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Corporate sustainability has captured the attention of much of the world over the last few years. Trends suggest that the public is no longer satisfied with corporations that focus solely on short-term profit maximization. A recent study that compares companies that adopted environmental and social policies with companies that didn't, authored by two of the authors of this article and another colleague, provides empirical support for this view. "High sustainability" companies significantly outperformed their counterparts over an 18-year period in terms of both stock market and accounting criteria, such as return on assets and return on equity. They also exhibited lower performance volatility. Currently, organizations that exhibit a broad-based commitment to sustainability on the basis of their original corporate DNA are few and far between. For most companies, becoming sustainable involves a conscious and continuing effort to build long-term value for shareholders by contributing to a sustainable society. The authors studied the organizational models of companies that they refer to as "sustainable" by comparing them with companies that they call "traditional." They focused on two primary questions: (1) How do sustainable companies create the conditions that embed sustainability in the company's strategy and operations, and (2) What are the specific elements of sustainable companies' cultures that differentiate them from those of traditional companies? The authors have developed an identity and cultural model for how to create a sustainable company. While the model is straightforward, implementation is by no means easy, because it is grounded in large-scale change-something that few companies seek out or do well. The first stage involves reframing the company's identity through leadership commitment and external engagement. The second stage involves codifying the new identity through employee engagement and mechanisms of execution. Both are ongoing processes. Once the second stage begins, the two stages reinforce each other. Employee engagement enables even more sophisticated external engagement, since a broader range of employees will be able to effectively engage with outside stakeholders. Mechanisms of execution bind leadership commitment, since these organizational-level attributes continue from one generation of leaders to the next. Similarly, leadership commitment provides a strong motivating force for employee engagement, since employees know that their leaders care about what they are doing. External engagement strengthens the company's mechanisms of execution, since stakeholder pressure challenges the company to constantly improve its quality. The article draws on examples at companies including Dow Chemical, PepsiCo, Natura and Toyota.
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How to Become a
Sustainable Company
SUMMER 2012 VOL.53 NO.4
Robert G. Eccles, Kathleen Miller Perkins, and
George Serafeim
Brought to you by
CORPORATE SUSTAINABILITY HAS captured the attention of much of the world over the
last few years. Trends including the growth of nongovernmental organizations and movements such
as Occupy Wall Street suggest that the public is no longer satisfied with corporations that focus solely
on short-term profit maximization. People want corporations to consider broad human needs.
Surveys show that a growing number of companies are taking notice of these shifts and have come
to consider sustainability-related strategies necessary to be competitive.1 One recent study that com-
pared companies that adopted environmental and social policies with companies that didn’t,
authored by two of the authors of this article and another colleague, provides empirical support for
this view. “High sustainability” companies significantly outperformed their counterparts over an 18-
year period in terms of both stock market and accounting criteria, such as return on assets and return
Novo Nordisk A/S,
a global healthcare
company, follows a
business philosophy
based on balancing
financial, social and
environmental con-
How to Become a
Sustainable Company
from tradi-
tional ones?
Sustainable organi-
zations are effective
at engaging with ex-
ternal stakeholders
and employees.
They have cultures
based on innovation
and trust.
They have a track
record of imple-
menting large-scale
Few companies are born with a broad-based commitment
to sustainability. To develop one, companies need leadership
commitment, an ability to engage with multiple stakeholders
along the value chain, widespread employee engagement and
disciplined mechanisms for execution.
on equity.2 In terms of stock market returns, the
“high sustainability” companies had an abnormal
stock market performance that was 4.8% higher
than the “low sustainability” companies on a
value-weighted basis. They also exhibited lower per-
formance volatility. It is not surprising, then, that
more and more companies are exploring how envi-
ronmental, social and governance performance can
contribute to financial performance.
Currently, organizations that exhibit a broad-
based commitment to sustainability on the basis of
their original corporate DNA are few and far be-
tween. An exception is Novo Nordisk A/S, a global
healthcare company created in 1989 through a
merger of two Danish companies. For decades, it
has followed a business philosophy based on bal-
ancing financial, social and environmental
considerations. Novo Nordisk managers use the
values framework to drive their day-to-day deci-
sions and make difficult choices, and the
company provides financial and nonfinancial in-
formation and data in one report.
For most companies, however, becoming sus-
tainable involves a conscious and continuing effort
to build long-term value for shareholders by con-
tributing to a sustainable society. To illuminate how
the transformation occurs and how a sustainable
strategy can be formulated and executed, we studied
the organizational models of companies that we
refer to as “sustainable” by comparing them with
companies that we call “traditional.(See “About the
Research.”) We focused on two primar y questions:
1. How does a sustainable company create the con-
ditions that embed sustainability in the
company’s strategy and operations?
2. What are the specific elements of sustainable
companies’ cultures that differentiate them from
those of traditional companies?
Based on our research, we have developed an iden-
tity and cultural model for how to create a sustainable
company. While the model is straightforward, imple-
mentation is by no means easy, because it is
grounded in large-scale change — something that
few companies seek out or do well. The first stage
involves reframing the company’s identity through
leadership commitment and external engagement.
The second stage involves codifying the new iden-
tity through employee engagement and mechanisms
of execution. Both are ongoing processes.
Once the second stage begins, the two stages re-
inforce each other. Employee engagement enables
even more sophisticated external engagement be-
cause a broader range of employees will be able to
effectively engage with outside stakeholders. Mech-
anisms of execution bind leadership commitment,
since these organizational-level attributes continue
from one generation of leaders to the next. Simi-
larly, leadership commitment provides a strong
motivating force for employee engagement because
employees know that their leaders care about what
they are doing. External engagement strengthens
the company’s mechanisms of execution, since
stakeholder pressure challenges the company to
constantly improve its quality.
Companies with an established organizational
culture that includes strong capabilities for change, a
commitment to innovation and high levels of trust
have a significant advantage. When these elements
are missing, becoming a sustainable company is
more difficult. Nevertheless, by moving through the
two stages, the necessary cultural characteristics are
likely to coalesce. And, if companies begin with a
strong cultural foundation based on trust and inno-
vation — all too rare in most companies — we have
found that those characteristics will only strengthen
over time. In contrast to the vast majority of tradi-
tional companies, sustainable companies are willing
and able to engage in the kind of ongoing transfor-
mational change that is required as social
expectations evolve. They aggressively create new
processes, products and business models that im-
prove enviro nmental, social and govern an ce
performance — all of which conspire to boost finan-
cial performance through cost savings, new revenues,
brand enhancement and better risk management.
Finally, employees in sustainable companies have a
high level of trust in each other, which allows them
to take the necessary risks to innovate and change
their behaviors to support sustainability.
Stage One: Reframing the
Company’s Identity
Reframing the company’s identity is composed of
two elements: leadership commitment and exter-
nal engagement. While these elements are closely
linked, one can drive the other or they can occur si-
multaneously. To gain commitment, leaders must
engage with groups outside of their organizational
boundaries, such as investors and NGOs that repre-
sent civil society. Effective external engagement
cannot happen without strong commitment from
the leadership team. By engaging the two elements,
a company can begin to fashion a new identity as a
sustainable enterprise.
Leadership Commitment When leadership com-
mitment drives the process, it usually comes from
the personal resolution of a CEO to create a more
sustainable company. In general, top-level execu-
tives have the ability to create an enterprise-wide
vision and the clout to see that it is realized. With-
out this commitment, becoming a sustainable
company is a “nonstarter.
Our data show that the leaders of sustainable
companies differ from leaders of traditional compa-
nies in several ways. First, the top-level leaders of
sustainable companies are perceived as taking a long-
term view when making decisions. They have an
unmistakable direction in mind and know that their
sustainability goals will not be achieved overnight. In
pursuing their visions, they are more willing than
leaders of traditional companies to tolerate risk.
Leaders at 72% of the sustainable companies are will-
ing to take measured risks in pursuit of sustainability,
in contrast to 40% at traditional companies. More-
over, sustainable companies are more likely to be
knowledgeable of the issues pertaining to sustainabil-
ity (90% vs. 60% of the traditional companies) and
have a clearer business case for pursuing sustainable
goals (83% vs. 30% at traditional companies). The
strong business case communicated from the top en-
ables the company to incorporate sustainability into
the core of its business. As a result, sustainable com-
pany leaders integrate sustainability considerations
into basic business decisions such as operating bud-
gets and capital investments (95% vs. 30% at
traditional companies).
Equally important, leaders of sustainable compa-
ni es dem ons trate person al com mit men t to
sustainability that inspires others throughout the or-
ganization (83% vs. 50% at traditional companies).
As a result, more employees in sustainable companies
view sustainable strategies as essential to the compa-
ny’s success (80% vs. 20% for traditional companies).
Surprisingly, our survey data show that leaders
of traditional companies are more likely to be seen
as having clear visions for sustainability than are
leaders of sustainable companies (5% vs. 20% at
traditional companies). One possible explanation
for this finding surfaced in our follow-up field in-
terviews: Leaders of sustainable companies often
set aspirational goals and seek transformational
change where the starting and end points are not
necessarily known in full. For example, Interface
Inc., the world’s largest carpet company, based in
Atlanta, Georgia, set a long-term corporate goal of
having a net zero environmental impact.3 Dow
Chemical, for its part, a global leader in specialty
chemicals, has committed itself to achieving at least
This study is part of a large research program on “Innovating for Sustainabil-
ity.” The purpose of this research is to understand how companies can better
integrate sustainability into the core of their strategy and operations. This pro-
gram is equally focused on understanding how institutional investors can
integrate sustainability into their investment decisions. In both cases, we are
using a broad range of research methodologies, including case studies, in-
depth field research, survey research, archival research and empirical
analysis.i Throughout 2010 and 2011, we conducted more than 200 inter-
views in more than 60 companies to explore how sustainable companies
were innovating for the development and execution of sustainable strategies.
We also developed some 20 in-depth teaching case studies and worked with
a number of companies to help them develop more sustainable strategies.
Based on this work, we began to detect some intriguing patterns related to
leadership and organizational elements.
We then tested for these patterns with a survey. First, we examined the
sustainability performance on both environmental and social factors for 3,000+
companies worldwide for 2009, with data provided by Thomson Reuters’
ASSET4. We isolated the top 20% and the bottom 20% of companies in terms
of environmental and social performance. Then we imposed an additional filter,
isolating companies from the top group based on whether they integrate social
and environmental metrics and narrative with their financial reporting, and iso-
lating companies from the bottom group based on those that do not integrate
social and environmental metrics and narrative with their financial reporting. We
identified 58 companies with very good sustainability performance and com-
munication (which we refer to as the sustainable companies) and 108 with poor
sustainability and communication (which we refer to as the traditional compa-
nies). We invited both sets of companies to participate in an online survey
examining organizational and cultural factors related to sustainable strategy; 28
companies, or 17%, responded. Of these, 18 companies met our criteria as
sustainable and 10 companies were classified as traditional.
We used a 68-item assessment instrument developed by Miller Consul-
tants, of Louisville, Kentucky, to look at organizational leadership, organizational
systems and climate, change readiness, internal and external stakeholders, and
disclosure issues. The results were validated through interviews with experts
in the relevant domains. The instrument was developed based on our prelimi-
nary research and tested through a pilot that compared the responses of
representatives from leading sustainable companies with responses from a
control group of companies.
three breakthroughs by year 2015 that will signifi-
cantly help solve world problems.4 Sustainable
companies also recognize that transformational
change requires taking on a large number of
smaller-scale change initiatives.
Leaders of traditional companies, by contrast,
are more likely to be committed only to smaller-
scale change (sometimes referred to as transitional
change), where the beginning and end states are
clearly known. Examples of a transitional change
could include moving from an energy system based
on fossil fuel to a system based on a renewable
source of energy or implementing a redesigned
process that will reduce waste. These goals are more
precise and clearly defined than some of the more
expansive ones.
External Engagement Companies that thrive
with a sustainable strategy realize the importance of
reaching beyond their own internal boundaries to a
variety of external stakeholders. In their book Green
to Gold, Daniel C. Esty and Andrew S. Winston iden-
tified at least 20 stakeholder groups that are likely to
wield a degree of power over companies with regard
to their sustainability performance.5 When external
engagement drives the initiation of the process in
this stage, it is usually catalyzed by a dramatic event
or series of events. The experience of a crisis often
pushes leaders to do some serious soul-searching.
Although some companies stonewall and dig into
their traditional models, others see a crisis as an op-
portunity for self-examination. They begin to
realize the benefits of learning about the concerns
and expectations of key stakeholders. In turn, this
affects the company’s license to operate and thereby
creates value for both stakeholders and sharehold-
ers. Once this realization hits home, the company
begins to reach out beyond its own institutional
boundaries to learn, collaborate and communicate.
Sustainable companies learn from the outside.
In doing so, they are far more likely to encourage
their employees to assimilate knowledge from
sources external to their company than are tradi-
tional companies (72% vs. 20% at traditional
companies). According to Bruce Bremer, former
manager of facility engineering for Toyota Engi-
neering & Manufacturing North America, Toyota
encourages employees to work with external peer
groups. “To build a culture of innovation, we have
to drive out narrow thinking and learn continu-
ously. When I worked with a group of my peers
from other global companies, I started to see things
from a much different light.6
Sustainable companies collaborate with other
companies and organizations to advance their
goals. For example, in 2011, Dow Chemical formed
an alliance with The Nature Conservancy. TNC’s
collaborative work is focused on assisting compa-
nies, including Dow, to re co gnize, value and
incorporate nature into global business goals, deci-
sions and strategies.7 At times, sustainable
companies have gone so far as to partner with com-
petitors to seek solutions to their challenges, and
they actively support their supply chains. Some of
the most critical stakeholder relationships occur
within a company’s supply chain, reflecting the re-
ality that companies cannot achieve their
sustainability objectives without widespread sup-
po rt and cooper ation . One of the stron gest
differences between the sustainable and traditional
companies in our data is that sustainable compa-
nies encourage their supply chain s to adopt
sustainable strategies (83% vs. 20% for traditional
companies). Many of them work closely with their
suppliers to support these efforts. PepsiCo, for ex-
ample, invites its suppliers to an annual gathering
where they share best practices and discuss prog-
ress on sustainability. These gatherings reduce the
natural tension between suppliers and customers.
According to David Walker, senior director of bev-
erage produ ctivity at PepsiCo, an imp ro ve d
working relationship unlocks the potential to max-
imize sustainability in the supply chain. For
example, PepsiCo and its suppliers share best prac-
tices on energy reduction, create common metrics
to track progress and engage in joint planning ses-
sions to ensure that ideas are executed.8
The actions of sustainable companies are ac-
companied by clear and consistent messages to
stakeholders (90% of sustainable vs. 30% of tradi-
tional companies say that their messaging to
external stakeholders is consistent and clear).
Transparency is a critical asset, and sustainable
companies achieve it by communicating their tar-
gets broadly and by reporting honestly and widely
on their progress toward meeting those targets.
They do not change their core messages on a whim,
nor do they engage in spin or “green-washing.” In-
stead, they talk about “the warts” as well as their
successes. Natura Cosméticos S.A., a Brazilian cos-
metics and fragrances company, exemplifies this
approach. In its annual integrated report, Natura
does not try to hide the commitments that it failed
to achieve in footnotes, as many companies do
with negative information. On the contrary, it dis-
cusses the commitments that were not achieved in
the prior year and the renewed commitments in
the beginning of the annual report.9 Rodolfo Gut-
tilla, Natura’s director of corporate affairs,
maintains that transparency in reporting facilitates
a better dialogue between the company and its
stakeholders: “Through the reports, stakeholders
are able to see what others are doing; they can see
how their interests are being integrated into the
management of the company, and they can begin to
understand the interconnections that exist between
actions and impacts all along the value chain.10
Stage Two: Codifying
the New Identity
The first stage — reframing the company’s overall
identity based on leadership commitment and ex-
ternal engagement is a necessar y, but not a
sufficient condition for becoming a sustainable
company. The second stage involves building inter-
nal support for the new identity through employee
engagement and mechanisms for execution, two
elements that are closely intertwined. Of course,
leadership commitment and external engagement
don’t end: They are embedded in and drive the cod-
ification of the company’s new identity. In essence,
the first stage continues into the second stage, and
once both stages are in process, they reinforce each
other. Together, they then create a culture support-
ive of sustainability, as described below.
As with Stage One, individual elements can
drive the other elements or they can occur simulta-
neously. Execution mechanisms serve as a platform
for engaging employees. At the same time, execu-
tion mechanisms require strong suppor t from
employees. Regardless of which element drives the
other, Stage Two is about making the company’s
newly framed identity a reality. While grassroots
actions can impact Stage Two, unless these activi-
ties are supported by leadership commitment and
external engagement, they will remain local initia-
tives that fall short of creating a new identity.
Employee Engagement Because sustainable
strategy execution requires behavioral change by
individuals, the personal engagement of employees
is crucial. For people to change their behavior, they
have to believe it is worth it. They have to under-
stand and believe in the reasons for the change and
recognize what they need to do to contribute to it.
We define employee engagement as actions a com-
pany takes to secure the interest and attention of
employees in their sustainability efforts. Engaged
employees are emotionally connected to their work
and to their workplace. As a result, they tend to be
more productive and more willing to engage in dis-
cretionary efforts to achieve company goals.
Sustainable companies are much more likely
than traditional ones to have a clear strategy for en-
gaging employees (72% vs. 30% of traditional
companies). They shift the engagement from local,
disconnected initiatives to company-wide efforts.
In order for the engagement strategy to be clear and
effective, the business case developed during the
first stage must be firmly in place, and leaders must
understand and appreciate the role of the employ-
ees. Sustainable companies implement their
engagement strategy by (1) communicating the
impact that the employees’ contributions will have
on the company, (2) articulating the connection
between each employee’s work and the sustainabil-
ity goals and (3) enabling cross-functional
communication and idea exchange. Anheuser-
InBev has incorporated
goals into individual
employee goals.
Busch InB ev, the world’s largest brewer, has
incorporated sustainability-related goals into indi-
vidual employee goals from senior leadership on
down to line management for several years. The
company believes that its employees think more
creatively and work more collaboratively because
they feel personally invested in the company’s sus-
tainability efforts and share important goals. Such
actions not only extend the impact of the leaders’
messages but also spread lessons learned from local
initiatives to the company as a whole.
Mechanisms for Execution The CEO often initi-
ates the codification of the new behavior by driving
the change through organization-wide mecha-
nisms and by promoting employee engagement.
Our study found that some of the most pro-
nounced differences between sustainable and
traditional companies are the presence of mecha-
nisms for execution and how they are used.
Sustainable companies are far more likely to have
enterprise-wide management systems for execut-
ing sustainable strategies (83% vs. 20% for
traditional companies). These systems consist of
structured frameworks of practices and proce-
dures that enable the organization to execute in a
consistent and lasting manner. Since specific sus-
tainability objectives often involve trade-offs, an
enterprise-wide approach allows for a portfolio
perspective to achieve the desired balance among
actions and outcomes.
Among the enterprise-wide management systems
companies use are processes that connect sustainabil-
it y to cor porate strate gy, wit h direct ties to
performance evaluation and compensation (66% vs.
10% for traditional companies). Sustainable compa-
nies also incorporate sustainability metrics into the
capital budgeting process, develop solid valuation
processes that take externalities into account, set clear
targets for sustainability objectives and establish tar-
geted programs linking the objectives to business
results (90% vs. 10% for traditional companies).
IBM, for example, embeds sustainability strategies
and practices into its global environmental manage-
ment systems, and recently it has begun requiring its
suppliers to adopt these systems. Sustainable compa-
nies are far more likely than traditional ones to have
established accountability processes that measure re-
sults and ensure that the objectives are met. Even so,
finding appropriate metrics and tools for measure-
ment continues to challenge sustainable and
traditional companies alike.
Many of the current methods used to track the
impacts of sustainability-related efforts are inade-
quate for measuring consistent, complete and precise
data. For example, although some companies at-
tempt to use standard tools such as Six Sigma and
performance scorecards to assess the impact of initia-
tives connected to sustainable strategies, even these
tools fall short in providing the robust valuation
methodologies needed to clearly measure and link
sustainable strategies to business results.11 Many tra-
ditional metrics do not measure the aspects of
sustainability that are material to the specific com-
pany or measure sustainability across the entire value
chain. Since traditional measures are subject to a va-
riety of caveats, Dow developed its own innovation
metrics for its 2015 Sustainability Goals. The com-
pany developed a proprietary Sustainable Chemistry
Index to comprehensively measure critical aspects of
sustainability for its products and business units
across the value chain; it also developed a specific set
of criteria and metrics to measure its achievement of
Breakthroughs to World Challenges.12
Despite the challenges, the sustainable compa-
nies we looked at indicated that they are pressing
forward and trying out new metrics. Rather than
letting the metrics challenges stall their progress,
sustainable companies are actively addressing the
issues creatively.
A Supportive Organizational Culture
Over time, the codification of a sustainable compa-
ny’s new identity will reinforce, or even establish, a
culture based on change capabilities, trust and in-
novation. Leadership commitment and external
engagement are necessary for transformational
change. Employee engagement fosters trust and in-
novation, and mechanisms for execution ensure
that change happens as innovations diffuse
throughout the organization. In turn, a culture
supportive of sustainability will increase the effec-
tiveness of leadership comm it ment, external
engagement, employee engagement and mecha-
nisms for execution. (See “The Role of Corporate
Culture in Sustainability.”)
Change Capabilities A common cultural element
that enables the process is the change readiness of
the culture.13 Our data show strong differences be-
tween the sustainable and the traditional companies
on this variable: Some 90% of the sustainable com-
panies report having a strong track record of
implementing large-scale change successfully, com-
pared to 50% for the traditional companies. This
difference is critical. As we have noted, unlike more
transitional change, where the beginning and end
points are clearly defined from the outset, transfor-
mational change may start with a clear direction but
lack exact beginning and end points.
Transformational change can take years or even
decades to accomplish. Particularly when it is di-
rected toward a concept that is still being developed,
it is not possible to have a clear blueprint to follow.
Not surprisingly, the pattern for sustainable com-
panies has been not to start with a precise plan but
to head in a direction, tolerate risk and make ad-
justments en route. Of course, transformational
change also depends on a large number of smaller,
incremental changes, which must be effectively ex-
ecuted in order for the transformational change to
be successful. In fact, 90% of the sustainable com-
panies report having a strong track record of
implementing incremental changes successfully,
compared to 70% of the traditional companies.
Companies with developed capabilities for trans-
formational and incremental change may be able to
move more quickly; those lacking the cultural ca-
pabilities will inevitably proceed in a more halting
fashion and are more likely to need help.
Innovation For sustainable companies, innovation
is a core cultural capability. To improve financial
performance along relevant environmental, social
and governance dimensions, sustainable compa-
nies tend to focus on innovations in processes,
products and business models. A commitment to
sustainability becomes a “forcing function” for in-
novation. Both employee engagement and external
engagement are important sources of new ideas
that become the basis for value-creating innova-
tions. The innovations build on and contribute to
the organization’s existing capabilities for innova-
tion — a process sustainable companies encourage
by rewarding innovation. Moreover, they vigor-
ously promote and facilitate learning, broad
thinking and creativity.
Sustainable companies use a variety of ap-
proaches to incorporate continuous learning into
their cultures. For example, they employ processes
that help people across the enterprise to learn from
each other. Innovation is most likely to occur in or-
ganizations where lateral communication is enabled
and people with different frames of reference can
come together to share ideas. Rather than suppress-
ing conflict, sustainable companies tend to
encourage the airing of diverse points of view. They
appreciate that, when handled well, enterprise-wide
conversations tend to create understanding across
the organization. In addition to leading to synergy
and innovation, these conversations also build trust.
Trust Having the conviction that people can be
taken at their word and that they will do their best
to deliver on commitments and promises is the
bedrock of success. Creating a sustainable company
requires trust on the part of every employee. With-
out trust, employees are reluctant to take the risks
that innovation requires, and they are reluctant to
engage. Trust is the difference between listening
and believing. It permits people to act in new ways
that truly contribute to the development of a sus-
tainable company.
Sustainable companies foster trust by (1) dem-
onstrating that they value the contributions of
Employee engagement fosters trust and innovation, and mechanisms for
execution ensure that change happens as innovations diffuse throughout
the organization. A culture supportive of sustainability will increase the
effectiveness of leadership commitment, external engagement, employee
engagement and mechanisms for execution.
Creates and Amplifies
Stage 1:
Stage 2:
New Identity
Tru s t
Capacity for
Tra n sf o rma tio nal
employees, (2) consciously aligning their actions
with their values, (3) honoring their commitments
and (4) basing decisions on what is good for share-
holder s and for the broa de r concerns of the
organization and society. Leaders of sustainable
companies understand the value that results when
people within the company know that they can
count on the integrity, competency, intentions and
reliability of their leaders and coworkers. Trust
grows when people perceive that they are part of a
collective effort to deliver value to stakeholders in a
way that contributes to the betterment of their
world. Work becomes more meaningful, and peo-
ple become more engaged and productive.
Fostering trust effectively allows a team produc-
tion approa ch, where the effor ts of multiple
stakeholders are crucial for the company’s success,
to everyday operations in which employees are
willing to make company-specific investments
without fear that their efforts will not be recog-
nized and rewarded. By enabling and encouraging
these investments, the company cultivates the
foundation for a competitive advantage in the mar-
ketplace: enga ge d employees who are able to
cooperate in order to drive corporate performance.
Starting the Journey
to Sustainability
Today companies must choose whether to start the
journey to become sustainable or to adhere to the
more traditional model. Although each company
must make that choice for itself, we believe that
changing social and investor expectations will only
increase the pressure on companies to adopt the sus-
tainable model. Doing so requires unswerving
leadership commitment, without which the journey
cannot begin. In reframing its identity, the company
must learn to engage openly with external stake-
holders. Maintaining transparency without recourse
to defensive strategies is integral to a sustainable
strategy. As this strategy is implemented through
broad-based employee engagement and disciplined
mechanisms for execution, a new identity can
emerge: that of a sustainable company.
Robert G. Eccles is a pro fessor of manage ment pr ac-
tice at Harvard Business School. Kathleen Miller
Perkins is presi dent of Mi ller Co nsultant s Inc., an or-
ganizational consulting firm in Louisville, Kentucky.
George Serafeim is an assistant professor of business
administration at Harvard Business School. Comment
on this article at, or
contact the authors at
1. For more information, see D. Kiron, N. Kruschwitz, K.
Haanaes and I. von Streng Velken, “Sustainability Nears a
Tipping Point,” MIT Sloan Management Review 53, no.2
(winter 2012): 69-74.
2. R.G. Eccles, I. Ioannou and G. Serafeim, “The Impact of
a Corporate Culture of Sustainability on Corporate Behav-
ior and Performance,” working paper 17950, National
Bureau of Economic Research Working Paper Series,
Cambridge, Massachusetts, March 2012,
3. M.W. Tof fel, R. G. Eccles and C. Taylor, “ Inte rface-
RAISE: Sustainability Consulting,” Harvard Business
School case no. 611-069 (Boston: Harvard Business
School Publishing, 2011).
4. R.G. Eccles, G. Serafeim and S.X. Li, “Dow Chemical:
Innovating for Sustainability,” Harvard Business School
case no. 112-064 (Boston: Harvard Business School Pub-
lishing, 2012).
5. D.C. Esty and A.S. Winston, “Green to Gold: How
Smart Companies Use Environmental Strategy to Inno-
vate, Create Value, and Build Competitive Advantage”
(New Haven: Yale University Press, 2006).
6. Interview with Bruce Bremer, Dec. 10, 2011.
7. For more informat ion, se e: www.nat ure.or g/aboutu s/
index.htm and
8. Intervi ew with Da vid Wal ker, s enio r director of bever-
age productivity, PepsiCo, May 9, 2012.
9. For more information, see “Natura Report 2010,”
Natura Brasil,
10. R. G. Ec cle s, G. Se raf eim a nd J . He ffer nan , “Na tur a Cos -
méticos, S.A.Harvard Business School case no. 9-412-052
(Boston: Harvard Business School Publishing, 2011).
11. D.A. Lub in and D.C . Esty, “ The Susta inabil ity Imper a-
tive,” Harvard Business Review (May 2010): 1-9.
12. Interview with Mark Weick, director of sustainability
programs and enterprise risk management, Dow Chemi-
cal Co., May 8, 2012.
13. D. Anderson and L.A. Anderson “Beyond Change
Management: Advanced Strategies for Today’s Transfor-
mational Leaders” (San Francisco: Jossey-Bass Pfeiffer,
2001): 98-102.
i. For more informat ion, se e: www.fac ebook. com/
Reprint 53415.
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... For this reason, an organization is said to be sustainable when it has the capacity to ensure its continuity and long-term positioning, as well as cooperate in the progress of the present and future generations [50]. Sustainable companies are those that focus on the development of a formula for profitability from a balanced approach, by creating responsible linkages with all stakeholders and the natural environment [51,52]. These are therefore companies that are characterized by multiple orientations and complete commitment (environmental, social, administrative, and financial). ...
... Therefore, their actions are not only aimed at compensating for the damage caused by economic activity, but also a form of social responsibility aimed at improving the state of the natural environment [51]. This transition to a more sustainable business model involves the transformation from a linear and degenerative system to a circular and regenerative one [62]. ...
Full-text available
In recent years, the growing emergence of environmental problems has meant that sustainability and related concepts such as green innovation have acquired special importance. This has resulted in a significant body of literature addressing these concepts. To help to integrate this extensive literature and establish a theoretical framework, this study summarizes the main principles and roots of green innovation. To this end, this study first makes a generic theoretical approach to the concept of innovation. Then, due to its direct link with green innovation, emphasis is placed on the importance of the value of sustainability in companies. After that, the meaning and current relevance of green innovation in today’s business environment is addressed. Finally, the main precepts and fundamentals of green innovation are established, and a series of academic proposals are made to further advance the study of this concept. This theoretical review may serve as encouragement to further research the concept of green innovation and contribute to providing a clarifying and comprehensive view of this topic.
... For employees to change their behaviour, they have to believe it is worth it. They have to understand and believe in the reasons for the change and identify what they need to contribute to environmental sustainability (Eccles, Perkins and Serafeim, 2012). Engineer D's practical approach is beneficial in promoting employee engagement within his firm to achieve environmental sustainability as much as possible. ...
... Hence, it is clear that all entrepreneur engineers who participated in this study demonstrate a positive commitment to sustainability. If any business entity requires to become sustainable in any aspect, leadership commitment should be there to inculcate the sustainable business culture within the firm as the first step of the sustainable journey (Eccles, Perkins & Serafeim, 2012). As identified from the study, entrepreneur engineers demonstrate their leadership commitment to environmental sustainability through their business operations. ...
Full-text available
Sustainability and entrepreneurship are two concepts widely discussed in the contemporary world. Nowadays, the concept of sustainability is merged with entrepreneurship and directs entrepreneurs into a sustainable entrepreneurial journey. Many engineers have started entrepreneurial ventures, majorly in technology disciplines in Sri Lankan and international context, which are not adequately studied in the literature. Hence, the authors have designed an exploratory study on entrepreneur engineers’ ethical practices in Sri Lanka, employing grounded theory approach. The present study investigates how entrepreneur engineers in Sri Lanka accomplish environmental sustainability as an ethical responsibility. Data were collected from purposively sampled fifteen entrepreneur engineers in Sri Lanka by conducting face to face semi-structured interviews. Voice recorded interviews were transcribed verbatim and analysed following grounded theory techniques with the support of NVivo software. The analysis has revealed that entrepreneurial engineers who participated in this study had a higher personal commitment to environmental sustainability while trying to accomplish sustainability by educating, introducing novel methods, planting trees, system optimisation, reusing, and recycling. Orientation towards sustainability has affected the entrepreneurial performances of a few of them too. Emerging entrepreneur engineers can utilise the findings of this study to contribute further to environmental sustainability through their business operations while achieving business success. Further studies can be conducted to expand the knowledge base of entrepreneur engineers’ sustainable entrepreneurship while identifying profitable ways of establishing sustainable practices based on the findings of this study using qualitative and quantitative techniques.
... According to Eccles, Perkins, and Serafeim (2012), top management's vision and high commitment result in sustainability-related changes. The study highlighted the role of the board of directors (BOD) in integrating social policies into the overall company strategy, thereby increasing the BOD's responsibilities. ...
... Society has challenged the economic objectives of organisations and demands that organisations consider activities that add value to not only shareholders and employees, but also to society and the environment (Eccles, Perkins & Serafeim 2012;Perego, Kennedy & Whiteman 2016). During the 1990s, the accounting profession was continually under scrutiny for not adequately satisfying the needs of all stakeholders and as a result, the concepts of performance and value were broadened to include non-financial activities (Laptes & Sofian 2016). ...
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Background: South Africa is currently the only country in the world where its largest stock exchange has adopted integrated reporting on an ‘apply and explain’ basis, through the implementation of the King Code for Corporate Governance (King IV). However, there exists significant uncertainty regarding the value of adopting integrated reporting.Aim: The objective of this study is to establish whether organisations, perceived to produce higher-quality integrated reports, achieve better financial performance or if the value of integrated reporting lies in improving organisational legitimacy and managing stakeholders’ impressions.Setting: The sample consists of the Ernst Young (EY) ranked companies listed on the Johannesburg Stock Exchange (JSE) from 2011 to 2020.Method: The study examines whether the quality of integrated reporting is associated with various financial performance measures, namely liquidity, solvency, profitability, and market performance, using multinomial logistic regression.Results: The multinomial logistic regression model is weak and indicates no direct relationship between integrated reporting quality and financial performance. An investigation into specific variables in the model indicates that top-performing companies, in terms of integrated reporting quality, tend to have significantly lower price-to-book value ratios and higher return on equity values. Companies with the best quality integrated reports also appear to be larger in terms of market capitalisation than those companies who prepare integrated reports of lesser quality.Conclusion: The results of the study do not record a significant relationship between integrated reporting quality and financial performance. The results indicate that larger companies listed on the JSE produce better quality integrated reports. This may be an indication that companies produce integrated reports, not for their financial value-adding benefits but to maintain organisational legitimacy and to manage the impressions of stakeholders.
... In this sense, sustainable marketing strategy emerged when companies emphasize on social and environmental aspects as a core of their marketing strategy (e.g., promotion, supply chain, design, organizational atmosphere, and employee-related elements) [1]. Creating value while protecting resources for next generations is the path of sustainable companies [2]. The aforementioned orientation can create a socially responsible image for an organization leading to strong competitive advantages backed by people which is the notion of Corporate Social Responsibility (CSR) [3]. ...
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In recent years, environmental consideration and notion of sustainability has gained extensive attention on global scale from political aspect to businesses and social means. It has been the core concept of development for organizations in different industries in an increasing manner. As tourists tend to be more aware regarding environment and impact of human activity on nature, it becomes more important to include sustainable measures so that firms can remain competitive in the market and attract new customers. The current research examines the relationship between sustainable marketing orientation deployed by organizations operating in tourism sector (i.e., hotels) and employees’ extra-role behavior in form of organizational citizenship behavior. Furthermore, indirect effects of employees’ socialization and involvement are examined to provide a better understanding on related factors. Gathering data from hotels of Beirut, 218 employees participated in the research and PLS-SEM yielded significant results, stating that the variables are vital for positive behavioral outcomes within the hotel industry. The results can be beneficial for scholars and practitioners in tourism sector alike.
... Organizations may find several guidelines on how sustainability initiatives can be implemented in their activities and strategies (Baumgartner and Rauter, 2017), on how they can help them in being more successful than the less-sustainable organizations (Eccles et al., 2012) or on how to improve their corporate value (Soyka, 2012). According to Chow and Chen (2012), organizations willing to perform sustainably need to implement social, economic and environmental development in their operations. ...
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Purpose - The purpose of this study is to examine the effect of knowledge risk management (KRM) on organizational sustainability and the role of innovativeness and agility in this relationship. Design/methodology/approach - The study presents the results of a quantitative survey performed among 179 professionals from knowledge-intensive organizations dealing with knowledge risks and their management in organizations. Data included in this study are from both private and public organizations located all over the world and were collected through an online survey. Findings - The results have confirmed that innovativeness and agility positively impact the sustainability of organizations; agility also positively impacts organizational innovativeness. The partial influence of KRM on both innovativeness and agility of organizations has been confirmed as well. Research limitations/implications - The paper findings contribute in different ways to the ongoing debates in the literature. First, they contribute to the general study of risk management by showing empirically its role in organizations in the given case of organizational sustainability. Second, by emphasizing the risks related to knowledge, this study contributes to emerging efforts highlighting the particular role of knowledge for sustained organizational development. Third, by linking KRM and organizational sustainability, this paper contributes empirically to building knowledge in this very recent field of study. This understanding is also useful for future development in the field of KM as a whole. Originality/value - The paper lays the ground for both a deeper and more nuanced understanding of knowledge risks in organizations in general and regarding sustainability in particular. As such, the paper offers new food for thought for researchers dealing with the topics of knowledge risks, knowledge management and organizational risk management in general.
... HEIs are seen as multipliers for disseminating SD principles with the ethical obligation to systematically integrate SD into their institutions [6][7][8][10][11][12]. At the same time, it should be noticed that trust management [13][14][15] is the key focus of the sustainability concept [16][17][18][19][20], closely referring to sustainable organizations [21][22][23] and to sustainable business models [24][25][26][27][28][29]. In the context of HEIs, there is an ongoing change from traditional universities, relying upon Newtonian and Cartesian [30] reductionist and mechanistic paradigms, to the more SD focused institutions and the factors/initiatives boosting this change [31,32]. ...
The qualitative research study conducted in the Polish higher education context confirms that students’ vision of an ideal university strongly embraces the concept of quality as transformation. The enhancement and empowerment are manifested by multiple facets of transformation that the students look for at an ideal university, including intel- lectual, critical, personal, emotional and physical develop- ment. Quality culture and transformative pedagogies form important enablers for operationalising quality as trans- formation. In support of the transformative power of the ideal-type university, implications for quality management in higher education are proposed. KEYWORDS Quality as transformation; higher education; university; enhancement; empower- ment; quality culture Introduction
Increasing numbers of reports reveal that planet Earth is at significant risk. There are mounting calls to address the damage caused by the unprecedented demand for land, energy and water and environmental destruction, which is attributed to escalating population growth and unparalleled, rising rates of economic growth. Society and its organisations now are expending the Earth’s resources much faster than they can be replenished. Consequently, over the past two decades, sustainability has become an important business issue; growing attention is being paid to organisations’ ecological and environmental performance; and to their impact on the climate and on local and global communities. A number of researchers broadly claim that organisations need to move from Traditional Business Models and adopt Sustainable Business Models, and to deliver a sustainable value proposition aligned with stakeholders’ economic, environmental and social expectations. To achieve this, organisations should expand their perceived stakeholders from customers and shareholders to include all other stakeholders who may be directly or indirectly affected by the organisation’s activities, such as the broader society and the environment. Organisations’ cultures have considerable influence on their attitudes to environmental and social sustainability; their commitment to sustainability; and their environmental and social performance. In order to develop and implement Sustainable Business Models, organisations need to understand their underlying cultural values and develop sustainability-related cultural characteristics. This chapter explains the role of organisational culture and its desired characteristics and discusses actions organisations can take to change their culture. It also discusses steps for embedding sustainability principles across the organisation.
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Today, the transition to a more sustainable model of the agro-food system is increasingly impellent, requiring all actors’ commitment. In particular, small and medium agro-food business (SMABs) play a decisive and central role in the food and economies of national and underdeveloped areas. Our study aims to identify, through desk research, the level of commitment and communication to the sustainability of SMABs operating in southern Italy. In this study, we followed the Food and Agriculture Organization’s (FAO) approach to implementing such a transition, using their principles as a diagnostic tool to interpret business operations. The data were analysed using two approaches: a regime analysis to assess which FAO principles are commonly followed to make the above transition possible, and an extension of the Abraham and Pingali (2020) framework to describe the commitment of SMABs to the Agenda 2030 goals with respect to the behaviour of small and medium enterprises (SMEs). We found that the SMABs’ behaviours are more oriented towards some FAO principles: those that explain their commitment to improving natural resources and livelihoods, fostering inclusive economic growth, and achieving sustainable development goal 7 of Agenda 2030 than towards others. The contribution of our study lies in providing detailed insights into sustainable actions taken by SMABs while testing the FAO’s principles as a new model to evaluate business operations.
Sustainable development is a significant issue facing small- and medium-sized enterprises (SMEs). Drawing on the literature of corporate sustainable development and the resource-based view, this study aims to examine how corporate flexibility and control culture influence sustainable performance by triggering innovation capabilities and investigate the moderating role of leadership style (i.e., transformational and transactional). The 186 matched questionnaire data from managers and employees in Chinese SMEs reveal that the flexibility and control culture are positively and negatively related to innovation capability, respectively, and that the latter mediates their influence on sustainable performance. Moreover, transformational leadership positively (negatively) moderates the relationship between flexibility (control) culture and innovation capability, while transactional leadership positively moderates the relationship between control culture and innovation capability. This study enriches the theoretical literature on corporate sustainable performance and provides management insights into how SMEs could survive and achieve sustained growth through corporate culture.
The essential guide for forward-thinking business leaders who see the Green Wave coming and want to profit from it. This book explores what every executive must know to manage the environmental challenges facing society and business. Based on the authors' years of experience and hundreds of interviews with corporate leaders around the world, Green to Gold shows how companies generate lasting value, cutting costs, reducing risk, increasing revenues, and creating strong brands, by building environmental thinking into their business strategies. Daniel C. Esty and Andrew S. Winston provide clear how-to advice and concrete examples from companies like BP, Toyota, IKEA, GE, and Nike that are achieving both environmental and business success. The authors show how these cutting-edge companies are establishing an "eco-advantage" in the marketplace as traditional elements of competitive differentiation fade in importance. Esty and Winston not only highlight successful strategies but also make plain what does not work by describing why environmental initiatives sometimes fail despite the best intentions. Green to Gold is written for executives at every level and for businesses of all kinds and sizes. Esty and Winston guide leaders through a complex new world of resource shortfalls, regulatory restrictions, and growing pressure from customers and other stakeholders to strive for sustainability. With a sharp focus on execution, Esty and Winston offer a thoughtful, pragmatic, and inspiring road map that companies can use to cope with environmental pressures and responsibilities while sparking innovation that will drive long-term growth. Green to Gold is the new template for global CEOs who want to be good stewards of the Earth while simultaneously building the bottom line. © 2006 by Daniel C. Esty and Andrew S. Winston. All rights reserved.
MIT Sloan Management Review and the Boston Consulting Group recently conducted their third annual sustainability survey of executives and managers worldwide. The survey results indicate that an increasing number of managers and companies are taking sustainable business practices seriously. According to the survey data, 70% of companies that have placed sustainability on their management agenda have done so in the past six years, and 20% have done so just in the past two years. Two-thirds of respondents said that sustainability was critically important to being competitive in today's marketplace, up from 55% in the 2010 survey. And despite ongoing economic uncertainty, many companies are increasing their commitments to sustainability initiatives. In fact, 31% of respondents said their companies are profiting from sustainable business practices. Some of the interest can be explained by increasing pressure, internally and externally. Among the external factors are stakeholder groups including investors and also regulations, climate change, resource constraints and consumer demand. Internal demands for brand integrity, employee engagement and increased efficiencies play a part as well. But the recent increase in the business focus on sustainability may also be because we are nearing a "tipping point" at which a critical mass of companies is taking sustainability seriously. Survey and interview data identified companies that are profiting from sustainability, which the authors termed "Harvesters." Harvesters are 50% more likely to have a CEO with a strong commitment to sustainability, and nearly two and a half times as likely to have a chief sustainability officer. They are also more likely to be involved in external collaborations. Starbucks, for example, brought in representatives from its entire supply chain, government officials and an MIT professor in order to develop a detailed assessment of and life-cycle analysis for take-out coffee cups. Reprint 53213. For ordering information, see page 8.
# gt-tr-001-2001 Parts of the work reported in this whitepaper have been performed at GMD-IPSI (now Fraunhofer IPSI), Darmstadt. This whitepaper is intended to provide an overview over the technology underlying go4teams ' commercial solutions. The information provided in this whitepaper is subject to change without prior notice. The information contained in this document represents the current view of go4teams GmbH on the issues discussed as of the date of publication. This whitepaper should not be interpreted to be a commitment on the part of go4teams GmbH, and go4teams GmbH cannot guarantee the accuracy of any information presented after the date of publication. This document is for informational purposes only. GO4TEAMS GMBH MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS DOCUMENT. This whitepaper introduces DyCE, a Java framework for the development of collaborative components (so-called Groupware Components), which forms the basis of go4teams' collaboration support tools. Components developed on DyCE can be distributed over the network, can be used collaboratively and can be combined with other components to form new collaboration support environments. A central programming model supporting the coupling and reuse of components is presented.
We investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies by 1993 – termed as High Sustainability companies – exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies – termed as Low Sustainability companies. In particular, we find that the boards of directors of these companies are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics. Moreover, they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit more measurement and disclosure of nonfinancial information. Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance. The outperformance is stronger in sectors where the customers are individual consumers, companies compete on the basis of brands and reputation, and in sectors where companies’ products significantly depend upon extracting large amounts of natural resources.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at
Dow Chemical is one of the few major American industrial corporations that was founded in the late 19th century that is still in existence. From its origins producing bromine out of the brine underneath Midland, Michigan, the company has evolved from a diversified commodity chemical company to an advanced materials company whose products and services can make its clients more sustainable. During the 1960s and 1970s the company received a series of external shocks in the form of negative public opinion for some of its activities. These challenged the company's perception as being a "good company" and made it realize it needed to more proactively seek outside perspectives on how the company was viewed and what it should do. This led to the formation of the Corporate Environmental Advisory Council in 1992 which was renamed the Sustainability External Advisory Council (SEAC) in 2008. With substantial input from the SEAC, the company set two ambitious sets of ten-year goals: 1996-2005 and 2006-2015 and was largely successful in meeting them or on the way to doing so. In 2011, Neil Hawkins, Vice President of Sustainability and EH&S (Environmental, Health and safety) is trying to decide what the content and format of the next ten-year goals should be to ensure the company's viability on its 200th birthday. Should they be incremental goals like the ones for 2005 or ambitious stretch targets like the ones for 2015? Or should they be broad statements of principles that encourage innovating for sustainability throughout the company? A further challenge facing the company that it was rapidly globalizing with a large portion of its workforce outside its Midland, Michigan headquarters, making it even more difficult to preserve a common culture and commitment to sustainability.Learning Objective: This case illustrates how ambitious commitments to sustainability can be a driving force to major and minor innovation. It also illustrates the importance of stakeholder engagement for both sustainability and innovation.
InterfaceRAISE is a sustainability management consulting firm created to leverage the capabilities of its parent company Interface Inc., a carpet manufacturer recognized as a global leader in corporate environmental sustainability. This case illustrates the challenges of turning an internal capability into a client‐facing revenue stream. This is made especially difficult by the fact that the parent company is a manufacturing firm and InterfaceRAISE is a professional service firm (consulting). InterfaceRAISE is not being staffed by a traditional consulting firm model, relying instead on the part‐time availability of employees in the parent company. At the time of the case, InterfaceRAISE was grappling to identify the appropriate business model for the type of consulting firm it wants to be, to determine what its client portfolio should look like, and to set its pricing structure. InterfaceRAISE needed to decide how to accelerate its growth while better achieving its three objectives: improving its clients' sustainability performance, enhancing its parent company's brand image and sales, and increasing operating profits.Learning Objective:To expose students to the opportunities and challenges of creating a consulting business based on selling a manufacturing company's environmental and operational capabilities developed through years of learning how to improve environmental performance. To highlight the strategy of offsetting one firm's environmental impacts by reducing the environmental impacts of other firms, and contrasting this with the carbon offset market. To explore the differences in operational strategies between manufacturing and consulting companies, and the implications on investment, R&D, marketing, and human resources policies. To illustrate the different types of business models that exist for consulting firms and how these affect decisions about client selection and client portfolio.
  • R G Eccles
  • G Serafeim
  • J Heffernan
R.G. Eccles, G. Serafeim and J. Heffernan, "Natura Cosméticos, S.A." Harvard Business School case no. 9-412-052 (Boston: Harvard Business School Publishing, 2011).
Beyond Change Management: Advanced Strategies for Today's Transformational Leaders
  • D Anderson
  • L A Anderson
D. Anderson and L.A. Anderson " Beyond Change Management: Advanced Strategies for Today's Transformational Leaders " (San Francisco: Jossey-Bass Pfeiffer, 2001): 98-102.