STRATEGIC BARRIERS TO SUSTAINABLE DEVELOPMENT OF THE ECONOMIES, FIRMS AND PROJECTS (EFP) IN CONDITIONS OF GLOBAL ECONOMIC CRISIS THREAT

Автор(ы): Доктор экономических наук, профессор Санкт-Петербургского государственного университета Маленков Ю.А.

Опубликовано: "Euro-Mediterranean Economic and Finance Review. The Review of Remereg", 2010, Vol.5, N2.
http://yu800.110mb.com/

Introduction

Sustainable development is the major multipurpose criterion of strategic management. Despite its importance, this criterion is the least studied in the theory and is poorly implemented in management practice. This criterion in the world scientific literature is based today on the approaches formulated in ecology. Managers, as a rule, do not include sustainable development principles in the formulations of corporate strategies, or formulate them so foggy, that it is impossible to use these principles in practice.

First of all, it is necessary to answer the basic questions: "What is the sustainable development criterion and in which interval of time it exists?» A number of criteria used in practice mismatch experience. Let's consider some of the most typical of them. Is it possible to understand sustainable development as a continuous growth? The right answer should be negative, as there are too many examples of the companies demonstrating for year's continuous growth and who suddenly went bankrupt in the conditions of crisis under the weight of internal defects and external influences. The understanding of sustainable development as long preservation of firm position on market segments also contradicts experience. Many companies in the conditions of crisis lost theirs positions in the market segments. Let's take well known approach to sustainable development from ecology as «…development that meets the needs of the present without compromising the ability of future generations to meet their own needs». But this interpretation, which is too general and abstract, does not allow management to evaluate and control sustainability of their companies.

Sustainable development is a multicriteria category which is characterized by various criteria. But for efficient management the main criterion is necessary. As the main criterion most precisely reflecting the essence of sustainable development, is organizations viability preservation irrespective of external and internal influences and processes, crises, emergency situations, catastrophes proposed.

Viability preservation means that EFP can flexibly change rates of its development, markets, products and services, but secure its presence in the market, ability to generate profit in the long and medium run, being safe from bankruptcies, acquisitions and unfriendly takeovers. Also keep the continuity of the major part of basic owners. It also means that the organization is safely protected by its management from liquidation.

What are needed today, when global economic crisis threat is real, are the new pragmatic theories of Strategic barriers to global sustainability and of building organizations Viability.

The new concept provides continuous growth of Organization Viability as the main criterion of its development in the conditions of world financial and economic crisis.

Sustainability

There are quite a number of approaches to the understanding of the term "sustainability". They all can be divided into several groups:

1. Mathematical and technical approach.
2. Ecological approach.
3. Combining ecological and market approaches.

There is no clear economical and system approach to the sustainability of modern economies, firms and projects (EFP).

Let us consider some of the most typical views. In mathematics a term "stability" is used and usually referred to as "…Lyapunovs stability, which occurs in the study of dynamical systems. In simple terms, if all solutions of the dynamical system that start out near an equilibrium point xe stay near xe forever, then xe is Lyapunov stable" [1].

Internet information system "Answers.com" gives it as: "Sustainable 1. Capable of being sustained. 2. Capable of being continued with minimal long-term effect on the environment: sustainable agriculture" [2].

Wikipedia states that "Sustainability is the capacity to endure. In ecology the word describes how biological systems remain diverse and productive over time. For humans it is the potential for long-term maintenance of wellbeing, which in turn depends on the wellbeing of the natural world and the responsible use of natural resources [3].

In 1981 White House Council on Environmental Quality report produced the following concept "The key concept here is sustainable development. If economic development is to be successful over the long term, it must proceed in a way that protects the natural resource base of developing countries" [4].

At the 2005 World Summit it was noted that this requires the reconciliation of environmental, social and economic demands - the "three pillars" of sustainability [5]. This view has been expressed as an illustration using three overlapping ellipses indicating that the three pillars of sustainability are not mutually exclusive and can be mutually reinforcing [5].

Golisano Institute for Sustainability, Rochester Institute of Technology gives the following approach to sustainable development and systems « The 1987 "Our Common Future" report of the World Commission on Environment and Development defines sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs Sustainable production systems are the cornerstone of sustainable development. These are systems that create goods and services using strategies and processes that are: non-polluting; conserving of energy and natural resources; economically viable; safe and healthful for workers, communities, and consumers; and socially and creatively rewarding for all working people» [6].

Four decades passed since first mentioning of sustainability on the global level. And one can see that the world has not become sustainable, moreover it has grown economically and socially even more unstable than it was before. It means that this theoretic approach does not work. Why? Because it is good but on the whole - idealistic, while the world today is pragmatic to the core. It is good for working out political concepts, but it is cannot be put into practice by mangers.

What is in need is the pragmatic working approach which is understandable to managers that combines theirs interest with interests of the communities and the states.

US Environmental protection agency in it's' approach to sustainability states contradiction between social and economical: "Over the past 30 years, the concept of sustainability has evolved to reflect perspectives of both the public and private sectors. A public policy perspective would define sustainability as the satisfaction of basic economic, social, and security needs now and in the future without undermining the natural resource base and environmental quality on which life depends. From a business perspective, the goal of sustainability is to increase long-term shareholder and social value, while decreasing industry's use of materials and reducing negative impacts on the environment.

Common to both the public policy and business perspectives is recognition of the need to support a growing economy while reducing the social and economic costs of economic growth. Sustainable development can foster policies that integrate environmental, economic, and social values in decision making. From a business perspective, sustainable development favors an approach based on capturing system dynamics, building resilient and adaptive systems, anticipating and managing variability and risk, and earning a profit.

Sustainable development reflects not the tradeoff between business and the environment but the synergy between them" [7].

The problem is that this and similar approaches are overloaded with too many general and foggy requirements, does not indicate principal criteria and remains still quite unclear for managers, who do not understand what sustainability means after all from the managerial point of view. And the last assertions are very dubious especially in the face of world crisis, when everything becomes strictly limited and business demands cutting costs on everything, including many programs and projects, ecological first, because they are resources most consuming. There is not a single company in the world which can say that it survived crisis and grew sustainable and successful because it had followed those principles. Moreover in a majority of companies you will not find a trace of them. It proves the necessity of a new concept of sustainability in the crisis world, which could be understood by managers.

Before last global crisis an interesting example of managerial business-social approach to sustainability was created in DuPont Corporation. DuPont Corp. developed 2015 Sustainability Pro Goals including: Goals "…design products and processes that pass rigorous criteria for reducing the use of energy, water and materials and encourage the development of products based on the use of renewable resources. …In 2006, we announced a new set of sustainability goals. With a target date of 2015, these include additional voluntary "footprint reduction goals," as well as - for the first time - "market-facing goals." Our marketfacing goals identify opportunities where we will put our research and development dollars to work to develop new products and offerings that will help meet our customers' needs and expectations for more sustainable products" [8].

New corporate approach - Reducing DuPont's Footprint 2015 consists of: Greenhouse Gas Emissions, Water Conservation, Fleet Fuel Efficiency, Energy Use, Renewable Energy. Safety, Health and Environmental Progress Performance and Reporting include a number of managerial activities, which provide information and it's evaluation by Third-Party
Corporate SHE and Sustainable Growth Center
Global Reporting Initiative Report
Third Party Evaluations ERM Report
Responsible Care® Management System Audit
DuPont Submission to 2009 CDP
Product Stewardship Assessments & Summaries
ISO 14001 Certification
UN Global Compact Communication on Progress

This way of combining market activities for stabilizing market situation and lessening impact upon environment could be of use to many a company, especially in developing countries which do not possess necessary managerial experience and understanding of sustainability essence. Corporation declared public view over its activity with clear - cut middle - range goals. It is still a rare thing for business on the whole and the Big business in particular.

But will Big business be able to fulfill its' obligations in the next years to come? In the first-quarter 2010 DuPont "... consolidated net sales of $8.5 billion were 23 percent higher than the prior year" [9]. It also shows the depths of 2009 year crisis. What will be if the world crisis continues its destructive action?

This is a question with many and very different answers. Under stable world economy conditions the chances of success would be great, while under the next wave of global economical crisis they drastically diminish. Under external crisis conditions business always is to shut its eyes on the social and environmental needs of public and to think only of economical survival. Being theoretically good and attractive this concept simply does not work when crisis stands at the threshold. But if it does not work in the crisis another concept, more pragmatic and which could be used under different external and eternal conditions must be created.

The last crisis has shown all the dangers of management by financial objectives in damage to viability criteria.

Sustainable development is a multicriteria category which is characterized by various criteria. But for efficient management the main criterion is necessary. As the main criterion most precisely reflecting the essence of sustainable development, organizations viability preservation irrespective of external and internal influences and processes, crises, emergency situations, catastrophes is proposed.

As a managerial system approach to the sustainability of modern economies, firms and projects (EFP) is proposed the following:
Sustainable development of EFP means realization of the requirements:

1. Continuous improvement of all EFP strategic criteria, which increase or preserve its principal criterion - viability. For each EFP system a specific complex of criteria should be used.
2. Smooth, gradual and predictable changes of EFP which better their positions and increase their viability.
3. Long range life span of EFP organizations and their managerial abilities to prolong EFP life cycles to the maximum after which to pass to other trajectories of development being transformed to totally new kinds of systems.

Key prerequisite for the right understanding of sustainable development is viability. Let's consider it more closely.

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