To formulate and implement a sustainability strategy in a savings bank: A case study of four savings banks

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To formulate and implement a sustainability strategy in a savings bank

A case study of four savings banks

Amanda Dahlgren Isabella Holmberg

Industrial and Management Engineering, master's level 2020

Luleå University of Technology

Department of Business Administration, Technology and Social Sciences

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ABSTRACT

Purpose – The purpose of this study was twofold. First, we wanted to increase knowledge about what is important to address within an organization, when formulating and implementing a corporate sustainability strategy. Second, we wanted to explore how the level of achievement of corporate sustainability influences the ability of an organization to integrate sustainability within its own organization.

Method – We used an abductive approach within this study. In total, we conducted 20 interviews which we analysed through a thematic analysis. We also conducted two surveys.

Findings - We have found six crucial aspects that will affect the formulation and implementation of a corporate sustainability strategy; conceptual confusion, motivation, action, cooperation, guidelines, and communication. We have also found that all dimensions of sustainability need to be understood and incorporated into the organization, in order for a corporate sustainability strategy to have impact.

Theoretical and practical contributions - We have contributed to previous literature by connecting the five stages of achieving corporate sustainability with obstacles and solutions within the phases of strategy formulation and implementation. Further, we have provided a framework that can be useful to organizations when trying to achieve corporate sustainability.

Limitation of the study - We have only analysed four out of almost 60 savings banks in Sweden, and the ones part of this study is also part of a sustainability project. It is therefore of essence that another more expansive study is performed that integrates more savings banks.

Keywords: Corporate sustainability strategy; Strategy formulation; Strategy implementation;

Corporate governance; Corporate sustainability

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ACKNOWLEDGEMENT

This master thesis was carried out during the period of January 2020 to June 2020 as the final part of our master’s degree in Industrial Engineering and Management with specialization in Innovation

& Strategic Business Development, at Luleå University of Technology.

First and foremost, we would like to express our sincere gratitude to all contributors to this master’s thesis project. We would like to thank Mats Westerberg, our tutor, for all the support, insights, and feedback during the project. We would also like to thank Sara Thorgren, our examiner, for providing us with clear directions during the project.

We would like to thank Anna Öhrwall Rönnbäck, the project manager of the HISS project, for giving us a lot of support, feedback, insights, and valuable contacts throughout the project. We also owe a great debt of gratitude to the chief executive officers of the savings banks Valdemarsvik, Vadstena, Kinda-Ydre and Åtvidaberg, for their engagement during the whole project.

We would also like to thank the respondent groups for the support, feedback, and new insight you have provided us with during this time. It has truly been helpful.

Last but not least, we would like to especially thank our families and friends who have supported us during all our academic years.

_________________________ ___________________________

Amanda Dahlgren Isabella Holmberg

Stockholm, June 2020

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1. INTRODUCTION

The increased demand from our society to prioritize sustainability has pressured organizations to become sustainable in all aspects of their operations. One sector that has received a substantial amount of attention is the banking sector, as the sector has a crucial role in the transition towards sustainable development (Nizam, Dewandary, Nagayev & Abdulrahman, 2019). The Sustainalytics Thematic Research (2014) states that banks are the heart of modern society, as they provide financial resources that ensure innovation as well as economic growth and prosperity. However, the banking sector has been under a substantial amount of public criticism (Stephens & Skinner, 2013; Yip &

Bocken, 2018). For instance, their involvement and support of businesses that hurt the environment, human rights, and local communities have faced mounting criticism. Many have expressed the need for “moral capitalism” and that actors within the banking sector need to increase their corporate sustainability (Nizam et al., 2019). In response to these concerns, initiatives and regulations that have emerged are, for instance, Banks for a Better World (Stephens & Skinner, 2013),Guide to Banking and Sustainability (UNEP, 2016) and Global Reporting Initiatives (GRI, 2019). These have set the standard for how banks should run their operations, by providing guidelines, principles and better practices to increase corporate sustainability. Engert and Baumgartner (2016) argue that corporate sustainability is grounded in the concept of sustainable development. Building on The World Commission on Environment and Development’s definition (1987), we define sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (p.8). An organization reaches corporate sustainability at the intersection between economic, social and environmental sustainability (Bansal, 2005; White, 2009).

It is, however, important to point out that there are different types of banks in our society. Savings banks have existed since 1810 and were founded with the purpose of ensuring that everyone had the opportunity to have a sound economy (Sparbankernas Riksförbund, 2019a), which increases economic sustainability. Even though a lot has happened since, part of the purpose of the savings bank is still achieving this original purpose. The corporate form of a savings bank is similar to a foundation in its construction and it has no actual owners (Sparbankernas Riksförbund, 2019b). Therefore, a main difference between a traditional bank and a savings bank is that savings banks do not have shareholders that require dividends. Instead, the margins from their operations are used for social benefits in the local community, leading to increased social sustainability. In many aspects, a savings bank thus operates in a way which society is pushing traditional banks to emulate.

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2 However, even if it can be argued that a savings bank has social and economic advantages compared to other banks, the consideration of the ecological aspect of sustainability is missing, which we have established is necessary to reach corporate sustainability.

Increasing corporate sustainability can be connected to corporate governance, as corporate governance includes the processes, rules and practices within an organization and how to direct it forward. Savings banks are regulated by Sparbankslagen (1987:619). It states which governing bodies should be present and how they should be elected. Some of the unique features of Sparbankslagen are the system of head members. Instead of having owners or shareholders, a savings bank has head members. It is the head members of a savings bank that appoint the board of directors. The driving force of corporate governance within an organization is the board of directors. The board has several responsibilities, including to direct the organization towards certain goals and to provide the top management team with guidance and to ensure that they run the organization in a way that is consistent with their views (Forbes & Milliken, 1999; Hillman & Dalziel, 2003). The top management team usually consists of the chief executive officer, the chief operating officer and other relevant managers in the organization. These often work closely with broad directives in order to drive an organization forward based on the decisions taken by the board of directors. It is worth noting that in savings banks the chief executive officer is part of the board.

Several studies have found that the main driver of an organization's corporate sustainability is its corporate sustainability strategy (Etzion, 2007; Galpin & Whittington, 2012; Lartey, Yirenkyi, Adomako, Danso, Amankwah-Amoah & Alam, 2019). Corporate sustainability strategies are strategies that balance the economic, social and environmental needs of both the organization in question and society (Epstein & Roy, 2001; Surroca, Tribó & Waddock, 2010; Darnall, Henriques

& Sadorsky, 2010). In terms of strategies, it is the board of directors that decides which ones the organization implements. However, when formulating strategies, both the top management team and the board of directors are often involved, though this may differ from organization to organization. It is often the top management’s job to ensure that the implementation of a strategy is enacted (Siciliano, 2002), and to report back to the board of directors.

The enactment of a new strategy is a complex process and there are several challenges within the strategic management process that need to be addressed by the board of directors and the top management team. Even if an organization embraces sustainability, there can be tensions when a corporate sustainability strategy is to be integrated (Hengst, Jarzabkowski, Hoegl & Muethel, 2020).

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3 For example, there is a risk that tension might arise because there are not enough resources available in order to implement the sustainability goals (Ashforth & Reingen, 2014; Van der Byl & Slawinski, 2015), and thus it is unclear what to prioritize. Indeed, studies have shown that it is the strategy implementation phase that is critical, since, in practice, strategies are prone to fail during the implementation stage and not during the stage of formulation (Greer, Lusch & Hitt, 2017; Hickson, Miller & Wilson, 2003). It is a commonly accepted consensus, in terms of strategy formulation and implementation, that organizations develop and formulate idealistic strategies to achieve strategic change; however, the strategies are implemented poorly (Tawse, Patrick & Vera, 2019) and with no effective implementation, strategies fail (Hrebiniak, 2006). The most successful strategic outcomes are delivered when those who are responsible for formulating and planning a strategy are also part of the implementation process (Hrebiniak, 2006). In addition, the involvement and commitment to sustainability practices from the top management team have an impact on the success of the integration of corporate sustainability strategies (Aguinis & Glavas, 2012).

Several authors (e.g., Mirvis & Googins, 2007; Engert, Rauter & Baumgartner, 2016) have provided theoretical models and frameworks, as well as empirical studies, analysing and describing the stages towards corporate sustainability. These are of help of organizations trying to achieve corporate sustainability, as they describe the challenges that comes with each stage and provide guidance and best practices of how to move forward to the next stage. It is therefore possible for organizations with different maturity rates in regard to sustainability to benefit from the models and frameworks, as they simply start at different stages. However, several authors (e.g., Klettner, Clarke & Boersma, 2014; Rodrigues & Franco, 2019) agree that the research field of sustainability strategy formulation and implementation must increase, in order for executives within organizations to understand how to develop and execute the strategies. Consequently, it is of interest to analyse how the sustainability maturity rate of an organization affects them in the different stages of achieving corporate sustainability.

In this article we will conduct a case study of four savings banks within Sweden, as we believe this kind of organization is well suited to be analysed in terms of sustainability, as they already have sustainability integrated into their business model. The purpose of this study is twofold. First, we aim to increase knowledge about what is important within the phases of the formulation and implementation of a corporate sustainability strategy and thus what should be addressed by the board of directors and the top management team of an organisation. Second, we aim to analyse how the organization’s sustainability maturity rate affects what is important to focus on. Based on our

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4 findings, we will provide a framework with guidelines with the aim to help the board of directors and the top management team when trying to achieve corporate sustainability. Even thought our study is performed within the concept of savings banks, we believe that the banking sector as well as other sectors could benefit from our thesis and that the result could be used as a foundation for further research within the area. We will address the following research questions:

RQ1: What are the central factors within the strategy formulation and implementation phases that need to be taken into account by the board of directors and top management team in order to increase the impact of a corporate sustainability strategy in a savings bank?

RQ2: How does the organization's maturity regarding sustainability affect which of these factors that are most critical to focus on?

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2. THEORETICAL FOUNDATION

In this chapter, we will present theories that lay the foundation for understanding the concept and importance of corporate governance. We will also address the strategic management process, including corporate strategy formulation and implementation, and the connection to achieving corporate sustainability.

2.1 Corporate governance

Corporate governance can be explained as the overall governing body within an organization. This governing body consists of a board chairperson and the rest of the directors of the board. It defines the role, function and structure of a board of directors, which is the guiding force of corporate governance (Campbell, 2007). The board of directors represents the interests of a variety of stakeholders of an organization (Suchman, 1995; Gillan, 2006). The stakeholders wield a certain amount of control over an organization by exerting their rights instituted in e.g., legal or regulatory frameworks, or policies and guidelines (Ingley & van der Walt, 2004; Garcia-Torea, Fernandez- Feijoo & de la Cuesta, 2016). Stakeholders can be customers of a firm, investors, lenders and regulators (Suchman, 1995; Gillan, 2006). The key decisions that are made within the organization, however, are controlled by top management and other insiders (Ingley & van der Walt, 2004). The structure of the governing and operating body of a savings bank is shown in appendix A.

2.1.1 The role of the board of directors

A board has several responsibilities, including to (i) monitor management (Garcia-Torea et al., 2016;

Baysinger & Hoskisson, 1990) to ensure that managers act in accordance with the beliefs of the board (Terjesen, Aguilera & Lorenz, 2015), (ii) provide top management with strategic advice and guidance (Garcia-Torea et al., 2016; Galbreath, 2016), and (iii) evaluate and discuss information of importance to an organization (Bailey & Peck, 2013; Brennan, Kirwan & Redmond, 2016).

Providing advice and guidance can be explained as the directors counselling or providing expertise towards top managers that could affect the strategies and legitimacy of a firm (Pfeffer & Salancik, 1978). It is important to point out that the roles of advising and monitoring are not independent of each other; active and effective boards ensure that both these roles take place (Hendry, Kiel &

Nicholson, 2010).

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6 2.1.2 The role of the board chairperson

The board chairperson has no extra authority compared to the rest of the directors of the board (Baxt, 2009) but is often considered to be the leader (Furr & Furr, 2005). Therefore, the board chairperson has the responsibility to ensure effective performance of the board and thus effective corporate governance (Kakabadse & Kakabadse, 2007; Levrau & Van den Berghe, 2013). In order to reach effective performance, Bezemer, Nicholson and Pugliese (2015) argue that it is important that the board chairperson acts in a way that enhances the directors of a board’s ability to contribute and participate during meetings. Having active and engaged directors during meetings is of further importance if the decisions that are made are to be good and well-informed (Guererro, Lapalme, Herrbach & Séguin, 2017; Hambrick, Misangyi & Park, 2015). Further responsibilities that are associated with the board chairperson is ensuring that the board hasaccurate information in order to make valid decisions (Kakabadse, Kakabadse & Barrat, 2006). In addition, the board chairperson has the responsibilities to lead and monitor board meetings and to be informed about what decisions have been made and how they are expected to be implemented (Harrison & Murray, 2012;

Kakabadse et al., 2006). Lastly, the board chairperson is considered to be the key connection between the board and the chief executive officer of an organization, who is part of the top management team (Brennan et al., 2016; Kakabadse et al., 2006).

2.1.3 The role of the top management

The top management team is the highest internal operating group in an organization hierarchy (Fama & Jensen, 1983). It includes several different roles and often entails both the chief executive officer and the chief operating officer. These often work closely with broad directives to drive an organization forward based on input from the board of directors.

2.2 Strategic management process

Strategy formulation and strategy implementation must be viewed as interdependent parts of the strategic management process concerning planning, implementing, and adjusting (Hrebiniak, 2006).

The planning of a strategy affects the execution of it, and vice versa.

Strategy formulation can be explained as the long-term or strategic planning of an organization, including the development of a mission, strategies and objectives (Foster, 1993). Strategy formulation and identification of key strategic initiatives usually take place in a boardroom and the individuals involved are directors and the top management of an organization (Siciliano, 2002;

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7 Bantel, 1994). When a strategy has been formulated and approved by the board of directors, top management will often take care of the processes of implementation, including aligning the systems, structures and incentives to integrate the strategy (Siciliano, 2002) and to achieve outlined targets (Chitayat, 1985).

The implementation process of a strategy generally takes place over a longer time period than the formulation of a strategy (Hrebiniak, 2006). While the planning and formulation of a strategy might take weeks or even months, the implementation process often lasts much longer. Generally, the longer an implementation process takes, the more difficulties are encountered (ibid). How to best transition from planning to implementation is particularly important to managers and other leaders in higher positions of a firm, as they are the ones’ responsible for the formulation of strategies and must ensure that the implementation process is successful (ibid). Nag, Hambrick and Chen (2007) argue that the top management team, as well as others involved within the implementation phase of a strategy, for example project managers, play an important part when it comes to ensuring the success of the implementation.

2.3 Corporate sustainability

In order for an organization to achieve corporate sustainability, there are different models and frameworks to adapt. Engert et al. (2016) have provided a general framework, containing internal and external factors that are either advantageous or disadvantageous for the process of integrating corporate sustainability within an organization. Mirvis and Googins (2007) have developed a framework with five steps that they argue need to be fulfilled before an organization has achieved corporate sustainability. What is worth noting here is that Mirvis and Googins (2007) use the term corporate citizenship rather than corporate sustainability. Nonetheless, the argue that there are many ways to name it and that the important thing is to understand what the term actually represents, namely, to be an organization that minimized harm while at the same time maximizing profit and takes social and ecological responsibility. Thus, the meaning of corporate citizenship is similar to the meaning of corporate sustainability and we will hereinafter use the latter definition to describe the concept. In table 1 we provide descriptions of the stages.

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Table 1. The five stages of corporate sustainability adopted by Mirvis and Googins (2007).

The five stages of the model can be viewed as different level of maturity in regard to the organisation’s sustainability work and thus how far they have come in the process of reaching corporate sustainability. The authors argue that the higher level of sustainability maturity of an organisation, the higher level of complexity, as the levels represents different challenges. The priorities of an organization are therefore dependent on how mature they are, in regard to sustainability. As we consider the model of Mirvis and Googins (2007) to be most suitable for our study, we will adopt it and use it as a foundation when trying to understand and classify what needs to be taken into account within the different maturity levels of corporate sustainability, in terms of strategy formulation and implementation. In the following section, we will therefore connect the challenges and solutions within the strategic management process to the different level of maturity of the model, as you will see in table 2.

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9 2.3.1 The first stages of achieving corporate sustainability

The first stages of achieving corporate sustainability is about understanding the increasing demands from society and responding to these demands (Mirvis & Googins, 2007). The board of directors and the top management team thus face a mounting challenge in assuring that their organization runs towards a more sustainable approach. In order to succeed, we argue that a mission statement within the organization is necessary. Further, as it is the board of directors that decide the direction of an organization (e.g., Hillman & Dalziel, 2003) we argue that clear guidelines and directives are also important.

Mission statement

A mission statement is a crucial element within all organizations, and it is a very important factor within the strategy formulation phase (Analoui & Karami, 2002). The mission statement answer questions in regarding to the aim of the organization, why it exists and the overall goals (Duygulu, Ozeren, Işıldar & Appolloni, 2016). Therefore, the mission statement of an organization that is trying to be more sustainable need to have all three dimensions of sustainability included.

Clear guidelines and directives

In order to facilitate the impact of a corporate sustainability strategy, it is important that an entire organization understands the importance of sustainability (Greer et al., 2017). The engagement of sustainability practices starts with the board of directors, as it is their responsibility to ensure that the top management runs the organization in a manner consistent with their views (Terjesen et al., 2015). Previous research has shown that the sustainability commitment of the top management team is vital in order to ensure the achievement of corporate sustainability (Aguinis & Glavas, 2012). This phase is therefore challenging for both the board of directors and the top management team. The board needs to understand the concept of sustainability to be able to direct the top management towards engaging the organization to work with sustainability. And the top management team need to ensure that sustainability is taken into consideration by the employees of the organization.

2.3.2 The middle stages of achieving corporate sustainability

The middle stages of achieving corporate sustainability is about increasing the capacity to work with sustainability, as well as coordinating and aligning their systems and ensuring that everyone works

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10 towards the same directions and engaging employees to a higher degree (Mirvis & Googins, 2007).

These stages are challenging for several reasons. For example, many things happen simultaneously, and it can be hard for managers and employees to know what to prioritize in terms of “old” and

“new” work-duties. A clear vision can therefore be beneficial. Further, as new programs and initiatives often emerge during these phases (Mirvis & Googins, 2007), it can be hard to keep track of everything that is going on and who is responsible for what. Clear responsibilities and communication could solve this issue. To ensure that the implementation of a corporate sustainability strategy is successful, it can also be beneficial to have increased discussions of implementation within the formulation phase and increased interactions between the planners and the doers.

Clear vision

As many things happen simultaneously, it might be hard for employees to know what directions to take and for managers to ensure that everyone works in the same direction. In particular when new sustainability goals can create tensions (Hengst et al., 2020) or that there are not enough resources available to work increasingly with sustainability (Ashforth & Reingen, 2014). To avoid these tensions between economic, social and environmental considerations, it is important that decision- makers are provided with accurate information of what to prioritize and what values exist. (Bonn &

Fisher, 2011). Having a clear vision can therefore be of help, as it will provide guidance towards making decisions in line with the will of the organization. A vision that highlights the importance of sustainability sends a signal to the employees of an organization that sustainability is a core value of the organization (Bonn & Fisher, 2011).

Clear responsibilities and communication

As the middle stages involve planning and executing at the same time, it can be assumed that the stages are somewhat chaotic. Thus, there is a risk that knowledge sharing and knowledge transfer, as well as clear responsibility and accountability, can appear within these stages, as these issues are a common cause of problems within the implementation phase (Hrebiniak, 2006). It is important to ensure that there exists coordination across the organization, where clear responsibilities are established and that information flows in the right direction.

Increased interactions between the planners and the doers

The most successful strategic outcomes are delivered when those who are responsible for formulating and planning a strategy are also part of the implementation process (Hrebiniak, 2006; Carpenter &

Westphal, 2001). As it is often employees of an organization who are part of strategy

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11 implementation, the employees should be involved in the process. Bordean, Borza and Maier (2011) argue that the formulation of a strategy should be in interaction between the board of directors and the top management, to ensure a positive implementation later. This indicates that the formulation of a strategy should be in interaction between the board of directors, the top management and the employees, to ensure a positive outcome.

Increased discussions of implementation within the formulation phase

Often the board of directors pay no or little attention to the implementation phase during the phase of formulation; more often than not it is not even a topic of discussion (Siciliano, 2002). There is, however, evidence that it is beneficial with board involvement and discussions of the implementation of a strategy. If problems that might arise when implementing a strategy would be reviewed beforehand and dealt with in the planning and strategy formulation process, it could be a key factor of success (Hrebiniak, 2006; Siciliano, 2002).

2.3.3 The last stages of achieving corporate sustainability

Within the last stages of achieving corporate sustainability, the organizations need to deepen their sustainability commitment and ensure that everyone in the organization works towards the three dimensions of sustainability (Mirvis & Googins, 2007). Here, it is important to keep encouraging sustainability within the organization, to ensure that you always stay on top of things and keep developing. Therefore, we argue that it is important to urge and reward sustainability initiatives.

Urge and reward sustainability initiatives

Emphasizing the importance of taking sustainability initiatives will send a clear message towards the employees of the organization, insisting that sustainability is, in fact, a crucial element in the strategy of the organization (Bonn & Fisher, 2011). It will thus facilitate the implementation of a sustainability strategy. It is of utmost importance that top management support the sustainability initiatives by employees. It is also beneficial if top management monitors the initiatives and encourages employees to work even more with sustainability initiatives. This will ensure the existence of an environment, or an organisational culture, where sustainability initiatives are welcome. It can also be beneficial to reward these activities, to further give birth to this environment (Bonn & Fisher, 2011). Bonn and Fisher (2011) argues that the employees play an important part in ensuring the success of corporate sustainability, as it is the employees who are the main workers in strategy implementation.

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12 2.3.4 Framework development - achieving corporate sustainability

When developing the framework of table 2, we first transformed the stages of Mirvis and Googins (2007) to levels of maturity as described previously, to facilitate the understanding and discussions of our work. We then connected the different levels with obstacles and solutions within the phases of sustainability strategy formulation and implementation. A as we believe that many of the obstacles is not to be linked solely to one level of maturity, we have merged them, see table 2.

Table 2. Obstacles and solutions within the strategic management process, connected to the five stages (maturity levels) of the framework developed by Mirvis and Googins (2007).

2.4 Corporate governance in relation to corporate sustainability

Within the first maturity levels, it is important that the board of directors and the top management team acknowledge basic elements, such as a mission statement (Analoui & Karami, 2002; Duygulu et al., 2016) which we believe must consist of all dimensions of sustainability. Furthermore, both the board of directors and the top management must engage in sustainability issues (e.g., Tawse et

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13 al., 2019). This starts within the boardroom. To ensure sustainability engagement within the boardroom to increase corporate sustainability, we argue that it is essential that the organizations have a board chairperson who knows how to align meetings well, so that every board member discuss, participate and lastly come to joint decisions (e.g., Guererro et al., 2017) with regard to sustainability. Some of the obstacles stated here might however be easier for a savings bank to facilitate, compared to an organization that is not at all, from the beginning, “connected” to sustainability in the same way as a savings bank is. For example, the discussions about social sustainability might be facilitated due to the fact that a savings bank works with social sustainability.

Further, discussions about economic sustainability might be facilitated by the fact that it is a bank that has, since 1810, been working with helping customers get a better economy. Thus, in particular the ecological could be crucial to discuss. Nonetheless, emerging towards the last stages of achieving corporate sustainability, it is important to keep developing and improving, and thus to keep engaging and discussing all three dimensions.

Within the middle maturity levels, where the employees are starting to engage in the sustainability work, the complexity of the process increases. In our developed framework we do not solely argue that it is necessary to ensure that the demands are fulfilled from the current levels; it is also necessary to ensure fulfilment of the previous level. Obviously, this indicates that the complexity of the process increases, the further along you get. We also argue that it is important that the employees are embedded in the process, as they are one of the main drivers of strategy implementation (Bonn &

Fisher, 2011).

We have chosen not to link any of the obstacles found in the literature on strategy formulation and strategy implementation to the last level within the framework of Mirvis and Googins (2007). We believe that all the difficulties listed need to be met before you can actually move on to the stage where you are in the lead of sustainable development.

To conclude, we argue that within the different sustainability maturity levels towards achieving corporate sustainability, there are different aspects that need to be considered by the board of directors and the top management team. And depending on what level of matureness in regard to sustainable they are in, they face different challenges.

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3. METHOD

In this chapter we will explain the method that was used in our research. First, we will describe our research approach. Second, we will describe in what context we performed our study. Third, we will describe how we collected and analysed our data. Lastly, we will explain and discuss what quality aspects we have taken to ensure the quality of the research.

3.1 Research approach

The purpose of the study was twofold. The first purpose was to increase knowledge about what is important when formulating and implementing a corporate sustainability strategy. The second purpose was to analyse how the organization’s sustainability maturity rate affects what is important to focus on. In this study we used an abductive approach, as it allowed us to move between theory and observations (Dubois & Gadde, 2002; David & Sutton, 2011).

Our research approach consists of six steps. The first step was to investigate how the savings banks work with sustainability today. The second step was to collect theoretical data on which to build our theoretical foundation. In the third step we developed interview guides and in the fourth step we conducted interviews and sent out a survey. In the fifth step we analyzed our theoretical and empirical findings. In the last step we developed a framework. Our research approach in shown in figure 1.

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Figure 1. A visualization of the research approach.

3.2 Context and Case selection

We conducted our master thesis within the project HISS – Leverage for Innovation and Sustainability in Business Development for SMEs. The project HISS was initiated in 2018 and is partly financed by Vinnova, Sweden’s Innovation Agency (Vinnova, 2020). In total, there are four savings banks involved in HISS and we have used these for analysis. We will hereinafter call them Alpha, Beta, Gamma, and Delta. The overall goal of the project HISS is to generate tools and applications that inspire other savings banks as well as small and medium sized enterprises to achieve environmental improvements linked to their business models. The project is thus in line with the UN climate target of 2030. We would, however, like to emphasize that there is a difference between the goal of HISS and the goal of our master thesis. Within HISS, we got the opportunity ourselves to choose in what area we wanted to conduct our research.

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16 3.3 Data collection

We collected data in four waves, see figure 2.

Figure 2. Description of the data collection waves.

Wave 1 - Situation analysis

Before our master thesis project started, we participated in an introductory meeting with the consulting firm KPMG, that had been involved in the project since it started. We got access to the result of a survey that had been distributed to the chief executive officers of the 60 savings banks in Sweden. The objective of the survey was to obtain an understanding of sustainability work in the savings banks from the perspective of a chief executive officer.

We also attended several workshops. During a workshop at Vinnova, we achieved a deeper understanding of the goal of the HISS project. Additionally, we discovered how to structure our own research. On two occasions we also attended workshops with the four banks. The focus of the first workshop was the employee’s views of sustainability and the focus of the second workshop was the customers of the savings bank’s views on the same subject. In total, we visited three out of four banks and participated in meetings where we discussed the sustainability work of each bank. The spread of Covid-19 forced us to cancel the last bank visit. With inspiration from the chief executive officer survey, we conducted a new survey and distributed to the employees of the banks, to further understand their views on sustainability. We also interviewed employees of some of the banks, to increase our understanding.

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17 Wave 2 - Semi-structured interviews

Based on the theoretical framework, we formulated interview guides for the board chairperson, the board of directors, and the top management team. The interview guides were constantly developed during the process as we gained new insights during the interviews. The questions were formulated so they could provide foundational information of the subject and address formulated research questions. We had more open than closed questions, as it provided us richer information. In total, we conducted five interviews of each bank. The interviews were semi structured as we wanted to ensure that the respondents got the opportunity to speak freely. Table 3 shows the respondents of the interviews.

Table 3. Interview respondents.

Wave 3 - Survey

After conducting most of our interviews, we sent a survey to the board members of the banks. The survey was based on theory and information that had emerged during the interviews. The purpose of the survey was to ensure that we had a holistic view of the thoughts of all board members, as we had limited time and thus only interviewed some of them.

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18 The survey was created in Google forms and consists of three parts, see appendix C. The first part consisted of basic sustainability as well as questions about the savings banks and their views on sustainability today. The second and third part was about interactions within the bank, as well as what is considered important during the formulation and implementation phases of a corporate sustainability strategy. In total, we got a 79 percent response rate. The high response rate indicated that we managed to capture the reality and view within the savings banks well.

Wave 4 - Other material

We collected data through documents and other materials, e.g., strategic plans and policies of the banks, which was sent to us by top management. We used this material to increase our understanding of how the four savings banks view and work with sustainability today.

3.4 Data analysis

In this section, the data analysis of the interviews and the survey will be described.

3.4.1 Interviews

According to Braun and Clarke (2006), using a thematic analysis is a way of identifying, analyzing, and finding themes within the collected data. Within this research paper, we used a combination of an inductive and deductive approach. An inductive approach can be described as a process in which the authors encode data, without trying to make it fit into an existing framework; the process is data-driven and potential themes are found in the coded material (ibid). These themes highlight the important findings in the empirical data of the study. In contrast, a deductive analysis is a theoretical driven process where researchers find support for their interest in theoretical areas. Thus, we used an inductive approach to find potential new themes that can demonstrate how to best formulate and implement sustainability strategies, and a deductive approach to finding themes rooted in existing theory. In order to perform a thematic analysis, we employed the five-step approach by Braun and Clarke (2006), see figure 3.

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Figure 3. Description of the data analysis of the interviews.

3.4.2 Survey

We began by transforming our answers from the survey to an excel file. First, we sorted the data by separating the results from the different banks. We then analyzed the answers that had emerged and sorted out the questions in two categories: the first category contained the answers from questions that we knew we could use, and the second category contained the answers that we were unsure if they would benefit the study. After this, we decided to create an average of the values of each group (top management, board members, board chairperson) within the different banks, to make the analysis easier and also to present the result in a way that is easy to understand. These values were analyzed in comparison with the result from the interviews, as we used them to strengthen (or weaken) those findings.

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20 3.5 Quality measures

In this section, we will discuss quality-enhancing measures for a qualitative approach as well as for a quantitative study.

3.5.1 Qualitative study

According to Lincoln and Guba (1985), there are four aspects that need to be evaluated to ensure the quality of a qualitative study. These are credibility, confirmability, transferability, and dependability.

Credibility describes how believable findings of the study are (Bryman & Bell, 2011). This can in turn be broken down to three sub-components; data collection, the researchers experience and the general perception of one’s appreciation of credibility, where all together accumulates to strong research credibility (Patton, 1999). To increase the credibility of this study, we interviewed different respondents within different positions in each bank. The respondents had different backgrounds, knowledge, and had worked at the bank for different lengths of time. The two project managers for HISS and our supervisor from Luleå University of Technology participated in the effort to minimize the risk that the interview questions could be misinterpreted. This was done by having them read the interview guide as a devil's advocate. Based on this, they gave us feedback that enabled us to revise the questions for further development of the interview guide. Before we started to conduct our interviews, we had a test interview with a respondent to ensure that our questions were not misinterpreted.

Conformability refers to how well the research is documented reflecting the true picture rather than reflecting researcher opinion (Shenton, 2004). When research has high confirmability, it can be confirmed by others by following the documentation. As interviews have been transcribed and processes are documented on a detailed level, one can argue that conformability is achieved. To increase the confirmability, we transcribed all interviews and solely based our analysis on the written words, rather than what we might have experienced or thought during the interviews. In addition, we confirmed with the interviewed person that it would be possible to contact them after the interview for any clarification in case it was necessary. In those cases where we were uncertain of something, we contacted the respondents again to ensure that we had interpreted their words correctly.

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21 According to Graneheim and Lundman (2004) the definition of transferability is how the study is applicable to a similar context or situation with the same circumstances. To increase transferability in our study, we provided a thorough discussion and description of the methods that we used in this study.

Dependability refers to how data can change over time and is achieved through reliability where the degree refers to neutrality in the results of the research study (Graneheim & Lundman, 2004).

To increase the dependability, we have worked as transparently as possible to ensure that others could repeat our study, and, furthermore, we have described our research method in detail.

3.5.2 Quantitative study

To ensure the quality of a quantitative approach, reliability and validity need to be evaluated (Bryman & Bell, 2011).

Research reliability describes how well a study can be conducted again and achieving same results (Bryman & Bell, 2011). By having processes well documented and illustrating steps at a detailed level, this simplifies reliability of the study. We tested and re-tested the survey that was designed for the board of directors by letting our supervisor and project manager test it. We ensured that the questions we asked could not be misinterpreted. For example, it was especially important to ensure that words, such as sustainability, could not be misinterpreted in the survey, and in order to ensure the survey's success. we provided a definition of the word within the survey.

Validity is described as if the results are dependent on the data collected (Bryman & Bell, 2011).

This is further broken down internal and external validity. Internal validity refers to that variables presented are relevant for the result and that the research represents its interrelationship (Bryman &

Bell, 2011), which in this case is presented as conclusions from multiple semi-structed interviews that were easy to understand. External validity refers to how well findings can be generalized to another context (Bryman & Bell, 2011), which could be done to other savings bank. We also ensured that the survey was easy to understand. Lastly, we did not start analyzing the survey before we had received all the data, to ensure we did not draw any conclusions before we had collected the whole material.

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4. FINDINGS AND ANALYSIS

In this section, we will present and analyse the findings of our study. In the end of this chapter we will provide a framework, developed from theory and our empirical findings.

4.1 Central factors within the formulation and implementation phase

The themes that represent the central factors that are important to address in the strategic management process of a corporate sustainability strategy are presented in table 4.

Table 4. Thematic map.

4.2 Conceptual confusion 4.2.1 Lack of understanding

Within the banks, there is a lack of understanding and confusion surrounding the term sustainability.

Many respondents agree that it is hard to create a common picture of what sustainability is, as they have different interpretations and levels of understanding of the concept. Nonetheless, since the project of HISS started, the understanding of the concept has increased within all banks, due to

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23 increased discussions about the subject. Further, criticism towards sustainability work has decreased since the start of the project.

4.2.2 Undefined concept

Not all the banks have a definition within their own organisation in regard to sustainability, which we found could create misinterpretations and disagreements, as everyone then has their own view of what sustainability is. Even within the banks where they have tried to reach a common agreement about the definition of sustainability, not every respondent had the same interpretation.

4.2.3 Summary and discussion of conceptual confusion

As the concept of sustainability holds many different interpretations, we argue that it is important that they learn what the term means and thus agree on what the term means for the particular bank.

Thereafter, the board of directors and the top management team must ensure that their mission statement integrates all dimensions of sustainability (Duygulu et al., 2016), to ensure that they all move in the same direction.

4.3 Motivation 4.3.1 Engagement.

We have found that the board chairpersons of Alpha, Beta, Gamma, and Delta are able to ensure that all members of the board participate, thus harnessing the power of the whole group. There was a consensus amongst the board members that the board chairpersons were able to do this well.

4.3.2 Coordination

We have also found that every meeting is well coordinated and that the board chairpersons always strive to ensure this. For example, we found that coordination was crucial in order for them to have enough time to discuss important matters, and to come to joint decisions. The board chairpersons expressed that it was important that every member of the board got to have their own opinion, but that they have to reach an agreement to ensure that they do not send out mixed signals as a board.

4.3.3 Summary and discussion of motivation

The board chairpersons are able to ensure effective corporate governance, which is in line with what is important with being the informal leader of the board (e.g., Levrau & Van den Berghe, 2013).

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24 They are also good at ensuring that everyone participates, which means that they have a solid ground on which to make well-informed and valid decisions (e.g., Guererro et al., 2017). Therefore, they have a solid foundation within all boards where they can discuss sustainability issues.

4.4 Actions

4.4.1 Sustainability interest and initiatives

In Alpha, there is a difference of opinion about which groups (employees; chief executive officer;

top management; board members) takes initiatives to pursue sustainability work, see table 5.

Table 5. Initiatives to pursue sustainability work in Alpha.

The top management of Alpha believes that the employees, the chief executive officer and the top management are the main driver of these initiatives. They do not believe that the board members contribute considerably. The board members of Alpha do not have the same view as the top management, as they believe themselves to be a driving force of pursing sustainability work, together with the chief executive officer and the top management. However, in particular regarding the social aspect of sustainability initiatives, their thoughts about how much the chief executive officer contributes differs. Further, they do not have a shared view about how much the employees actually contribute, as some of them believe they contribute only little and some of them as much as the other groups. Nonetheless, some of the board members believe that the work is in symbiosis between the groups:

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“I think it is teamwork. I don't think it is only top management, I can't say that it is only the board that only has the proposals to work with sustainability. It is teamplay, we all believe we can

make a difference” - Board member, Alpha

The board chairperson of Alpha believes that initiatives to pursue sustainability work comes from the employees, the chief executive officer, the top management and the board members in symbiose.

As the board chairperson is the main connection between the board and the chief executive officer, it comes as no surprise that those groups have similar views regarding how the employees of the banks contribute. The board members of Alpha do not have a common perception about e.g., how much the chief executive officer and the employees contribute in this question. The variation of answers can be assumed to be unfavourable, as it indicates that the board members are not familiar with what sustainability initiatives currently exist or what groups are contributing to the work. Thus, it indicates that there might be little or lack of discussions within the boardroom about sustainability work and initiatives.

In Beta, the top management team, the board members and the board chairperson agree there is an established interaction between them with regard to pursuing sustainability initiatives, see table 6.

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26 They also agree that the employees of the bank contribute least. We have, however, found that initiatives are starting to emerge from the employees as well:

Analysing the answers from the board members regarding the ecological aspect, there is, however, a deviation. The board members do not share the same view about how much of a driving force they actually are when it comes to pursuing ecological sustainability initiatives. Some of them believe they are the main driving, and some believe they do only contribute little. It is hard to determine what this is due to. Regardless what reason, it is important that they are on the same page as it may be easier for the board members to continue contribute to increased sustainability work if they are, e.g., to avoid e.g., disagreements within the boardroom that takes valuable time from discussing important sustainability issues.

In Gamma, the survey results imply that initiatives to conduct sustainability work differs between economic, social and ecological sustainability, see table 7.

Table 7. Initiatives to pursue sustainability work in Gamma.

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27 The top management, the board members and the board chairperson share the same opinion that every group (employees; chief executive officer; top management; board members) takes initiatives to pursue social and ecological sustainability. When it comes to pursing economical sustainability, they also agree that the employees contribute less than the other groups. It is beneficial that there exists agreement between the groups as it will facilitate the progress of working with sustainability, given that everyone is on the same page and contributing (e.g., Terjesen et al., 2015). Further, emerging from our interviews, we have found several additional important aspects. First, there was a consensus amongst the interview respondents that the top management team – and in particular the chief executive officer – was the main driving force of sustainability. In fact, since the chief executive officer took office, he made changes that had positive effects within the bank in regard to sustainability. According to the chief executive officer in Gamma, discussing sustainability increases the effect of sustainability work within the whole bank. To further accelerate the sustainability work of the bank, the chief executive officer therefore appointed a group of employees as responsible for conducting more extensive sustainability work at the bank, by analysing what can be done and how they can evolve their sustainability work. This had effect not only within the rest of the employees but also amongst the board members.

Other findings from our interviews showed that the board members were not as engaged in these questions as the rest of the groups are. However, they argued that they supported and encouraged initiatives, for example by ensuring that the organization has a mandate to pursue sustainability projects. They also have a discussion point on the agenda during each board meeting, where they discuss sustainability issues when there is something to discuss.

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28 In Delta, there was different perceptions about initiatives to pursue sustainability work, see table 8.

Table 8. Initiatives to pursue sustainability work in Delta.

The top management team of Delta believes that the main driving force of sustainability initiatives are the chief executive officer, the top management team and the board members. They do not believe that the employees contribute as much, in particular not regarding economic and ecologic sustainability. There is disagreement amongst the board members of Delta regarding which groups are actually taking initiatives. Several of the board members chose not to answer every question, which can be interpreted as they do not know how to answer due to simply not knowing who is responsible for certain initiatives. The board chairperson of Delta believes that the chief executive officer and the board members are the main driving force of taking sustainability initiatives. The board chairperson’s thoughts about this is unknown.

The result from the survey indicates that there is a lack of clarity regarding who actually takes initiatives to pursue sustainably work. This could be due to several reasons, for example lack of sustainability discussions within the bank and within the boardroom.

Emerging from our interview was that the respondents of Delta wished to be further ahead in the bank’s sustainability work, than they are today. There existed consensus that they had a lot of work ahead of them, in order to be sustainable. Two interesting aspects came up with regard to this issue:

first, the lack of commitment of sustainability practices of the top management team and second,

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29 the lack of sustainability interest of the employees. According to our findings, these issues were linked together:

The top manager hence argues that the lack of sustainability interest of the employees is because they have not had a chance to be interested, as the subject has not been discussed thoroughly within the top management team. The top manager further argues that the interest of sustainability from the chief executive officer plays a great deal, as it permeates the rest of the organization.

4.4.5 Summary and discussions about actions

In line with previous research we have found that in order to advance in the sustainability work of an organization, the board members must be engaged (e.g., Greer et al., 2017), which in the cases of in particular Alpha and Delta is not obvious. We have also found that the lack of top management commitment to sustainability can result in decreased sustainability interest amongst employees (e.g., Aguinis & Glavas, 2012), as it has in Delta. In contrast to this, the high commitment to sustainability practices by the top management in Gamma has led to increased commitment of the employees and the board members. Therefore, it is important that the top management team and the board of directors engage in sustainability, to ensure that the whole organization starts to work with this.

We have also found that giving the opportunity to the employees to take the lead and develop the sustainability work of the bank has a positive effect throughout the whole organization, as in Gamma.

4.5 Cooperation 4.5.1 Interactions

As it is important to formulate strategies in interaction between employees, top management and board of directors to increase a positive outcome (e.g., Bordean et al., 2011), we wanted to explore how Alpha, Beta, Gamma and Delta formulate their sustainability strategies. The result is shown in table 9.

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Table 9. Interactions between groups within the formulation of a sustainability strategy.

In Alpha, there is a consensus that there exists an interaction amongst the groups, in terms of sustainability strategy formulation. There is a deviation between the answers from the board members, but we will not analyse it further, as it is only a small deviation.

In Beta, there is a difference in how in particular the top management and the board chairperson views the process of sustainability strategy formulation. Emerging from our interviews is that the top management team believes that the employees are less involved in the process than the rest of the groups, which might explain the deviation. Nonetheless, as it is important to have all groups contributing in the formulation of a strategy, it is important to ensure that everyone is familiar with the process and, if it in fact is the case, involves the employees further.

In Gamma, there is a consensus that the formulation of a sustainability strategy happens in interaction between the top management, the board of directors and the employees. As stated by the chief executive officer:

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31 In Delta, the board members and the board chairperson believe that the interaction is strongly anchored between the groups, whereas the top management team believes that the employees do not have quite as much participation, even though they participate. This is expressed about the general strategy formulation phase:

4.5.2 Responsibilities

In terms of sustainability work, we have found that the pronounced responsibilities set are weak, and it is not always possible to determine who is accountable for what. One of the banks have, as mentioned previously, given a lot of mandates to a group of employees. This has been very successful and as well sustainability interest and initiatives has increased within the bank since.

In one of the banks, Gamma, they have given major responsibility to accelerate the sustainability work of the bank to the employees. They have a group consisting of a few employees, whose main mission is to monitor global events related to sustainability and find ways that enhance the bank's journey towards corporate sustainability. This group has increased sustainability discussions within the bank. We therefore argue that it is beneficial to integrate employees within the decision-making process of strategies, but perhaps even more so to fully give them responsibility to work with sustainability. In line with Bonn and Fisher (2011), we argue that this sends a clear message to the

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32 whole organization, that the input of the employees is in fact the most important and therefore it urges other employees to follow the lead.

4.5.3 Summary and discussion about cooperation

There is a consensus that the employees should be part of the strategy formulation process, which is in line with findings of e.g. Hrebiniak (2006). In some of the banks, the process of formulating a sustainability strategy must be clearer, as it did not exist agreement about who was part of the process.

We have also found that not all banks have clear established responsibilities in terms of sustainability initiatives and work. This could be the reason for why some of the banks work more with sustainability than others. We therefore argue that, in line with Hrebiniak (2006), responsibilities need to be more established, to ensure the success of achieving corporate sustainability.

4.6 Guidelines 4.6.1 Goals

We have found that it is important to formulate clear and measurable goals in order to reach certain objectives. However, in terms of sustainability goals, there existed consensus that these could be hard to measure. Our findings are thus a bit of a paradox; the goals need to be measurable, but it is hard to measure sustainability and thus hard to measure certain objectives within a corporate sustainability strategy.

4.6.2 Vision control

We have found that vision control is a powerful tool in order to control the organization and direct it towards sustainability thinking. Within in particularly one of the banks, Gamma, they have established that they are a vision-controlled organization that always thinks through their vision, and that they have to ensure that they rule through the vision of the organization in order to ensure that the organization moves in the same direction.

4.6.3 Clear mission statement and vision

Many of the respondent’s state that sustainability is integrated into the business models of savings banks, in particular social and economic sustainability. As stated by a board member:

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33 4.6.4 Incentives

In some of the banks they use incentives as a motive to ensure that employees reach certain goals.

However, as they do not yet have concrete sustainability goals, they have no incentive to reach these.

4.6.5 Summary and discussion about guidelines

Our findings are line with the findings of e.g., Duygulu et al. (2016), arguing that having a clear vision is a way of guiding everyone within the decision-making process. In Gamma, they have found that it is a very powerful tool. Thus, we believe that a vision control can act as a substitute for measuring goals in terms of sustainability, given that the vision has economic, social and ecological dimensions of sustainability integrated.

4.7 Communication 4.7.1 Internal communication

Even though communication about sustainability work towards employees, including the importance of it and what sustainability initiatives exist within the bank is considered important in Alpha, Beta, Gamma and Delta, there is a lack of it in particular one of the banks. One reason for this could be that they do not work with sustainability to the same amount as the rest of the banks, and therefore do not have as much to communicate towards their employees. The general communication within all the banks works without any trouble, and thus it can be assumed that communicating sustainability will not be a problem when the sustainability work accelerates.

4.7.2 Open climate

We have found that an open climate is something that they strive for within each of the banks. They want their employees to contribute and be part of the processes of sustainability work, and that their employees should feel that they can contribute by making suggestions that are accepted by the top management and the board. The chief executive officer in Beta explain it the following way:

To formulate and implement a sustainability strategy in a savings bank: A case study of four savings banks