Sustainable Development and Competitive Advantage – Do those words fit together?

Maybe this is a strange headline but during the whole course I had to think about it. At the beginning of course we were thought what the meaning of Sustainable Development is: Inter- and intragenerational equity, no waste of natural capital, careful use of regenerative resources (that can still regenerate) and a pollution-rate that the nature can still absorb. So that’s the challenge we are facing and I feel really committed to.
The next step was that we were introduced to the (neo-)classical system and that it fails to handle the challenge of Sustainable Development. It is just looking for growth which indeed – on the long run – doesn’t fit with SD. If we now start talking about Competitive Advantage as an instrument to face the challenge of SD, it is like using one of the most powerful instrument (or slogan) of the system we blamed before.
Of course in the cases where we can find a Competitive Advantage and we use this, it will help to solve some problems. But there is nothing new about it. This is a business rule that is as old as business is itself. And even a manager who has absolutely no commitment to SD would take this advantage. So it is rather an ecological (and SD-) instrument than a lack of the (classical) economical system with absolutely no change in mentality or attitude. If a few years later a technology is developed that is cheaper but causes more pollution, companies will change their technology again because of the Competitive Advantage. New discovered Competitive Advantages had always been taken – long before anybody was talking about SD.
The real challenge begins where the both theories (SD and CA) don’t go in the same direction…

The real challenge begins where the both theories (SD and CA) don’t go in the same direction. And I’m wondering if management in a free capitalism would be able to face the challenge or at least if it should be their task? I think both not. In order to create SD there is a need to change the (legislative) framework in a way that brings the goals of the two systems (SD and CA) together. We need a framework where it leads to SD when companies go on acting just on their own interests. So I really believe that the problem can’t be fixed by management and that it is more an economical problem. Although most governments today are less powerful than some world-wide acting companies, they are the ones who could build up the (world-wide-)framework to reach SD. Companies will always have to make profits that’s what they are made for. But it is still good to teach future managers the spirit of SD, because if they feel a commitment to SD, they can use their power to influence governments that they faster change the framework, so that they are able to compete with “the bad companies”.
There could also be the idea that the people of a country could force companies to behave sustainable by just asking for high quality and environmental-friendly produced products. But in my opinion that is just a nice dream. There are economical theories like the social dilemma or the Low-cost-hypothesis which can point out that this probably won’t work. Social dilemma is about the fact that the best solution for the whole group is not congruent to the best solution of an individual member. Here it is again just the framework that is able to unite the best solution of the individual with the one for the whole group.
To sum it up: It is important that management and people are aware and sensitive of environmental problems, but on a long-term view it is the responsibility of the government(s of the world) to create a sustainable framework. Competitive Advantage can serve or do harm to SD, so these words are not necessarily linked.

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3 comments on “Sustainable Development and Competitive Advantage – Do those words fit together?
  1. jeremy says:

    Excellent post Andreas! This will be ‘music to the ears’ of my colleague and co-author, Judith McNeill, who would agree with you whole-heartedly. While I have more faith in the business community than she does, I don’t think this necessarily means I disagree with you (or her). The state does have an important role to play in creating the right business environment (through an appropriate legislative framework) for ecologically sustainable businesses to thrive. This way, your concern that business will be happy to introduce cheaper, ‘dirty’ technology to gain competitive advantage will be avoided.

  2. Prem says:

    I agree with you andy when you say that the goals of SD and CA are not currently aligned and probably companies will favor dirty technologies that give them CA in the present business scenario.
    But I firmly believe that SD and CA can go together if the drive for it comes from the grassroots – that is the people and the consumers.
    For this man has to change his fundamental behaviour from one that maximises his self interest (homo economicus) to one that believes in the greatest good for the greatest number. Game theory actually shows that such outcomes are possible and perhaps preferable.
    But for this to happen, the populace of a country have to reach a minimum standard of living , education and environmental awareness. Once this happens:
    (1)consumers will demand cleaner and safer products forcing companies to look at sustainable ways of conducting businesses
    (2)Investors will demand that companies act more responsibly and demand triple bottom line reporting
    (3)Politicians elected from such a populace will also be supportive of SD and pass laws and regulations that put the proper checks and balances through laws (which will check CA through dirty technology as the professor said)
    For populations to get to such a stage requires economic development which is a time consuming process. Hence the environmental kuznets effect that things will get much worse before they get better.
    So the change has to come from the people…and i think it is already happening in Europe. Other places it will take time….although i feel america is still a mystery with regard to this (but thats probably because there, the energy lobbies are quite strong and entrenched in the political system…and not because there is no awareness among the people)

  3. zsuzsanna says:

    I agree in several points with Andreas for example when he said, that the Competitive Advantege had existed before this term became widespread. But in my opinion Competitive Advantage and Sustainable Develeopment point to the same direction in the future. I think that most of the large companies are based on long term strategies nowdays. First they set up their long term goals and their corporate values then they decide the instruments which will help them to reach these aims. In the short term with their specific products, technologies etc. they can reach competitive advantage in the market. But they should know that the competitive advantage has to be reformed because the other companies can copy the successful way of business. So the competitive advantage is the result of the short term strategy. On the other hand the companies’ short term strategy is based on the long term goals which should be sustainable development.
    I think that media and the governments should draw the attention of people to be more ecologically sensitive. So there will be a greater demand for quality products. Companies that can satisfy these needs will obtain competitive advantage and they will also contribute to the sustainable development in the long run.

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