Organizations and their investors increasingly recognize sustainability as a strategic priority which involves both significant business risks and opportunities for growth. Despite this, still too few organizations have designed structures that “treat sustainability as a material business issue”. Instead, most sustainability activities have mainly focused on investor relations, public relations (PR) and corporate social responsibility (CSR). There is also a growing trend for short-term investments at the expense of long-term holistic growth. That in turn often results in poor planning, bad business decisions or employee dissatisfaction. More pessimistically, it can even push a struggling organization into the boom-and-bust cycle. To overcome such scenarios, conscious organizations increasingly decide to incorporate sustainability into their business strategy.
Read An Introduction to Organizational Sustainability (Part I).
3 key aspects of organizational sustainability
A sustainable organization should be strong institutionally, financially and morally in equal measure. Having exceptional strength in one aspect cannot compensate for weaknesses in the other two. Organizations thus need to view sustainability as “a never-ending organizational initiative”, which requires careful consideration of the key sustainability aspects at all times.
Institutional sustainability
A sustainable organization needs a mission statement which clearly explains why it exists and what it aims to achieve. Having defined its mission, the organization has a process in place to develop strategic plans, i.e. a set of goals and objectives that it aims to achieve within a certain period. A sustainable organization also has an annual planning process in place. Based on the strategic plan, annual plans define annual goals and objectives as well as allocate resources needed to achieve them. It should be noted that sustainability should be viewed as an ongoing process that requires organizations to become both proactive and flexible to properly address all changes that can affect their business activity.
Financial sustainability
In terms of finances, a sustainable organization needs to be self-reliant but not necessarily self-sufficient. More precisely, a truly financially self-reliant organization should know what financial resources it can generate through its own income, what resources it has at its disposal at any given time, what resources it needs over the long, medium and short-term period, and how it can gather resources from other sources of funding. To overcome its lack of financial self-sufficiency, an organization seeking financial sustainability focuses on developing its grantsmanship competence, i.e. the ability to market its capabilities and to communicate its mission and, at a more practical level, the ability to write proposals and fill out forms to seek funds that management decides to pursue.
Moral sustainability
There are several criteria which determine the moral sustainability of organizations:
- The organization’s leader has a clear vision for the future and commitment to the mission, and is able to communicate it effectively to his / her subordinates.
- Staff support the leader, and also become committed to the mission.
- Staff think that their commitment to the organization’s mission is rewarded by career development opportunities, fair compensation and a dynamic work environment.
- Staff morale is high: staff feel that they can overcome challenges with strong commitment.
- The organization’s leadership, management and staff act ethically, and are perceived as being ethical by others.
Organizational sustainability and open innovation
Organizations increasingly focus on how to manage ideas and practices that can help expand business. In this context, open innovation plays a key role in enhancing the effectiveness of strategic sustainable management. Open innovation assumes that knowledge needed to generate innovations can be accessed anywhere in the value chain. Therefore, leveraging open innovation, organizations can turn external knowledge into sustainable innovations, thus enhancing their competitiveness. External knowledge thus becomes “an essential and strategic asset”, which means that any business success increasingly depends on the organization’s ability to create, collect, store and disseminate knowledge of strategic importance.
References: Aaron De Smet et al., mckinsey.com | Miniya Chatterji, entrepreneur.com | Joseph B. Coblentz, Organizational Sustainability: The Three Aspects that Matter | Catia Milena Lopes et al., An analysis of the interplay between organizational sustainability, knowledge management, and open innovation