SUSTAINABILITY, ORGANIZATION, AND MANAGEMENT: …theinstitute.org.il/files/pictures/articles/sustainability.pdf · especially regarding the nature of the norms it sets and the level

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Sustainability, Organization and Management: Sustainable Performance of Public Organizations

SUSTAINABILITY, ORGANIZATION, AND MANAGEMENT:

SUSTAINABLE PERFORMANCE OF PUBLIC ORGANIZATIONS

Written by: Moti TaliasEdited By: Yonatan Oren

February 2014

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Executive summaryThis review includes background material for a wide process aimed at developing knowledge and tools for promoting sustainable activity in the conduct of public organizations in general, and in that of the public sector in Israel in particular. The document is organized in four parts:

A. Background on the increased scope of sustainability-related activities in organizations:

The expectation for social involvement of businesses, once narrowly defined as philanthropic activity and monetary contributions from company income to the community, has evolved into the demand for all-encompassing sustainable social conduct. Several factors have fuelled this trend:

The contrast between the modest scope of the social activities of organizations and the sometimes • vast extent of social and environmental damages they cause in their ongoing operations.

A growing awareness of the environmental damage caused by the Western consumerist lifestyle; • considering that business organizations are at least partially responsible for shaping consumer culture, they must also bear responsibility for the harm caused by it.

Organizations affect the social environment through their decisions regarding products and services, • as well as through their internal conduct.

Globalization has brought about the creation of powerful multinational corporations, with large equity • capital. These characteristics weaken the regulatory grasp of states, thus enabling such corporations to adopt operational practices that cause serious harm to the environment and society.

While business organizations have thus far been at the center of the demand for sustainability, it is recently being expanded to include public organizations as well.

B. Sustainable conduct in the business sector:

Most sustainable conduct in the business sectors is the product of the activity of long-standing international establishments, the International Organization for Standardization (ISO), and a wide array of voluntary standardization initiated either by the businesses themselves or by standardization and regulation organizations established to promote the issue. Voluntary regulation enables the companies to avoid tighter governmental regulation, allows for more flexibility and adaptation to specific circumstances, and gives businesses a sense of ownership over the rules. However, it is also subject to much criticism, especially regarding the nature of the norms it sets and the level of adherence it can obtain.

C. Sustainable conduct in the public sector:

The unique conditions in which the public sector operates create a gap between sustainable conduct in it and in the business sector. Factors contributing to this include:

Lack of competition, stemming from the consumer’s inability to choose or waive public sector • services, e.g. the consumer is unable to impose substantial sanctions which would foster sustainable conduct.

Lack of public pressure and public oversight regarding sustainable conduct in the public sector, • compared to the public pressure on the issue exists vis-à-vis the business sector.

The range of incentives for adopting sustainable organizational strategies is much weaker in the • public sector than in the private sector.

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Varied circumstances limit the ability of the public sector to promote and implement sustainable conduct:

Knowledge and experience infrastructures regarding implementation of sustainable strategies in • public organizations are currently insufficient.

The public sector lacks the array of supportive services that exists in the business sector, which is • engaged in a continuous learning process of successful models for action that serve as comparative benchmarks.

Tools for sustainable conduct by public organizations are not yet being developed in cooperation with • organizations for promoting sustainable strategies, nor are the achievements of public organizations being evaluated based on rating systems such as the business rating indices for social corporate responsibility.

D. Sustainability in the public sector in developed countries and in Israel

Surveying the processes for promoting sustainable conduct in the public sector in both Israel and the rest of the developed world proves that, in Israel and elsewhere, awareness of the issue of “sustainability” and practical involvement in the public sector are less developed than in the business sector.

Recommendations for promoting sustainable conduct in the public sector in Israel:

In light of the above, a process aimed at encouraging sustainable strategies in the public sector in Israel would have to act to both raise awareness and create tools and support for public organizations advancing in this direction. For this purpose, infrastructures that have already been developed both abroad and in Israel should be used. Accordingly, the following governmental processes would help promote sustainable conduct in the public sector:

Revalidating government decisions regarding the formation of annual and three year action programs 1. for government ministries regarding sustainability, and issuing an annual report on the subject alongside the general annual performance evaluation of the ministry.

The possibility should be considered to better specify requirements for reporting, as has been done 2. in the business sector.

Comparative studies of the conduct of public sectors abroad should be carried out, in order to create 3. a basis for comparison between the measures taken in Israel and in other countries.

The place of social metrics in demands for promoting sustainability in the governmental sector 4. should be expanded, similar to what has been done in the municipal sector.

Special emphasis should be placed on strengthening partnerships between ministries and public 5. agencies in promoting sustainable conduct by government bodies.

Government companies should be addressed separately, and not as part of the ministerial system. 6. It is possible that the Government Companies Authority, being the relevant regulatory body, should act in promoting sustainable conduct and supervising its implementation in these companies.

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BriefThis review contains background material for a broader scale process, which goal is the development of knowledge and tools for advancing sustainable activity within the management of public organizations in general, and the public sector in Israel. The review is based on the following premise: in order to consolidate an intervention strategy, one has to first learn of the different ways this issue is being manifested in various organizations worldwide (mainly in the business sector, and in the public sector if it exists). The next step is creating links between what you have learned, and the Israeli context, and then determining how to move forward.

This paper has four parts. The first deals with the background of the increase of sustainability activity in organizations, as part of what is known as “Corporate Social Responsibility”. The next two parts deal with the way the idea of sustainable performance intersects with the operative manifestation it has in both sectors- first the business sector, and then the public one. In these two parts, the discussion includes the interpretation that the idea of sustainable performance receives in both sectors. Furthermore, it includes action strategies which are being used, and the limitations and challenges concerning this domain in each of the sectors. The final part of this review illustrates the processes that are being carried out in order to advance sustainable performance in the public sector in Israel, as shown in the activity of the public system in the last fifteen years. In addition, it portrays the current situation concerning sustainable performance, and provides recommendations for areas of activity by the government that can advance the issue.

The review shows that awareness of “sustainability” among the public sector, and dealing with it, both in Israel and worldwide, is less developed than in the business sector. Contributing factors are: “responsible” or “public” self-identity, lack of public pressure for sustainable performance in the public sector versus pressure for it in the business sector, and that the array of incentives for adopting sustainable organizing strategies is not as salient as in the private sector. That is partially the reason why the infrastructure of knowledge and experience for inclusion of existing strategies within public organizations is also insufficient. In addition, the public sector lacks the support system the business sector has, which constantly studies the successful action models that have been used as comparison standard (Benchmark). Another factor is that tools have not been developed for sustainable management of public organizations, in coordination with organizations for advancing sustainable strategies and evaluating their achievements based on rating similar to rating charts of businesses according to social corporate responsibility. Though there is progress being made in that subject, both in Israel and around the world, the public sector still lacks the comprehensive development of the business sector concerning that matter.

In light of the above, it seems that taking steps to encourage the Israeli public sector to adopt sustainable strategies requires raising awareness on the one hand, and on the other hand creating tools and support for public organizations wishing to progress along that route. In order to accomplish that goal, one should use the infrastructures that have already been developed, both around the world and in Israel, which are detailed in this paper. In addition, one has to consider subjects concerning sustainable performance of the business sector – to what extent should actions regarding sustainability within public organizations be left to their discretion, to what degree should they be anchored in government policy and directives, and to what degree those instructions have to be specified and encompassing, as can be seen in some countries.

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A. Background on the expanding involvement of organizations in sustainabilityThe growing involvement of organizations in sustainability is a reaction to the increasing public demand for examining organizations’ performance according to their achievements, and even more so, according to the implications of their activity on society and environmental issues. Until recently, business organizations were the main focus of this demand, and the term defining it was “Corporate Social Responsibility”- CSR. The demand for public organizations to act accordingly has come up just recently. This approach sets the organizations in front of a double test- in addition to the traditional evaluation of the bottom line, it adds the evaluation of social benefit. The social benefit is supposed to be added to the consumer’s considerations when making decisions on whether or not to consume services or products from companies, thus influencing their reputation, scale of sales, and profit.

The business’s social responsibility as recognized today has evolved in the last few decades. At first, it mainly manifested itself in philanthropic activity and by repaying some of the company’s income as a donation to the community. This attitude towards social involvement is relatively narrow, and over the years, it underwent a dramatic change. The main reasons for this are: First, a salient gap and disconnect between the social activity within the philanthropic segment of the organization, and the vast social and environmental damages which were sometimes caused by their day-to-day business activity. Second, that following the growing awareness of the environmental damages caused by the Western culture life style and consumption, the need for change has arisen not only at the personal level, but even more so at the organizational level. Since organizations are largely responsible for shaping life style and consumption, and in various ways for satisfying the demands caused by that life style, they are also those causing wide scale damage: polluting air, water and soil. Third, by making decisions concerning products, services and internal management, like recruiting workers and defining employment terms, organizations influence the social environment as well. Looking at this positively, considering the large scale of organizations and business practices that connect to almost every aspect concerning global quality of life, they can effectively be used as an essential lever for improving sustainability in the environment we live in.

Another motive for the expansion of social performance in business practices, including sustainable performance, is the globalization of economics and commerce. This expansion is manifested by the following phenomena: an increasing rise of activity dominated by a small number of international companies, operating simultaneously in many countries and branching the production chain between different geographical units. These international companies acquired enormous power due to their owners’ equity, which sometimes exceeds that of the state. In addition, they apply pressure in the economic domain of countries through investment decisions and via their widespread operations in several countries. That is the reason for the poor supervision of these companies by countries, for the common phenomena of transferring businesses to weak areas and adopting performance practices that badly harm the environment and the society, and for the lack of ability to supervise and enforce policies.

In the absence of an international force that can compel businesses to adopt socially responsible performance patterns, and due to the lack of local power and desire to do so, private regulation and governance initiatives concerning aspects such as corporate responsibility, quality of life, employment terms, food safety and more, have emerged. International bodies were never considered enforcement bodies. At most, they created standards. The countries themselves deal with enforcement, but are concerned about creating extra norms that can be a burden, regulation wise, on local business practices, and harm their competitiveness concerning international businesses. This is especially true regarding areas in which there is a dispute regarding scale of risk involved and the question of whether governments should be involved. The governments are also concerned about being accused of creating trade blocks for external companies, and of harming international trade treaties. In addition, more regulation creates

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a burden on the governments themselves, who practice enforcement, and necessitates an increase in public spending, from which many governments try to refrain.

The purpose of the private enforcement initiatives is to demand of businesses that they engage in sustainable performance out of moral duty, as much as out of profitability considerations. The assumption of these initiatives (and there are many of them, both internationally and locally) is that if a business does not adopt socially sustainable practices, it will be punished by a blow to its reputation and sales, since consumers consider not only quality and cost while making consumption choices, but also increasingly consider social considerations, including the sustainable value of a product or service.

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B. The business sectorThe business sector pioneered the adoption of sustainable performance patterns. This is mainly because it has been identified as greatly responsible for the erosion in the sustainable conditions we live in, and due to continuous public pressure for a sustainability considerate performance. This pressure has been influenced by increasing awareness of performance that harms the environment, grave exploitation of workers and employment in inhumane conditions, and mass disaster events resulting from irresponsible business practices, such as massive air pollution, chemical substance leakage to the ocean, polluted food, dissemination of diseases passed from animals to people, and more. Next, we specify how the expansion of sustainable activity is being manifested in the public sector.

International standardization and regulation

A significant part in encouraging the public sector to adopt sustainable performance patterns can be credited to the activity of well-known international institutions such as the international organization for standardization, ISO, and an array of voluntary regulation initiated by businesses themselves, or by independent standardization and regulation organizations, that evolved in order to promote this issue. International institutions that show sustainable performance include the UN, which has adopted the Global Compact contract regarding sustainable business management, World Health Organization- in food product marketing in general, and specifically in promoting a healthy diet including feeding babies with breast milk, and the World Trade Organization in the code for food production management that preserves hygiene rules, and prevents food manufacturing processes from harming the environment. Another important international institution that promotes sustainable management is the ISO, the International Organization for Standardization, in which there is representation of most countries’ local standards institutions. After 50 years of focusing on product and process standards, the organization has begun to deal with standards concerning sustainability. Two well-known standards the organization has published are the ISO 14001 standard relating to environmental quality, and the ISO 26000 standard regarding corporate social responsibility.

As we have said, voluntary regulation initiatives have a place of their own regarding the promotion of sustainable performance of businesses. Some of them originated in business bodies, a model of self-regulation. Examples include the organization of the world chemistry industry, and the development of its initiative for the regulation of strict environmental performance (Responsible Care Global Charter), standardization in the manufacturing and marketing of agricultural products (Global G.A.P.), and standardization for manufacturers and marketers, regardless of their product nature (BRC- British Retail Consortium) - that started as a local wholesaler initiative in Britain and expanded all through Great Britain, even receiving global status due to its broad use.

Voluntary regulation evolved into self-regulation not only due to business initiatives, but also due to the initiatives of independent bodies that are evolving specifically in order to encourage sustainable business practices, and to supervise them. These are a few examples: GRI (Global Reporting Initiative)- the initiative to self-report regarding social responsibility performance (more details ahead); FSC (Forest Stewardship Council)- the supervision initiative of sustainable management of the world forests; MSC (Marin Stewardship Council)- to promote sustainable fishing practices; the supervision initiative of agricultural goods and handicrafts commerce between developing and developed countries. This initiative aims to ensure sustainable agro-ecological practices, ensuring good working conditions, and payment of a fair price for the products (Fair Trade).

Local initiatives have evolved alongside these international ones, although they differ in model and scale, as is the case in Israel. Here are some examples of Israeli initiatives not connected to the government: MAALA organization, promoting corporate social responsibility of business practices through the

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Maala index, and the Maala fellows program; Ma’agalei Tzedek organization (Paths of Righteousness) that grants business a certificate of social responsibility according to their accessibility to people with disabilities, and whether or not they treat their workers ethically; voluntary standards for certification by the Institution Standard of Israel regarding green building, in collaboration with the Israel Ministry of Environmental Protection (SI 5281); corporate responsibility standard (SI 10000) and building accessibility standard, developed in collaboration with Access Israel (SI 1918).

These diverse initiatives differ in several ways: the degree in which they are dealing with the business itself, or with the factors concerning it along the production chain as a whole, including marketing the product beyond the country’s borders; the degree in which they define requirements, specifically or in general guidelines; the degree in which they settle for statements of self-reporting, or have mechanisms for certification after inspection, and additionally run arrays of control and inspection, etc. In spite of differences between these initiatives, their involvement in sustainability on a combination of levels - economic, social and environmental - and the attempt to create awareness of the subject, promote it, and even enforce sustainable performance of business practices, is mutual to them all.

Focal centers for promoting sustainability by business practices1

One can identify two focal points (which are not content domains like agricultural goods, marine practice, or forestry) with which these initiatives are concerned: one focal point is internal management of the business, and the other is the external performance of the company.

Internal business performance1. - this deals directly or indirectly with sustainability issues that are influenced by the internal performance of the business. For example:

Diverse employment and representation of weakened groups in the business work force•

Business accessibility for employees with special needs•

Promoting these aspects: work-home balance, worker’s health, employment and safety • conditions

Creating an ethical code and keeping the ethical rules in business performance•

Business performance that narrows environmental damage by the business: building according • to environmental principals, reduction and recycling of waste, reduction of water usage and recycling of sewage, reduction in use of private cars, and in scope of organizational transport.

External business performance2. - this deals directly or indirectly with sustainability issues that are affected by the external performance of the business, in relation to the chain of value and chain of supply. For example:

Treating customers with dignity, guarding their privacy, sharing, and being attentive•

Business accessibility for clients with special needs•

Business transparency towards the public and customers•

The degree in which the business contributes to society, money wise and otherwise, such as • volunteering, equipment, infrastructure and social products

Continuous improvement of green performance (“ecological footprint”) in order to reduce • environmental damage, meaning: source point pollution, damaging nature, harming animals, etc.

1 Detailed documents on social responsibility domains of business practices can be found on the Global Reporting Initiative- GRI - internet site. A document adapted to Israel can be found on the website of the Maala organization.

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Continuous risk assessment•

Wage conditions and profit sharing•

Conditions for working with suppliers, green performance of suppliers and employment conditions • of the suppliers’ workers.

Differences in the potential of businesses to contribute to sustainability

The system of rules concerning sustainable performance of business practices is relevant when tailored to different businesses.

These are some distinctions to consider when making these adaptations:

Between a product-oriented and service-oriented company• - The influence of a service-oriented business practice on its environment is probably minor, and that is why the focus of such a business should deal with internal performance rather than external. In a product-oriented business, both focal points are important, though the external focal center is of much greater importance.

Different types of product-oriented companies• – Product-oriented businesses differ from one another in the level of risk related to their activity, and its influence on physical and human surroundings. A chemical plant is not like a food factory, a mining and quarrying company is not like a toy manufacturer, an energy company differs from a car factory, and hospitals differ from hotels.

Different types of service-oriented companies • – Though the potential of service-oriented businesses to harm their physical surroundings is smaller than that of product-oriented businesses, they can have a large potential for harming people. Here too, the potential levels of harm differ. Regarding potential risk and danger, a bank or an investment company are not like an advertising agency, a law firm is not like a public relation agency, and a real estate company differs from a wholesale chain.

Small or large business• – The last important distinction is between a big business and a small one. The size relates to the number of workers, business turnover, scope of secondary suppliers, and scope of business, local or global. The scope of the business’s contribution or harm to sustainability is directly related to its size, and hence the need to consider this aspect when adapting sustainability practices to a specific company.

These factors are taken into account when assessing to what degree a company’s practices are • sustainable, by giving different importance to certain rules according to type of business.

Challenges in advancing sustainable performance by businesses

When businesses voluntarily undertake to manage their business in a sustainable way, whether initiating the change themselves, or at the instigation of a third party, there are many advantages. From the business point of view, it enables refraining from strong governmental regulation and enjoining a more flexible regulation, and allows continuous adjustment to the evolving circumstances. It also creates a sense of ownership of the rules, increasing the chances of compliance.

Despite the advantages, voluntary regulation receives a lot of criticism as well, mainly concerning the norms it can create and the degree of compliance it can achieve. Regarding the norms, the need for getting the businesses’ consent to comply, and the need to make adjustments for a variety of businesses, as mentioned above, creates pressure for weakening the norms, especially when businesses are required to pay for membership, and those payments are part of the incomes which enables the regulation bodies to exist. As for compliance, given the lack of ability to perform direct legal or economic sanctions, it is possible to perform only indirect economic and social sanctions, such as negative publicity and damage

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to reputation, resulting in lower sales, which causes concern of low or partial compliance.

Research tells us there is a strong connection between the compliance issue and the degree to which businesses are sensitive to their public reputation. In addition, the compliance issue is connected to the degree to which competing businesses join and adopt strict sustainable performance rules. If their competitors operate according to the same rules, the businesses show greater readiness to consent to the additional regulatory cost and enjoy the positive social reputation, and the opposite is also true. This issue is directly connected to the degree to which consumers value sustainable practices, and consider them when making consumer choices. Lack of consumers’ value of these practices serves as a negative incentive for adopting these rules, and compliance.

Policy questions concerning sustainable performance of the business sector

A set of questions concerning public policy rises from this description of the challenges that businesses face in the process of voluntary assimilating rules for sustainable performance:

Does it have to be enforced by law, or left to the voluntary considerations of organizations?1.

What are the correct boundaries between anchoring the standardization by law, and leaving it to 2. the discretion of companies and consumer judgment?

What are the considerations one has to take into account when choosing to use voluntary supervision 3. or public supervision: cost, effectiveness, harming competition, adhering to commerce agreements, and so forth?

Does voluntary regulation have to be anchored by a third part supervision system (an independent 4. organization that operates a system of certification, ranking and standardization), or is it possible to allow self-regulation mechanisms?

The description of what concerns the promotion of sustainable performance of businesses is partially relevant to the public sector, although part of it is not relevant to that sector due to the conditions under which it operates, that are different from those of the business sector. The following section describes the situation of sustainable performance in the public sector and the challenges to its promotion.

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C. The Public SectorBackground: Sustainability and the Public Sector

In the last two decades, sustainable performance of businesses has received a lot of attention, but the public sector’s sustainable performance has received little attention. This is particularly noticeable regarding the indicators we specified earlier as motivating factors, developing conceptions of good practice, and supporting assimilation and supervision. When a business is revealed as not acting according to sustainable performance, there is much public protest. That is not the case when dealing with the public sector not acting sustainably. Additionally, in what concerns the sustainable performance of businesses, a vast body of knowledge has developed, and many models as well. There are no models dealing with the public sector.2 There are hundreds of independent standardization organizations concerning businesses’ sustainable performance, and no standardization organizations dealing with the public sector. In addition, public bodies cannot choose to subject themselves to external bodies’ control.

This gap between the public sector and the business sector concerning sustainable performance is not because the public sector does not have the potential to either contribute to sustainability, or harm it. It is rather the opposite. Countries usually hold vast lands and many properties. They serve as one of the biggest employers of the economy. They consume energy, and make requisitions on a very large scale. Additionally, sustainable performance of the public sector is important not only because of this sector’s ecological footprint, but because it serves as a role model and an inspiration for the business sector. Likewise, the gap between sectors is not due to lack of support mechanisms that create knowledge, adapt practices and supervise them, although, as will be specified ahead, there is a need for adjustments concerning the meaning of sustainable performance by the public system. The cause of this gap apparently lies in the fact that both the public sector and the public itself, that serves as an important catalyst for sustainable performance, assume that this is a sector that acts for the public wellbeing and therefore focuses its activity on increasing sustainability, and certainly doesn’t cause harm. Because these are nonprofit bodies, there is no reason why they should not invest time in determining how to improve sustainability, and in adapting the appropriate practices once they are determined.

However, this attitude ignores the fact that the public sector is also driven by economic considerations, alongside considerations for societal wellbeing, and these considerations frequently contradict sustainability principals. This situation is quite noticeable in government bodies in Israel, in companies such as Israel Ports, Israel Railways, Israel Post, and the Israel Electric Corp. All of these companies are concerned with profit issues, as much as with social wellbeing. Their potential for harming sustainability is very high, and yet they rely on their public image, and don’t subject themselves to regulation concerning sustainability beyond what is legally required of them.

Not only public companies are concerned with resource issues. Public bodies located at the core of the public system (government ministries, local authorities, statutory authorities and so forth) are also concerned with this. It is true that they don’t have to present stockholders with the profit line, however there is a desire to minimize public expenditure, or to produce more services out of the same public budget. Sustainability expenses can be seen as a burden and as non-productive, meaning they do not produce services. One has to add that the interpretation given by the public sector to the term “public wellbeing” can be limited, and does not sufficiently take into consideration sustainability considerations, sometimes even totally ignoring the issue of sustainability. One noticeable example is the continuous tension between land development considerations and sustainability considerations. The rather limited way the public sector deals with sustainability issues derives from some obstacles we will discuss later. First, we’ll specify the relevant domains for promotion of public sector sustainability.

2 Apart from one exception, the GRI organization which is mentioned further on, that has developed only in recent years and is not widely used.

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Domains relevant for promotion of public sector sustainability

Although sustainable performance in the public sector is as relevant for promoting sustainability as it is in the business sector, there are similarities and differences between the two sectors regarding some aspects of that performance. Generally, even in the public sector, different organizations will require different sustainability strategies. An internal sustainability strategy deals with the extent to which the organization operates as a sustainable organization, whereas an external sustainability strategy deals with the organization’s relation to the public. It links public policy to the sustainability approach,3 and is manifested in public policy and regulation. One can find many similarities between the two sectors regarding internal sustainable performance, but the external sustainable performance of the public sector has a unique character. These are some examples of issues concerning each of the strategies. It is important to note that our reference to the public sector is comprehensive and includes government ministries, professional units, governmental companies, statutory corporations, defense forces, the health system, the education system, and more.

Sustainable strategies for internal organization performance

Recycling: paper, sewage, electronic waste•

Reduction of consumption: energy, paper•

Use of ecological products•

Green building policy in new building projects of public facilities, using public facilities for several • different uses, and by several government bodies

Choosing the location of public buildings while considering the environment•

Physical accessibility to buildings and services•

Reduction of worker transport, general organizational transport, and customer transport to receive • service

Use of environmentally friendly cars•

Planning of meetings and conferences in a sustainable manner• 4

Ordering service from local bodies in order to strengthen sustainable economy•

Employment diversity: gender, ethnic origin, nationality, handicapped people•

Transparency of activity and sharing with the public•

Prioritization of suppliers who promote sustainability along the entire production chain: raw materials, • products, employment conditions

Integration of sustainability considerations and practices into the work plans of the organization.•

Sustainable strategies for external performance of organization

Integrating sustainable considerations in physical development plans: building, roads, railway tracks, • recreational sites, and so forth

Policy of supporting businesses, or canceling subsidies, which puts an emphasis on sustainability • considerations

3 An example of this is a paper of The Society for Protection of Nature in Israel about the conservation of biodiversion in public decisions concerning physical development, Rothschild 2012.4 Video conference, teleconference and holding meetings, when appropriate, in a location accessible to people who live far.

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Award of benefits to businesses according to their sustainability performance: energy saving, diverse • employment, contribution to the community

Integration of sustainability considerations in government tenders•

Integration of social sustainability considerations in public policy: promotion of solidarity, community • sense, and social resilience

Education for sustainability, and improving awareness of it through all age groups•

Diversity in the potential of public bodies’ ability to contribute to sustainability

Similar to the diversity of the potential influence of business bodies on sustainability, which we discussed earlier, there are also differences among public bodies. Here are some possible differences:

Head offices and operational offices - one of the distinctions concerning the potential for sustainability • contributions is between head offices that support policy determination, such as a prime minister’s office, ministry of justice and ministry of finance, and offices in charge of implementing the policy in the field, such as the ministry of construction and housing, the ministry of health, the ministry of education, the ministry for environmental protection, and the ministry of economics. As with the distinction made between a service oriented business and a productive business, one should make a distinction between head offices and operational offices: in head offices the emphasis has to be on internal performance, and in operational offices the emphasis has to be on the external focus.

Operational offices and operational units - although operational offices deal with actual activity, • they are not actually responsible for executing it. The bodies in charge of it are professional units, statutory bodies and government companies - the Israel National Transport Infrastructure Company Ltd., Israel Natural Gas Lines, Israel Ports Company, Israel Railways, and so forth. The degree to which the different offices influence what happens differs from the influence of the operational bodies mentioned above. These bodies have a broad range of considerations in making decisions that can greatly affect sustainable practice.

National units and local units - Another distinction is between national bodies and local authorities. • Here too, this is expressed in areas of influence and types of influence. Government offices deal with national projects and issues, and specific domains. Local authorities deal with an array of subjects concerning residents’ wellbeing, and determine local policy in areas within their authority, and in execution of decisions.

Between units according to size - as in the business sector, so it is in the public sector. A distinction • must be made between bodies according to their size. Size refers to number of workers, size of budget, scope of direct activity, and that of contractors, and spread of activity. The scale of contribution or harm to the sustainability issue within the defense forces (military, police, Shaback - Israel Security Agency, Mossad - Israel Secret Intelligence Service, prison authority, fire fighters) and the health or education systems is not similar to the scale of contribution or harm of the Ministry of Construction and Housing, and certainly not of head offices.

Obstacles to promotion of sustainable performance in the public sector

Although sustainable performance of the public sector is significant in regard to sustainability, as we mentioned earlier, and there are similarities between the public and the business sectors regarding the need to deal with sustainability issues, there are limitations and challenges to promoting it in the public sector, which must be taken into consideration. The challenges concern motivation, and the limitations are structural.

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Challenges

Lack of competition• - while consideration of competition and the wish to address consumer’s demands are both important factors for businesses in the adoption of sustainable strategies, in the public sector these considerations don’t exist. In most cases, these are monopolistic bodies. The consumer has no choice, and cannot do without their services, which is why he has no meaningful sanctions available with which to motivate them to perform sustainably. The motivation of competition does not exist either, because there is no parallel body that can attract customers. The customers have no other choice.

Lack of economic incentives• - Businesses adopt sustainable strategies partly in order to achieve cost reduction, such as reduction of energy consumption, reduction of waste, and so forth. Cost reduction is of course an advantage that allows reduction in operating costs and product and service prices, thus attracting more customers. Though public organizations have no reason to object to cost reduction, this consideration does not hold the great importance it has in the business sector. Their budget is ensured, and in most cases has to do with input and not output, and is not affected by cost-benefit ratio.

Lack of public criticism• - A major part of motivating the business sector to adopt sustainable strategies has to do with public criticism concerning the environmental and social harm caused by their performance. Though the public sector is the subject of constant public criticism, which differs in scale and intensity in different bodies, according to the civil culture, this criticism does not focus on sustainable issues. It mainly concerns political issues: political decisions, military decisions, fair resource distribution, and so forth. Even the Israeli social protest in the summer of 2011 centered on the high costs of living, and the need for effective regulation by the government of businesses concerning this issue, and not on sustainability issues connected to management of public bodies.

Limitations

Exposure • - as we saw earlier, promotion of sustainable performance in the business sector must be connected to creation of a system for reporting and regulation, which is why many of the mechanisms that evolved in order to promote this subject deal with these issues. The demands for exposure might encounter a barrier of secrecy and confidentiality considerations in the public sector. Though not all public decisions require secrecy, this argument often serves as an excuse for lack of transparency. The public system has a reputation as a system that does not incline to easily render the public information concerning its performance, as demonstrated in the difficulty in implementing the law of freedom of information in Israel and around the world.

Measurement • - This is a major issue with which the public sector is dealing, and it refers to the measurement of sustainable performance in the public sector. In some aspects concerning external performance of these bodies there are difficulties in measuring general outcomes, and some of them might also apply in measuring sustainable performance. Additionally, there are indications that the outcomes measured are subjected to external influences such as performance of bodies under supervision, and limitations of public authorities to enforce and perform effective supervision.

Reporting• - Just as dealing with sustainability within the business sector may be a burden and a source of complications, so it is within the public sector, and perhaps even more so. The public system sees itself as subjected to continuous public control that is partially manifested in subjection to procedures and many bureaucratic demands. Here are a few examples: acquisitions, tenders and contracts. The demand for reporting activity connected with sustainability can be seen as another bureaucratic burden, and this must be taken into account.

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Legal limitations• - The private sector enjoys great flexibility in decision making, and is not subjected to the rules the public sector is obligated to (such as providing fair chance tenders), that affect that sector’s ability to promote sustainable performance. Part of the strategies for promoting organizational sustainability within the public sector may require governmental and legal support, such as preferring suppliers acting upon sustainable principles, thus adding difficulties to achieving the desired change.

Collaboration• - Public organizations, as opposed to business organizations, belong to a single organizational super-system that deals with advancing public wellbeing. As a result, different governmental bodies work together to promote and implement policy. As much as these reciprocal relations are essential for promoting content policy (education, welfare, health, public security), they are also essential for advancing sustainable performance of the public system. However the public system does not cooperate well, and that challenge may appear in promoting the sustainability aspect as well.

Promoting sustainability within the public sector- fundamental conclusions

One has to promote sustainable performance within public organizations as well. Sustainability is not 1. just “the business” of business oriented organizations. First, the public sector has great influence on the sustainable performance of every company, much like the business sector. And more important is its role of serving as a source of inspiration and a role model for the business sector. The public sector is seen as a sector that is supposed to be operating according to stricter standards, and to serve as a model of inspiration. For example, this is customary in the ethics domain. Lack of strictness in sustainable performance within the public sector harms its potential for contributing to sustainability, and harms the business oriented sector’s motivation to address this issue.

Promoting sustainable performance within the public sector is important since that sector shapes 2. public policy in all aspects of life: commerce, construction, transport, education, health, and so forth. It is important for both its internal and external performance, which are of great influence in promoting a sustainable society.

Much like with businesses, there is a need for adjustments in expectations according to the profiles 3. of various bodies, and their domains and influence. Much like businesses, alongside mutual issues for all organizations, there is a need for examining unique sustainability oriented issues that are connected to each organization, and serve as added value from their point of view.

Since public organizations belong to one organizational super-system and hold mutual influence, 4. there is a need for promoting the sustainability issue not only on the individual level, but also in areas requiring collaboration.

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D. Sustainability within the public sector in Western culture and in IsraelSustainability within the public sector around the world

In different western countries such as the United States, Canada, Italy, Britain, and Australia, developing and assimilating processes for public policy that deals with public sector sustainability performance has been going for years. The development of the sustainability issue in the public sector can be largely attributed to discussion sessions held at the UN concerning that subject over the past few decades, such as the 1992 Rio de Janeiro summit. Most salient is the 2002 Johannesburg summit.5 These examples are evidence of growing recognition of the potential influence of the public system on sustainable social and economic performance by including sustainable considerations in their internal performance, and in public policy.

However, not only governments initiated the assimilation of sustainable thinking and performance within the public sector, but also international bodies such as the UN and the World Bank, and independent international standardization systems, which deal with sustainability, and focused only on the private sector in the past. The most salient example is the Global Reporting Initiative – GRI – that promotes the development of designated rules for the public sector.6 There are already sectorial measures for some types of public bodies, such as airports, and this system invites countries and public bodies to hand over an annual activity report, much like the reports handed over by multinational corporations.

The GRI reports the growing interest of public bodies in rules for reporting, though the number of the reports handed over today is still not very high, in spite of several report precedents by cities, government ministries, and specific public bodies.

There are a number of different approaches used by Governments who support sustainable performance of the public sector: the most common approach is to demand that each government ministry hand over a plan relating to sustainability issues, in addition to their usual work plan, and a performance report at the end of the year regarding actual implementation. This approach enables governmental units to use their judgment and decide in what way the sustainability issue relates to their internal and external activity, and which of the relevant goals they intend to promote during the year. Another approach, with some loose ends, is determining sustainability for the internal activities of all public bodies (energy, transport, waste and so forth), leaving space for each bodies’ own judgment regarding external activity. A third model introduces a third approach, with less loose ends, that determines rules and goals for action for all the bodies concerned, regarding both their internal and external performance. As said before, there are not many public bodies that have adopted as systematic and detailed reporting approach such as the one offered by the GRI, and that was one of the reasons why the organization made an effort to develop designated rules for the public sector.

Sustainability within the public sector in Israel

First, it must be noted that since May 2003 there is a government decision declaring a commitment to sustainable performance, guiding public bodies to act accordingly. This government decision was made following the 2002 Johannesburg Earth Summit:

“Israel government policy will be based on sustainable performance and development that include: a dynamic economy, a rational use of nature resources, protection of ecological systems, and equal opportunity for all.

5 The outcomes of that summit were the Israeli government motivation for adopting sustainable performance. Details ahead. 6 The organization published in 2004 an appendix designed for reporting criteria for the public sector. See Public Agency Sustainability Reporting 2004. In 2012, an Australian team dealt with developing a more comprehensive measurement infrastructure for the public sector. See Public Sector Sustainability Reporting 2012.

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The above aims to address the needs of this generation, and the needs of the next generations, in accordance with government resolution no. 2426 of August 4th 2002, and in the spirit of the resolutions of the world summit for sustainable development held in Johannesburg, South Africa.”7

The government resolution is not restricted to a declaration of commitment, but rather specifies domains and directions of activity for each of the ministries and units to which they apply, 80 goals for 17 government ministries. Additionally, the resolution obligates each ministry to prepare a strategic plan for promoting sustainable development in its domain, in collaboration with the public, stakeholders, and the third sector, to be submitted by the end of 2003 and updated every three years. The government also appointed the Ministry of Environmental Protection to coordinate actions concerning this issue, to support other ministries professionally, and to hand over a semi-annual progress report.

The government resolution certainly serves as a meaningful step in promoting sustainable performance within the public sector in Israel. It defines an inclusive government obligation, specifies each ministry’s area of responsibility, refers to all authorities, both governmental and local, and creates a progress chart and a guiding system. However, there are some weak points in that resolution: it refers much more to the environmental and economic aspects, than the social ones; furthermore, it focuses mainly on external aspects, and very little reference is made towards internal performance of the governmental systems as an arena for sustainability (details ahead). In any case, even within the resolution’s restrictions, it seems that there is a big gap between the declaration and its implementation in practice.

The government resolution was translated into action, but only for a very short time. The inter-ministerial team headed by the CEO of the Ministry of Environmental Protection acted, and ministerial plans were prepared and compiled into a joint governmental report. Though the ministerial reports were partial, and the goals were not chosen systematically, it was still a step forward. However, the process lasted only three years (2004-2007), and in 2009 the third and last report (which dealt with 20078) was submitted. In order to create uniformity among the government ministries, and to focus the ministerial activity, and despite the comprehensiveness of the government decision, the ministry for Environmental Protection, which coordinated the work, developed 16 criteria for guidance. Despite this, it is clearly seen in the annual reports that there are salient differences in the interpretation of each ministry regarding the promotion of sustainable performance.

External bodies are increasingly demanding consideration of sustainability factors in policy decisions regarding external performance. Two examples from recent years: (1) A process in collaboration with Joint Israel, the Ministry of Interior’s division for studies and development, Zipori Center, and the Ministry of Welfare’s community work service, in which a demand for an all-out review (not only social) during planning stages, was placed;9 (2) The Society for Protection of Nature in Israel initiative, in which there was a demand to relate to a biological range, and assess the influence political decisions, legislation, and public projects have on it.10

The discussion concerning sustainable performance within the public sector in Israel has to be judged, as mentioned earlier, by referring to the two dimensions we identified concerning the assessment of sustainable performance of public systems: internal performance and external performance.

7 Government resolution 246, May 14th , 2005.8 See: report no. 3: executing government resolution regarding sustainable development. The state of Israel, April 2009.9 See the Guide for including a “community-social appendix” in planning and building procedures; principals and modes of action; Jerusalem June 2006.10 Rothschild 2012, Mor 2002.

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The government resolution mentioned above referred to external performance. Regarding internal performance, there is a 2009 government resolution that deals with the subject: “green government - improving efficiency of government ministries”.11 This resolution can be seen as an addition to resolution 246, specified above, that focuses on external aspects. The 2009 government resolution determines the rules regarding environmental performance of government ministries from the physical aspect. It sets annual economic goals for paper, water, and electricity consumption, and guidelines for the acquisition department regarding decreasing transport related pollution. The resolution determines there is a need for assigning a green ministerial team headed by the CEO of each ministry, choosing companies that will support the ministries in implementing the resolution, and providing an incentive by stating that any budgetary savings resulting from that activity will remain within the ministry. Here too, the Ministry for Environmental Protection was the one appointed as the coordinator of the government’s activity concerning this issue, and the Minister of Environmental Protection was asked to submit an annual execution report to the government. A report submitted by the Ministry of Environmental Protection regarding the execution of that resolution during 2012 indicates the advancement of the ministries towards achieving the goals, but recognizes a great need for improvement.12 Since a summation report for 2013 was not submitted, one cannot know where the execution of the government resolution stands today, and one has to hope the turnover of ministers in the ministry did not further harm advancement of that resolution.

One can summarize in a few points the efforts made towards promoting sustainable performance of the government, as indicated by the resolutions mentioned above, and their execution. On the positive side, there seems to be a desire to implement both internal and external sustainable performance, to anchor it in binding regulation, and to create a mechanism of professional control, follow-up and support. Furthermore, there are clear directives and goals, and a demand for constant updating of those goals. Of course, one has to check the level of compliance. It is clear that a concentrated effort has been made both by the ministries and by the Ministry for Environmental Protection as the coordinator, but it seems like the momentum created has been stopped. In both cases, there are no reports regarding progress in the last year.

Among the weaknesses, there is an emphasis on cost efficiency in some of the chosen focuses, and not for reasons of sustainability. Furthermore, the activities are individual to each ministry and not a part of a single system. Aside from various headquarters, the professional ministries do not direct themselves towards defining inter-ministry goals and realizing them, though many goals are of mutual concern to many of the ministries. The lack of reference to government companies is also obvious. There is an assumption that the ministers in charge of the government companies will be the ones to encourage their sustainable performance, but the reports do not refer to them, and it is unclear to what extent public policy is penetrating this very active domain.

The most salient weak spot though, of both resolutions mentioned above, is that they focus on only two out of the three sustainability focal centers- the physical and the economic aspects. The social focus is almost totally ignored, except in cases dealing with an issue that is the responsibility of a certain Ministry, such as the Ministry of Welfare or the Ministry of Health. This despite the fact that it is perceived as an important focus of sustainability, and government performance in both dimensions (internal and external) can contribute greatly to this issue. The social focus refers to creating social resilience by such means as these, among others: encouragement of a sense of community and strengthening of solidarity, encouragement of civil organization, cooperation with the public, governmental transparency, fair allocation of resources between groups, promoting accessibility, and inclusion of all groups in society.

11 See: government resolution 1057: "Green Government”- improving efficiency of government ministries 2009.12 The Ministry for Environmental Protection. Report no. 2, executing government resolution regarding a green government, July 2012.

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The situation today regarding sustainable performance in the governmental system is still far from satisfactory. An appropriate summation of all mentioned above, and more, can be found in the summation report on sustainability of Valery Brachya, who coordinated the Ministry for Environmental Protection Forum, submitted to the government on behalf of the CEO’s Forum. These are the main aspects mentioned: the lack of a governmental strategic plan for sustainable development of the State of Israel; a weak connection between the three main pillars of sustainable development - the economical, the environmental and the social ones (and an especially weak and lacking reference to the social domain); the fact that fields of joint activity between government ministries were identified, but effective tools for actual implementation were not yet created; and that reporting in Israel is still verbal, and there is a need for measurements enabling comparison of the situation in Israel to the situation of other developed countries around the world.13

The Commission for Future Generations

In 2001, another noteworthy governmental move was made regarding the sustainable performance of the public sector in Israel - a commission for future generations was established, and regulated by an amendment to the law of the Knesset. The amendment gave future commissioners the authority to intervene in all proposed legislature that they determine will considerably effect future generations, and convey their opinion. The commission focused on increasing the legislator’s awareness of future implications of legislation and secondary legislation in Israel on various fields: environmental quality, natural resources, science, development, education, health, economics, demography, planning and construction, quality of life, technology and law. The commission also dealt with developing a fundamental law: sustainable development. Unfortunately, the commission existed and was active for only 5 years. In 2006, it ceased to exist after no replacement was appointed for the retiring commissioner.

Local government

Local authorities have a very important part in promoting sustainable performance within the public sector, due to their size, broad distribution and scope of activity, and because many of the problems connected to sustainable performance are within the direct responsibility of these authorities. The UN conference held in Rio-de Janeiro in 1992 noted this, and in section no. 28 of the “agenda 21 paper”, the following was declared:

“Because so many of the problems and solutions being addressed by Agenda 21 have their roots in local activities, the participation and cooperation of local authorities will be a determining factor in fulfilling its objectives. Local authorities construct, operate and maintain economic, social and environmental infrastructure, oversee planning processes, establish local environmental policies and regulations, and assist in implementing national and sub national environmental policies. As the level of governance closest to the people, they play a vital role in educating, mobilizing, and responding to the public to promote sustainable development”.14

13 See: report no. 3: executing government resolution regarding sustainable development. The state of Israel, April 2009, p. 109-110.14 UN Sustainable Development Agenda 21, 1992.

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Local governments in Israel tried to leverage the government resolution meant to promote sustainable performance in the public sector into a broad, detailed, guiding policy. The Union of Local Authorities, together with the Ministry of Environmental Protection, published a detailed manual for sustainable performance in local authorities in 2007.15 This manual formulates ten directives and guiding principles for a local authority that wishes to act and promote sustainable performance. Among others, they include environmental management of the municipality and its institutions, development of environmentally friendly transport systems, preservation and cultivation of water sources, cultivation of open spaces and their supervision, and encouragement of local economics. In opposition to the government’s resolution, the manual’s wish to combine all sustainability aspects and refer to environmental, economic, and social aspects is salient. However, promotion of the issue within local government is only partial, and there is no periodical report from which one can learn about the progress of the local authorities in this field.

The increasing promotion of sustainable performance in local authorities in Israel is supported by two external bodies: The Local Sustainability Center - an initiative of the Heschel Center for Environmental Learning and Leadership, the Ministry for Environmental Protection, and the international organization for promoting local governance sustainability (Local Governments for Sustainability) - and the Jerusalem Institute for Israel Studies, that had worked to prepare background papers for promoting sustainable practices in Israel in general, and specifically in local government.16 The Institute has also launched a project named Urban Sustainability that tries to identify ways for obtaining sustainability through changing the urban life style.17

The general impression seems to be that strong local authorities embrace and implement sustainable performance more than weaker authorities. Forum 15, shared by 15 of the biggest and strongest local authorities in Israel, is continuously dealing with sustainability issues. It also seems that regional councils implement sustainable performance more than local councils and municipalities. The Regional Councils Center has even launched (2005) a broad initiative for preparing master plans for sustainable performance in regional councils. That difference is possibly rooted in the fact that regional councils are more exposed to environmental issues then local councils and municipalities due to the nature of residence and employment of the rural areas in which they operate.

15 Hod 2007.16 See: Ben Elya 2019, Kimhi Hoschen Asaf-Shapira 2012.17 See: Newsletter, urban sustainability project news, January 2014.

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E. Recommendations for promoting sustainable performance of the public sector in IsraelPromoting sustainable performance of the public sector should include the following aspects:

A renewed validity of governmental decisions concerning the formulation of annual and three-year 1. action plans regarding sustainability for government ministries and submission of annual reports regarding sustainability, along with the general annual report of the ministry.

It is necessary to consider the question of whether or not to change the general report demand 2. concerning sustainability into a detailed demand, as common today in the business sector.

It is necessary to invest in learning about other public sectors worldwide, and in creating a basis 3. for comparison between what is done in Israel and other countries.

It is necessary to broaden the reference to social measures as part of the demands for promoting 4. sustainability of the governmental sector, much like the work done in the municipal sector.

It is necessary to emphasize the empowerment of inter-ministry partnerships in promoting sustainable 5. performance by government ministries and public units.

It is necessary to address governmental companies separately, and not as part of the ministerial 6. system. Perhaps the office of government companies, as a regulatory body, should deal with promoting sustainable performance and supervising it in those companies.

SUSTAINABILITY, ORGANIZATION, AND MANAGEMENT: …theinstitute.org.il/files/pictures/articles/sustainability.pdf · especially regarding the nature of the norms it sets and the level

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