Politicized Economy and Its Effects on Business Sustainability: A Case Study on
5.1 Business Sustainability and Socio-Political Environment
Sustainable development was defined by the Brundtland Report as being the “de- velopment that meets the needs of the present without compromising the ability of future generations to meet their own needs”, a development described as a “process of change in which the exploitation of resources, the direction of investments, the ori- entation of technological development, and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspira- tions” (Brundtland1987:43). The concept of sustainable development upholds the compatibility and complementarities of its three dimensions: economic, social, and environmental. It is a global, macroeconomic concept particularly through its social and environmental facets (Oncic˘a-Sanislav and Cândea2016).
We can interpret the concept of sustainable development as the ideal of a human society thriving indefinitely. Pop (2015) asserts that development is sustainable if it leads to an increased number of human options, both locally and globally, to meet the needs of the present and future generations and defines resilience (R), viability (V), and subsistence (disaster) (S) as three levels of eco-economic reality, three different stages in the functioning of eco-economic systems in the context of sustainable development. These levels are measurable by identifying energy interdependencies with the three pillars of sustainable development in a trans-disciplinary context: the environmental (environmental) sector, the socio-community sector (human habitats), and the economic sector (market).
At macroeconomic level, the development process interconnects the global with the local levels, through what is defined as the concept of “glocalization”.1Possible human choices are determined by the available resources and personal creativity.
There is a resource limit at the matergical level, but fortunately, there is no limit to creativity at the informational level. The least used potential is the human one, the knowledge in its complexity, which integrates the two seemingly difficult issues to manage together (Pop2015).
At microeconomic level, the sustainable development concept relates to “sustain- able business” concept, a concept (business sustainability) that can be regarded as the correspondent of sustainable development for the business sector (Oncic˘a-Sanislav and Cândea 2016). By analogy with the three pillars of the sustainable develop- ment concept: economic development, social development, and environmental pro- tection, the generally held view is that companies should strike in all their actions a balance between their economic, social, and environmental performance (Cân- dea2010). Addressing the higher level context of corporate sustainability, Werbach (2009) extends the number of sustainable development dimensions to include the cultural aspect, in other words the local level, and holds that a corporation will not be sustainable unless its strategy for sustainability addresses all these four dimensions simultaneously.
1Glocalization: the idea that in globalization, local conditions must be considered—Cambridge Dictionary2017.
Fig. 5.1 Business sustainability depends on and, simultaneously, affects the social and natural environments.Source (Morris2000)
In this context, we can define business sustainability as the capacity of a business to prosper in the long term, with no foreseeable time limit. As the engine of eco- nomic development, for-profit business is a very important actor and stakeholder of sustainable development.
On one hand, its activity and its sustainability (or lack of) have a significant impact on its social and natural environments. The well-being of society depends upon profitable and responsible/sustainable business enterprises. On the other hand, business sustainability (its long-term prosperity) is conditional on the sustainability of the social system and both depend on the sustainability of the natural system (Morris2000) (Fig.5.1).
This hierarchy implies that the organizational performance on which business sustainability hinges is determined by higher rank conditions that shape the activity of the organization. Namely, certain performance criteria of a company that strives to be sustainable can be limited by the way the broader, social, and natural system works.
The natural system includes interrelated factors like physical resources, wildlife, and climate. The social system (or societal environment) includes general forces that can be divided in at least four interrelated subsystems (Wheelen and Hunger 2006): the economic subsystem (forces that regulate the exchange of materials, money, energy, and information), the technological subsystem (forces that gener- ate problem-solving inventions), the political–legal subsystem (forces that allocate power and provide constraining and protecting laws and regulations), and the socio- cultural subsystem (forces that regulate the values and customs of society).
The lists of factors comprising each subsystem are relatively long and as more and more markets become global, the number of factors becomes huge and much more complex. All these factors could prove important for business sustainability:
the long-term survival of the firm. In order to achieve the purpose of this paper, we will further focus on the factors comprising two interrelated subsystems that are, usually, providing a major individualization at the national level: the sociocultural and political-legal subsystems.
The sociocultural subsystem is shaped by factors, such as national identity, val- ues, religion, social organization and language, demographic trends, legal/justice system, the level of corruption, the level of government control, cultural understand- ings, and the list could continue. These factors are critically influencing the way
the organizations are managed (Hofstede et al.2010), the prevalence of long-term view as opposed to short-term view in managing organizations, the interpretations given to and actions related to Corporate Social Responsibility (Tilt2016), and the importance granted to environmental sustainability (B˘acanu2006: 66).
As an example, the level of corruption is a factor that can be an important source of environmental and social degradation, with negative impacts on sustainable devel- opment, thus hindering company’s prospects for sustainability. For a company, the level of corruption in the society it operates can directly affect all the three dimen- sions, previously discussed, of business sustainability: economic, social, and envi- ronmental. Corruption and bribery escalates costs, undermines fair competition, and poses serious legal and reputational risks (UN Global Compact2017). It also can be an important source of environmental degradation, especially in developing coun- tries—it may reduce the stringency of environmental and labor regulation or the effectiveness with which these regulations are enforced (Welsch2003).
The political factors comprising the political-legal subsystem can impact business organizations in many ways. Their evolution can add substantial risk to business operations and profitability, thus affecting directly business prospects for sustain- ability. A list of political factors affecting business (and business sustainability) can be considered to be (without claiming to be exhaustive): protectionism as opposed to free trade, level of bureaucracy, freedom of the press, education and education law, environmental law and laws that regulate environment pollution, tax policy (includ- ing here tax rates, incentives and tax administration), government stability and its involvement in trade unions and agreements, employment, immigration law, health and safety law, and so on (Wheelen and Hunger2006). Also, a country’s political stability, government efficiency, and central bank independence are to be considered as important factors with impact on state sustainability (RobecoSAM2016) and, as a direct consequence, on business sustainability operating locally.
At the global level, the recent evolutions of the political landscape are rising doubts regarding the evolution of the globalization process, populist, and national- ist movements, based on anti-elitist, anti-immigration, and protectionist platforms gaining more and more traction and popularity.
At the Western society’s level, the political environment is rocked by the populist successes at the polls in Western Europe and the United States, the proliferation and flourishing of nationalist and populist parties in EU, and by the democratic deteri- oration and authoritarian consolidation in the postcommunist countries of Eastern Europe.
Examples of these political evolutions are the United Kingdom’s popular vote to withdraw from the EU and the election of Donald Trump as president of the United States, victories achieved through political campaigns based on anti-elitist, anti-immigrationist, and on economic protectionist platforms.
France is the latest country to deal with a blow to politics as usual, its voters rejecting the political parties that have governed in the last decades, in favor of Emmanuel Macron (a pro-European liberal) and the far-right challenger, Marie Le- Pen, who has vowed to take on globalization and France’s relationship with the EU (BBC2017).
This political evolutions, which are rejecting diversity of identity and of opinion within society and are discarding basic principles of modern constitutional thinking that democracy requires constraints on the will of the majority and checks on the deci- sions of the executive (BBC2017), are also manifesting in the political-geographic area of Romania.
Thus, the political situation in the postcommunist countries (now members of UE) seems to indicate, after years of populism and corruption have eroded once-promising democratic institutions, a constant drift toward authoritarian types of regimes—Two outstanding examples being the recent political evolutions in two of the recent cham- pions of transition from communism to democracy: Hungary and Poland (Balogh 2017). The EU and Britain are now focused on the Brexit phenomenon and govern- ments in the region are also unsure of the positions of the Trump administration. As a result, the EU’s capacity to encourage and support the commitment to democrati- zation and a stable, rules-based order, seems to be weakened.
In Romania, the current political power seems to interfere with all the major pillars of the democratic society, an interference that could lead, in our opinion, to the elimination of the existing checks on its power, restrictions on democracy, and corruption strengthening. In the following, we will review some of the signs of the politicization of the Romania society and the potential impact on the local and corporate businesses sustainability.