• Ozzie Paez

Strategy & sustainability at HBS


Harvard Business School’s (HBS) course on Sustainable Business Strategy is an important departure from its traditional focus on competitive business strategy development and practice. The course is led by Rebecca Henderson, a professor in the General Management and Strategy unit at the school[i]. Professor Henderson brings many years’ experience working with companies in Europe and the United States on strategy, sustainability and environmental stewardship[ii].

I’m one of over two hundred international participants examining sustainability as a component of competitive strategy development. The course’s implications are best understood by considering the relatively short histories of competitive strategy and the environmental movement.

Business straregy - a brief history

Competitive business strategy has focused since its inception in the 1960s on helping companies position themselves to gain and sustain competitive advantage. Bruce Henderson, the legendary founder of the Boston Consulting Group (BCG), is widely regarded as the father of modern business strategy practice. BCG developed a series of innovative strategy tools and methodologies, including the Experience Curve (mid-1960s) and the Growth-Share Matrix (1970) to help executives identify markets and product lines where they should and shouldn’t compete. Henderson habitually recruited the best and brightest Harvard MBAs for his company, often paying them a premium for joining his firm[iii].

HBS’ Michael Porter revolutionized strategy practices in 1979 with the publication of his Five-Forces-Framework, consisting of Threat of New Entrants, Bargaining Power of Suppliers and Buyers, Threat of Substitutes and Industry Rivalry. Porter and his framework continue to influence competitive strategy concepts and practices to this day.

My experiences with competitive strategy began in the mid-1990s when process reengineering (PR) became a dominant force in strategy development. PR drove the redesign of business models and operations to help companies exploit the emerging Internet for competitive advantage. It remains an important component of modern strategy practices, particularly in industries disrupted by technological innovations. PR can be found, for example, at the heart of many business/digital transformation initiatives.

Parallel tracks

Competitive business strategy coincidentally emerged alongside the American environmental movement, which traces its beginning to Rachel Carson’s 1963 book, Silent Spring. Carson’s seminal work coincided with the passage of the Clean Air Act (1963) and later the Clean Water Act (1972). Expanding environmental laws and regulations led President Nixon to established the US Environmental Protection Agency (EPA) in 1970 to oversee their management and enforcement.

EPA’s influence and power expanded with the passage of the Comprehensive Environmental Response, Compensation, and Liability Act (1980), known as Superfund. It held companies responsible for cleanup costs on sites they owned or had owned, even when their activities had not directly contributed to site contamination. Superfund liabilities can affect company financial performance for years.

Competitive business strategy and environmental practices matured during the 1970s and 80s along paralleled tracks. They usually crossed paths only when compliance and liability risks threatened corporate survival. The two camps have generally view each other with suspicion. Historically, many environmentalists have framed large businesses as unprincipled polluters, while business leaders often viewed environmentalists as idealists who didn’t understand economics and business competition.

Sustainability and business strategy

Sustainability as a philosophy and practice emerged out of the environmental movement[iv]. The business community and environmentalists often see sustainability through their entrenched filters. HBS’ Sustainable Business Strategy program is distinctly different in recognizing that corporations are indispensable to sustainable development and economic prosperity, and that business strategy is the key to their engagement. Professor Henderson emphasizes the contributions of various global companies to sustainable operations and environmental stewardship. She also highlights concrete, measurable competitive advantages and returns on investments produced by corporate sustainability strategies.

The course introduces innovative concepts and tools for developing and communicating the returns on investments from sustainable business practices. These practical methods move the course beyond abstractions to the crafting of strategies intended to deliver business advantage, while promoting effective environmental stewardship. The practical contents and exercises reflect the shared operational aspects of sustainability and the role of individual businesses and industries.

Summary and implications

Sustainable Business Strategy is an important contribution to competitive strategy, sustainability programs and related practices. HBS’ historic role in the development and teaching of competitive strategy is lending business credibility to a philosophy born within the environmental movement. The course reframes businesses as indispensable to successful environmental stewardship. In this context, effective sustainable business strategies don’t force businesses to choose between stewardship and profits. Case studies presented during the course demonstrate how sustainability programs can reduce risks, improve efficiency and profitability, and grow market share. In other words, Harvard Business School and Professor Henderson are teaching managers and executives from around the world that sustainability can be good for business.

References

[i] HBS Faculty, Rebecca Henderson, https://www.hbs.edu/faculty/Pages/profile.aspx?facId=12345

[ii] Rebecca Henderson, Ranjay Gulati, Michael Tushman, Leading sustainable change: an organizational perspective, 2015, Oxford, https://books.google.com/books?id=3RrVBQAAQBAJ&source=gbs_book_other_versions

[iii] Walter Kiechel III, Lords of strategy: the secret intellectual history of the new corporate world, Kindle Edition, Location 267, Harvard Business Press.

[iv] History of sustainability, US Environmental Protection Agency, https://www.nap.edu/read/13152/chapter/4

#sustainability #businessstrategy #environment