Sustainability And Profit: A Contradiction?

Whether it's the World Economic Forum in Davos or the invitation from Siemens to Fridays for Future activist Luisa Neubauer to get a seat on the supervisory board: Climate protection and sustainability are now dominating the debates even in the management floors of major international corporations. While these companies are publicly committed to these issues, the question remains as to whether they're not merely paying lip service or conduct greenwashing. After all, climate protection often comes at the expense of profit maximization. However, whether these two concepts must really be contradictory and whether a possible contradiction can be resolved has been investigated by Professor Miriam Müthel of WHU - Otto Beisheim School of Management together with her colleagues Dr. Iris-Ariane Hengst, Professor Paula Jarzabkowski and Professor Martin Högl. In their study "Toward a Process Theory of Making Sustainability Strategies Legitimate in Action" they investigate the question of how a sustainability strategy can be introduced and accepted in a market-leading company alongside the already established profit-oriented strategy.

In a three-year qualitative study, they examined the implementation of a sustainability strategy at TechPro, a company that employs around 20,000 people and generates annual revenues of 3.5 billion US dollars. The premise was that sustainability is increasingly in demand from customers, employees and other stakeholders because an ever stronger ecological conscience is emerging. However, sustainable management and the partial conversion of the means of production naturally costs money. But because it rarely has a direct benefit for value creation, it increases unit labor costs and thus reduces the company's profitability. At TechPro, as with other companies, this circumstance was initially at odds with the strategy aimed at profit optimization. Nevertheless, the company management committed itself to the introduction of a sustainability strategy, which initially caused scepticism among employees.

Although the introduction of a second corporate strategy initially meant more effort for the workforce, it was gradually accepted and its benefits recognized. This sustainability approach was designed to pay for itself over a longer period of time than short-term profit maximization. It paid off in the end. The establishment of a sustainability strategy ultimately even produced synergies that justified the investments from a business management perspective. The new strategy convinced customers with the longevity of the products, as otherwise the industry often deliberately installs parts that break after the warranty period in order to maintain consumption. Although employees were often confronted with problems and contradictions of the strategies when implementing the sustainability strategy at the beginning, in the end the successful integration of both strategies into the corporate philosophy was the result.

Through the consistent implementation of the sustainability strategy, which was not abandoned even when difficulties arose in keeping with the profit-oriented strategy, TechPro was able to gain a lot of support for its products. After initial skepticism, the employees were also convinced of the incorporation of the sustainability strategy and finally committed themselves to its realization by conviction. Even if both strategic approaches initially appear contradictory, ecological sustainability and the improved status of the company among customers and consumers have meanwhile contributed a great deal to progress.