Freelance Contract Manager, Independent Consultant in Portugal.
"For years, international organizations have created various regulatory frameworks for determining how their business and contracting activities impact society and the environment. And, although corporate social responsibility1 has increased our awareness, business decisions and inherent operations have failed to adopt the important mindset and critical information we need today to get our complex jobs done. This article evaluates how we can use better strategies that have emerged from lessons learned including unexpected losses from the COVID-19 pandemic."
We remember painfully what that pandemic has done to us. Minimized profitability. Shut down worldwide production. Forced borders to close -- leaving survivors struggling within a volatile, even nonexistent market for their products or services.
Unexpected, catastrophic events forced organizations and governments to change their way of thinking when seeking solutions to add or retain sustainable value, but they knew it would require producing stronger strategies than were used in the past. Three challenges have become especially critical:
- Stakeholder Business Context,
- Sustainable Development, and
- Maximum Value
Pulling the three challenges into one simple formula provides this image…
The challenges work together to:
- influence a specific Business Context (BC) model and
- embrace Sustainable Development (SD) principles
- -> to attain a Maximum Value Creation (MVC).
Author Jason Fernando explains the Stakeholder BC model above, saying, “The business context (BC) model should identify the actors (people, organizations, systems) who play a significant role in the business process or in the business domain, and the business areas of interest relevant to the scope of the work and potential change which may require exploration and further analysis.”2
Amplifying that point is the often-quoted definition from the book Our Common Future,3also known as the Brundtland Report:
"Sustainable development (SD) is development that meets the needs of the present without compromising the ability of future generations to meet their own needs…There are four dimensions to sustainable development – society, environment, culture and economy – which are intertwined, not separate. Sustainability is a paradigm for thinking about the future in which environmental, societal, and economic considerations are balanced in the pursuit of an improved quality of life. For example, a prosperous society relies on a healthy environment to provide food and resources, safe drinking water and clean air for its citizens.”4
An article by the United Nations Educational, Scientific and Cultural Organization (UNESCO) expands the definition for SD5 stating, “The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity… The 17 SDGs are integrated—they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability.”
Two questions arise:
- Can you maximize the value of your organization based on a collective well-being approach all parties to the contract understand?
- Could your medium or small-sized enterprise define and set up a business strategy with a vision of sustainable development during times of economic recession?
Both questions require answers before you can begin using a sustainable development (SD) approach to your business and contracting operations. It requires going beyond mere corporate social responsibility as you seek to maximize sustainable value in your organization.
Globalization tends to inevitably lead to the development of heightened relations among businesses, enhancing changes in many aspects of society like social, cultural, political, and economic. It creates a more complex business context where new actors (organizations and entities) participate and influence our business.
Indeed, the new trends in technology are facilitating global real-time communications, encouraging business models beyond our borders, creating a need for constant multicultural, social, economic, and political exchange. Within this context we see communities, customers, tourists, entrepreneurs, suppliers, public and private institutions participating in business operations jointly. And this only gives us stronger reason for carefully ensuring that our decisions and actions consider the potential impacts on our business context (BC) stakeholders.
Therefore, the vision for the business strategies should consider the framework that best suits all components of this unpredictable and volatile reality. In other words, if your business strategy is internally focused and driven by only internal needs, and if you exclude your interaction with any parties affected by such a strategy, you will waste many opportunities to leverage and synergize creative opportunities that benefit all parties you are dealing with. Worse, internal strategies can potentially threaten your business associates resulting from narrow decisions that often create adversity. So, thinking in a sustainable development approach would lead to reduce those risks and enhance opportunities.
However, some organizations have a limited vision of how this benefits them, because they view corporate social responsibility (CSR) only from a sense of duty. They tend to believe that implementing CSR comes only from complying with rules or tax benefit policies. But this view limits the extent of the value that the concept of sustainable development represents. These organizations and their context actors do not see themselves as a team. They have no common interest in success, no willingness to compromise to make it work. Leaders with self-interest only restrict innovation, because they make no effort to allow members of the organization or colleagues feel part of the solution. They do not share information, and this limits knowledge, causing the decision-making process to be inefficient or even invisible.
By contrast, many successful, large organizations have adopted a sustainable development approach, one that discovers how collective welfare maximizes value for both -- the context actors and entities themselves.
An important step to correct this anomaly is to develop a plan to find solutions for reaching agreed commitment to optimizing the resources and reduce risks. We must apply the principles of system thinking and implement lean and sustainable operations. Indeed, the strategy focuses on enhancing value chains for generating business opportunities to all parties within the decision-making process, both inside and outside the organization. When decisions involve consensus of all parties, they stimulate the team's creativity towards more effective and efficient solutions by making them part of those solutions.
Short-term profit orientation over sustainability relationship leads to value leakage. To avoid this, we must ask and answer questions like these:
- What is the difference between profit-driven or value-driven?
- Will value encompass more than just the explicit financial benefit?
- What happens when entities have no resources or capacity to respond in real-time to windows of opportunities?
- Is it not true that volatility causes market demands to change frequently and dramatically to adjust to the environment or context?
- Is it not more profitable, when value maximization is sustainable over time, to achieve a trustworthy brand perception?
- Is it not more strategic to share and leverage risks than to assume all risks by themselves?
By answering these questions, we will better understand why the sustainable development approach has an advantage in terms of business strategy. Specifically, Table 1 captures actions you can take to create maximum value.
Table 1. strategies for getting the best outcomes from maximum value creation (MVC).
Table 2 lists the organizational and communities’ benefits (SDGs)7 from using Sustainable Development (SD) to drive value and profit.
Table 2. Sustainable Development Goals (SDGs)6 benefits from using Sustainable Development (SD) to drive value and profit.
Many case studies demonstrate how a well-implemented, sustainable strategy reduces operating costs, grows investments, or makes them more efficient to stimulate the market and create sustainable communities having a vision of environmental protection where “no one is left behind”3. A classic example could be community-supported organic agriculture. As is well-known, organic food demands certain practices and knowledge to optimize its production. But when communities, entrepreneurs and governments work together, a chain of strategic partnerships are achieved.The tables tell us to consider the span of benefits resulting from a well- thought-out SD approach to permit better prioritization and more realistic visualization of the economic feasibility of projects. The big challenge could be to measure the indirect benefits of these strategies. Although some benefits are quantifiable, others are difficult to assess.
Likewise, public and private institutions work jointly to conduct research and development (R&D) to find new green technologies. Small farmers sell to small traders. Community members buy products in local markets.
Restaurants promote gastronomy with local seasonal products. Ecologists partner to provide opportunities for restaurant services. Large companies scale up distribution and commercialization. Eco-energy providers optimize the energy consumption using waste, solar and others type of eco- solutions.
Therefore, individuals and entities combine skills and interests to build a symbiotic strategy, stimulating chains of business that involve all team members of the context. They maximize value, creating a collective commitment to reach the goals of sustainable development described by Bruntland Commission Report as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”3. The primary objective is “ending all forms of poverty, fighting inequalities and tackling climate change while ensuring that no one is left behind”3.
ABOUT THE AUTHOR
Carmen Elena Sandoval is a multilingual (English/French /Spanish/ Portugués) Civil Engineer with an MBA and PMI-ACP certification. She has a proven background in LATAM Contracting-Commercial, Financial planning, and Project Services with over 15 years of experience working in energy projects (Oil and Gas Industry and hydroelectric). She is working as consultant for portfolio and project management for automatization processes and infrastructure projects in Portugal. See also provides related professional insights published LinkedIn.
- Investopedia, article Corporate Social Responsibility (CSR), by Jason Fernando.
- Business Analyst (BA Times), article titled The Business Context Model; As Good as It Gets, written by Suzanne Jane Maxted
- Our Common Future from Wikipedia.
- UNESCO Sustainable Development article by United Nations Educational, Scientific and Cultural Organization (UNESCO)
- UNESCO The Sustainable development Goals in Action article by United Nations Educational, Scientific and Cultural Organization (UNESCO)
- Wikipedia definition and commentary, Cost of Delay in Product Development, described by Don Reinertsen.
- UNESCO Sustainable Development report by International Institute for Sustainable Development (IISD). See also Leading SDG 4 – Education 2030 and UNICEF and the SDGs
Article published in Contracting Excellence Journal, July edition, – World Commerce and Contracting association. https://journal.iaccm.com/contracting-excellence-journal.