The Culture of Responsible Decision Making at Melhema, PART 1
This case study is the story of Melhema' sustainability performance and culture. Melhema is a fictional name of the case-study-company name. Throughout the story, we aim at uncovering how responsible decisions at Melhema were made.
Author: Ali Abou Melhem
This case study is the story of Melhema' sustainability performance and culture. Melhema is a fictional name of the case-study-company name. Throughout the story, we aim at uncovering how responsible decisions at Melhema were made. The case study uses empirical research methods that are based on observations and measurements of how sustainability decisions at Melhema affected the overall company’s sustainability performance.
Melhema, a business with around €80 billion in revenue and more than 300,000 employees, has long known its responsibility towards the planet.
In this case study, we discover Melhema’ culture of responsible decision making. We explore using quantitative research methods – through a management survey – the culture of sustainability at Melhema and the influence of this culture on decision making. We also use qualitative research methods such as stakeholders’ interviews and reviewing of company’s published documents. This enables the research to gain inside understanding about sustainability topics within the company as well as more credible interpretations of survey results.
Recommendations about improving responsible decision making and advancing in sustainability are suggested in the concluding part of this study. In this part, we provide suggestions based on our observations of the sustainability culture of Melhema, as well as our interpretation of the drivers for major sustainability related decisions.
Why Act Responsibly?
The World Business Council for Sustainable Development (WBCSD) predicts that the world’s population will rise by two billion by the year 2050 (WBCSD, 2010). About nine billion people will have to live on available resources, and two-thirds of the world’s population will live in cities, putting enormous pressure on governments and business to maintain sustainable development. At the same time, research shows that our world has crossed several “planetary boundaries” such as climate change, rate of biodiversity loss, and nitrogen and phosphorus cycles. Similarly, it has arrived at critical levels and boundaries in regards to issues such as ozone depletion, ocean acidification, global fresh water use, change in land use, atmospheric pollution, and chemical pollution (Rockstrom et al., 2009).
Companies and governments need to become future oriented and will have to work together to adapt to a fast-changing world. Responsible behaviors need to be recognized, such as harmful emissions reduction, the effective use of resources, and improved ways of dealing with fresh water use and energy consumption (WBCSD, 2010). In addition to that, the WBCSD predicts that successful companies of the future are the ones who integrate the world’s major challenges into their core businesses.
Businesses in the past few decades have become more conscious about their responsibility towards social and environmental challenges as an important aspect of creating value for shareholders, customers and stakeholders. Carbon emissions and energy and water use have become, in many companies, integral parts of performance metrics. In addition to that, many companies have started to invest in renewable resources, energy efficiency, resources productivity, and pollution control. Leading organizations have established their own codes of responsible behavior related to work conditions, transparency, supplier relationship, and compliance.
Melhema, due to its size as a global organization, has a large impact on all three sustainability pillars. At the same time, it is a business that is well known about recognizing its global responsibility.
Corporate Culture and its Relation with Responsible Decision Making
Acting responsibly requires a culture of responsible decision making at all levels of the organization. We define a responsible decision made by a company or individuals acting on its behalf as those rational decisions that lead into an improved organizational sustainability performance. Goodwin et al. (2015) define rationality in decision making as:
- choosing goals such that (a) when the actor achieves the goals, she or he will be glad to have done so; or (b) the pursuit of the goal itself contributes to well-being; and
- pursuing those goals in a manner that the actor expects will lead toward their achievement
From the above definition, we develop a hypothesis which assumes that rational decision makers, after satisfying defined life and career goals, would integrate sustainability elements into their decisions in order to satisfy higher objectives, such as well-being and societal development.
This case study is particularly focused on discovering how responsible decisions are made within Melhema, both at leadership and operational levels. Referring also to the work of Eccles et al. (2012), who analyses the behavior of leading companies in integrating sustainability into decision making, two elements were investigated. The first element is related to the leadership culture, while the second one is linked to the corporate environment.
Leaders of sustainable companies characteristically take long-term views when making decisions. They have a clear business case for pursuing the goals of sustainability, which acts as a main driver for integrating sustainability into their decision-making. In pursuit of those sustainability related decisions, the leaders of sustainable companies characteristically are willing to take measured risks in order to achieve the sustainability set targets (Eccles et al., 2012).
The second element includes a corporate environment which awards innovation. Most people in sustainable companies believe that a commitment to sustainability is essential to the company's success in the long-term. Additionally, sustainable companies have effectively embedded sustainability into their operating procedures and policies. In order to highlight the importance of suitability in daily operations, those companies have integrated sustainability related goals into their performance management systems. That of course is completed by linking rewards and compensation to the organization’s sustainability goals (Eccles et al., 2012).
Regarding Melhema, a management survey conducted for this case study suggests several strong characteristics related to the above mentioned elements of “responsible-decision-making”. It also suggests certain challenged areas where Melhema did not score so well and where improvements may be suggested.
The purpose of the management survey is to provide the case study with information about Melhema sustainability culture and the influence of this culture on responsible decision making. The assessment is based on benchmark data regarding the cultural characteristics that distinguish companies that have demonstrated leadership in sustainability (Eccles et al., 2012).
In order to obtain a snap shot of the sustainability culture at Melhema, a management survey was administered with the sustainability management group. The selected sample of Melhema management team is therefore considered a none-probability sample with the possibility that the sample will be biased on sustainability topics.
The results of the survey showed a high level of transparency and cooperation with the research topic. The sustainability management team were, on the contrary, more critical in their opinion of Melhema’ sustainability culture, having provided their honest and constructive remarks about how sustainability can further be advanced in the company. We therefore deduce that the results of the survey correlate to a slightly negative bias with respect to Melhema’ sustainability culture. However, the survey analysis does not reflect the opinion of all employees of Melhema. But due to the fact that the participants are largely connected to sustainability topics at Melhema and work closely with the executive management of the company, we consider that those results provide a clear image about sustainability culture within the company and, therefore, are a valuable input for our conclusions.
The survey was conducted with 49 Melhema employees representing the sustainability management team at Melhema headquarters and regional representatives that are fully or partially dedicated for sustainability topics in their countries and regions. Thirty-eight participants completed the full survey, for a response rate of 44%.
Nineteen percent of the survey participants are located at Melhema headquarters while the remaining 81% are located in regions where Melhema operates, as follows: Middle East: 2%, Africa: 4%, Europe: 61%, Asia and Australia: 12%, and America 2%.
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