The Natural Edge Project The Natural Advantage of Nations Whole System Design Factor 5 Cents and Sustainability Higher Education and Sustainable Development

"I particularly like the way this book (The Natural Advantage of Nations) crosses traditional boundaries and bring insight into how students of business, engineering, and public policy, can and should all work together to build a powerful and positive future for all of us."
Janet Graaff, Instructor, University of Colorado Leeds School of Business

The Natural Advantage of Nations (Vol. I): Business Opportunities, Innovation and Governance in the 21st Century


Section 2: Natural Advantage a Business Imperative

Chapter 8: The Political and Social Context: A Sixth Force on Business?
1 Consumer demand change: knowing your market
2 Human resources: attracting the best people
3 Staying ahead of changes to government regulations
3.1 Can market based mechanisms be designed to assist firms to achieve competitive advantage?
3.2 Can regulation be designed to assist firms to achieve competitive advantage?
3.3 Raising the bar: independent certification schemes
4 The insurance industry: responding to climate change
5 The finance industry: a new paradigm in investment
5.1 The practice of ethical and socially responsible investment
6 References List from the Book
Sample of Resources to Support Chapter 8
Further Aspects of the Business Case for Sustainable Development

In Chapter 6 we showed that there are many drivers for change for business to embrace sustainability; there are many win-win options for most business. Chapter 6 also showed how Porter's 5 Forces Model provides a framework within which to understand how sustainability strategies could help business. Shaun Mays, in his report Corporate Sustainability: An Investor Perspective,1 points out that 'in assessing the external environment, approaches such as Porter's five forces are used. However, most companies and analysts also look at the political and social environment when looking at the future of the industry in which they operate.

Sustainability provides a framework in which to assess this "sixth force"; the political and social forces that are also driving a company's external environment.' (See Figure 8.1 for key sustainability principles and characteristics of less and more sustainable companies.) By way of example, Mays refers to the Canadian based CIRANO research centre's industry level study looking into environmental regulation and productivity. Regulatory change is one of these additional political and social drivers that are additional key reasons for business to change. We consider some of these in detail now, starting with changing consumer demands.

Further Aspects of the Business Case for Sustainable Development



The SustainAbility report, Buried Treasure: Uncovering the business case for corporate sustainability, 2001 also has an ongoing web-based dialogue linked to it. Other reports such as The Power to Change: Mobilising board leadership to deliver sustainable value to markets and society (written in partnership with the International Business Leaders Forum) also address the business case.

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World Resources Institute

Stalking the Elusive Business Case for Corporate Sustainability, December 2001. This report provides valuable insights into traditional and emerging valuation methods that can be applied to different sustainability strategies, and builds on an earlier report, The Next Bottom Line: Making sustainable development tangible . The World Resources Institute, in collaboration with UNEP and WBCSD, has also recently produced a report entitled, Tomorrow's Markets: Global trends and their implications for business , which identifies 19 critical global trends that companies and the financial sector should be aware of in terms of future risks and opportunities.

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WWF and Cable and Wireless

To Whose Profit? Building a Business Case for Sustainability, 2002.

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Global Environment Management Initiative

Environment: Value to the Top Line , November 2001; This report builds on a 1999 report Environment: Value to Business .

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Association of British Insurers

Investing in Social Responsibility: Risks and Opportunities, 2001. View Website

Accountability and The Center for Corporate Citizenship at Boston College

Conversations with Disbelievers: Persuading Business to Address Social Challenges, October 2001. This is an ongoing initiative based on a report written by Simon Zadek and John Weiser.

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The Conference Board

Doing Good and Doing Well: Making the business case for corporate citizenship, 2000. Report written by Simon Zadek.

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World Economic Forum, Yale and Columbia University

Esty, D. and Cornelius, P (eds) Environmental Performance Measurement: The Global Report 2001-2002 .The World Economic Forum/ Harvard annual World Competitiveness Report also provides growing material on the national competitiveness case for social and environmental investment.

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The International Business Leaders Forum

Recent and forthcoming publications that cover aspects of the 'business case' include: Human Rights and Business: A Geography of Risk (in collaboration with Amnesty International); The Business of Enterprise; Creating the Enabling Environment for Global Corporate Citizenship; and a CEO-signed statement entitled Global Corporate Citizenship: The Leadership Challenge for CEO's and Boards (produced in partnership with the World Economic Forum).

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The US-based groups Business for Social Responsibility and CSR Europe both offer extensive business case rationales and materials on their websites.


The US-based Council on Foundations and Walker Information Inc. have produced a research report entitled, Measuring the Business Value of Corporate Philanthropy , October 2001.

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Mining Sector (MMSD) initiative

The Mining, Minerals and Sustainable Development Project (MMSD) was an independent two-year project of research and consultation seeking to understand how the mining and minerals sector could contribute to the global transition to sustainable development. It was a project of the International Institute for Environment and Development (IIED) commissioned by the World Business Council for Sustainable Development (WBCSD).

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Climate Change and Insurance

Insurance is in the front line of climate change. As the widespread floods of autumn 2000 demonstrated so clearly, it is insurance companies that will have the responsibility of dealing with many of its consequences. Furthermore, it is insurers who must be equipped to analyze the new risks that flow from climate change, and to help customers manage these risks. Climate change is no longer a marginal issue. We live with its effects every day and we should prepare ourselves for its full impacts in the years ahead. It is time to bring planning for climate change into the mainstream of business life. For this reason, the ABI commissioned Dr Andrew Dlugolecki, an internationally respected authority on climate change and insurance, to undertake this report on the impacts of climate change on the insurance industry. This is one of the first studies to rigorously analyze the practical implications of climate change for a key business sector and its customers.

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A Changing Climate for Insurance: A Summary Report for Chief Executives and Policy Makers

This report was prepared for by Dr Andrew Dlugolecki. A chartered insurer with a PhD in Economics, Dr Dlugolecki held a series of senior positions in the insurance industry and left Aviva plc in December, 2000. During his career he became known for his work on climate change and insurance, which arose out of his early work on motor insurance pricing for General Accident. Dr Dlugolecki was the chief author of the Insurance and Financial Services chapter in the Second Assessment Report of the Intergovernmental Panel on Climate Change (1995) and edited that chapter in the Third Assessment Report (2001). He also contributed to UK Government reviews (1991, 1996) and chaired two research reports on climate change for the Chartered Insurance Institute (1994, 2001).

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Key Reference: Vellinga, P. V., Mills, E., Bowers, L., Berz, G., Huq, S., Kozak, L., Paultikof, J., Schanzenbacker, B., Shida, S., Soler, G., Benson, C., Bidan, P., Bruce, J., Huyck, P., Lemcke, G., Peara, A., Radevsky, R., and van Schoubroeck, C., Dlugolecki, A. (ed) (2001) 'Insurance and Other Financial Services', Chapter 8 in Climate Change 2001: Impacts, Vulnerability, and Adaptation , Intergovernmental Panel on Climate Change, United Nations and World Meteorological Organization, Geneva. Working Group 2.

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References from the Book

1. Mays, S. (2003) Corporate Sustainability: An Investor Perspective: The Mays Report, prepared with BT Financial Group for the Department of Environment and Heritage, Australian Government.


2. This articulation has been contributed by Dr Ian Woods, Senior Research Analyst, Sustainable Funds, AMP Global Investors, Australian Equities.


3. Lajeunesse, R., Lanoie, P. and Patry, M. (2001) Environmental Regulation and Productivity: New Findings on the Porter Analysis, CIRANO Working Papers/CIRANO (RePEc:cir:cirwor:2001s-53).


4. Figure 8.1 demonstrates the approach to assessing corporate sustainability by one investment institution.


5. Suzuki, D. and Dressel, H. (2002) Good News For A Change: Hope For A Troubled Planet, Allen & Unwin, Sydney .


6. Responsible Shopper provides access to information regarding various products from clothing to shoes to toothpaste, investigating hundreds of companies on a range of issues, including sweatshops, pollution, ethics and discrimination.


7. IFC (International Finance Corporation) (2002) The Business Case for Sustainability In Emerging Economies, IFC, Ethos Institute, Sustainability Ltd.


8. Misra, M. and Misra, P. (2002) Best Employers in India 2002 Study, Hewitt Associates LLC Mumbai.


9. Pfeffer, J. (1998) The Human Equation: Building Profits by Putting People First, Harvard Business School Press, Boston .


10. Jones, R. (2001) The Big Idea, Profile Books, London , p47. Quoting Sir John Brown CEO of BP Petroleum.


11. Wilkinson, A., Hill, M. and Gollan, P. (2001) 'The Sustainability Debate', International Journal of Operations and Production Management, vol 21, no 12, pp1492-1502.


12. Sheehy, B. and Dickie, P. (2002) 'Facing the Future', Australian submission to the Report of the Mining Minerals and Sustainable Development (MMSD) Project Breaking New Ground, MMSD/Earthscan, London.


13. The Federal Government of Australia has published online and in hardcopy 17 booklets of best practice in environmental management and mining. (Refer to Australian Government Sustainable Industry: Sustainable Minerals).


14. Robinson, S. (2001) 'Looking Beyond the Bunker', Chemistry and Industry Journal, 5 November, pp688-689.


15. Braithwaite, J. and Drahos, P. (2000) Global Business Regulation, Cambridge University Press, Cambridge .


16. Ibid, p269.


17. Ibid, p280.


18. Kumarasivam, K. (1996) 'Implementation of EMS in Malaysia ', paper to the ISO Conference 14000: Regulatory and Trade Challenges, Canberra .


19. Thailand Environment Institute (1999) How Can It Benefit Business? A Survey of ISO 14001 Certified Companies in Thailand, Thailand Environment Institute, Bangkok .


20. USAID (United States Agency for International Development) (2002) 'Field Report: East Timor - April 2002. Joint Report between Office of Transition Initiatives (OTI) and USAID/East Timor Mission', USAID, Bureau for Democracy, Conflict and Humanitarian Assistance, OTI, Washington, DC.


21. This material was drawn from the UNEP Press Release, 'Impact of climate change to cost the world US$300 billion a year'.


22. The Carbon Disclosure Project began on 1 November 2003 with a group of 87 institutional investors with assets of over US$9 trillion under management who wrote to the 500 largest quoted companies in the world, asking for the disclosure of investment relevant information concerning their greenhouse gas emissions.


23. We will not attempt to debate here the relative merits or otherwise of the name given to this form of investment but concentrate instead on its salient attributes, and therefore we will assume for the purpose of this discussion that the terms are synonymous.


24. Mays, S. (2003) Corporate Sustainability: An Investor Perspective: The Mays Report, prepared with BT Financial Group for the Department of Environment and Heritage, Australian Government.


25. Garz, H., Volk, C. and Gilles, M. (2002) More Gain than Pain, SRI: Sustainability Pays Off, WestBL Panmure.


26. Dunstan, B. (2003) 'Henderson Top of the Global Pack, in theory', Australian Financial Review, 24 October.


27. Deni Greene Consulting Services (2001) A Capital Idea: Realising Value from Environmental and Social Performance, prepared with Standards Australia and Ethical Investment Services for the Australian Department of Environment and Heritage.


28. Lewis, A. (2002) Morals, Markets and Money: Ethical, Green and Socially Responsible Investing, Prentice Hall, London , p20.


29. Deni Greene Consulting Services (2001) A Capital Idea: Realising Value from Environmental and Social Performance, prepared with Standards Australia and Ethical Investment Services for the Australian Department of Environment and Heritage.


30. Margolis, J. and Walsh, J. (2001) People and Profits: The Search between a Company's Social and Financial Performance, Lawrence Erlbaum, Mahwah , NJ .


31. Schafer, H. and Stederoth, R. (2002) 'Portfolioselekton und Anlagepolitik mittels Ethikfilters: Ein Uberblick zum Stand der Empirischen Kapitalmarktforschung', Kredit und Kapital 35, Jahrgang, Heft 1, S, pp101-148.


32. Hildyard, N. and Mansley, M. (2001) The Campaigners Guide to Financial Markets, The Corner House, Dorset .


33. Geczy, C., Stambaugh, R. and Levin, D. (2003) Investing in Socially Responsible Mutual Funds, Research Paper, Finance Department, Wharton School, University of Pennsylvania.


34. Angel, J. and Rivoli, P. (1997) 'Does Ethical Investing Impose a Cost Upon the Firm? A Theoretical Examination', Journal of Investing, Winter.


35. Alfred Rappaport is one of the founders of the shareholder value mindset, which gained importance in the 1980s and is still growing and increasingly accepted worldwide. Rappaport has written a ground-breaking classic book on Corporate Strategy in relation to Shareholder Value creation, Creating Shareholder Value - The New Standard for Business Performance, 1986.


36. Garz, H., Volk, C. and Gilles, M. (2002) More Gain than Pain, SRI: Sustainability Pays Off, WestBL Panmure.