An online monthly research publication by the Ivey Business School 

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Volume 16, Number 6
June 2010

Taking the long view

The research of Tima Bansal explores the role of time in business sustainability

The Alberta oil sands is not an obvious place to look for lessons on sustainability. After all, the region’s production of “dirty oil” accounts for 20 percent of Canada’s carbon emissions. Yet a growing number of oil companies are taking the issue of climate change seriously, and are committed to sustainable development.

Ivey Professor Tima Bansal and PhD student Natalie Slawinski recently completed a Research Report focused on the Alberta oil sands. Bansal is the Director of Ivey’s Cross-Enterprise Leadership Centre on Building Sustainable Value. In one of her research streams she looks at the links between business sustainability and time. “In the short term firms make trade-offs between social, environmental, and economic issues,” says Bansal. “In the long term these issues converge. Firms will survive only if they’re good to the people around them and good to the environment.”

The Research Report looks at how companies balance short term goals with long term goals. The Report is based on more than 60 interviews with managers, consultants, and NGO leaders with experience in the oil sands. Although the focus is on climate change, the Report identifies eight best practices that apply to a broad range of social and environmental issues.

Climate change is happening now, but many people see the long-term benefits of reducing carbon as uncertain. There is uncertainty around the future price of oil, the development of technology, the impact of carbon on the climate, its effect on society, and the degree of government regulation. Managers are uncomfortable with uncertainty, and this is an important reason why firms have failed to address the dangers of climate change.

One best practice identified by the Report is to “embrace uncertainty.” Managers need to look at the uncertainty of climate change as an opportunity, rather than a risk, says Bansal. “Leading firms build competitive advantage around uncertainty. They also know they are doing the right thing, and that way they attract the people who want to make a difference in the world.”

Another best practice is to accept short –term pain for long-term gain. Most firms expect a payoff from their investments in five years. Carbon capture and storage is an example of a very expensive technology that’s unlikely to pay off for 20 years or more. Bansal recently wrote a case study on Suncor, one of the largest companies working in the oil sands. Suncor believes that carbon capture and storage will eventually play an important role in curbing emissions. The company’s willingness to explore the potential of this technology is helping to influence others to work together toward long-term solutions.

Leading firms also adopt a strong vision that helps them shape their future. This best practice enables firms to imagine a number of future scenarios, and then choose the one they prefer. “These firms anchor their worlds in the future, and say what do we do now to realize that future,” says Bansal. “In contrast, firms that anchor in the present can’t really perceive a future that’s much different than the way it is now.”

Ironically, firms that have a strong link with the past are often the ones with the strongest vision of the future. Suncor was the first company to develop the oil sands, and is one of the most committed to sustainability. “Suncor has an anchor into both the past and future,” says Bansal. “It looks into the future and asks how do we make sure we’ll be here for a long time?”

Firms committed to sustainability also need to take the time to understand issues. When making decisions, companies need to create a balance between speed and quality. Some decisions have to be made quickly, but other decisions need careful thought. Stakeholder engagement, often a slow process, is critical to understanding the issues of climate change.

In another of her research projects, Bansal is looking at carbon markets. The ‘cap and trade’ approach is seen by many as an effective way to combat climate change, but Bansal is not so sure. Carbon markets put a monetary value on the reduction of carbon. But they don’t capture the true costs of carbon because they ignore the element of time.

For example, a unit of carbon released into the atmosphere takes 100 years to be absorbed. If a company reduces its carbon emissions from 100 to 98 tons, that’s a good thing, but the company is still responsible for the 98 tons that remain part of the atmosphere for the next 100 years. “I don’t think that carbon markets are going to help global warming,” says Bansal. “In fact they may accelerate it because firms will feel that just by paying the financial costs of carbon, they’ve addressed the issue.”

Bansal believes that the role of time is critical to our understanding of business sustainability in its broadest sense. “When I do something where the impact is immediate and not enduring, then prices are a good framework in which to negotiate,” she says. “But when I put into the atmosphere a molecule of carbon that lasts a hundred years, I have an obligation that lasts a hundred years.”

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For a copy of “Thinking Long Term: Climate Change and the Oil and Gas Industry”, by Natalie Slawinski and Dr. Tima Bansal, please click here.

Professor Bansal holds the MBA '80 Faculty Fellowship.

Professor Bansal's Homepage