Sourcing Practices

Culture Management: The Key to Achieving Financial, Environmental, and Social Sustainability Through Global Sourcing

Managing culture is a strategic imperative for the global sourcing industry. Sourcing firms must have the organizational intelligence and agility to adapt to the needs and environment of their diverse client base to help those clients achieve the eco-system capability essential to success in today’s global economy: Supervening wholes, directing synergistic parts, to achieve extraordinary results.

While sourcing relationships begin because of price and service, they often end because of the inability to manage culture. Culture management is at the center of a newly created global standard for corporate governance. This article will therefore briefly describe the purpose of culture while revealing how this new governance standard came to be, all to enhance your ability to leverage culture management as a new strategic asset and competitive advantage.

The primary purpose of culture is integration. Integration breeds the organizational intelligence and adaptability needed to achieve financial, environmental, and social sustainability — the new imperative for business excellence. It is no coincidence that integration is the focus of the emerging sustainability reporting standards being embraced by the majority of the Fortune Global 250.

In 2009, while serving as Chairman of the Annual MENA Region Corporate Governance Congress Dubai, I facilitated a process in which a combination of board directors and governance opinion leaders representing every major region of the world produced The Universal Purpose of Corporate Governance.

This statement is based on the following six assertions:

  • The four critical pillars of strategic governance are government, education, professional associations, and industry.
  • Government needs to coordinate with education and professional associations to provide guidance to industry.
  • Industry values and standards need to be managed in the context of professional and ethical values and standards.
  • The focus should be on the creation of cultures based on ethical, professional, and industry values and standards.
  • The goal for industry and professional values and standards is to set the bar higher than ethical values and standards and governmental regulations, whose purpose is to serve as a safety net to prevent economic fiascos like Enronitis and the capital market crisis beginning in 2008.
  • If a firm, unit, function, or individual is not conforming with all three categories of values and standards, it is unethical to continue on that path. Governments should prevent this.

These six assertions serve as the foundation for the following statement:

“The Universal Purpose of Corporate Governance is to integrate ethical, professional, and industry values and standards into firm-level cultures that enable winning strategies, manage risk, meet the needs and expectations of the firm’s stakeholders, and fulfill the firm’s responsibility for a sustainable world.”

One of the participants in this discussion was Professor Mervyn E. King, Chairman of Global Reporting Initiative (GRI). Professor King participated in a rigorous review of the ten Strategic Governance principles, and then helped me finalize The Universal Purpose of Corporate Governance.

More recently, Professor King participated in a recorded conversation now on YouTube in which we discuss the synergistic relationship between GRI’s sustainability framework and the Strategic Governance System. Both GRI and Strategic Governance focus on the integration of governance with strategy, risk, culture, and social responsibility. GRI’s focus is on measuring and reporting or – “saying what you do”, aka talking the talk of sustainability, while Strategic Governance provides the global business community with an action-based system of methods, principles, and purpose to actually “do what you say”, aka walk the talk of sustainability. Culture is the “heart and soul” of this integrated approach to governance and sustainability.

By synthesizing Strategic Governance and GRI reporting into a strategic asset, global sourcing firms are now able to “say what they do about financial, environmental, and social sustainability, do what they say, and document it with openness, honesty, and integrity.” The overall effect is a newly enlightened governance regime, made possible by the availability of a principle-based system for achieving it. And at the center of it all is culture.