Value Creation or Sustainable Development – Which Would you Choose?

Ok, I have to admit that title was a bit hyperbolic. But the point is, stakeholder value and responsible governance / sustainable development are often regarded as contradicting ends. In fact, several organizations regard this balancing act as their greatest strategic challenge ever. When you look at the survivors – those who do manage to traverse this tightrope – what emerges as a common pattern is a strong sense of conviction. Conviction in their capabilities, in their values and in their accountability to stakeholders.

Take the case of Birla Cellulosic, a unit of Grasim Industries (Aditya Birla Group). The company is the world’s largest manufacturer of Viscose Staple Fiber (rayon) , with a 90 percent share of the Indian market. When the global viscose market hit an all-time low at the turn of the century, how did Birla Cellulosic manage to beat the odds? Simple – by focusing on a value creation strategy that reflected a commitment to stakeholders and to the society at the same time. On the one hand, they perfected a “key account strategy” – identify your key customer groups, then create a new customer experience for them through branding and new product development to achieve higher sales from these groups. On the other, they focused relentlessly on transforming the image of viscose from an environmental pollutant to an eco-friendly fiber. The R&D wing developed a technology for substituting the harmful zinc with alum and for producing pulp from tropical hardwood instead of the rarer softwood. The result? Continued market leadership and increase in the share of VSF in India’s fiber consumption. The product development and research unit at Kharach has won several awards including the Deming Quality Control Award, the Greentech Gold Award and the Ramakrishna Bajaj National Quality Award.

So, when it comes to balancing seemingly contradictory elements it all boils down to some really ingenious out-of-the-box thinking. Or does it?

Explore posts in the same categories: 01 Leadership, 07 Value Creation Processes, Benchmarking, Business

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One Comment on “Value Creation or Sustainable Development – Which Would you Choose?”

  1. AM Says:

    On a slightly philosophical tangent, can an enterprise define stakeholder value merely in terms of profits? To me, the most important component of any firm’s stakeholder accountability is trust. Maximizing stakeholder value, then, means not just ensuring steady figures on the balance sheet but also gaining the long-term confidence of all stakeholders concerned.

    On the same note, the community at large is an important – though not always immediate- stakeholder for most enterprises. That is precisely why sustainable development and responsible governance need to be as much a part of the strategic framework as, say, increasing market share or maximizing profits. This is also the reason why global governance standards like the Sarbanes-Oxley Act are fast gaining acceptability and compliance.

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