Interview with Juergen H. Daum: „Sustainability as Objective of Enterprise Management and Control“

Sustainability in enterprise management and control is becoming a cornerstone of enterprise management best practice. In this interview, which has been published in the current edition of the German Controller Magazin, Juergen H. Daum explores with Alfred Biel, why sustainable enterprise management has become so crucial today and what it means in practice.

- Juergen H. Daum -

Alfred Biel: Mr. Daum, you’ve long dealt with the theory and practice of developing, managing, and controlling companies. In this context, I’d like to speak with you today about a management topic that is becoming the focus of increasingly intensive discussion throughout the world – sustainability. How would you define sustainability?

Juergen H. Daum: I don’t think it’s a coincidence that the term's origins are in forestry: In that field, it's immediately evident that failing to manage things in a sustainable manner will end in disaster. If you have a section of forest with full-grown trees and decide to cut them all down – in other words, exhausting the forest's yield potential all at once – it will take decades of reforestation to restore things to their original state. Assuming that reforestation is even possible under such conditions, those will be decades of investment without any kind of yield. In this context, sustainable management simply means following policies that conserve your existential basis – in this case, the forest – and its potential use for future generations. It’s also about safeguarding the long-term interests of others along with the typically more short-term interests of the acting party. These days, you’d describe it as securing stakeholder interests – those of the forest owner's heirs, but also of current and future residents in the area with regard to the recreational value of the forest and the preservation of its ecological balance, for instance. Things like soil erosion due to clear cutting pose a danger to such aspects. As you can see, the concept of sustainability in forestry already contains economic, social, and ecological dimensions. In my view, sustainability always involves all three. It means that I strive to preserve the essence of that that sustains both my own interests and the stakeholder interests influenced by my actions. 

[If we now look back to the business world the critical question is: do I create value-added for my stakeholders in a sustainable way or do I destroy the foundation for future value creation?] The ability to achieve sustainable management – and thereby enterprise sustainability – is essentially based on the ability to generate added value organically and to maintain this capability over market cycles.

[And] this is the reason why] I think corporate sustainability starts with economic sustainability – at least for businesses. The other two aspects, social and ecological sustainability, follow as a result, if you take economic sustainability serious.

Alfred Biel: [And what does this mean for enterprise management?]

Juergen H. Daum: Investors, other important stakeholder groups, and the general public are paying increasing attention to whether and how a company is able to create original, sustained value for its own customers, investors, and stakeholders. [CEOs and business executives will have to take more care to maintain and strengthen the capabilities of their companies for creating original value-added.]

As a result, it will be more important for CFOs and controllers to not only secure their companies’ ability to control and optimize the financials, but to integrate all the aspects of sustainable value generation into their overarching enterprise control system in the future.

[With the traditional financial control based enterprise management concepts we are facing a problem: they are leaving a big gap and do not provide the tools to manage all value creation actitivities and value creation potential of today's enterprises].  We now need to enhance our controlling systems with perspectives that map and can optimize all activities and processes in value creation in order to end up with management systems and management processes that foster effective knowledge transfer with regard to the real success factor of today’s companies and thus institutionalize effective decision-making.

What we need is a single concentrated effort to compile the experience and expertise of companies, controller organizations, scientists, and regulators (particularly with regard to IFRS) [and to create a new architecture for business administration theory]. Two years ago, I started a European initiative called International Management Accounting Standards (IMAS), which I’ve been organizing on behalf of the International Controller Association (ICV) and the International Group of Controlling (IGC) [more at the IIOE IMAS wegpage]. There is still strong interest in continuing it – particularly from the European companies I initially addressed and invited to participate. That's why I'm confident that we will be able to re- launch it and continue with the work we have started.

Read the full interview

Vollständiges Interview lesen (Deutsche Version)

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Related article:

We aren’t just experiencing the aftermath of a financial crisis: It’s the dawn of a new economic era and of a new business reality! - 'The Seven Fields of Reorientation and of Action for Renewal in Enterprise Management" - by Juergen H. Daum