network-based structures with the strategic endeavors of the firm by building strong employee commitment, leveraging strategic positioning opportunities and dynamic capabilities, and identifying interorganizational complementary capabilities for the achievement of competitive advantage.

Discussion For decades, management scholars have pushed for a paradigm shift at the organizational level of analysis. While scholars tend to agree on the need for change, few have identified firms that have adopted a sustaincentric paradigm or examined what explains this adoption. To answer these questions, my objective was to first validate the sustaincentric paradigm empirically by identifying firms that conformed to the principles of sustaincentrism and were distinct from the proactive and reactive orientations. I then searched for relevant observations that explained variation in the adoption of sustaincentric principles across these three sets of firms. These observations dispersed across three levels of analysis – individual, organizational, interorganizational – where each level and their corresponding observations informed three conceptual subthemes that explained firm adoption of a sustaincentric paradigm. Figure 1 presents these interrelationships in a matrix format with points of intersection along the vertical and horizontal axes.

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Valente Enacting multiple roles

Business-context linkage made

Sustaincentric frame building identity

Sharing of perspectives

Ownership of sustaincentric business model

Job functions transcend boundaries

Loyalty and productivity

Sustaincentric Dynamic Dynamic Relationships with positioning and capability stakeholders capability core activities

Complementary capabilities for sustaincentrism

Tension elicits sustaincentric frames

Network anchoring thru structure

Network interdependence

Roles and responsibilities defined

Figure 1.  Adopting a Sustaincentric Orientation

Four contributions are expected from this study. First, this study empirically validates firm-level adoption of the sustaincentric paradigm and consequently suggests that the existing reactive/ proactive orientation dichotomy is insufficient in capturing the diversity of firm-level approaches to sustainability. The first phase of the research provided clear evidence that firms are capable of going beyond a proactive orientation and demonstrated that the seeds of alternative business approaches that holistically consider multiple systems are not only conceivable but are actually being experimented with and enacted. It may therefore be inappropriate to combine the sustaincentric firms identified in this study with those that we consider proactive simply because they have an environmental department, conduct internal and external reporting, or train employees on environmental issues (Wartick & Cochran, 1985) without any broader understanding of the principles of sustaincentrism. Correspondingly, this study answers the concerns of Hanna (1995) and Newton (2002) about whether it is indeed possible to create ‘new orders’ towards less anthropocentric paradigms, and provides preliminary insight into how existing management discourse goes beyond the view that society and the environment are commodities to be traded for strategic win-win opportunities (Egri & Herman, 2000). Second, the second phase of the study answers calls for research that pushes the field beyond the normative ‘should/must’ debate (Kallio & Nordberg, 2006; Newton, 2002; Starkey & Crane, 2003) and presents a clear way of fusing social and environmentalism with business. Presented here are firm-level nuances that provide important insight into the adoption of the highly elusive sustaincentric paradigm. The three subthemes suggest the importance of shifting levels of analysis from the firm to the network while acknowledging the need for greater cognitive capacity within the firm and its external stakeholders. As a consequence, this study identifies critical variables through which to operationalize the sustaincentric paradigm, variables that are methodologically distinct from its reactive and proactive cousins. Third, the three conceptual dimensions clarify many of the theoretical arguments put forward by scholars. For instance, building cognitive complexity enables individuals and organizations to adopt an ontology that views ‘economic and human activities as interwoven with natural systems’ (Gladwin et al., 1995, p. 891). The increase in cognitive frames mirrors the need for a synthesis of

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the dichotomous anthropocentric and ecocentric worldviews as firms and their stakeholders no longer see the contradiction between economic growth and ecological preservation. Operating as a network overcomes the undeniable limits of cognitive complexity at the individual actor level, thereby allowing for greater absorptive capacity to incorporate multiple systems in an integrated way. Operating as a network provides important insight into how organizations build transdisciplinary problem-solving approaches (Gladwin et al., 1995; Goldstein, 2011) that transcend boundaries between the firm and other organizational fields. Organizations do not accomplish sustaincentrism in isolation but instead need to build interdependencies among actors who represent divergent yet equally legitimate perspectives and contribute important complementary resources and capabilities that allow multiple systems to be interwoven as part of a broader strategy. Competitive advantage is achieved because a shift in cognitive complexity allows for alternative lenses of possibilities (Gladwin et al., 1995; Starkey & Crane, 2003), enabling firms to avoid waiting for environmental and social justice agendas to align with economic interests as occurs with the popular businesscase logic (Dobson, 1990). As Hoffman and Ehrenfeld (2000) explained, rather than viewing sustaincentrism as a basis for dismantling capitalism, it becomes a motivation for the search for altered forms of capitalism. Firms therefore avoid attempting to destabilize social and environmental concerns because it conflicts with their core activities and instead build new core activities that are predicated on the equitable integration of social, environmental, and economic systems (Shrivastava, 1995). Sustaincentrism therefore becomes a vehicle through which to extend strategic management principles by providing insight into how firms avoid remaining ‘trapped in an outdated approach to value creation’ (Hoffman & Ehrenfeld, 2000; Porter & Kramer, 2011, p. 64). Rather than establishing and using power over other actors and protecting resources and capabilities to prolong the temporary monopoly of competitive advantage, firms redefine their strategy by incorporating the intellectual and operational complexities of actors who represent social, ecological, and economic systems (Hart & Sharma, 2004). This is unlikely to be a conscious choice but a reflection of the cognitive lenses and integrated stakeholder network that usurps the temptation to manipulate environmental and social discourse (Livesey, 2002). Finally, and perhaps most importantly, the three dimensions reduce the conceptual ambiguity that presently characterizes the sustaincentric concept (Gladwin et al., 1995; Hawken, 2007; Hoffman & Ehrenfeld, 2000). Drawn from these results is a firm-level definition of sustaincentrism based on the notion that what is to be sustained is not determined in advance but is a result of a complex interactive and idiosyncratic process where firms and their stakeholders build cognitive complexity within a network system in a way that creates synergistic value creation. In effect, sustaincentrism is a contextual phenomenon where a network of actors works collaboratively to comply with principles of inclusiveness, interconnectedness, and equity. This suggests that sustaincentrism may need to take on a more process-based definition that considers the elements of the three subthemes identified here. One such definition may look like the following: A sustaincentric orientation is defined as an ongoing process of equitably including a highly interconnected set of seemingly incompatible social, ecological, and economic systems through collaborative theorization of coordinated approaches that harness the collective cognitive and operational capabilities of multiple local and global social, ecological, and economic stakeholders operating as a unified network or system.

This study is not without limitations. While developing countries represent a provocative context through which to explore these research questions, the findings may not be generalizable to other, more developed economies. Furthermore, while 12 case studies are useful in achieving generalizability and construct validity, such a design may have left out other idiosyncratic dimensions

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that would have been uncovered with a smaller set of cases or even one case. This study may therefore act as a departing platform through which future scholars can explore these dimensions in more depth. The findings from this study have important research implications. First, to fully understand paradigmatic adoption of sustaincentrism, scholarly work may need to extend focus to higher levels of analysis (Banerjee, 2003; Hoffman, 2003; Newton, 2002; Valente, 2010) while operationalizing cognitive complexity within the firm and among stakeholders. Second, to avoid the limitations of a reductionist approach, future research may need to move towards an empirical focus on the cognitive and paradigmatic dynamics associated with firm-level evolution (Jermier, 2008) yet in a way that incorporates multiple levels of analysis. Management theorists may need to incorporate to a greater extent frameworks and tools that build in or even leverage, rather than reduce, the complexity of organizational situations to understand how firms are able to incorporate the interconnectedness of various systems and stakeholders in decision-making. This may imply the need to consider complexity science when discussing organizational dynamics related to sustaincentrism. Third, these findings highlight a need to extend strategic management principles beyond the narrow focus of power concentrations, control, and protection (Ghoshal, 2005) to strategies that leverage inclusiveness, interconnectedness, and equity in a firm’s quest for competitive advantage. Finally, in light of the inappropriateness of a proactive orientation in operationalizing a paradigmatic adoption level, future research should explore how to translate the principles of sustaincentrism into specific firm-level quantitative measurements that go beyond top management support, reporting, training, committees, and technologies and focus instead on the degree to which firms consider the limitations and interconnectedness of multiple systems. Finally, with some explanatory variables associated with a sustaincentric approach uncovered, it would be useful to conduct a quantitative study to examine its rigor across multiple types of firms in multiple sectors. Do any of these relationships vary by context? Are there important moderating or mediating variables that may further explain main effect strength? Acknowledgements I would like to acknowledge the helpful support from professors Ellen Auster, Oana Branzei, Christine Oliver, and David Wheeler. I thank International Finance Corporation for their assistance in data access. I also thank the International Development Research Centre (IDRC), the International Order of the Daughters of the Empire (IODE), and the Social Sciences and Humanities Research Council for their financial support. Finally, I would like to thank the Associate Editor Professor Bobby Banerjee and the three anonymous reviewers at Organization Studies for their patience and very supportive comments and suggestions.

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Author biography Mike Valente is an Assistant Professor in business strategy and sustainability at the Richard Ivey School of Business, University of Western Ontario. Mike’s broader research program revolves around understanding how firms respond to highly complex systemic issues that carry with them collective action problems among heterogeneous actors. A majority of his work is in developing country contexts where he qualitatively explores the unique interface between the private sector and poverty. He typically employs a case-based methodology examining a range of firms from small social enterprises to large multinational firms. Mike teaches the mandatory Corporations and Society course at the Ivey Business School.