Making sense of sustainability issues: The role of cognitive structural alignment
and enterprise logic
Bénédicte Deryckere1 Grenoble Ecole de Management Caroline Gauthier2 Grenoble Ecole de Management ABSTRACT Why are firms reacting differently to sustainability related issues? To contribute to address this longstanding question, this research adopts a managerial cognitive perspective on corporate sustainability. An integrated framework combining insights from different literature perspectives is proposed. Using a comparative case study approach the framework allows to inductively explore the cognitive mechanism used by top managers in their effort to make sense of sustainability issues and take actions. Results show the impact of (1) the enterprise logic, i.e. the top managers’ conceptualization of their firm’s relationship with society and (2) the degree to which a manager cognitively aligns a sustainability issue with his/her enterprise logic. It appears that both play a role in interpreting a sustainability issue as an opportunity versus a threat. Thereby both impact the type of actions taken. These findings highlight the value of adopting a combined managerial cognition and enterprise logic perspective to explain why some firms address sustainability issues more strategically than others. 1 Bénédicte Deryckere, DBA Student, Grenoble Ecole de Management, 12 rue Pierre Semard,
38000 Grenoble. France, E-mail: [email protected], [email protected] Tel:
+41 (0)7 95 38 86 56.
2 Professor Caroline Gauthier, Grenoble Ecole de Management, 12 rue Pierre Semard, 38000
Grenoble. France, E-mail: [email protected] Tel: +33 (0) 4767 06260.
Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 1 of 32 INTRODUCTION Companies increasingly identify sustainability as a strategic business issue and incorporate the principles of sustainability into their business practices. A recent survey of more than 3,800 managers from 113 countries around the world, conducted by the United Nations Global Compact, the MIT Sloan Management Review (MIT SMR) and the Boston Consulting Group (BCG), reveals that the number of companies that have sustainability on their top management agenda jumped from 46% in 2010 to 65% in 2014. In line with this growing trend, sustainability and its conflicting social, environmental and economic goals has increasingly been addressed by strategic management and organization studies scholars. Corporate sustainability is defined as a firm’ s strategic intent to simultaneously achieve conflicting and diverging environmental, social and economic goals (Bansal, 2005). Therefore corporate decision-­‐makers perceive issues related to sustainability as (1) strategic (Buysse & Verbeke, 2003; Hart & Milstein, 1999, 2003; Sharma, 2000), (2) complex (Bowen & Aragon-­‐Correa, 2014; Devinney, 2009; Hart & Milstein, 2003), (3) ambiguous (Clarkson, 1995; Hart & Milstein, 1999; Sharma, 2000) and (4) creating tensions (Margolis & Walsh; 2003). This research stream highlights that within the same industry, some firms respond more radically and more effectively than others (Bundy et al., 2013; Crilly & Sloan, 2012). Some business leaders perceive sustainability related issues as more salient (Bundy et al., 2013; Whiteman & Cooper, 2011) and take strategic actions, when others barely react tactically, just complying with basic regulatory and reporting requirements (Gao & Bansal, 2013). Past studies have either adopted a stakeholder perspective focusing on the impact of stakeholder pressure, legislation and competition on corporate social and environmental strategies (Buysse & Verbeke, 2003; Clarkson, 1995; Murillo-­‐Luna et al., 2008; Sharma & Henriques, 2005; Bansal & Roth, 2000) or investigated the internal organizational factors leading to managerial actions such as individual concerns, corporate identity, organizational values, resource slack and individual discretionary slack (Andersson & Bateman, 2000; Bansal, 2003; Sharma, 2000). Both failed to explain why firms operating in the same context and confronted with the same external pressure react differently to sustainability related issues. Recent literature contends that both internal organizational factors and external environment factors interact in shaping managerial responses to stakeholder concerns in general (Bundy et al., 2013) and related to sustainability in particular (Bansal, 2005; Crilly & Sloan, 2012, Hahn et al., 2014). This new stream of literature identifies the need to build on a cognitive perspective to explore firms’ responsiveness to sustainability issues. The goal of this article is to respond to this call by building on the managerial cognitive perspective in strategy to answer the question of firms’ responsiveness to sustainability issues. To address this question, we focus on the cognitive mechanism(s) employed by top managers when making sense of a sustainability issue and draw on the literature on strategic issues (Dutton & Jackson, 1987), enterprise logic (Crilly & Sloan, 2012) and the cognitive process of structural alignment (Gentner, 1983; Gregoire et al, 2010) to develop a framework for analyzing top managers’ sensemaking and decision-­‐making about sustainability. The core contentions underpinning the framework suggest that managers’ conceptualization of their firm’s relationship with society “the enterprise logic” acts as a cognitive frame and shapes the sensemaking of a sustainability related issue, ultimately influencing the classification of this issue and the type of organizational response. When confronted with a sustainability related Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 2 of 32 issue, managers cognitively align this issue with their enterprise logic to categorize it and determine the most appropriate course of action. As a starting point, the framework serves to characterize the enterprise logic of the firm under study by identifying its strategic intent, mode of interaction and external constraints, then the degree to which top managers cognitively align a sustainability issue with their enterprise logic when making sense of this issue is analyzed. By proposing this framework for exploring firms’ responsiveness to sustainability issues, we make several contributions. First, we contribute to address the broader question on why firms operating in the same context and confronted to the same external constraints react more strategically than others. Second, we add to the emerging literature on strategic cognition and cognitive frames by proposing the enterprise logic as a socially constructed cognitive frame filtering top managers’ interpretation and categorization of sustainability issues and shaping decision-­‐making. Third, the framework allows us to systematically identify and characterize a firm’s conceptualization of their environment and its impacts on managers’ sensemaking and decision making process. Our findings should bring elements of answers to scholars seeking to understand why companies operating in the same context and confronted to the same external pressures differ in their response to sustainability related issues. From a managerial standpoint, this article sheds light on the role of enterprise logic on strategic decision-­‐making about sustainability and why some managers perceive sustainability issues as bearing risks and conflicts whereas others see benefits and value. In the sections that follow, we further expose the theoretical guideposts leading to the emergence of the framework; we then present the research design, data analysis, findings and develop a set of propositions to be further empirically tested. THEORETICAL CONSIDERATIONS Strategic cognition and sustainability issues as strategic issues Strategic cognition is recognized as critical to the shaping of organizational processes but also to the formulation of firm’s strategies (Kaplan, 2011). Strategic cognition embeds the two major activities of strategy formulation and strategy implementation (Narayanan et al., 2011). First, strategy formulation is a “complex activity consisting of scanning, sensemaking and (strategic) decision-­‐making” (Narayanan et al., 2011, p. 310). Strategic issues are perceived by strategic cognition scholars as central to the articulation of the process of strategy formulation (Dutton et al., 1983; Ocasio, 1997). Second, strategy implementation in strategic cognition is defined as a recurring process of top management sensegiving (Gioia & Chittipeddi, 1991; Gioia et al., 1994, Narayanan et al., 2011) and middle management’s sensemaking and issue selling (Dutton et al., 2001, Narayanan et al., 2011). The processes of sensemaking and sensegiving are therefore intimately linked to the broader strategic cognition processes of strategy formulation and implementation (Gioia and Chittipeddi, 1991). Sustainability and its conflicting social, environmental and economic goals are perceived as strategic issues for corporations (Buysse & Verbeke, 2003; Hart & Milstein, 1999, 2003; Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 3 of 32 Sharma, 2000). Strategic issues are defined as events that potentially affect the achievement of organizational goals (Dutton & Jackson, 1987) and imply opportunities, challenges, problems and threats that are often ill-­‐structured and ambiguous, requiring interpretation (Sharma, 2000). “Threat” and “opportunity” are two salient strategic issue categories and are the “labels” most frequently used for categorizing strategic issues (Dutton & Jackson, 1987). A threat category involves a negative situation in which losses are to be expected and over which a manager has a low degree of control, whereas an opportunity category involves a positive situation in which gains are to be expected and where a manager has a more substantial degree of control (Andersson & Bateman, 2000; Dutton & Jackson, 1987). While the new stream of literature on managerial cognition and sustainability points to the role of cognitive frames in categorizing a sustainability issue as an opportunity or a threat (Andersson & Bateman, 2000; Sharma, 2000), little research investigates the process by which an opportunity or a threat is recognized (Gregoire et al, 2010). The role of strategic frames in the sensemaking about sustainability issues When decision-­‐making is a rational exercise drawn from a firm’s strategic goals, sensemaking is required to interpret and take actions on vague and ambiguous issues in order to reduce the confusion posed by those issues on an organization (Weick, 1993). Sensemaking has been defined as placing an item such as an ambiguous issue into a frame to gain an understanding of this issue (Weick, 1995). Sensemaking shapes managerial interpretation and choices of how to respond to issues (Kaplan, 2011). Research in strategic management and organization studies has increasingly used the sensemaking perspective and cognitive frames to understand managerial issue identification, interpretation and decision-­‐making in general (Bundy et al., 2013; Cornelissen et al., 2014; Nadkarni & Barr, 2008) and related to sustainability in particular (Crilly & Sloan, 2012, Hahn et al., 2014). This new stream of research explores firms’ responsiveness to sustainability and represents a significant step towards understanding the cognitive process adopted by managers when addressing sustainability issues. These studies propose theoretical insights on the role of frames on managers’ cognitive process for sustainability (Bundy et al., 2013; Van der Byl & Slawinski, 2015) and contend that cognitive frames adopted by managers correlate with firms’ strategic choices and actions (Kaplan, 2011) and thereby influence the sensemaking process of sustainability related issues (Hahn et al., 2014). A series of theoretical cognitive frames have been proposed to explain why managers grant different levels of salience to sustainability issues and decide on different courses of actions. But this leads to an ontological debate (Maitlis & Christianson, 2014), which may hamper further empirical research in this area. Indeed, on the one hand, cognitive frames are presented as individual frames used by managers, such as “business case” or “paradoxical” frames or even “corporate citizenship”, “state regulation”, “altruism” or “enlightened self-­‐interest” frames (Hahn et al., 2014), and whilst their influence on the sensemaking process for sustainability is theoretically developed, it must be empirically validated and key questions remain concerning why managers activate a specific frame versus another (Hahn et al., 2014). On the other hand, a second set of studies draws on literature on strategic cognition and propose socially constructed cognitive frames such as strategic frames (Bundy et al., 2013) or “enterprise logic” (Crilly & Sloan, 2012), recognizing that the means by which organizational members go about understanding their world and experience is socially constructed (Gioia et al., 2013; Weick, 1979) and that frames reflect managerial experience and a firm’s historical background (Crilly & Sloan, 2012); these studies explore the influence of socially constructed frames on managerial interpretation of issues but require further Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 4 of 32 qualitative research and empirical testing. As a result, while recent literature starts to theoretically shed light on the cognitive mechanisms that drive managers interpretation and action in response to sustainability-­‐related issues (Bundy et al., 2013; Hahn et al., 2014; Laplume et al., 2008), a lot remains to be done to examine the cognitive process(es) used by managers to interpret sustainability issues and take action (Bundy et al., 2013; Gregoire et al., 2010). Dominant logic and enterprise logic as strategic frames for sustainability The dominant logic has usually been used to explain firms’ variety in strategy formulation and decision-­‐making (Narayanan et al., 2011; Prahalad and Bettis, 1986). But firms also face variety in their external environment and are subject to various stakeholder and institutional pressures and it is therefore crucial that when formulating their firm’s strategy, managers also understand the purpose of their firm and conceptualize its interaction with the external environment (Freeman, 1984) and thereby formulate an “enterprise strategy (Schendel & Hofer, 1979) that articulates the firm’s relationship with society” (Crilly & Sloan, 2012, p. 175). In 2012, Crilly and Sloan introduced the concept of “enterprise logic” to characterize a firm’s relationship with society and how managers conceptualize this relationship. Based on the notion of dominant logic (Prahalad & Bettis, 1986), they present the enterprise logic as a broader strategic frame encompassing not only their firm’s financial goals but also social and environmental goals making it particularly relevant to the exploration of strategy formulation in the context of sustainability. Crilly and Sloan (2012), identify three types of enterprise logic depicting an increasing level of complexity: (1) the “firm-­‐centric” logic, is the simplest of the three and its conceptualization focuses on the strategic achievement of economic goals, (2) the “industry network”, reflects a conceptualization of the firm into a more complex system with economic goals still being central to the strategic goals, but interactions with stakeholder perceived as instrumental to achieve those goals, (3) the “extended enterprise”, situates the firm into an even more complex system, with strategic goals defined not only in economic but also social and environmental terms. Enterprise logic influences both strategic issue interpretation and categorization as opportunity or threat and the level of response and type of response granted to an issue. TOWARD A FRAMEWORK FOR EXPLORING MANAGERS’ SENSEMAKING AND DECISION MAKING PROCESS ON SUSTAINABILITY ISSUES Drawing on the above theoretical considerations, we define in this article the process of making sense of a sustainability issue, as an individual cognitive process implying the placement of an issue in a collectively and socially constructed frame such as a firm’s enterprise logic. To explore the cognitive mechanism(s) used by top managers to make sense of sustainability issues and in particular to understand if the enterprise logic acts as a cognitive frame filtering a sustainability issue and driving interpretation and action, we develop the integrated framework illustrated in Figure 1 below. This framework draws on the mechanism of structural alignment (Gentner, 1983) to demonstrate the role of the enterprise logic as a cognitive frame. Cognition studies indeed reveal that in order to Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 5 of 32 interpret an issues, managers will compare this issue with what they already know and therefore mentally align external events with cognitive frames relevant to them (Gentner, 1983) and we posit through this framework that the enterprise logic acts as such a frame. According to Gregoire, Barr and Shepherd (2010), the cognitive process of structural alignment is useful for understanding the process of recognizing opportunities but also for exploring how ambiguous issues are interpreted (Gregoire et al, 2010), ambiguous issues such as the ones posed by sustainability (Hart & Milstein, 1999; Sharma, 2000). The cognitive process of structural alignment works at two levels: one centered on the “superficial features” and the other on “structural relationships” (Gentner 1983, 1989; Gregoire et al., 2010). Superficial features relate to the basic “parts” of a mental representation, along with their attributes and characteristics (Gentner et al. 1995, p. 271). Structural relationships represent the links between superficial features within a cognitive conceptualization (Gregoire et al., 2012). This framework allows us to examine, first, if a top manager structurally aligns a sustainability issue with his/her firm’s enterprise logic when interpreting this issue, thereby confirming the role of the enterprise logic as a cognitive frame (Gregoire et al., 2010), second, if the type of enterprise logic influences the level of structural alignment (Gentner, 1983) and therefore the level of attention granted to this issue (Gregoire et al., 2010), and third, if both the enterprise logic and the level of alignment influence the interpretation of this issue and the type of action taken (Crilly & Sloan, 2012). Sustainability%%
Issue%
Enterprise%%
Logic%
Issue%interpreta,on%
Decision%making%
Superficial+
Features+
Structural+
rela/onships+
Superficial+
Features+
Structural+
rela/onships+
Alignment%
Figure 1 -­‐ Framework for the exploration of top managers' cognitive mechanism when making sense of a sustainability issue Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 6 of 32 RESEARCH DESIGN In order to examine the research question and investigate the role of the socially constructed enterprise logic in the managerial cognitive process of sustainability issue interpretation and decision-­‐making, a research strategy based on an inductive approach and comparative case studies is adopted, drawing on the recommendations of Eisenhardt and Graebner (2007) and Gioia, Corley and Hamilton (2013). Analytical induction combines theoretical insights and assumptions and involves inductive reasoning and provisional testing (Bansal & Roth, 2000). Comparative case study design allows for cross-­‐case comparison to enhance both theorizing and generalization (Eisenhardt, 1989; Yin, 1994) and is useful in this context where existing theory explains to a degree why firms facing the same sustainability issues differ in their interpretation but is hindered by ontological differences, leaving unanswered questions on issue interpretation and decision-­‐making. Our approach involves inductive Taking into consideration the facts that strategic cognition is context specific (Huff, 1990) and that cognition in the context of sustainability is particularly unexplored (Hahn et al., 2014). Two extreme cases were used to provide an in-­‐depth understanding of this process. The specific context of the emergence of the sustainability issue of public health and nutrition and the new requirement for firms to report on their contribution to this issue was selected (Tyler & Gnyawali, 2009). Two cases were chosen, one because of its exemplarity in addressing this sustainability issue and another for its potential incapacity to address it. It is expected that comparing both cases should reveal the key aspects underpinning the research question and proposed framework (Eisenhardt & Graebner, 2007; Yin, 1994). The specific issue of public health and nutrition was selected because this issue and its related aspects such as obesity, food security, ingredient safety, and nutritional value has recently emerged as shaping the consumer goods industry’s competitive landscape, potentially impacting company’s license to operate and ability to provide long-­‐term value to shareholders (SASB, 2015). Also, prevailing non profit-­‐organizations such as the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) have recently introduced new reporting requirements asking firms belonging to the consumer goods industry to report on their material contribution to public health and nutrition. Business case selection The following criteria were used to select the two business case companies. First, driven by the context of our research design and focusing on the sustainability issue of public health and nutrition we selected on the one hand, a business-­‐to-­‐business (B2B) company operating in the consumer goods industry and more specifically, the global leader in the creation of flavors from natural ingredients. Sustainability is perceived by B2B companies as a strategic means to attract new clients (Christensen, 2008, Hockerts, 2015) and foster loyalty of existing clients (Homburg et al., 2013). B2B companies are therefore expected to strategically address sustainability issues and depict an exemplar sensemaking process about sustainability related issues. This company is also known for its proactive stance towards sustainability but also for its innovation and its extensive network of partners and is therefore expected to draw on an extended enterprise logic. On the other hand, we selected a company operating in the controversial tobacco industry and therefore expected to take more tactical actions in order to preserve their corporate image (Bansal et al., 2015). The tobacco industry is considered as a “slow-­‐clockspeed” industry depicting a low level of complexity in their strategic frame thereby Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 7 of 32 promoting strategic persistence instead of strategic flexibility (Nadkarni & Narayanan, 2007). Such a company is therefore expected to portray a firm-­‐centric type of enterprise logic. Senior C-­‐level vice presidents were interviewed, holding positions such as head of global operations, head of global HR, head of global sustainability, and head of global procurement. Both companies are international companies with corporate headquarters in Switzerland and comparable in size as outlined in Table 1 below. Industry Firm HQ Revenue, 2014 EBITDA(*), 2014 Consumer Goods B2B N. Europe 4,5 billion USD 1 billion USD Tobacco Tobacco N. Europe 12 billion USD 4 billion USD Table 1 -­‐ Business Cases -­‐ (*) EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization METHODS Cognitive mapping and verbal protocol analysis methods were combined to explore the cognitive process used by top managers in their effort to make sense of sustainability issues and take action. Cognitive mapping techniques (Calori et al., 1994; Crilly & Sloan, 2012) were applied on each firm’s latest available annual report to define the respective enterprise logic. An open-­‐ended interview was then conducted with each senior executive and their cognitive process analyzed using think-­‐aloud verbalization techniques (Gregoire et al., 2010). It was decided to run interviews with senior executives only because of the importance of top managers in shaping enterprise logic (Crilly & Sloan, 2012) and because a firm’s responsiveness to strategic issues is highly dependent on top managers’ interpretation and decision-­‐making (Bundy et al., 2013). Cognitive mapping is a technique employed in research on strategic cognition to operationalize strategic frames through the drawing of cognitive maps (Barr et al., 1992; Calori et al., 1994; Nadkarni & Narayanan, 2007; Prahalad & Bettis, 1986; Stigliani & Ravasi, 2012). Cognitive maps are primarily produced from archival data such as annual reports (Narayanan et al., 2011). Drawing on the study of Crilly & Sloan (2012) on the role of the enterprise logic in directing top managers’ attention towards stakeholders’ concerns, we used cause maps, a form of cognitive maps that incorporates concepts linked together by causal relationships (Tyler & Gnyawali, 2009) to draw the enterprise logic of our business case. Through an in depth textual analysis of the latest annual report, the concepts related to the firm’s strategic intent, mode of interaction and external constraints were identified and linked together to depict and determine the enterprise logic. The coding scheme of those three major concepts constituting the enterprise logic is described in the next section (Table 2). Few methods exist for operationalizing the subjective aspects of managerial mental processes into “quantitative and reproducible measures” (Calori et al., 1994). Repertory grid techniques, considered as more rigorous than open-­‐ended interviews have been used to identify constructs and link them together but are tedious and inappropriate when dealing with top executives (Calory et al., 1994). This research has therefore opted for a simple open-­‐
ended interview method. Open-­‐ended interviews are well accepted by top managers and allow to identify the most salient concepts in their cognitive process and reasoning Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 8 of 32 mechanisms (Calori et al., 1994), when combined with an in-­‐depth verbal protocol analysis (Gregoire et al., 2010). The method of verbal protocol analysis has been used in organization research to study the reasoning strategies of managers and corporate officers (Isenberg; 1986; Melone, 1994) or top manager’s cognitive process of opportunity recognition (Gregoire et al., 2010) and proves to be useful for avoiding the retrospective bias of traditional interviews (Gregoire et al., 2010). Taking into account the recommendations from Calori, Johnson, and Sarnin (1984) the following precautions were taken in order to limit the potential biases generated by loosely structured interviews: sufficient time for discussion was foreseen, biases were corrected when possible, the coding scheme used was defined as precisely as possible (see next section for a detailed description) and the length of the interview was controlled. DATA COLLECTION Secondary data: 2014 annual reports Primary data: Senior executive’s interviews taking place in 2015 and 2016 and lasting between 90 and 120 minutes. The following research procedure was adopted: first, a preliminary enterprise logic map was designed from a textual analysis of the latest annual report (2014) and the type of logic was identified (firm-­‐centric, industry network or extended enterprise logic). Second, the top managers were individually interviewed and asked to think aloud about the issue of public health and nutrition and what the requirement of reporting on his firm’s material contribution to this issue means to them and their company (see interview grid in appendix). No other information was communicated, in particular no information related to the annual report and enterprise logic in order to avoid retrospective bias. When a manager completed his reasoning, he was asked about past events that triggered his sensemaking about this issue. Recognizing that the interviewer can introduce bias into the data by prompting a particular theme during the interview, a theme mentioned after a prompt was kept only: (1) if this theme was mentioned by the manager as being important, (2) if it had already been mentioned in the interview prior to the prompt and, (3) if the length of the discussion on the theme was material; otherwise it was deleted. Then, once the manager finished describing his thoughts, he was asked to talk about the responses and actions taken. Finally, the firm’s enterprise logic cognitive map was presented to him for review and comments. The think-­‐
aloud section of the interview was recorded and transcripted. The transcripts of the top manager as he was making sense of the issue of public health and nutrition was then analyzed according to the method outlined by Gregoire, Barr, & Shepherd (2010), looking for evidence that his sensemaking effort draws on his/her enterprise logic as a cognitive frame and uses a cognitive mechanism of structural alignment (Gregoire et al., 2010), but also to explore to what extent the level of alignment between the issue and the enterprise logic influences the interpretation of this issue as an opportunity or threat (or emerging other categories) and analyze the resulting types of actions. Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 9 of 32 DATA ANALYSIS Measures Enterprise Logic In order to determine the enterprise logic of the business case, an in-­‐depth textual analysis of each 2014 annual report was performed using the 2nd order themes and “meta-­‐constructs” provided by the analysis of Crilly & Sloan (2012) on corporate attention to stakeholders and the role of the firm’s enterprise logic (see Table 2 below). The first meta-­‐construct “strategic intent” refers to the long-­‐term goals of the firm’s decision makers (Lovas and Ghoshal, 2000) and reflects the purpose of the firm in relation to its stakeholders (Kacperczyk, 2009). The second-­‐construct “mode of interaction with stakeholders” can be transactional (economic transaction, one-­‐time interaction, etc.) or relational (partnership, collaboration, etc.). The third construct “external constraints” regroups factors such as legal compliance or license to operate. In the 2nd order themes, a new node called “Public Health and Nutrition” has been added to identify its centrality in the enterprise logic of the business case. Meta Construct (aggregated) Strategic Intent Mode of interaction with stakeholders External constraints Central Node (2nd-­‐order themes) Innovation Social development Sustainability Public health and nutrition Economic growth Efficiency Market power Market knowledge Reputation Competitive advantage Environmental stewardship Communication Collaboration Contracts Trust Codes, standards Legal compliance Fiduciary duty License to operate Table 2 -­‐ Enterprise logic cognitive map -­‐ Central nodes Following Crilly & Sloan’s method (2012), the type of enterprise logic (firm-­‐centric, industry network or enterprise logic) was established based on measures of nodes centrality, comprehensiveness and connectedness. Centrality indicates the number of ties to and from a given node and measures the node’s immediate influence on other nodes (Crilly & Sloan, 2012; Freeman, 1979). Comprehensiveness is measured by the number of nodes that appear in a firm’s map and is a first indicator of cognitive complexity (Calori et al., 1994). Connectedness represents the number of actual links in the map divided by the maximum number of links possible and is a second indicator of cognitive complexity (Calori et al., 1994). Three maps can be distinguished: (1) a cognitive map depicting a low measure of Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 10 of 32 comprehensiveness and connectedness compared to its counterparts and associated with central nodes on “economic growth” and “efficiency” and revealing a transactional (versus relational) mode of interaction will be classified as “firm-­‐centric” (Crilly & Sloan, 2012), (2) a cognitive map depicting a focus on economic value creation and a relational mode of interaction and showing a higher level of comprehensiveness and connectedness than firm-­‐
centric cognitive maps will be classified as “industry-­‐network”, and (3) a cognitive map depicting a strategic intent oriented towards society and a relational mode of interaction and showing the highest level of comprehensiveness and connectedness will be classified as “extended” enterprise logic (Crilly & Sloan, 2012). Cognitive alignment The cognitive tool of structural alignment works at two levels: one centered on the “superficial features” and the other on “structural relationships” (Gentner 1983, 1989; Gregoire et al., 2010). Superficial features relate to the basic “parts” of a mental representation, along with their attributes and characteristics (Gentner et al. 1995, p. 271). Structural relationships represent the links between superficial features (Gregoire et al., 2010). “Research distinguishes two types of structural relationships: first-­‐order and higher-­‐
order structural relationships. The former consists of one-­‐to-­‐one functional relationships between superficial features (e.g. action verbs, direct effects). Higher-­‐order relationships include more abstract relationships between relationships, such as causal chains, goal statements and conditional rules” (Gregoire et al., 2010, p. 416). To analyze the occurrences of distinct forms of logical thinking across interviewees’ verbalizations and in accordance with the research of Gregoire, Barr and Shepherd (2010) on the cognitive process of structural alignment, the coding schemes introduced in Table 3 below were used (Gregoire et al., 2010). The in-­‐depth textual analysis of the transcript of the top managers’ verbalization allowed for the identification of meaningful blocks of texts. A block of text is typically composed of sentences or groups of sentences separated from other blocks of text by a short pause and following each other in the manager’s verbalization. Each block was coded according to the dimensions and coding scheme outlined in Table 3 below. The coding scheme focuses on two aspects of the developed assumptions: (1) the attention focus (i.e. the “topic” of each statement, related to “enterprise logic” or the introduction of the new requirement to report on the material contribution to public health and nutrition) and (2) the level of structural reasoning (i.e. superficial versus structural). The first dimension isolates the particular aspect of the “problem space” (Gregoire et al., 2010) that captured a manager’s attention. Because this research design focuses on the process of making sense of the issue of reporting on public health and nutrition material contribution, the relevant “problem space” consists of information about the specific issue to be presented to interviewees and whatever objects, models, situations or contexts they use to “make sense” of this issue. Each statement was coded according to whether it referred to something about the issue or about the enterprise logic, about both or neither. Evidence of cognitive alignment came from statements that attended to features/relationships of both the issue of public health and nutrition reporting and the firm’s enterprise logic (Gregoire et al., 2010). It must be stressed that the participants were not asked to align the issue and their enterprise logic: whether they do so is at the core of this empirical research and overall assumption. The second dimension of the proposed coding scheme identifies the level of reasoning expressed in each statement. Here, the intention was to code each statement according to whether it made an explicit reference to superficial features or to one of two types of structural Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 11 of 32 relationships: first or high order. Adopting an approach similar to Gregoire et al. (2010), the two forms of structural relationships were combined for the purpose of the detailed analysis. Analytical Categories Sub-­‐Categories Operationalization Attention focus Enterprise logic Public health and nutrition issue Neither/other The statement consists primarily of comments, observations, questions, issues (etc.) about the enterprise logic of the firm. The statement consists primarily of comments, observations, questions (etc.) about the issue of public health and nutrition or about it’s reporting requirement. The statement refers to neither the enterprise logic, nor to the issue of public health and nutrition. Operationalization: the statement consists primarily of comments, observations, questions, issues, (etc.) about … …. the “objects” of an enterprise logic such as a strategic intent (environment, innovation, social development, etc.), mode of interaction with stakeholders (transactional, relational), or external constraints (legal compliance, fiduciary duty, etc.). … the “objects” of the issue of public health and nutrition such as health impact (cancer, diabetes, obesity), need to reduce fat and sugar, ingredient safety, smoking is legal, or key aspects to be reported on marketing campaign, alternative products offering, etc. How and why the company associates various strategic intents, or a strategic intent with a mode of interaction or an external constraint with a strategic intent or mode of interaction, etc. How and why the company associates different aspects of the issue of public health and nutrition. Evolving lifestyle, warning from the world health organization (WHO) leading to the reduction of fat and sugar from produced goods or increased testing on raw material quality, etc. Operationalization: the statement consists primarily of … … one-­‐to-­‐one functional relationships between a superficial feature of the enterprise logic (a specific strategic intent, mode of interaction or external constraint) and a superficial feature of the issue of public health and nutrition (e.g. use of action verbs, notion of direct effect). For example, smoking is legal leading to increased communication with governments. … higher-­‐order relationships including more abstract relationships between relationships, such as causal chains, goal statements and conditional rules. The potential benefits,/advantages or threat,/risks posed by the issue on the firm’s enterprise logic, along with the reasons/causes.. For example, consumers are reading the labels a Level of structural reasoning Superficial, enterprise logic alone Superficial, issue alone Structural, enterprise logic alone Causal relationships between the “objects” of the enterprise logic Causal relationships between the “objects” of the issue of public health and nutrition Structural, issue alone Level of alignment Superficial, Enterprise logic and issue 1st order Structural, Enterprise logic and issue High-­‐order Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 12 of 32 Implicit enterprise logic, Implicit, issue lot more and are aware of the impacts of certain ingredients on their health, consumer awareness is higher and our customer are therefore left with the challenge to remove fat and sugar and we need to innovate and collaborate with them to find solutions. Although the statement discusses something else, a preposition in the statement refers implicitly to something about the firm’s enterprise logic or the issue. But because it is implicit it is not possible to determine the level of structural alignment. Table 3 -­‐Verbal protocol analysis-­‐ coding scheme Issue classification and actions taken For an inductive analysis of the issue interpretation and classification and also of the actions taken, the following 2nd order themes were used (Table 4 and 5 below): Dutton & Jackson, 1987 Opportunity Threat Bundy et al. (2013) True opportunity True Threat Identity conflict Frame conflict Instrumental opportunity Instrumental threat Expressive opportunity Expressive threat Non issue Table 4 -­‐ Issue classification -­‐ coding scheme As per Dutton & Jackson’s (1987) work, the threat versus opportunity categorization has increasingly been used by researchers (Narayanan et al., 2011). In the context of sustainability and why companies go green, a sustainability event may resonate in the mind of a manager because it represents an economic opportunity, answers to a stakeholder pressure, need to be addressed to comply with legislation, links to corporate values (Bansal & Roth, 2000) or provides legitimacy as an integral part of corporate identity (Sharma, 2000). Bansal et al., 2015 Tactical Strategic Bundy et al. (2013) Substantive accommodative Substantive defensive Substantive negotiation Substantive negotiation Symbolic accommodative Symbolic defensive Symbolic accommodative Symbolic defensive No response Table 5 -­‐ Actions taken – coding scheme Actions can be tactical or strategic (Bansal et al., 2014). Tactical actions are short term, require little resource and have little organizational impact, whereas the strategic actions are Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 13 of 32 long term, require to commit to a subsequent amount of resources and have an important impact organization wise (Bansal et al., 2015). THE ENTERPRISE LOGIC AS COGNITIVE FRAME INFLUENCING ISSUE INTERPRETATION AND DECISION MAKING The comparison of two extreme business cases suggest that when making sense of a specific sustainability related issue such as the issue of public health and nutrition, top managers draw on their enterprise logic and thereby use it as a cognitive frame to interpret this issue and take action. Top managers cognitively align the sustainability issue being interpreted with their enterprise logic (Gentner, 1983) and the enterprise logic influences top managers’ sensemaking about this issue through three mechanisms. First, it affects the level of alignment of this issue reflecting a differentiation in attention (Gregoire et al., 2010). Second, it influences the classification of this issue. Third, because attention and interpretation precede action (Occasio, 1997), the enterprise logic also influences the level of action taken. Enterprise logics As a starting point, the cognitive maps emerging from the in-­‐depth examination of B2B’s and TOBACCO’s 2014 annual reports drive our inductive analysis. The results and measures in terms of their map’s logics and content are presented in Table 6. Because our study is based on two cases only, we use the results of Crilly and Sloan (2012) as a benchmark for the identification of the business cases’ type of enterprise logic. Table 6 B2B and Tobacco cognitive maps measures The cognitive maps of the two firms are displayed in Figure 2 below. Single arrows represent positive causal links between two nodes indicating that a strategic intent or mode of interaction positively affects another strategic intent or mode of interaction. For example the analyzed annual report of B2B indicates that in order to support their customers in developing healthier products, the firm organizes various symposiums, indicating a positive link between the node “communication” and the node “public health and nutrition”. Bidirectional positive ties depict a strategic interdependence between two nodes and are represented by thick double arrows. Negative causal links are represented by a thick dashed arrow. Negative links indicate that a strategic intent or mode of interaction negatively influences another strategic intent or mode of interaction and show a perceived trade-­‐offs (Crilly & Sloan, 2012). For example in the annual report of TOBACCO, one can read that regulations become increasingly restrictive resulting in industry contractions and accelerated down-­‐trading in some key markets indicating a negative relationship between the node Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 14 of 32 “regulatory compliance” and “economic growth”. Finally, the top ten most central and influential nodes are highlighted by grey shaded boxes (more details are available in appendix). B2B!
TOBACCO'
“Extended”!enterprise!logic!
“Firm4centric”!enterprise!logic!
Figure 2 – Cognitive maps of B2B and TOBACCO The results corresponding to the cognitive map of B2B are similar to the results of Crilly & Sloan (2012) in term of comprehensiveness and show a higher ratio of connectedness than the value found for an extended enterprise logic, indicating a particularly dense and complex enterprise logic. The results of TOBACCO are under the benchmark’s values both in terms of comprehensives and connectedness revealing a particularly simple firm-­‐centric type of enterprise logic. The cognitive map of B2B depicts a strategic intent focused on innovation, economic growth, efficiency and sustainability through a collaborative mode of interaction with stakeholders. Sustainability and economic growth as strategic intent score equally high (see appendix B for more details). This reflects an interdependence of both economic growth and sustainability related goals and corresponds to an “extended” type of enterprise logic. Consistent with the characteristics of an extended enterprise logic defined by Crilly and Sloan (2012), this enterprise logic is complex with many ties among nodes. Fourteen bidirectional links, a significant number compared to the benchmark, are identified, suggesting a strategic interdependence in the pursuit of corporate goals. However the interdependence of the economic and sustainability strategic goals requires complex management of trade-­‐offs (Thompson & McMillan, 2010) as confirmed by three identified negative links. Those trade-­‐
offs are between “regulatory compliance” and “efficiency”, “economic growth”, and “environmental stewardship” and “economic growth” and “sustainability”. When reviewing the cognitive map established from its latest annual report, the difficulty to Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 15 of 32 address those trade-­‐offs was acknowledged by a top manager of B2B. “As we grow in the emerging markets, this becomes exponentially more complicated. And if it is more complicated, it is usually more costly, because you need much higher skills to deal with it, you’ve got to invest much more. So if that’s what that line represents, that’s accurate. It is just incredible, and you think that the mature markets are the toughest, not even close!” (B2B, top manager) Pointing to the three doted arrows: “This is exactly right. This I 100% agree with. I live this and I live this, and I live this. Yes, this is a 100% right”. (B2B, top manager) The cognitive map of TOBACCO, on the other hand is simple and shows few nodes and ties (see Figure 2 above), the measures of comprehensiveness and connectedness are far below the measures of Crilly & Sloan’s leading to the classification of the map as a firm-­‐centric logic. Consistent with the definition of such a logic, the more central node is economic growth (see appendix B for more details), also social development and environmental stewardship do not appear at all in the cognitive map when sustainability does to a certain extent (see Appendix B for more details) indicating that little strategic attention is granted to sustainability related stakeholders concerns. The cognitive map shows few nodes and few bidirectional links indicating a low level of complexity of the enterprise logic. The enterprise logic of TOBBACO can therefore be classified as a “firm-­‐centric” enterprise logic. It must also be noticed that the enterprise logic of TOBACCO reveals a single trade-­‐off, articulated around the negative impact of government’s regulations on their economic growth, indicating that this negative impact is a primary concern for this company. From the analysis of B2B and TOBACCO annual reports, two additional external constraints inductively emerged, namely, “consumer preference change” (B2B and TOBACCO) and “depletion of natural resources” (B2B only). When consumer preference change is part of the traditional strategic and marketing repertoire, depletion of natural resources has been identified as one of the triggers to sustainable development (Bansal, 2005, Hart & Dowell, 2011). Level of alignment and attention to a sustainability issue According to the principles of verbal protocol analysis, the recorded interview and related transcription was analyzed using Microsoft Excel. Blocks of texts were used as unit of analysis (Gregoire et al., 2010) to explore the cognitive process of the interviewed top managers and in particular the extent to which they align the issue of public health and nutrition with their enterprise logic. Results of the analysis are summarized in Figure 3 below. From the verbal protocol analysis of a B2B top manager talking about the issue of public health and nutrition, it can be observed that the issue of public health and nutrition attracts a high level of attention. Indeed, less than 10% of the cognitive effort is spent thinking about the enterprise logic when 90% is spent on reasoning about the issue solely (22%) or aligning this issue with the enterprise logic. When aligning the issue with the enterprise logic this alignment is nearly exclusively performed structurally. B2B top manager then associates the features and relationships of the issue of public health and nutrition such as reducing fat, salt and sugar, reducing healthcare costs or coping with developing countries children’s nutritional needs with features and relationships of his/her enterprise logic Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 16 of 32 related mainly to the three strategic intents of innovation, sustainability and economic growth, a collaborative mode of interaction and an external constraint stated in terms of consumer preference change. For example, “The consumer awareness is significantly greater today than it was five years ago and many of our customers are experimenting with the challenge of removing the salt. So we have solutions to do that”. (B2B, interview) A TOBACCO top manager on the other did spend half (50%) of his reasoning talking solely about his enterprise logic and was doing so as much superficially than structurally, talking about regulatory compliance, communication, codes and standards and efficiency. A small effort (10%) was spent talking about the issue only and aligning on a superficial way (40%) the issue with the enterprise logic. This shows a lower level of attention granted to the issue of public health. Also, when an alignment occurs, it is nearly exclusively taking place superficially. Features mentioned about the issue then relate to the facts that smoking is legal and that excess of tobacco is bad for health and these features are linked to individual features relating to regulatory compliance, codes and standards, communication and license to operate or reputation and investor’s pressure. For example, “As a public company, you want to ensure that your share price goes up, so the investors are able to invest in your company and many of the funds and the large investors are becoming more social responsible and therefore want to invest in those companies that are doing the right things. And therefore this reporting gives us the ability to communicate to our potential investors who might want to buy our shares and therefore we are taking away the risk that they won’t invest because we are not doing the right things.” (Tobacco, interview) B2B#
Tobacco#
Figure 3 -­‐ Verbal protocol analysis Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 17 of 32 Those findings are coherent with existing research in strategic cognition which reveals that individuals drawing on more complex mental conceptualizations reason more in terms of structural relationships (Chi et al., 1981) and therefore shows that in their process of recognizing opportunities, managers associate a greater cognitive effort to align structural relationships than to align superficial features (Gregoire et al., 2010), leading to the following two propositions: Proposition 1.1. When making sense of a sustainability issue, top managers drawing on a firm-­‐
centric enterprise logic will allocate a greater cognitive effort aligning the superficial features than aligning the structural relationships. Proposition 1.2. When making sense of a sustainability issue, top managers drawing on an industry-­‐network or an extended enterprise logic will allocate a greater cognitive effort aligning the structural relationships than aligning the superficial features. Enterprise logic, level of alignment and issue interpretation Analysis of the verbal protocol of B2B reveals that when being asked if the issue of public health and nutrition and reporting on this issue represents a threat or opportunity to his/her company (see interview grid in appendix), a B2B top managers will exclusively draw on a mechanism of structural alignment linking structural relationships of the issue with structural relationships of their extended enterprise logic. For example, “We manufacture the flavours for foods for all the all the different business units: dairy products, beverage, confectionary bakery, etc. And so obviously it’s about the taste and it’s about a taste experience but way beyond that, one, of the highest growth areas and one of the areas with he biggest demand from our customers is around health and wellness and it’s around removing the sugar, and it’s around removing the salt and replacing fat”. (B2B, interview) The issue of public health and nutrition is then classified as an opportunity leading to economic growth opportunities and enhanced stakeholder collaboration. But this classification must be mitigated by the fact that reporting on the firm’s material contribution to public health and nutrition is perceived by a B2B top manager as a threat because it may lead to the release of competitive advantage and intellectual property related information. “So the FMCG comes back to us and tell us we need to know what is inside your flavours, and so we say, we will tell you what is inside of our flavours down to this level of detail but at the end of the day, our formulas are Intellectual Property (IP)”. (B2B, interview) On the other hand, when being asked if the issue of public health and/or reporting on this issue represents a threat or opportunity to their company, a TOBACCO top manager will exclusively draw on a mechanism of superficial alignment between the issue and their firm-­‐
centric enterprise logic. TOBACCO top manager then classifies the issue as a “defensive opportunity” leading to a better reputation and preserving the firm’s license to operate. The issue of reporting on the contribution to public health is classified as an opportunity and a new channel for communicating with the consumers, suppliers, shareholders and employees. Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 18 of 32 “You’ve got a defensive opportunity because the WHO wants to cut the link between the farmers and us as an industry…what they want to do is to cut the ability for us to be able to provide a quality product…. by cutting the ability for us to have a quality product they make it more difficult for us to do business…. So it’s an opportunity to cut threat off”. (Tobacco, interview) “It helps to communicate to our suppliers, shareholders, society in general. and employees. They’ve got a structured way of looking at what we are doing and why we are responsible”. (Tobacco, interview) In line with literature on strategic cognition, the enterprise logic influences both strategic issue interpretation and categorization as opportunity or threat and the level of response and type of response granted to an issue (Crilly & Sloan, 2012). In their matched-­‐pair study of eight global corporations on the role of enterprise logic on managerial attention, Crilly and Sloan (2012) found consistent evidence that firm-­‐centric conceptualization is linked with threat reduction rationale, while the industry-­‐network and extended enterprise logic are associated with opportunity recognition rationale. Leading to the following set of propositions: Proposition 2.1. Managers cognitively aligning a sustainability issue with a firm-­‐centric enterprise logic will classify this issue as a threat. Proposition 2.2. Managers cognitively aligning a sustainability issue with an industry-­‐network enterprise logic will classify this issue as an opportunity. Proposition 2.3. Managers cognitively aligning a sustainability issue with an extended enterprise logic will classify this issue as an opportunity. Enterprise logic, level of alignment and decision-­‐making When being asked about the most strategic actions taken to address the issue of public health and nutrition (see interview grid in appendix), both the interviewed B2B and TOBACCO managers exclusively align this issue with their enterprise logic but when a B2B manager exclusively structurally aligns the issue with his enterprise logic, a TOBACCO manager exclusively aligns it superficially. B2B actions relate to the creation of a new business unit, the establishment of working relationship with the company’s science and technology team and the dedication of one of company’s strategic pillars to health & wellness. Those actions require the commitment of a subsequent amount of resources and have an important organizational impact (Bansal et al., 2015) and are therefore clearly strategic. “We created a business unit with Health and Well-­‐being. So there is an owner of a business unit with a team and so that was the first thing. We created a business unit that would have it’s own P&L. With the creation of a business unit comes targets … and we paired that group up with a science and technology group, so within the science and technology team, there are scientists that are peerly focused on health and wellness products that Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 19 of 32 serve those segments”. (B2B, interview) TOBACCO managers on their side, mention more tactical actions relating to the way of communicating with consumers to ensure that only adults smoke, the signature of agreements with governments to reduce illegal trade of cigarettes, or the testing of tobacco leafs to make sure that there is no crop residues to be found. “We communicate very well to our consumers on public health, we don’t cut corners; we make sure that all of our consumers recognize the risk to your health of smoking in excess. We want to make sure that we participate at any of the programs to ensure that only adults smoke, so we push very hard on ensuring that only adults smoke. We distinguish, we penalize retailers who sell to anybody under age, we will stop supporting them, stop putting our cigarettes there, won’t give them any advertising material. So we take that responsible approach from a public health point of view”. (Tobacco, interview) Existing studies show that issue interpretation and classification shape subsequent managerial responses (Bundy et al, 2013; Crilly & Sloan, 2012). Because the firm-­‐centric and the industry network logics are centered on the achievement of economic goals, it can be deducted that those frames will guide managerial issue interpretation and decision-­‐making through an “instrumental logic” (Bundy et al., 2013) when an “extended enterprise” frame will guide managerial issue interpretation and decision-­‐making through an “integrative logic” (Gao & Bansal, 2013). Indeed, an instrumental logic is defined as the rational fulfillment of a firm’s strategic goals (Bundy et al., 2013), whereas an integrative logic is at the core of the concept of sustainability (Gao & Bansal, 2013; Gladwin et al., 2015) and is defined as the embracement of the strategic paradox of simultaneously achieving environmental, social and economic goals (Gao & Bansal, 2013). Research in sustainability finds evidence of an integrative logic when a firm takes strategic actions to answer sustainability issues (Gao & Bansal, 2013). Leading to the following additional propositions: Proposition 3.1. Managers aligning a sustainability issue with a firm-­‐centric or industry network enterprise logic will consider tactical actions to resolve this issue. Proposition 3.2. Managers aligning a sustainability issue with an extended enterprise logic will consider strategic actions to resolve this issue. DISCUSSION AND IMPLICATIONS This study addresses the broad question of why firms operating in the same context and confronted with the same external pressures react differently to sustainability related issue. Using a cognitive approach and through our proposed framework, we sought to address this question by exploring and developing a better understanding of the cognitive process used by top managers to make sense of sustainability related issues. We propose the enterprise logic as a strategic frame filtering a sustainability issue and driving interpretation and action. This construct has not been empirically tested as a strategic cognitive frame yet and applied to the context of sustainability. Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 20 of 32 The enterprise logic as strategic frame We found evidence that the enterprise logic influences top managers’ sensemaking about a sustainability-­‐related issue through three mechanisms. First, it affects the level of alignment of this issue reflecting a differentiation in attention, second, it influences the classification of this issue, and third because attention and interpretation precede action, the enterprise logic also influences the level of action taken. We found evidence that top managers of firms depicting an extended enterprise logic more deeply and more structurally filter a sustainability related issue through the frame of their enterprise logic. Their reasoning pattern is more complex and they grant a higher level of attention to this issue. As a result, they tend to classify this issue as an opportunity and take strategic actions. On the other hand top managers of firms depicting a firm-­‐centric logic reason more in term of enterprise logic and tend to neglect to make sense of the issue itself, the issue raises a low level of attention and its strategic aspects may be questioned. When the issue is aligned, it is done superficially, and the issue is then classified as a defensive opportunity or threat, leading to the adoption of tactical actions. Furthermore, informed by literature on the role of the enterprise logic on managerial cognition and stakeholders attention (Crilly & Sloan, 2012), we operationalize the enterprise logic construct and empirically demonstrate that this concept acts as a socially constructed strategic cognitive frame in the sensemaking process of sustainability issues, which is a step forward compared to existing research in cognition and sustainability which has suggested individual cognitive frames such as business case or paradoxical frame without operationalizing and empirically testing the influence of those frames on managers’ sensemaking process (Hahn et al., 2014). Enterprise logic and business case or paradoxical frames Prior research in strategic cognition and sustainability has emphasized the role of a business case frame or paradoxical frame as cognitive frames (Hahn et al., 2014) influencing managerial sensemaking and decision-­‐making. Our in-­‐depth textual analysis of the transcripts of top managers’ verbalization when asked to make sense of a specific issue of sustainability does not reveal a reasoning mechanism in relation to costs and benefits. Our analysis shows that a manager would only talk about benefits when asked about the key strategic issues taken by his/her company to address a sustainability issue indicating that cost/benefit aspects are only taken into considerations by top managers during the decision-­‐making stage of their cognitive process and that those aspects do not influence their sensemaking and interpretation of a sustainability issue. A view in line with the stream of research challenging the notion of a business case for sustainability (Barnett & Salomon, 2012; Margolis & Walsh, 2003 ; Pujari et al., 2003) stressing that while it may not pay to be “green” now, it may at a later stage (Barnett & Salomon, 2012) and therefore that time matters (Bansal et al., 2014; Bansal & DesJardine, 2014). Likewise notions of trade-­‐offs and paradoxes are not mentioned directly by top managers being interviewed on whether the sustainability issue of public health and nutrition makes sense to them. However the notion of trade-­‐offs inherent to the issues of sustainability (Angus-­‐Leppan et al., 2010; Crane et al. 2014; Hahn et al., 2014; Luo & Bhattacharya, 2009; Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 21 of 32 Thompson & McMillan, 2010) does emerge from the analysis and representation of the firm’s enterprise logic, which is an additional element supporting our framework and overall assumption on the role of the enterprise logic as a socially constructed strategic cognitive frame in top managers sensemaking and decision making about sustainability. Both the enterprise logic, i.e. the top managers’ conceptualization of their firm’s relationship with society and the degree to which a manager cognitively aligns a sustainability issue with his/her company’s enterprise logic are central to the sensemaking and decision-­‐making process about a sustainability issue such as the issue of public health and nutrition. It appears that both play a role in interpreting a sustainability issue as an opportunity versus a threat. Thereby both impact the type of actions taken. These findings highlight the value of adopting a combined managerial cognition and enterprise logic perspective to explain why some firms address sustainability issues more strategically than others. Implications for researchers This study has some interesting implications for researchers. First it contributes to address the debate in strategic cognition on whether individuals draw on individual or socially constructed frames when making sense of a strategic issue (Maitlis & Christianson, 2014) by analyzing the impact of the socially constructed enterprise logic frame on top manager’s cognitive process about sustainability. Second, we advance research in cognition and sustainability, which has mostly relied on “business case thinking” (Hahn et al., 2014) by proposing the enterprise logic as a cognitive frame and demonstrating its influence on the sensemaking and decision-­‐making processes about sustainability. Third, we contribute to remedy to the lack of empirical research in strategic cognition (Hahn et al., 2014). Finally, this study demonstrates the usefulness of adopting a multi-­‐method approach to analyze a cognitive process. Indeed, on the one hand it uses a cognitive mapping method to operationalize the enterprise logic as a strategic frame and on the other hand analyzes the impact of this frame on a cognitive process using a verbal protocol analysis method. We believe there is much work to be done to better understand how sustainability issues are interpreted and acted upon within firms. This study brings evidence that a firm’s enterprise logic strongly influences the sensemaking process of top managers about sustainability but we also found that during the decision making process top managers may also draw on other frames such as a business case frame, in line with existing theoretical studies revealing that managers may activate various frames at different stages of the sensemaking and decision-­‐
making processes about sustainability (Hahn et al., 2014). It may also be interesting to search on the impact of other frames such as the business model and more specifically the customer value proposition (Chandler et al., 2014) in the sensemaking process about sustainability or to investigate which frame impact the very first process, preceding the sensemaking and decision-­‐making processes (covered by this study) in strategy formulation, i.e. the scanning process (Narayanan et al., 2011). Implications for practitioners From a managerial standpoint, this research stresses the importance of adopting an “inside-­‐
out” perspective (Crilly & Sloan, 2012) during strategy formulation about sustainability and sheds light on the fact that embedding sustainability in its strategic agenda is not only a matter Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 22 of 32 of objectively addressing external stakeholders’ concerns but is a process strongly influenced by how managers conceptualize their business and their firm’s relationships to society. This study provides a framework that top managers may find useful to increase their strategic awareness about sustainability. This framework may be used as a diagnostic and benchmarking tool for analyzing how strategically societal and environmental concerns are addressed and for identifying and understanding the resulting trade-­‐offs that need to be addressed. LIMITATIONS We acknowledge the limitations of our study. First this study is based on two business cases study depicting an “extended” and a “firm-­‐centric” enterprise logic, the influence that an “industry-­‐network” type of enterprise may have on the interpretation of an issue and subsequent decision-­‐making was therefore not explored. This study must therefore be considered as exploratory and we call for more empirical testing of the developed propositions. We accepted these limitations because we wanted to conduct a rich, multi-­‐
method comparative case study research and test the appropriateness of the proposed framework and research design for exploring the cognitive process used by top managers in their effort to make sense of sustainability issues and take actions. To further test our framework, explore the impact of other type of enterprise logics such as the industry-­‐
network and expand the validity of our preliminary findings we would propose to further test our framework by using a multiple comparative case study approach. CONCLUSION This research contributes to a better understanding of the cognitive process by which top manager make sense of sustainability issues and provides valuable elements of answers to the broader question on why companies are reacting differently to sustainability issues. Indeed, first preliminary results of our study show the impact of (1) the enterprise logic, i.e. the top managers’ conceptualization of their firm’s relationship with society and (2) the degree to which a manager cognitively aligns a sustainability issue with his/her enterprise logic. Both play a role in interpreting a sustainability issue as an opportunity versus a threat. Thereby both impact the type of actions taken. These findings highlight the value of adopting a combined managerial cognition and enterprise logic perspective to explain why some firms address sustainability issues strategically when others barely react tactically. The enterprise logic, defined as top managers’ conceptualization of their firm’s relationship with society, plays a central role in top managers’ interpretation of sustainability-­‐related issues and decision making processes, two key activities of the strategy formulation process. Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 23 of 32 References Accenture, & UN Global Compact (2013) The UN Global Compact-Accenture CEO Study on
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Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 29 of 32 Appendix A – Interview grid Introduction 1) May I ask you to introduce yourself? 2) Are you in charge of or belonging to a specific Business Unit? The issue of public health and nutrition – Questions Sensemaking is required to interpret and take actions on vague and ambiguous issues in order to reduce the confusion posed by those issues on an organization (Weick, 1993). Q1.What does the issue of public health and nutrition mean to you and your company? Q2. What does the requirement to report on your material contribution to this issue mean to you and your company? Q3. What would you describe as the three most strategic actions taken by your organization to deal with the issue of public heath and nutrition? Prompts: a) Do you perceive this issue as an opportunity or a threat? Please explain. b) Which events would you identify as having triggered your company’s sensemaking about this issue? Review and comments on the enterprise logic Prepare few slides depicting the enterprise logic and explaining the process. 1) A close analysis of your latest available annual report (2014) looking at: 1. Your strategic intent (economic growth, innovation, sustainability, etc.) 2. Your mode of interaction with stakeholders (relational/collaboration versus transactional) 3. Your external constraints (license to operate, depletion of natural resources, legal compliance, etc.) Led to the following map and analysis what are your comments/remarks? Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic Page 30 of 32 Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic
Appendix B – Verbal protocol and Cognitive map analysis B2B Cognitive Map Analysis Summary Page 31 of 32 Making sense of sustainability issues: The role of cognitive structural alignment and enterprise logic
TOBACCO Cognitive Map Analysis Summary Page 32 of 32