Report from the Research Frontier
Every month, researchers publish dozens of articles on business sustainability. NBS highlights insights at the frontier of knowledge.
Humans tend to be overconfident in our decisions — too certain that our beliefs, judgments, and predictions are accurate. This kind of bias negatively impacts organizations. For example, overconfident investors take too many risks and earn lower average returns.
Researchers Steffen Keck
and Wenjie Tang
have a solution: involve women in decision making. In laboratory experiments, Keck and Tang found that groups including at least one woman are better “calibrated”: knowing whether they are uncertain or sure of a fact.
This finding has clear application to sustainability, the researchers told NBS. They pointed to forecasts concerning the consequences of climate change or the impact of green energy policies. “Such forecasts typically involve high levels of uncertainty and are expressed as confidence intervals or probabilities,” they said. “Forecasts in these situations are frequently overly ‘precise’ (underestimate the amount of uncertainty) and our findings suggests a way to reduce this problem.”
Having women present also makes discussions more effective. Keck and Tang found that when women are in a group, time spent sharing information and ideas improves confidence calibration. But Keck and Tang found that discussion actually harms confidence calibration for all-male groups. A likely explanation: in all-male groups, discussions ended more quickly and were more likely to be dominated by a single member.
Article: Keck, S., & Tang, W. 2018. Gender composition and group confidence judgment: The perils of all male groups. Management Science, 5461-5959.
Sustainability advocates often say that firms need to think more long-term. Researchers Hao Liang
and colleagues find that such a long-term perspective is associated with specific languages.
Languages differ in how sharply they distinguish between the present and future. In German, for instance, saying “Tomorrow is cold” is grammatically the same as “Today is cold” (“morgen ist es kalt”), while English and French require speakers to add “will” or a future tense. Research shows that different tenses actually make the future seem farther away — and less important.
Liang and colleagues found that companies with working languages that separate future and present deemphasize future-oriented behaviours, such as corporate social responsibility (CSR) and research (R&D). On average, they engage 7% less in CSR and 40.6% less in R&D. The results are based on a large global sample of firms from 39 countries.
What can a company do if its primary language is one that separates present and future? Find ways to incorporate other languages, say the authors. International sales, subsidiaries, investors and employees can all bring different languages — and perspectives.
Responsible business practices by the data industry are “very much in infancy,” write researcher Mikkel Flyverbom
and colleagues. These companies – such as Facebook and Spotify – collect and use vast amounts of data on individuals. The novelty of their business model means that, until recently, they escaped close scrutiny.
Corporate social responsibility (CSR) issues occur at each stage of their operation:
- Data gathering: CSR issues relate to violation and intrusion of privacy, the consent of the data provider, and the transparency with which big data companies collect the information.
- Data processing and aggregation: Even if data are gathered with consent and transparency, combining them might provide new metainformation which no longer meets those criteria. Worker treatment is also a concern, with data companies driving an unstable “gig economy.”
- Data usage: Applications such as advertising can infringe on individuals’ personal space. Data services can also change the way humans interact, socialize, and take responsibility – an example would be Snapchat’s disappearing messages.
The industry is failing to grapple with these issues, the authors write. The Global Network Initiative
represents a “lukewarm and arms-length approach,” and companies have undertaken little voluntary action or standardized reporting.
What if developers of a technology could foresee the impact their product will have – and change it for the better? “Prospective” Life Cycle Analysis (LCA) is a way to understand likely impacts when a technology is still in an early phase of development. These insights allow developers to alter the technology before design parameters are fully set.
Traditional, or “retrospective,” LCA, looks backward at an existing technology. For prospective LCA, the emerging technology is modeled at a future, more‐developed phase (e.g., large‐scale production). Researchers Rickard Arvidsson
and colleagues provide recommendations for dealing with the uncertainty involved in such modeling. They suggest:
- Comparing the technology under study to a wide range of alternatives, as it’s difficult to know which ones will be most relevant in the future
- Using scenarios to model production of the technology and its alternatives, and to consider changes in the broader system (e.g. regulations)
- Drawing on different kinds of data to build scenarios: for example, expert interviews and patents instead of the lifecycle databases used in traditional LCAs
Existing economic models are showing strain. Cooperatives — an old idea — may be becoming new again.
Cooperatives are “jointly owned, democratically controlled enterprises that advance the economic, social, and cultural interests of their members,” explains researcher Nathan Schneider
. Cooperatives exist as credit unions, grocery stores, healthcare, utilities, and more.
“Since the financial crash of 2008, the cooperative movement has been coming back with renewed vigor,” says Schneider. His book provides multiple examples, from “taxi cooperatives that are keeping Uber and Lyft at bay,… to a fugitive building a fairer version of Bitcoin, to the rural electric co-op members who are propelling an aging system into the future.”
Schneider sees cooperatives as increasing accountability and equity
, because users are also owners. He comments: "Shared ownership and governance are poised to set higher standards for how businesses demonstrate their commitment and accountability to their customers, employees. Any kind of company can learn from the cooperative tradition. It is a uniquely time-tested strategy for building businesses that live by their values."
Electric cars have been called “batteries with wheels
.” They draw electricity from the energy grid
but, when parked, can also supply electricity to that grid. Grid managers can use such “Vehicle 2 Grid,” or “V2G” connections to smooth out peaks in energy demand. V2G generally lowers the energy system’s carbon emissions by replacing non-renewable energy sources.
The case for V2G is growing stronger, according to researcher Micha Kahlen
and colleagues. They used modeling based on real-life data to identify the benefits of V2G. They found that V2G reduced the average electricity price for consumers up to 3.4 per cent, and increased profits for electric car fleet owners by 4.3 per cent. (So far, V2G efforts focus on fleets owned by large businesses or car sharing companies.)
"This is a strategy which is both profitable for electric vehicle fleet owners and sustainable for society and planet," the authors write. V2G is already operational in locations including the Los Angeles Air Force Base and University of Delaware. Article
(free access): Kahlen, M., Ketter, W., & Gupta, A. 2018. Electric vehicle virtual power plant dilemma: Grid balancing versus customer mobility
. Production and Operations Management
, 27(11), 2054-2070.
Big data can be used to make operations more sustainable. Charles Corbett
(UCLA Anderson School of Management) focuses on ways that big data can pose challenges to sustainability. His review identifies challenges related to:
- Energy use. Managing and storing data are resource intensive.
Government and other elements of society should address these challenges through governance mechanisms, ownership structures, and other approaches — before big data grow even larger. Article
: Corbett, C. 2018. How Sustainable Is Big Data
? Production and Operations Management
, 27(9), 1685 -1695.
“Sharing economy” firms such as Uber and Airbnb are trying to gain market share internationally. Bilgehan Uzunca
(Utrecht University) and colleagues report that Uber’s strategy for entering new countries is disruptive and defiant; the company makes little effort to accommodate local rules and expectations. AirbnB, by contrast, takes a relational and gradual approach, cooperating with governments to set rules.
The effectiveness of these different strategies depends on whether the country has strong institutions (e.g. effective government and NGOs). In countries with strong institutions, AirBnB’s approach has been more effective than Uber’s. For example, in the Netherlands, Uber experienced so much government opposition that it had to abandon its disruptive strategy.
But in developing countries, with weaker institutions, Uber’s independent approach can work better. In Egypt, for example, Uber has filled voids left by the government, specifically around transportation safety. By contrast, AirBnB’s more passive approach hasn’t led to strong market share in Egypt.
Many companies have taken meaningful steps to improve their own environmental performance. But while corporate political actions such as lobbying can have a greater impact on environmental quality, they are ignored in most current sustainability metrics. Tom Lyon
(University of Michigan) and his co-authors argue that sustainability metrics should be expanded to critically assess firms based on the sustainability impacts of their public policy positions.
To enable such assessments, firms must become “as transparent about their corporate political responsibility (CPR) as their corporate social responsibility (CSR),” the authors write. In turn, rating systems should demand such information from firms and include evaluations of corporate political activity in their assessments of corporate environmental responsibility.
Lyon, T.P, Delmas, M.A., Maxwell, J.W., Bansal, P., Chiroleu-Assouline, M., Crifo., P., Durand, R., Gond, J-P., King, A.A., Lenox, M., Toffel, M.W., Vogel, D.J., & Wijen, F. 2018. CSR Needs CPR: Corporate Sustainability and Politics
. California Management Review
, 60(4), 5-24