The Durable Corporation: Strategies for Sustainable Development

Citation

Shaw, H.J. and Shaw, J.J.A. (2009), "The Durable Corporation: Strategies for Sustainable Development", International Journal of Law and Management, Vol. 51 No. 6, pp. 458-460. https://doi.org/10.1108/ijlma.2009.51.6.458.2

The Durable Corporation is a book appropriate for our times in more ways than one. Recent events such as the environmental disaster of Hurricane Katrina in 2005 and the financial storm of the Credit Crunch which hit the world two years later may well be just the wake up call to greater such occurrences in future years, if more account is not taken of the environment and of the sustainability of our lifestyles in the global North. Globalisation was driven by the corporations' quest for the economies of scale that facilitated both greater financial profits and cheaper prices, but consumers should not forget that there is a downside to cheapness, expressed in the traditional Arab proverb, “If you buy cheap meat, when it boils you smell what you have saved”. Take for example three of the world's largest corporations, ExxonMobil, Wal‐Mart and Royal Dutch Shell; each has annual revenues in excess of US$ 300 million, comparable with the GDP of Switzerland. They may appear “durable” in the sense of monolithic, indestructible, callous or hard, yet none of these corporations are immune to financial or environmental tremors in the world economy. As the Credit Crunch has graphically demonstrated, the globalised financial environment, with its leveraged risks and returns, has multiplied risk not minimised it, and has spread this risk to a global panoply of stakeholders, including shareholders, employees, neighbourhoods, governments, and even other corporations in the supply chain.

“Durable” can mean “hard, callous and impenetrable”; it can also mean “continuing to exist, remaining serviceable”. In The Durable Corporation, Aras and Crowther call for a different sort of durability; asking, in effect, “serviceable to whom?” Traditional accounting, as reviewed in chapter seven of this book, may be defined as “the systematic recording, reporting, and analysis of financial transactions of a business”; however this fails to capture the interests of stakeholders outside the narrow financial definition of stakeholders as owners, managers, staff, customers and suppliers of a company. Enviro‐economic events and processes such as climate change, exhaustion of fossil fuels, and famines demonstrate that to be sustainable, or durable, corporations need to account for their actions upon society and the environment. Moving on from Brundtland's influential definition of sustainability, a more holistic semiotic of accounting is needed, including even the sustainability of other companies in the supply chain, the ethics and social responsibility of their actions (Brundtland, 1987). Some organisations such as the BBC in Britain already follow this principle (Shaw, 2007, p. 16). However just as there is a movement towards a global set of “Generally Accepted Accounting Principles” (GAAP), a sustainable world needs a globally accepted ethical and environmental accounting system for its corporations.

A common present day business cliché is “time is money”; in fact this saying has been attributed to Benjamin Franklin (Bloomsbury, 1991, p. 48), or even to Antiphon in Classical Greece (The Phrase Finder, 2009). In The Durable Corporation Aras and Crowther describe how corporations already manipulate time to increase profit. Supermarkets converted to self‐service in the 1950s and 1960s, not only creating the externality of unemployment (a cost to be born by the State or taxpayer) but also making the customer use their own time in selecting goods, rather than shop staff using the company's time to perform this task. Using Marxist analysis, Aras and Crowther note how corporations can extract “worker‐value” from the future to boost profits now. Employees may be overworked, or underpaid, resulting in future health problems or future societal problems of adult under‐education in the case of LDC countries' child workers; the corporate bottom line is raised in the present, and society bears the costs that will accrue in future years (Shaw and Shaw, 2005, p. 68). In The Durable Corporation the case is made for the time element to be included, as explicitly creating value for the future, rather then implicitly extracting value from it. The costs to generations as yet unborn of pollution, resource extraction, and implied future maintenance costs need to be part of the bottom line of the sustainable corporation. Economists will concur that as a finite resource is used up now, future bottom lines will bear the costs of either increased prices for that same resource or the costs of substitution and new technology installation to shift to an alternative resource; and as an English proverb states, “It is easier to build two chimneys than to maintain one” (Harrison, 1983, p. 180). Responsible corporations will see the often financially insubstantial rewards of social responsibility converted into hard cash through increased sales and customer loyalty, and the CEOs will gain through lower production costs, easier capital access, and enhanced shares prices.

The Durable Corporation, although extending the CSR debate and calling for increased environmental awareness and reformed accounting, is by no means anti‐corporatist. Rather it is a survival course and toolkit for the global corporations of the twenty‐first century, using the “stewardship principle” as a means of achieving a sustainable commercial system for the planet. Philosophical theories of Utilitarianism are combined with Agency Theory, Social Contract Theory and environmental principles such as those contained in the Brundtland Report and the Triple Bottom Line, to develop a new paradigm of long‐term corporate strategic planning and environmental preservation.

The Durable Corporation is an innovative, inspired and up to date analysis of the economic and environmental threats and opportunities facing the corporate world of the twenty‐first century, using real life examples from well known companies such as Shell and Timberland. It contains a useful analysis of corporate size, profit goals, and sustainability which suggests that whilst profitability is not incompatible with sustainability, profit maximisation without internalisation of traditionally external factors relating to society and the environment is not a long term sustainable goal, and large companies may in fact be more sustainable than small ones. This book will be extremely useful to students and academics researching economics, accountancy, corporate social responsibility, and the sustainable environment. It is also an essential inclusion for any university library where these subjects are taught.