ABB’s Hydropower Sustainability Dilemma
(10 pages of text)
This case is about the multinational company ABB’s development of a sustainability strategy, and its dilemmas in supplying hydropower dam projects. Adam Roscoe, head of sustainability at ABB Group, had to evaluate the content and business consequences of a letter written by the non-governmental organization (NGO) International Rivers. The letter discussed the alleged violations of sustainability criteria when building the Nam Theun 2 dam in Laos. Roscoe needed to assess what implications the letter had for ABB, which had a large stake in the outcomes of the project. Such a letter from a prominent NGO might affect ABB’s policies and practices in sustainability.
The World Bank and the Asian Development Bank had great interest in seeing the project’s success, as it would supply rural areas of Laos and Thailand with electricity, bring in a large source of revenue that would be used in poverty-reduction programs for Laos and, lastly, provide a non-carbon-based energy source. ABB also had to consider the position of its stakeholders including customers, investors, media, and NGOs. If ABB was associated with a dam project that did not comply with international regulations, this could lead to negative publicity and potential loss of business.
Roscoe thus faced two interweaved questions: Would International Rivers’ letter pose a reputation risk for ABB? What would this example mean for ABB’s sustainability criteria and objectives and would this need to be acknowledged and, if so, how?
The case illustrates how sustainability may affect business and thus need to be factored into strategic management regarding investment and project decisions. The case illustrates that ABB had a long tradition in proactively addressing sustainability issues, notably in the climate change, energy, and environmental management (ISO 14001) contexts. One could argue that ABB was a clear sustainability leader in the field.
However, given the complex nature of sustainable development, firms face trade-offs and conflicts in corporate sustainability. This becomes most tangible regarding hydropower investments in dams: although they can contribute to economic development and poverty alleviation, they usually have significant impacts on local communities. The social dimension has to be weighed and addressed, often at the expense of the economic dimension. Overall, the learning objectives can be summarized as follows:
- Understand the three dimensions of sustainability (economic, ecological, and social) and that there are both situations where management can realize win-win situations between the dimensions, as well as situations where management faces trade-offs and conflicts in corporate sustainability. This will be discussed by the pros and cons of the Nam Theun 2 dam project.
- Discuss different stakeholder interests and how firms have to analyze the different positions of stakeholders and reflect those in business decisions.
- Reflect on how firms can position themselves as sustainability leaders and show the underlying risks of such strategies. A good corporate reputation requires that firms fulfill the expectations they raise within their explicit sustainability objectives.
Zurich/Switzerland/Laos/Thailand, Large, 2010
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