Interview with John Elkington – why his triple bottom line has to be reexamined

John Elkington is an author, entrepreneur and world authority on corporate responsibility and sustainable development. He is also the Founding Partner, Chairman, and Chief Pollinator at Volans, as well as co-founder, now Honorary Chairman, of SustainAbility and of Environmental Data Services.

In this interview Mr. Elkington talks about his reexamination of the phrase “triple bottom line”, implementing CSR and sustainability into strategies and operations, and the future of the business world.




1) Why did you feel that after 25 years a fundamental reexamination of your triple bottom line theory was warranted? What has changed in your mind?

Since the 1990s, the sustainability sector has grown rapidly, though at around $1 billion in annual revenues globally it is no giant. Still, market research suggests that future markets for its products and services could be huge — with the U.N. Sustainable Development Goals forecast to generate market opportunities of over $12 trillion a year by 2030 (and that’s considered a conservative estimate).

But success or failure on sustainability goals cannot be measured only in terms of profit and loss. It must also be measured in terms of the wellbeing of billions of people and the health of our planet, and the sustainability sector’s record in moving the needle on those goals has been decidedly mixed. While there have been successes, our climate, water resources, oceans, forests, soils and biodiversity are all increasingly threatened. It is time to either step up — or to get out of the way.

As I wrote in the Harvard Business Review:

Fundamentally, we have a hard-wired cultural problem in business, finance and markets. Whereas CEOs, CFOs, and other corporate leaders move heaven and earth to ensure that they hit their profit targets, the same is very rarely true of their people and planet targets. Clearly, the Triple Bottom Line has failed to bury the single bottom line paradigm.

Critically, too, TBL’s stated goal from the outset was system change — pushing toward the transformation of capitalism. It was never supposed to be just an accounting system. It was originally intended as a genetic code, a triple helix of change for tomorrow’s capitalism, with a focus was on breakthrough change, disruption, asymmetric growth (with unsustainable sectors actively sidelined), and the scaling of next-generation market solutions.

To be fair, some companies did move in this direction, among them Denmark’s Novo Nordisk (which rechartered itself around the TBL in 2004), Anglo-Dutch Unilever, and Germany’s Covestro. The latter company’s recently retired CEO, Patrick Thomas, has stressed that the proper use of the TBL involves, at minimum, progress on two dimensions while the third remains unaffected. It is time for this interpretation to become the default setting not just for a handful of leading businesses, but for all business leaders.

I see a bright ray of hope coming from the high-energy world of B Corporations. There’s a lot of momentum there; around 2,500 businesses worldwide are now certified as B Corps. All are configured around the TBL — dedicated to be not just “best in the world,” but “best for the world.” Major companies like Brazil’s Natura and Danone’s North American operation are now B Corps, with other multinational corporations considering how to follow suit.

To truly shift the needle, however, we need a new wave of TBL innovation and deployment. But even though my company, Volans, consults with companies on TBL implementation, frankly, I’m not sure it’s going to be enough. Indeed, none of these sustainability frameworks will be enough, as long as they lack the suitable pace and scale — the necessary radical intent — needed to stop us all overshooting our planetary boundaries.

Hence the need for a “recall.” I hope that in another 25 years we can look back and point to this as the moment started working toward a triple helix for value creation, a genetic code for tomorrow’s capitalism, spurring the regeneration of our economies, societies, and biosphere.

*For some background on the recall process itself, see here:

2) Following up on that question, do you feel that we have reached an inflection point regarding the acceptance of CSR and sustainability as viable strategic approaches by mainstream business in 2018, given Larry Fink’s open letter to CEOs, or are we not quite there yet?

BlackRock are a passive investor, which means that they are not going to rock the corporate boat that much. Welcome, but not quite the manifesto for changing capitalism that some have seen it to be.

3) Given the fact that most managers and executives, at least in the West, have been long taught to believe that there is a fundamental trade-off between profit and social responsibility, how should they best go about holistically incorporating CSR and sustainability into their strategic and operational thinking?

In the same way that we encouraged them to pay attention to what NGOs were saying a few decades ago and then more recently to what social innovators, social entrepreneurs and impact investors are doing, they now need to pay a lot more attention to what exponential innovators, entrepreneurs and investors (from Elon Musk to Josh Tetrick) are now doing to disrupt one sector after another. More sustainable outcomes are not guaranteed on these trajectories, indeed far from it, but the combination of disruption with new values is a powerful one.

4) It is, understandably, a herculean task to fundamentally reexamine the entire way in which one does business, in which specific areas do you foresee businesses having trouble with the integration of these concepts?

There is much talk currently of corporate purpose, which is all well and good. But I’m skeptical. If Patagonia talks about purpose, I know what I’m dealing with; if ExxonMobil does, it’s a different matter entirely.

Business leaders need to lobby much more actively for the sort of market incentives that will push and pull their industries in the right directions – and at the right scale and pace.

5) In your opinion, what does the future of business look like? Will companies still be able to get away with negatively impacting society in favor of profit and growth? Or will investors begin to realize that such rabid short termism is ultimately unsustainable, and begin to reward companies that prioritize long term growth, and thus sustainability, over quarterly returns, or I am giving wall street too much credit?

Some companies will always get away with murder – because we haven’t yet woken up to what they’re doing, because we don’t (yet) have enough political leverage on them, or because we don’t care.

But major brands are finding it increasingly hard to hide – and, indeed, their younger employees are bringing a very different value set to work.

Wall Street will struggle to take all of this on board for quite some time yet, but I do see the Larry Fink CEO letter as an encouraging sign that our change agenda is finally starting to percolate at the top of some pretty major financial institutions.

Interview with Prof. Dr. Elisabeth Fröhlich – President of Cologne Business School

Prof. Dr. Elisabeth Fröhlich is the president of the CBS Cologne Business School and a professor for supply chain management.

In this interview, Prof. Dr. Elisabeth Fröhlich describes how CBS is working to become a leader in the realm of sustainable education and research. Furthermore, she explains why the CBS was chosen as one of the two venues for the 5th Responsible Management Education Research Conference as well as the 8th International Conference on Sustainability and Responsibility.

1) Why will CBS be hosting the 5thResponsible Management Education Research Conference as well as the 8thInternational Conference on Sustainability and Responsibility?

The CBS has proven in recent years, under the guidance of my colleague Prof. Dr. René Schmidpeter, the co-director of the Center for Advanced Sustainable Management (CASM) here at CBS, that we are leaders when it comes to sustainable education and research. We are one of the few universities that have implemented and accredited a so-called integrated sustainability curriculum. Our vision for 2017, which was adopted last year, declares that employability and lifelong learning are a top priority for CBS.

We develop competent and responsible decision-makers who take their roles in society very seriously and work to find innovative solutions to the economic problems of our time. CBS can be considered to be a pioneer in the development of new methods for management education, which is why we are proud to announce that we will be hosting the 5thResponsible Management Education Research Conference as well as the 8thInternational Conference on Sustainability and Responsibility.

2) What do you promise guests that visit the conference?

I can promise our guests that they will meet “like-minded people” and that together we will work to develop innovative approaches for sustainable management to ensure that we can find answers to the most important questions of our time. During the conferences, no topic and no region will be neglected – for me personally, this global exchange is incredibly important and future-oriented.

With CASM, we have created a national platform where this exchange can take place to further innovation and change. The conference should also serve to help develop new ideas for study and teaching programs. PRME focuses very intensively on the question of how we can successfully implement sustainability in teaching and how we can “prove” this success. Our guests will hear from some of the best practice examples and can take inspiration to develop management education approaches.

It is also very important to me that we encourage companies to invest more into their employees as well as their management team. Especially when we think about CSR in the context of digitalization, companies will also face the challenge of how to make their top management level “fit” for this change.

My personal highlight of this conference is to discuss our ideas and visions with top-class, international experts from business, science, society and politics.

3) What do you personally look forward to the most? 

For me personally, the biggest challenge in the context of CSR is the intercultural component. I’ve participated in several international CSR conferences myself and learned a lot from the lectures and panels. Especially in my field of research “sustainable management of global supply chains” the intercultural dimension plays a crucial role. As a German company, I cannot just enforce my own understanding of sustainability on the supplier. I have to understand sustainability first and then I can work together with my supplier to find approaches on how to best enforce sustainability standards.

To realize and to discuss the necessary transparency in the global supply chain, such as new technologies and blockchain developments, can help to overcome these challenges. I am very excited about these opportunities and I hope to take one step further in the right direction here.

I am looking forward to engaging in discussions with our international experts from on the issues that challenge our current business models – and I am convinced that CBS is making an important contribution to this discussion.

Interview with Prof. Danica Purg – Dean and President of IEDC Bled School of Management, President of CEEMAN

Professor Danica Purg is the President of the IEDC-Bled School of Management, Slovenia, and the President of CEEMAN, the international association for management development in dynamic societies, which brings together 225 management development institutions from 54 countries. She is also leading the European Leadership Centre (ELC). [1]

In this interview, Danica Purg describes her views on trends such as digitalization, sustainability, and CSR. She also discusses the concept of responsible leadership and the role of business schools in reshaping the next generation of leaders. 



1) Growing up in the former Yugoslavia you have experienced a significant amount of change in your life, including the fall of Communism and the break-up of Yugoslavia, offering you a unique perspective compared to many western academics. How would you say this experience has influenced your views on trends like digitalization, sustainability, and CSR?

Although it must be already a part of my DNA not to be afraid of challenges and the big political and social changes during the first decades of my life it helped me to think of solutions and to grasp opportunities. Even the establishment of IEDC, a “modern” business school, in the time of (self-management) socialism has been a “disruptive” initiative. The time of anomalies in the late 80s’ and beginning of 90s’ inspired me to introduce ethics in the curricula of the School. Out of that the attention for CSR and sustainability was a logical consequence. I was convinced that only the best faculty could help CEE to close the managerial gap. By attracting the best professors I positioned myself in the frontline of innovative methods of teaching and learning. I see digitalization as opportunity to reach more people to improve own performance.

2) What do you think are the biggest opportunities or challenges that we face in the fields of sustainability, digitalization, and CSR?

The biggest challenge is to change the mind-set of people, in order to be able to live in the era of fast changes (what we call “disruptive” today, will be “normal” in the future), to be able to make “automatically” the right decisions for people and the globe. The biggest opportunity lies in the area of information and communication.

3) What are some of the unique attributes that you believe managers need to have? And how do these attributes this manifest itself in their businesses and their business culture?

Managers of the future are mentors, coaches, creating the conditions for others (people, robots) to perform. They need the necessary technical and functional skills, but focus will be on analytical and emotional qualities. Managers of the complex future are people who are able to build their behaviours and decisions on intuition and their senses. They will perform in horizontal organizations with self- management teams in continuously changing organizations with innovations as an “embedded” characteristic.

4) Leadership as a concept has changed a lot in the past decades, shifting towards the term “responsible leadership”. What does responsible leadership mean for you?

Responsible leadership means for me awareness that every decision has consequences for the environment, for people you lead and for yourself. It also means that you are acting transparently and you are ready to explain your vision and acts and are open to critics and ready to change.

5) Building upon the leadership concept, where do you see the role of business schools in reshaping the next generation of leaders?

Business schools have the responsibility to assist in developing leaders with the above-mentioned mind-set and skills. We are not able to “ensure”, but we can do our best to deliver not only the “toolkit”, but also the “mind-set” to be a responsible leader.

6) What do you think are the most important metrics for defining success?

Success for me is a sustainable and responsible activity (movement, product, service) on the basis of the long-term mission and vision. It can be measured by the level of satisfaction of your stakeholders (employees, customers, financers, relevant groups of citizens).


Microfinance’s Viability as a Social Impact and Poverty Alleviation Tool

There is some debate regarding the actual impact of microfinance. One example of this can be seen if one simply compares the “escape from poverty rate” of borrowers and non-borrowers. In this case, one fails to consider the self-selection of borrowers, i.e. those with entrepreneurial tendencies will have a higher propensity towards borrowing (Chowdhury, 2009). This will naturally have a tremendous effect on the measurement of a fund’s impact. In addition, if one considers the “escape from poverty rate” to be the single meaningful measure of a fund’s success, one would be ignoring the other tenets of economic development, and thus disregarding some of economic development’s larger goals.

Poverty alleviation should have other positive corollary effects on society, namely an increase in the number of children enrolled in school, increase in public health metrics, etc. However, there is a number of contrasting research to be found in this area. In example, an extensive study found that 62% of school-aged sons from Grameen Bank borrowers attended school, compared to just 34% of non-borrowers (The Economist, 2009). In comparison, a 2009 study, by Banerjee, Duflo, Glennerster and Kinnan, determined that microfinance had no impact on current measures of health, education, or a woman’s decision-making in the slums of the Indian city of Hyderabad. Proponents argue that, given microfinance’s relatively short history and a lack of understanding of banks and financial services amongst target groups, one can only truly evaluate the success of microfinance in its most developed markets, where potential borrowers are familiar with the concept and loans of microfinance institutions are a ubiquitous part of the economy. In Bangladesh, the world’s most developed microfinance market, a study found that microcredit was responsible for 40% of the total poverty reduction in rural areas, and had positive corollary effects as it reduced moderate poverty at a rate of 1% annually, and extreme poverty at a rate of 1.3% (Khandker, 2003). Again, many economists and scholars find these numbers to be misleading, and believe that those involved in microfinance have dramatically oversold it as an anti-poverty tool. A 2006 World Bank Study found that Bangladeshi women, who received microcredit only experienced an annual income increase of 8 Taka (Bangladeshi currency) for every $100 borrowed, which represents a $0.03 per day increase in income. Consequently, a 1.5% increase in income for someone surviving on only $2 a day is seemingly insignificant (Khandker, 2006 and Roodman & Quershi, 2006).

The consensus amongst economists appears to be that microcredit and microfinance have potential as tools for development, but cannot considered to be a method that can replace the state’s important role in economic development (Chowdhury, 2009). Microfinance funds need to reassess their business models, as they should attempt to find successful microenterprises and microentrepreneurs and provide them with access to capital, as they are shown to be more successful than the very poor in properly utilizing their loans (Easterly, 2006). Additionally, microfinance funds cannot operate in a vacuum and must be cognizant of macro and microeconomic factors when investing (Chowdhury, 2009). Therefore, an examination of the four main issues regarding microfinance is required to gain a better grasp of the field.

Observations and Recommendations:

The problems surrounding microfinance seem to be a combination of several factors. Microfinance institutions fail to adequately assess and understand target markets, the prioritization of financial sustainability over social impact, the fact that borrowers are self-selecting, and funds generally fail to consider macroeconomic variables.

While microfinance institutions’ intentions are noble, they often fail to properly research and understand their target markets before beginning lending activities. Often, they fail to understand that microcredit only functions in areas with a well-functioning and growing domestic market, as without the requisite consumer base, there is no room for expansion (Pollin & Feffer, 2007). Simply having access to capital is useless, if there is no infrastructure in place, i.e roads, to support entrepreneurs and business activates. And because the majority of microfinance funds prioritize financial sustainability over social impact, they normally approve a number of loans that are far in excess of what the local economy can support, in order to diversify their investment (Bateman & Chang, 2009). While this practice is financially sound in developed economies, the same does not hold true in developing countries. By providing loans to such a great number of people, the fund floods the local economy with a plethora of in-efficient microenterprises, which must engage in cost-cutting measures to remain competitive. These cost-cutting measures usually hinder the development of, and take away, market share from more efficient local small and medium enterprises (SMEs), which, in the long-run, have much greater potential as a poverty-reduction tool (Bateman & Chang, 2009).

An example of this phenomenon can be found in a scheme to provide rural Bosnians with a microloan so that they can purchase a cow. The increase in the supply of milk contributed to a significant decline in the overall price. The combination of an oversupply with a price decrease, diminished the market share and income of larger local dairy farms, which in turn effected their ability to purchase and invest in new equipment, stock, and labor (Agripolicy, 2006). Consequently, this measure had an overall negative effect on development. It is quite clear that this fundamental misunderstanding of scale economics has the potential to destroy entire industries.

Therefore, funds need to reassess their lending policies and perhaps work with the local government, instead of bypassing it, to determine areas where microfinancing has the capacity to produce social impact. Funds would do well to focus on successful microenterprises that exist within the “informal economies” in developing countries. To this effect, Bateman & Chang argue that the economic development achieved by all nations throughout history, both in the 1800s and in the last couple of decades, was a product of government coordination, in monetary and fiscal policy, investment, and in some cases by state led capitalism –see the “tiger economies” (2009 and Witt, 2012). Providing established entrepreneurs with capital, after a critical assessment of the local market’s growth potential, would allow these SMEs to expand, and in the process, employ more people and bring more trade to the area (Ditcher, 2006). Utilizing such an approach also decreases the possibility that the loans are used for “consumption smoothing”, a process where the loans are not put to their intended purpose, but towards things like tuition fees, healthcare costs, and weddings (Bunting, 2011).

Concluding Thoughts:

Microfinance certainly has the potential to have an meaningful impact on economic development, especially in areas that are underserved by the current development programs operated by governmental and international organizations. The onset of the digital age will help solve a lot of the problems currently facing Microfinance and part two of the series will concentrate on how Fintech can redefined the industry, whilst simultaneously increasing Microfinance’s potential impact.

About the Author

Haden Garth Cosman is a master’s student in International Business – Strategic Management and Consulting at the Cologne Business School. In his current role at CASM, he is primarily responsible for the management and support of research and other assorted publications. He completed his bachelor’s in International Political Economy, with a focus on Economic Development, and German Language at Fordham University in New York, and has professional experience in the finance and consulting sectors on both sides of the Atlantic.


Agripolicy. (2006). Structure and Competitiveness of the Milk and Dairy Supply Chain in Bosnia and Herzegovina (Rep.). CEEC Agri Policy Project.

Bateman, M., & Chang, H. (2009). The Microfinance Illusion. SSRN Electronic Journal. doi:10.2139/ssrn.2385174

Bunting, M. (2011, March 09). Is microfinance a neoliberal fairytale?| Madeleine Bunting. The Guardian. Retrieved May 06, 2018, from

Chowdhury, A. (2009, December). Microfinance as a Poverty Reduction Tool – A Critical Assessment (Working paper No. 89). Retrieved May 10, 2018, from United Nations Department of Economic and Social Affairs website:

Ditcher, T. (2006). Hype and Hope: The Worrisome State of the Microcredit Movement. United States Agency International Development.

Duflo, E., Banerjee, A., Glennerster, R., & Kinnan, C. (2015). The Miracle of Microfinance? Evidence from a Randomized Evaluation. American Economic Journal: Applied Economics, 7(1), 22-53. doi:10.3386/w18950

Easterly, W. R. (2007). The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Oxford: Oxford University Press.

Khandker, S. (2003). Micro-Finance and Poverty: Evidence Using Panel Data from Bangladesh. Policy Research Working Papers. doi:10.1596/1813-9450-2945

Khandker, S. (2005). Microfinance and Poverty: Evidence Using Panel Data from Bangladesh. The World Bank Economic Review, 19(2), 263-286. doi:10.1093/wber/lhi008

A Partial Marvel. (2009, June 16). The Economist. Retrieved May 10, 2018, from

Perkins, A. (2008, June 03). A Short History of Microfinance. The Guardian. Retrieved May 01, 2018, from

Pollin, R., & Feffer, J. (2007, June 21). Microcredit: False Hopes and Real Possibilities: Is microcredit the solution to global poverty? Yes and no…. [Web log post]. Retrieved May 09, 2018, from

Pollin, R., Feffer, J., & Daley-Harris, S. (2007, June 21). Debate on Microcredit: Sam Daley-Harris argues for improving microfinance so that it lives up to its potential. Robert Pollin counters that microfinance must be embedded in a larger development program. [Web log post]. Retrieved May 09, 2018, from

Roodman, D., & Qureshi, U. (2006). Microfinance as Business (Working paper). Washington, DC: Center for Global Development.

Witt, M. A. (n.d.). South Korea: Plutocratic State-led Capitalism Reconfiguring. In The Oxford Handbook of Asian Business Systems (pp. 216-237). Oxford: Oxford University Press. Retrieved May 10, 2018, from

Gesellschaftliche Herausforderungen als unternehmerische Chance – Ein Corporate Social Responsibility Ansatz

Aktuell, wird das Marktumfeld von vielen unterschiedlichen gesellschaftlichen Herausforderungen geprägt. Zu diesen Herausforderungen zählen wir die Marktvolatilität, die sich aus Themen rund um demografische Änderungen und eine Volatilität in Angebot und Nachfrage zusammen setzt. Des Weiteren, stellt sich für viele Unternehmen heutzutage die Frage nach dem Zusammenhang zwischen Profit und Gesellschaftlicher Verantwung. „Profit vs. Gesellschaftliche Verantwortung“ steht hier für die Auseinandersetzung zwischen Rekordprofiten und sozialen Problemen. Immer mehr Unternehmen setzen sich mit Ihrer Rolle in der Gesellschaft auseinander und versuchen nicht nur eine Profit Maximierung zu erreichen sondern auch gesellschaftlichen Nutzen zu erzielen. Ebenfalls zu den gängigen Herausforderungen im Marktumfeld zählen die verfügbaren natürlichen Ressourcen, wie beispielsweise fossile Brennstoffe oder Frischwasser. Die Globale Wertschöpfung fördert zudem Interdependenzen und Disruptionen im Marktumfeld. All diese Herausforderungen wirken sich auch auf unternehmerischen Entscheidungen aus. Diese Entscheidung werden oft aufgrund bestimmter Treiber getroffen wie beispielsweise die Industrie 4.0 oder der steigende soziale Druck auf Unternehmen. Diese Herausforderungen und Treiber führen uns zu der Kernfrage: „Wie können Unternehmen Wert schaffen?“ und „Wie können wir gesellschaftliche Herausforderungen lösen?“ [1].

Diese Fragestellung leitet uns zu einer Neupositionierung der Unternehmen in der heutigen Gesellschaft. Unternehmen sind ein wichtiger Bestandteil der Gesellschaft, sozusagen Bürger der Gesellschaft. Dadurch wird Ihnen eine explizite Verantwortung übertragen. Eine Neuausrichtung des Managements im Unternehmen führt daher oft zu einem Corporate Social Responsibility Ansatz [2]. Doch wofür steht Corporate Social Responsibility? Und wodurch wird Social Responsibility geprägt?

Die EU-Kommission definiert CSR als “die Verantwortung von Unternehmen für Ihre Auswirkungen auf die Gesellschaft”[3].

Mit CSR können Unternehmen sowohl Ihrer sozialen Verantwortung im vollem Umfang gerecht werden als auch neue Märkte erschließen, sinnvolle Innovation voranbringen und Prozesse optimieren. Wir sehen vermehrt, dass CSR gemeinsam mit Globalisierung, Innovation und Digitalisierung gedacht wird. Um CSR holistisch voranzutreiben benötigt es daher auch verantwortungsvolle Führungskräfte.

Verbinden wir dieses nun mit unseren globalen Herausforderungen, dann sehen wir, dass ein verantwortungsvolles wirtschaften auch neue Chancen bringt. Zu der Verantwortung, die Unternehmen übernehmen gehören beispielsweise die Mitarbeiterförderung, die Ressourcenschonung oder das Engagement für die Gesellschaft [4].

Der Bereich der Nachhaltigkeit muss somit neu überdacht werden. Für Unternehmen bedeutet CSR nicht, dass zwischen gesellschaftlichem Nutzen und eigenem Interesse entschieden werden muss. CSR bedeutet, dass Unternehmen durch gesellschaftlichen und ökonomischen Nutzen Profit erzielen können. Dies ist eine Verzahnung von finanziellem, sozialem und ökologischem Erfolg und zwar langfristig. CSR ist somit eine Mischung aus dem „Business Case“ und dem „Social Case“. Es ist weder reine Philanthropie, der „Social Case“ noch ist es eine ausschließliche Gewinnmaximierung, der „Business Case“. In Wahrheit liegt Corporate Social Responsibility genau zwischen diesen zwei Polen [5].


[1] in Anlehnung an Michael Dheur (2013). CSR und Value Chain Management, Management – Reihe CSR.

[2] Schmidpeter (2012). Verantwortung Zukunft, FAZ Institut für Management.

[3] Europäische Kommission (2012). Definition CSR.

[4] Unternehmensbarometer DIHK (2012).

[5] in Anlehnung an Schmidpeter (2012). Verantwortung Zukunft, FAZ Institut für Management.

Are Sustainability and CSR Practices Here to Stay in American Business?

“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society.“ – Larry Fink, CEO of BlackRock Inc.

Changes in economic, social, and environmental factors have altered market conditions to such a degree that enterprises that are unwilling to integrate meaningful CSR (Corporate Social Responsibility) and Sustainability practices into their core corporate strategy will simply die off[1].

Since the 1970s, CSR and Sustainability have been relegated to the fringes of American business thought. In large part stemming from the considerable influence of Milton Friedman and the Chicago School’s doctrine, which asserted that the sole metric of a company’s social responsibility should be profit maximization and the creation of shareholder value[2]. More recently, academia and business have come to consider the Friedman Doctrine as outdated and lacking the necessary nuance to properly understand social responsibility of business[3]. Thus, enterprises have begun to move away from concentrating solely on profit maximization. The shift in the philosophy surrounding governance and the responsibility of enterprises is the direct result of substantial shifts in economic (globalization and digitalization), environmental (climate change and resource scarcity), and social factors (changes in generational consumer preferences). It is abundantly clear that failing to seriously consider these increasingly crucial factors will degrade an enterprise’s value by eroding its social license to operate[4]. For the most part, society has placed the responsibility for the integration of CSR and Sustainability programs on the shoulders of managers in industry, and investors have been slow to understand its importance, and therefore have not rewarded enterprises that implement meaningful CSR and Sustainability strategies. This is beginning to change with the rise of impact investing, which is based upon two fundamental principles, “accumulating wealth by any means followed by a turn to philanthropy in search of impact is not an efficient way to create overall value for society” and “there are investment opportunities that create both strong financial and impact returns without requiring a tradeoff”[5]. Impact investing and SRI (Socially Responsible Investing) has been increasing steadily the past decade, but those principles have been adopted to a greater degree in the venture capital and private equity space[6] than capital markets and institutional investors.

2018 is the inflection point in which CSR and Sustainability have finally entered the lexicon of the uppermost tier of American finance. As Larry Fink, CEO of BlackRock, the world’s largest asset manager, called on CEOs to fundamentally reexamine their companies’ value proposition, “Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate”[7]. His open letter represents a fundamental break from the conventional finance philosophy and represents a call to action to the American finance elite, who are well-schooled in the self-correcting nature of Adam Smith’s invisible hand and the Friedman doctrine.

Why is this important? While the notion of impact investing has existed for the past several decades, it was mostly considered to be the domain of small and middle market private funds, NGOs, and non-profits, and it traditionally delivered below market returns[8]. It was not considered to be of interest to large financial players that are driven by returns, not social impact.

However, given the fact that there has been a considerable amount of academic research that has demonstrated that there is, in fact, a positive correlation between performance on ESG matrices and overall financial returns[9], investors have begun to take notice. After the 2008 financial crisis, business leaders have started to recognize the dangers of short-sighted strategies driven by an obsession with quarterly results, which have been only reinforced by the West’s seeming fixation on short-term success[10]. By serving all stakeholders, instead of only shareholders, enterprises can gain competitive advantages by approaching their strategy in a holistic manner that puts the long-term sustainability of their business over short-term profit maximization[11]. An even more telling example and one that ties directly into Larry Fink’s words is that the average holding period of a stock was just 22 seconds in 2014, compared to four years after the end of the second world war[12]. However, enterprises that prioritize the long-term viability and health of their business tend to get penalized in the short-term by markets, thus making the paradox of short and long-term strategy even more difficult to navigate. There is an obsession with hot money[13] and high-frequency trading that has significantly altered the structure of the market, creating levels of volatility that result in levels of uncertainty that affect the strategic decision-making of companies. This “short-termism” is not only being driven by human tendencies, but also by the proliferation of short-term passive investment vehicles, which has altered the structure of the market. ETFs (Electronically Traded Funds), whose algorithms fail to consider “real world” factors other than financial information. By only interpreting financial statements and not possessing the ability to consider unpredictable real-world events, companies are penalized for activities that active investors would not penalize.

One might ask how this tie into sustainability and more importantly Larry Fink’s letter? Essentially, investors are beginning to look for companies that successfully balance the paradox of short and long-term thinking and strategy, as companies that think further out into the future strategically perform better[14]. However, markets are significantly trailing business in their understanding of the strategic importance for companies in engaging in meaningful CSR and Sustainability practices. Therefore, it has become almost self-evident to leaders in that they need to adjust their business model and operations to remain competitive in the long run. But what has not shifted is the way that most investors evaluate companies, they are still primarily concerned with short-term performance, and are reluctant to hold stocks for extended periods of time. This creates a tremendous problem for CEOs, as they are being pulled in two different directions simultaneously. They need to ensure that they address long-term strategic concerns, whilst putting up acceptable quarterly returns for investors. One can see how this presents a problem for companies, as it is a chicken and egg problem, allocate resources for CSR and sustainability activities, or continue to focus on short-term results and continue to please investors.

The only way to solve this problem is to fundamentally change investor behavior, and business needs to convince investors to hold stocks for increasing periods of time, which would provide the necessary stability for companies to implement strategies that ensure their long-term competitiveness. This really underscores the importance of Larry Fink’s letter, because he is giving industry leaders the license to reexamine and readjust their business models to adapt to the coming changes.

We see this as being a pivotal moment in the acceptance of Sustainability and CSR as legitimate strategic concepts in the American business psyche. And while it represents a significant step in the right direction, the flood is coming and those who do not fundamentally rethink their businesses will be left off the ark.

About the Authors

Prof. Dr. René Schmidpeter holds the Dr. Juergen Meyer Endowed Chair of International Business Ethics and Corporate Social Responsibility at Cologne Business School (CBS), Germany. He is also a professor at the Nanjing University of Finance and Economics and an Adjunct Professor at Murdoch University in Perth, Australia. He is a series editor for Springer’s CSR, Sustainability, Ethics and Governance books, a section editor of the Encyclopedia of Corporate Social Responsibility (ECSR) and an editor of the Dictionary of Corporate Social Responsibility (DCSR) as well as Editor-inChief of the International Journal of CSR (Springer).

Haden Garth Cosman is a master’s student in International Business – Strategic Management and Consulting at the Cologne Business School. In his current role at CASM, he is primarily responsible for the management and support of research and other assorted publications. He completed his bachelor’s in International Political Economy, with a focus on Economic Development, and German Language at Fordham University in New York, and has professional experience in the finance and consulting sectors on both sides of the Atlantic.

[1] See Definition of Strategic Drift and Katz, D., & Kahn, R. L. (1966). The social psychology of organizations. New York: Wiley.

[2] Friedman, M. (1970). “The Social Responsibility of Business is to Increase its Profits”. The New York Times.

[3] McKinsey Global Institute. (2009). Valuing Corporate Social Responsibility: McKinsey Global Survey Results; McKinsey Global Institute. (2011).The Business of Sustainability: McKinsey Global Survey Results.

[4] Heuskel, D., Lewis, T., & Reeves, M. (2010). “Social Advantage”. The Boston Consulting Group Publications.

[5] Seegull, F. (2018). “From Milton Friedman to Larry Fink—The Rise of Impact Investing”. Harvard Business School Social Enterprise Impact Insights.

[6] EY Global Private Equity Advisory (2017), “Profit and Purpose: Impact Investing Goes Mainstream”. EY Private Equity Hot Topics.

[7] Fink, L (2018). “A Sense of Purpose”. BlackRock, INC.

[8] EY Global Private Equity Advisory (2017), “Profit and Purpose: Impact Investing Goes Mainstream”. EY Private Equity Hot Topics.

[9] Bassen, A., Busch, T., & Friede, G., (2015). “ESG and financial performance: aggregated evidence from more than 2000 empirical studies”. Journal of Sustainable Finance & Investment.

[10] Barton, D. (2011). “Capitalism for the Long Term”. Harvard Business Review.

[11] Gordon, M. (2014): Ira Sohn Investment Conference Presentation.

[12] Gordon, M. (2014). Ira Sohn Investment Conference Presentation.

[13] Constable, S. (2018). “What is Hot Money”. Wall Street Journal.

[14] Barton, D., Manyika, J., & Williamson, K, S. “Finally, Evidence that Managing for Pays Off”. Harvard Business Review.

Ed Freeman

Stakeholder and Responsible Leadership – Ed Freeman

In this interview, Ed Freeman, the founder of the stakeholder theory, provides valuable insight on how to overcome stereotypes about “academics” and “practitioners”, to create positive social impact. He also discuss the  essentially of communication and notes that one of the reasons why this conference series has been so successful is due to the informal time that academics and practitioners spend together.

(1) Ed, you are known as the founding father of the stakeholder theory. What motivated you to postulate this theory?

My understanding of what has been done may be a bit different from others.  I was simply trying to make sense of what “business” really was.  I had recently gotten my PhD in Philosophy and had no experience with business, and I found myself with a Post-doc at Wharton.  It seemed to me like every business I saw was trying to create value for customers, suppliers, employees, communities, and financiers.  I took this as obvious and common sense, not a “theory” at all.  I’ve tried to pursue this understanding of business for the last 40 years.  I get way too much credit for “stakeholder theory”.

(2) The topic of The 8th International Conference on Sustainability and Responsibility is, “Responsible Leadership in Times of Transformation”. What role does the stakeholder theory play with respect to responsible leadership?

Once again I have to confess being naieve.  I didn’t know that business schools and business theorists separated “business” from “ethics” (and responsibility).  I was trying to give a useful answer to the questions of (1) How can businesses thrive in times of instability and uncertainty? (2) How do we address the issue of the ethics of capitalism? and, (3) What should we be teaching in business schools?  Business and responsibility have always seemed intimately connected to me.  I originally thought that positivism was long dead having been killed at least by Wittgenstein and the pragmatist philosophers of the 1950s.  I was surprised to find it alive and thriving (especially today) at business schools all over the world.

(3) In your opinion, what are some of the pressing challenges facing stakeholders in times of transformation (e.g. considering digitalization or increased fragmentation of stakeholders)?

One of the biggest challenges is keeping up with some incredible technological advances, and since that is really technically impossible, it is imperative to be able to trust others.  The role of ethics and integrity is more important than ever.

(4) At the conference we aim to connect academics and practitioners. What do you think are the most significant challenges and opportunities that arise from a such format?

The biggest issue is how to really listen to each other, and establish some trust.  Academics aren’t the best listeners, and practitioners don’t always have the most open minds.  The challenges of communication are fairly substantial.  One of the highlights of this conference in the past has been the informal time to spend with both other academics and practitioners.  All seem to want to have better relationships and more communication.

(5) How can we use this conference to create or foster societal impact?

Perhaps, out of the communication will come some new ideas, embodied in some new projects that can make a difference.  Getting rid of old stereotypes about “academics” and “practitioners” can really help here.

(6) What do you personally hope for this conference to accomplish?

Conferences can inspire people to do important work.  I see that as part of my role as an academic:  to inspire colleagues, students, and practitioners to figure out how to create value for their stakeholders, and make the world a better place for our children.

Thank you for your time!

About the Author

R. Edward Freeman is University Professor and Elis and Signe Olsson Professor of Business Administration; Senior Fellow of the Olsson Center for Applied Ethics; Academic Director of the Business Roundtable Institute for Corporate Ethics; and Co-Academic Director of the Institute for Business in Society. He is also Adjunct Professor of Stakeholder Management at the Copenhagen Business School, and Adjunct Professor at Monash University (Melbourne). Mr. Freeman taught previously at the University of Minnesota, and The Wharton School, University of Pennsylvania. 

Freeman’s latest book, Business: The New Story, with Bidhan Parmar and Kirsten Martin will be published by Columbia University Press in 2019,  A previous book, Stakeholder Theory: The State of the Art, was published by Cambridge University Press in 2010 (co-authored with J. Harrison, A. Wicks, B.Parmar, and S. de Colle.) He is the author or editor of over twenty volumes and one hundred articles in the areas of stakeholder management, business strategy and business ethics. Freeman is perhaps best known for his award winning book: Strategic Management: A Stakeholder Approach, published in 1984.

Freeman has a Ph.D. in Philosophy from Washington University, and a B.A. in Mathematics and Philosophy from Duke University. He was recently awarded four honorary doctorates in economics and management (DHC) from Comillas University in Madrid, from Radboud University in Nijmegen, the Hanken School of Economics in Helsinki and Sherbrooke University in Canada for his work on stakeholder theory and business ethics. Mr. Freeman is a lifelong student of philosophy, martial arts, and the blues. He is a co-principal in Red Goat Records, LLC found at For more information, go to

René Schmidpeter

Responsible Leadership in Times of Transformation

The world is rapidly changing. Digital transformation, sustainable management and industry 4.0 are already the reality. This not only affects our workplaces and businesses, but also academia and education. Instead of linear conventional thinking, managers need innovative skills, such as cooperation and social competences. The whole world has access to the internet’s unlimited knowledge base and an increasing number of people have the ability and means to access it every day. In order to properly utilize this continuously growing and changing knowledge base, leaders have to develop new skills and enhance personal abilities. New skills can only be developed in an open and free setting without the limitations of ideologies and old mindsets.

Organizations, as well as their leaders and employees benefit from these recent developments. On the one hand, people become part of global information and knowledge network caused by digitalization, on the other hand personal excellence and creativity becomes more valuable in the value creation process. Intuitive knowledge, personal values, as well as a clear orientation towards the future are gaining importance and seen as necessary mindsets to foster innovation and drive sustainable development.

Currently Academia is going through a transformation itself. We need to develop new content (e.g. sustainable management), new methods (innovation and creativity, unique experiences, free thinking), and governance structures (open networks, co-creation and dynamic learning organizations). The question remains: How can we achieve all this? How can we develop innovative leadership approaches and new education systems at the same time? How can we re-organize academia and management, so that we can create value from the under-utilized ecological, social and entrepreneurial potential, which lies within all of us and our organizations? What does a co-creation process of knowledge and responsible leadership look like? How can we have a positive impact on current transformation processes?

Management and Academia will change fundamentally within the next decade. It is not going to be enough to only provide the same opportunities for the next generations. Instead, we need to INCREASE opportunities for current and future generations NOW. This new vision for business and universities will empower even more people, especially managers, to change out-dated structures and organizations, and pioneer responsible leadership that will create more opportunities for all of us. If one examines the changes from this perspective, the current transformation is the biggest opportunity of our lifetime! Academic conferences like the PRME and the Humboldt conference represent a tremendous opportunity to build new collaborations across disciplines, between business and academia, as well as between different cultures and continents, so that we can achieve these new goals together. Times of transformation are always different from previous times, that’s why every person and their unique competencies and skills count! That’s why I hope to see you all in Cologne from 12th till 16th in November 2018.

About the Author

Prof. Dr. René Schmidpeter holds the Dr. Juergen Meyer Endowed Chair of International Business Ethics and Corporate Social Responsibility at Cologne Business School (CBS), Germany. He is also a professor at the Nanjing University of Finance and Economics and Adjunct Professor at Murdoch University in Perth, Australia. He is a series editor for Springer’s CSR, Sustainability, Ethics and Governance books, a section editor of the Encyclopedia of Corporate Social Responsibility (ECSR) and an editor of the Dictionary of Corporate Social Responsibility (DCSR) as well as Editor-in Chief of the International Journal of CSR (Springer).