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Journal of Business Ethics (2005) 61: 263-281DOI 10.1007/s10551-005-7054-0 Springer 2005

Corporations, Stakeholdersand Sustainable Development I:A Theoretical Explorationof Business-Society Relations

Reinhard SteurerMarkus E. LangerAstrid KonradAndre Martinuzzi

ABSTRACT. Sustainable development (SD) - that is,"Development that meets the needs of current genera-tions without compromising the ability of fiture gener-ations to meet their needs and aspirations" - can bepursued in many dierent -ways. Stakeholder relationsmanagement (SRM) is one such way, through whichcorporations are confronted with economic, social, andenvironmental stakeholder claims. This paper lays thegroundwork for an empirical analysis of the question ofhow far SD can be achieved through SR.M. It describesthe so-called SD-SRM perspective as a distinctiveresearch approach and shows how it relates to the widerbody of stakeholder theory. Next, the concept of SD isoperationalized for the microeconomic level with refer-

ence to important documents. Based on the ensuing SDframework, it is shown how SD and SR_M relate to eachother, and how the two concepts relate to other popularconcepts such as Corporate Sustainability and CorporateSocial Responsibility. The paper concludes that thesignificance of societal guiding models such as SD and ofmanagement approaches like CSR is strongly dependenton their footing in society.KEY WORDS: sustainable development, sustainability,corporate stakeholder, stakeholder management, stake-holder relations management, Corporate Social Respon-sibility/CSR, Corporate Responsibility, environmentalmanagement

ReinhardSteurer s a seniorresearcherand lecturerat the ResearchInstituteforManagingSustainabilityat he Vienna U niversityofEconomics and BusinessAdminstration.His researchocuseson the changingrolesofstates, businesses andcivilsocietiesin thecontextofsustainabledevelopment. He is authorandco-authorofnumerousarticles, dealingwith questionsofhot govenmnentsand businesses tackle the challenge of ustainable development,and what the tivo societal domains can learn rom each other indoing so. He holds a Ph.D. in Political Science from theUniversity ofSalzburg/Austria,and a Masters in PublicPolicy

fromn the University of Maryland/U.S.A.MarkusE.Langerstudied cology andenvironmentaleconomicsat he

University ofV/ienna and the Vienna University ofEconomicsan dBusiness Adminstration as well as industrial environmentalmanagement at Yale University. He is currently working asManaging Director ofFORUM Univeltbildung. Previously hewas working since 1999 as a senior researcheran d lecturerat theResearch Institutefor Managing Sustainability at the ViennaUniversity ofEconomicsandBusinessAdininstration.His research

foatsed on the Evaluationof SustainableDevelopment as ivell asCorporate Social Responsibility and Stakeholder Management.

Astrid Konradstudied business administrationat the Universityof Graz. She ha s been working at the Research Institute orMvlanaging Sustainability at the Vienna University of Eco-nornics and Business Adminstration since 2002. Her research

focus is on Corporate Social Responsibility and StakeholderManagement.

Andr Martinuzzi studied business adminstrationat the ViennaUniversity of Economics and Business Administration. He isworking as a project manager at the Department ofEnvironmentalEconomics andManagement since 1993, as alecturer at the Vienna University of Economics and BusinessAdininstration and leads the Managing SustainabilityResearch Centre since 1999. Since 2001 he worked as ascientific coordinatorof Austria's Sustainability Strategy. In2003 he worked as a scientific editor of the Corporate SocialResponsibilityvision statement of the Austrian Industry an das a process consultant for the Austrian Forest Program.Research areas: Eco-Consulting, Corporate Sustainability,Evaluating SustainableDevelopment, Sustainability Strate-gies and Stakeholder Dialogues.

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ReinhardSteurer et al.Sustainable development (SD) andstakeholders: introducing the "SD-SRMperspective"

The basic idea behind the concept of SD has beenarournd for centuries. It appeared in German forestryin the 17th century not only as idea but even as legalconstraint to logging: the rule wa s to cut trees at arate which enabled forests to renew themselves overtime, i.e. to utilize timber in a responsible andsustainable way (Birnbacher and Schicha, 1996,p. 149; Kirchgissner, 1997, p. 3). However, it wasnot before the mid 1980s that SD became a prom-inent concept known well beyond experts' circles.In 1987, the UN-Report "Our Common Future",better known as "Brundtland Report" defined SD as"Development that meets the needs of currentgenerations without compromising the ability offuture generations to meet their needs and aspira-tions" (WCED, 1987, p. 43).2 Almost two decadeslater, this is still the most commonly cited definitionof SD . However, if one looks beyond this superficialconsensus, different notions of what this principleactually means for various policy fields emerge(Steurer, 2001, 2002). For example, regarding theissue of economic growth, the Brundtland Report(WCED, 1987) concludes that a strong economy isa prerequisite for rather than a burden on a healthyenvironment. Others contend that this notion of"sustainable growth" is an oxymoron, divertingattention from imminent environmental limits toeconomic growth (see, e.g., Daly, 1996). However,the Brundtland Report coined SD as an integrativeconcept aiming to balance environmental and eco-nomic issues in a mutually beneficial way. It outinedSD as an environmental concept for the macroeco-nomic level (Steurer, 2002, pp. 241ff, pp. 341-366).In the course of the 1990s, the scope of SD was bothbroadened and deepened. Regarding its thematicbreadth, issues other than strictly environmentalones were incorporated. While initially economicand social issues were addressed only as far as theywere perceived to be relevant for environmentalconcerns (Steurer, 2001), they evolved into equallyimportant dimensions or pillars of SD . Regarding itsconceptual depth, the concept was expanded fromthe macroeconomic to the microeconomic and indi-vidual level.

Today, SD is a well-known societal guidingmodel that asks for the integration of economic,social and environmental issues in all societal spheresand levels in the short- and long-term. Conse-quently, the concept ought to be pursued byeverybody in a variety of ways. When it comes tothe corporate context, two frequently analyzed waysare environmental and social policies on one hand,and respective management systems like EMAS, ISO14001, or SA 8000 on the other. While SD policiescome from governments and often imply some sortof regulatory force, management systems are appliedmore or less voluntarily by a company's manage-ment. With the vague restraint "more or less vol-untarily", stakeholder influence comes into play.

Some scholars tend to argue that in the contem-porary neo-liberal age, relationships between cor-porations and societal groups are less likely to be thesubject of active state interventionism than they werein the Keynesian age, which ended in the late 1970s.Therefore, it seems to be no coincidence that sincethe mid 1980s, stakeholder influence on corporationsbecame a prominent topic for researchers and forpractitioners alike. A decrease of state intervention-ism "might open up the possibilities for more'responsible' forms of interaction between stake-holder groupings, devolved to enterprise level"(Mellahi and Wood, 2003, pp. 190f; see alsoRondinelli andBerry, 2000, p. 74; Banerjee, 2002, p.8). Since corporate activities dealing with this kind ofsocietal interaction, here referred to as stakeholderrelations management (SRM) 3 are often focused oneasing stakeholder pressure (including governmentinterventions) by strengthening the voluntary side ofcorporate SD activities, SR_N4 can be seen as amediating concept, neither fully voluntary normandatory. However, the quasi-mandatory side ofSRM must not be underestimated. With Boele et al.(2001, p. 122) one can say that companies are"confronted by the growing power of key stake-holder groups and the complex links between them[...]. The time has passed when the interests oractivities of all but the most obvious stakeholdergroups could be conveniently overlooked.",4 In thissense also the European Commission (2001, p. 4)states in its Green Paper "Promoting a Europeanframework for Corporate Social Responsibility",that "An increasing number of European companies

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Coiporations, Stakeholders and SustainableDevelopment Iare promoting their Corporate Social Responsibility(CSR) strategies as a response to a variety of social,environmental and economic pressures". If corpo-rations do not respond adequately to these pressures"society could place increasing costs on unsustainablebusiness practices, and customers may not choose topurchase associated products and services. Ulti-mately, this process may alienate the company fromthe rest of society, resulting in reduced reputation,increased costs, and decreasing shareholder valuethrough erosion ofits licence to operate" (Hill, 2001,p. 32).

After all, SRM needs to be addressed as anincreasingly important transmission mechanism thatmay be able to transmit SD from societal groups tothe business world. The purpose of this paper, then,is to lay the groundwork for an empirical analysis ofwhat this transmission of SD through SRM reallylooks like (for the empirical findings, see Konradet al., 2005). The key question of this so-called SD-SRM perspective is to what extent SD can beachieved through SRM. As the concepts of SD andSRM are rarely related to each other (see, e.g.,Starik, 1995; Stead and Stead, 2000), and becausethe underlying research traditions (i.e. the inter-disciplinary approaches ofnatural and social scientistsaddressing SD , and the study of strategic manage-ment underlying SRM) have very little in common,the theoretical foundation laid out in this paper iscrucial for a thorough understanding of what we callthe SD-SRM perspective, and especially for theempirical analysis documented in a subsequent paper(Konrad et al., 2005).

This paper intertwines the concepts of SD andSRM as follows: Section 2 describes the SD-SRMperspective as a distinctive stakeholder researchapproach and shows how it relates to the wider bodyof stakeholder theory. Section 3 lays out the details ofSD on the microeconomic level. Since an empiricalanalysis of the SD-SRM perspective requires a dearunderstanding of what SD actually means, a frame-work of SD with four dimensions and 14 issues isdeveloped. Section 4 summarizes how SD and SRMrelate to each other, and how the two concepts relateto two other popular business-society approaches,namely Corporate Sustainability and CSR. Finally,some conclusions regarding the SD-SRM perspec-tive are discussed in Section 5.

Stakeholder theory and the SD-SRMperspective 5

Like with SD , the concept of SRM is older than itseems, but it did not become popular before the mid1980s. From a historical point of view, SRMemerges as the latest stage of an old research traditionwhich addresses various forms of business-societyrelations. Numerous works in this tradition can befound throughout the 20th century (see, e.g., Clark,1939; Bowen, 1953; Heald, 1957; Walton, 1967; foran overview, see Carroll, 1999). However, whileneoclassical economists saw firms as closed systemsonly concerned about their shareholders, thosefocusing on business-society relations opened thefirm up to its societal context and, thus, positionedthemselves beyond the neoclassical mainstream (Dill,1958; Andriof et al., 2002) - at least until the mid1980s. In 1984, Freeman's (1984) book "StrategicManagement: A Stakeholder Approach" establishedSRM as a popular research field (Andriof et al.,2002, pp. 12f).6 With this the focus shifted at leastpreliminarily from Corporate Social Responsibility(CSR1), broadly discussed as a normative conceptalready in the 1970s, to Corporate Social Respon-siveness (CSR2) (Clarkson, 1998, pp. 243, 248;Mitchell et al., 1998, p. 307). Today, the distinctionbetween CSR1 and CSR2 finds little attention.Instead, CSR is often linked to the study of stake-holder relations (see, e.g., Clarkson, 1995; Snideret al., 2003). While CSP, "describes the relationshipbetween business and the larger society" (Snideret al., 2003, p. 175) in rather general terms, SRM isabout actually managing business-society relations ina strategic way (for a more detailed comparison, seeSection 4).

Over the years, stakeholder theory evolved from apure "theory of the firm" (Jones and Wicks, 1999,p. 208) into a more comprehensive and diverseresearch tradition, addressing "the overall stake-holder relationship as a multifaceted, multiobjective,complex phenomenon" (Harrison and Freeman,1999, p. 483) from various perspectives (see alsoAndriof and Waddock, 2002, p. 19; SutherlandRahman et al., 2003, p. 9; see also Steurer, 2005).When stakeholder theorists step out of the extensivecorporate perspective, they approach SRM eitherfrom a stakeholder or from a particular concept's

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