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L
LA 21
▶Agenda21 (UN)
Labor Code of Practices
▶Ethical Trading Initiative
Labor Force
▶Community Relations
Labor Standards
▶Ethical Trading Initiative
Law
▶New Zealand Resource Management Act 1991
Lawmakers and Policymakers
▶Government (Role in Regulation, etc.)
S.O. Idowu et al. (eds.), Encyclopedia of Corporate Social RDOI 10.1007/978-3-642-28036-8, # Springer-Verlag Berlin
Laws of Governance
▶Corporate Governance
Leadership
▶Giving Voice to Values
Lean Management
▶Lean Thinking
Lean Production
▶Lean Thinking
Lean Thinking
Catarina Delgado1 and Branco Manuel Castelo2
1University of Porto, Porto, Portugal2Faculty of Economics, University of Porto:
OBEGEF (Observatory in Economics and
Management of Fraud), Porto, Portugal
Synonyms
Lean management; Lean production; Toyota
production system
esponsibility,Heidelberg 2013
L 1570 Lean Thinking
Definition
The expression “lean thinking” was first used by
Womack and Jones (1996) in the book with the
same name. Lean thinking is a Japanese inspired
management model which aims to reduce waste
(“muda,” in Japanese) in all phases. It is an
update of the Toyota Production System (TPS),
introduced to the western countries by Taiichi
Ohno, in 1988. Having inherited its principles
and set of tools (such as jidoka (autonomation),
heijunka (production leveling), kanban, and just-
in-time production), and being conceived to
reduce waste in resources and time, it is now
a management philosophy that considers waste
as anything that does not bring value to the cus-
tomer. Therefore, lean thinking has evolved to
a strategic management approach with a new
goal (continuous improvement of customer ser-
vice value), and a new set of more strategic-
oriented tools such as value stream mapping.
Introduction
The Toyota Production System (TPS) is
a philosophy of operations management, devel-
oped in Japan since the 1960s, taking as its
starting point the production system of Toyota
Motor Company. The TPS system seeks to man-
age operations easily and efficiently, making
optimal use of resources. The result is
a manufacturing system capable of meeting the
quality requirements and customer delivery at
less cost.
It is based on three basic ideas:
1. Integration and optimization of the entire
manufacturing process. TPS seeks to reduce
or eliminate unnecessary functions and pro-
cesses and activities such as inspection,
rework, and inventories, among others. Many
of the nonproductive functions that exist
within enterprises were created due to ineffi-
ciency or inability of the initial functions.
Thus, the concept of integration and optimiza-
tion begins at conception and design of a new
product/service and continues until the cus-
tomer delivery and after-sales service.
2. Kaizen (continuous improvement). In TPS, the
development of internal systems that encourage
continuous improvement of both procedures
and people within the company is a crucial
aspect. TPS is therefore a system designed to
provide peoplewith tools andmethods to enable
them to continually improve its performance.
3. Understand and respond to customer needs.
This means the responsibility to meet the
customer requirements in product quality,
delivery, quality, and cost.
Figure 1 shows a set of the key elements of
TPS.
In Fig. 1, the left side (just-in-time processes)
focuses on managing materials. The JIT produc-
tion requires a continuous flow of materials and
information, both coordinated according to the
pull approach (in which the customer initiates
the production process by placing an order),
working at a pace as close as possible to the takt
time (cycle time calculated according to demand
and time available).
The right side, jidoka, focuses on managing
the manufacturing process. Jidoka (or
autonomation, a word adapted by Ohno to
express the concept of automation with human
characteristics) may be defined as the decision to
stop and fix problems as they occur (rather than
pushing them down the line to be resolved later).
It involves the automatic detection of errors or
defects during production. When a defect is
detected, the halting of the production forces
immediate attention to the problem.
The bottom (the “foundations” of the house)
focuses on the fundamentals:
• Heijunka, or production leveling, involves the
creation of conditions for maintaining
a continuous production flow, inventory
reduction, and increased stability and consis-
tency of procedures.
• Standardized work focus on transforming pro-
cesses into stable and more predictable
processes.
• Kaizen (continuous improvement) is
a commitment of the organization to continu-
ously improve its performance by seeking
total elimination of waste while being
supported by people and simple systems.
Goal: Highest Quality, Lowest Cost, Shortest Lead Time
JidokaJust-in-Time
Heijunka KaizenStandardized
Work
Stability
Continuous FlowTakt TimePull System
Stop and notifyof abnormalities
Separateman’s work &machine’s work
Lean Thinking,Fig. 1 Toyota production
system – key elements
Lean Thinking 1571 L
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• Stability is the core element of TPS since
the waste can only be eliminated through
systems designed to be stable. Therefore, the
three previous elements enhance the stability
of TPS.
Some of the most popular and groundbreaking
tools introduced by TPS/lean thinking are
(1) just-in-time production (JIT), (2) the SMED
(“single minute exchange of die”) method (setup-
time reduction), (3) U-shaped cellular layout and
multiskilled workers, (4) kanban control system,
and (5) visual control and 5S.
Just-In-Time Production (JIT)
JIT focuses on producing the necessary parts,
when they are strictly necessary and in the quanti-
ties strictly necessary. A part/product produced
earlier or later than what is necessary is considered
waste. Thus, we have the JIT (just-in-time) as
opposed to the JIC (just in case (something goes
wrong)). The main goals are as follows: (a) almost
nonexistent inventories, (b) extremely short pro-
duction cycles, (c) rapid response to changes in
customer orders and to changes in product speci-
fications, and (e) excellent quality of products.
When production achieves these goals, inter-
mediate buffers do not make sense anymore.
Thus, in a JIT production system, to reduce the
inventories turns out to be more of a consequence
than a goal in itself. Since missing the reasons for
maintaining these inventories can be eliminated.
There are several possible ways for a company
to change its production system to begin
implementing just-in-time. One of them is the
following process, divided into ten steps:
1. Obtain approval and support of top manage-
ment. They must be aware of what it means
switching to just-in-time, in terms of costs,
benefits, and change in the structure of the
organization.
2. Develop a realistic and understandable
implementation plan.
3. Persuade workers, which entails training,
encouraging participation, namely, through
quality circles, and providing strong
leadership.
4. In the final assembly line, stabilize produc-
tion output in order to have, each day, the
same production rate. For this, you need to
use boxes or other containers with
L 1572 Lean Thinking
standardized parts and easily accessible,
according to the kanban system.
5. In intermediate stages, reduce waiting time
and batch size in all the stages of the produc-
tion process. They should be calculated con-
sidering the amounts required for the final
stage of production.
6. Remove the main warehouse inventory and
place it along the assembly line, where the
parts are needed.
7. Balance the production paces with the paces
of the final assembly. This can lead to the
need to replace some missing parts. A small
inventory may thus be necessary at this stage.
8. Reserve some free space in all areas or sec-
tions: if there are failures, it will be needed to
fill it with other parts or machinery or tools to
ensure the production and lost time.
9. Collaborate with vendors so that the pace of
deliveries is the same as the pace of
production.
10. Eliminate inventory previously maintained
just to manage long-term production and
production variations.
Setup-Time Reduction and the SMEDMethod
The change of materials or tools and the adjust-
ments that are made during the production pro-
cess is usually referred as setup. The sequence of
setup tasks does not add value to the customer,
yet they are necessary to the manufacturing pro-
cess. Therefore, setup cannot, in most cases, be
completely eliminated. When the setup cost or
the setup time in a machine is high, the produc-
tion batches are big and the inventory level high.
Thereby, faster and simpler setup procedures
allow smaller production batches, a decrease in
errors rate, and, therefore, a cost reduction.
One method that has revolutionized the man-
agement of operations in this area was proposed
by Shigeo Shingo in the 1960s. This method,
widely known as SMED (“single minute
exchange of die,” also called quick changeover),is a systematic approach to the reduction of the
change/adjustment of tools time. The SMED con-
sists on a sequence of six basic tasks:
1. Identify and separate the internal and external
setup activities.
2. Whenever possible, convert the internal activ-
ities into external activities in order to mini-
mize the time change.
3. Eliminate the need for adjustments by stan-
dardizing processes, tools, and procedures.
4. Improve manual operations through educa-
tion, training, and collecting and applying
ideas and suggestions given by the workers.
This can be implemented without significant
investment gains.
5. Improve equipment (through changes or
reconfiguration).
6. Create a chart of improvements to track the
results and congratulate the team.
U-Shaped Cellular Layout and Multiskilled
Workers
A cell is a group of processes designed to produce
a family of parts in a flexible manner. The move-
ment of materials is made through small batches,
which are transferred between cells. Employees
in the cells master multiple skills and may move
between cells and between positions within a cell.
This guarantees a very flexible manufacturing
strategy.
A U-shaped cellular layout arranges machines
and workers around a U-shaped line in the order in
which production operations are performed. Oper-
ators work inside the U-shaped line, machines
outside, and one of the workers supervises both
the entrance and the exit of the U-shaped line. It is
desirable that machines work as much indepen-
dently as possible and are rebalanced periodically
when production requirements change. The
U-shaped line satisfies the flow manufacturing
principle. This requires operators to bemultiskilled
to operate several different machines or processes.
It also requires operators to work standing up and
walking. When setup times can be neglected,
U-shaped lines are operated as mixed-model lines
where each workstation is able to produce any
product in any cycle. When setup times are larger,
multiple U-shaped lines are formed and dedicated
to different products.
The advantages of implementing a U-shaped
cellular layout are:
• Reduction of volumes of inventory of the final
product (and raw materials)
Lean Thinking 1573 L
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• Reduced manufacturing cycle time and thus
the lead times to customers
• Reducing the space occupied (as the need to
have necessary space to accommodate the
large inventories of goods in course of produc-
tion disappears)
• Better organization of space (since no longer
needed the movement of goods in course of
production between sections)
• Reduction of the inventory of raw materials
and finished products by the production cycle
is much faster
• Reduction of the cost of labor because of
better planning of operations
• Greater motivation, involvement, and partici-
pation of the traders who come to accept
greater responsibility for quality
• Greater occupancy rate of the equipment
Kanban Control System
Kanban is a Japanese word which means card,
bulletin board, or ticket. According to the JIT
manufacturing, the worker of the following pro-
cess withdraws the completed parts of the previ-
ous process and leaves a kanban. This kanban
represents the delivery of a certain amount (the
needed amount) of individual parts to process.
In the kanban system, the emphasis is placed
on the output and not on the input, since the
production flow is controlled by the customer.
The kanban system “pulls” the production pro-
cess, and a kanban is used to move and allow the
flow of production materials and information.
Once all the necessary parts are consumed by
the following process, a kanban is the way to
request the manufacture of more parts.
The kanban system is a small batch production
system. Each batch is stored in standardized con-
tainers, each with the same number of pieces. For
each batch, there is a kanban card. Parts inside the
container, followed by the card, are moved
through the work center, through all production
process’s stages, until they arrive (in the form of
finished part) to final assembly.
The kanban system controls operations and
coordinates and regulates the pull system. There
are two types of kanban cards: the production
kanban card (with product code, description,
batch size, container and work center identifica-
tion, and manufacturing date) and the
transportations kanban card, with the same infor-
mation as the production kanban and some
additional information (destination and departure
date). These two types of kanban allow a simpler,
faster, and self-ruled production and movement
system, which guarantees a better service to
customers, a reduction in inventory levels and a
better coordination (and cooperation) between
workstations.
Since the kanban system exposes the produc-
tion gaps and potential problems, to guarantee the
success of a kanban system successful implemen-
tation, the organizations must undergo some
changes (at the strategic, organizational, and tech-
nological levels). Examples of such changes are:
• Predictable and stable demand.
• Standardization and simplification of pro-
cesses’ workflows and of the design and pro-
duction steps of the products. It allows the
elimination of the unexpected (thus increasing
stability), the reduction in the number of mate-
rials/references to work with (thus reducing
the number of different kanban cards), the
reduction in setup times, and the reduction in
the overall operation time.
• Cell layout (preferably) or process-oriented
layout of workstations.
• Human resources practices that emphasize
education/training and job rotation (in order
to guarantee multiskilled and versatile
workers that can replace (or help) each other
whenever necessary) and the ability to per-
form adjustments, maintenance tasks, or qual-
ity control at the source whenever necessary
(empowerment, autonomous maintenance).
Visual Control and 5S
The visual control, also referred to as “visual
factory,” requires that in all workplaces, there
are simple available signals (sound or visual)
that inform people of what to do, when to do it,
what is going wrong, and who needs help. This
tool aims to help people in better managing and
controlling the processes, avoiding mistakes,
wasting time, and giving them more autonomy,
in a simple and intuitive manner.
L 1574 Lean Thinking
Thus, a visual control procedure should show
how the work should be executed, how things are
kept or stored, how things (e.g., materials and
tools) are used, the level of inventory control,
and display the status of processes. It should
also indicate when people need help, identify
hazardous areas, and support error-proof opera-
tions. Typical examples of control mechanisms
are the visual light signals, sound signals, mark-
ings painted on the pavement to indicate some-
thing, labels, etc.
The 5S is a tool focused on the mobilization of
employees through the implementation of
changes in the workplace, including waste dis-
posal, storage rooms, and cleanliness. The
method is called 5S because, in Japanese, the
words that describe each phase of implementa-
tion begin with the sound of the letter S:
1. Seiri (sort) – Everything that is not necessary
for the activity must be removed from the
workplace.
2. Seiton (set in order, everything in its place) –
Everything must have its place for that, being
required to be found easily.
3. Seizo (cleaning) – A clean workplace sends
the message that there is demand for quality
work.
4. Seiketsu (standardize) – The definition of
standards is essential to maintain the progress
achieved by the group.
5. Shitsuke (discipline, responsibility to sustain)
– Discipline means to work consistently across
organizational rules and standards, storage,
and cleaning.
The permanent concern to identify and then
eliminate waste is one of the central features of
lean thinking. Waste (“muda,” in Japanese), as
seen by this management approach, can be
caused by eight possible sources (Ohno 1988;
Womack and Jones 1996):
1. Overproduction: Producing too much or too
early, resulting in irregular flows of materials
and information, or excessive amounts of
inventories. Suggested tools: heijunka (pro-
duction leveling), with smaller batches andbalanced workstations, continuous flow, just-
in-time production (JIT), and quick tools
changeover.
2. Waiting times: Long periods when people,
equipment, materials, and parts or information
are waiting to proceed, resulting in irregular
flows, as well as long lead times. Some exam-
ples are delays caused by equipment break-
downs, delays in deliveries, bureaucratic
processes, lack of autonomy of people,
etc. Suggested tools: heijunka (production
leveling), product/service-oriented layouts,
setup-time reduction, and balancedworkstations.
3. Transportation: Excessive (and unnecessary)
movement of people, materials, and informa-
tion, resulting in unnecessary costs, delays,
and energy loss. For example, materials are
moved in and out of storage or handle more
than once. Suggested tools: improve transpor-
tation systems (smaller, quicker, and more
flexible), route, and capacity optimization.4. Inadequate procedures: Improper use of
equipment and tools; inadequate choice of
resources or processes; and procedures too
complex, incorrect, or without the necessary
information support. Suggested tools: stan-
dardize and simplify procedures, 5S, poka-yoke (error-proofing) solutions.
5. Excessive amounts of inventories: too much
time in storage, too many places of storage,
lack of information, misplaced products,
increasing costs, and decreasing performance
and the quality of the service provided to the
customer. Suggested tools: heijunka (produc-
tion leveling), JIT, setup-time reduction, and
improve process quality.6. Unnecessary motion: Disorganization of the
workplace, resulting in poor performance and
lack of concern for ergonomic aspects and
issues related to labor conditions. Examples:
delays caused by the need to look for certain
items, information, or people; Suggested
tools: 5S and product/service-oriented layouts
7. Defects (correction): Delays and additional
costs caused by the need to repair, rework,
recount, repack, etc., because work was not
done right the first time. Suggested tools:
poka-yoke (error-proofing) solutions, automa-tion, standardize procedures and materials,
and quality at the source (each worker is
Lean Thinking, Table 1 Basic principles/steps of lean thinking (Adapted from Womack and Jones 1996)
Step Main goal Key questions Next actions
1. Identify
value
Understand what the
customer/end user
perceives as “value”
What features or
attributes in the product
or service the customer
considers worth paying
for?
Identify the features or attributes of the product/service
that do not meet the needs or expectations of the
customers. Those are the potential opportunities for
improvement.
Suggested tools: voice of customer (VoC), qualityfunction deployment (QFD)
2. Map the
value stream
(value chain)
Map the value
stream and identify
waste
What are the steps
(actions/processes)
necessary to meet the
client’s requests (that is
to develop, produce,
and deliver the desired
results)? And those that
are expendable?
In the value stream map, classify activities into three
main groups: activities that (1) create value; (2) do not
create value, but are necessary (as supporting
activities) or unavoidable for the moment, due to
current technology or established management//
working styles (e.g., planning meetings and preventive
maintenance); and (3) do not add value and are totally
expendable
Suggested tools: value stream mapping (VSM), eightsources of waste framework
3. Create flow Create a continuous
production flow,
with minimal
buffers between
steps of the process
How can we align
production with
customer demand?
Production pace set to takt time (calculated as the
quotient between planned production time and
customer demand)
Suggested tools: heijunka
4. Establish
pull
Produce only what is
needed when needed
in order to prevent
the accumulation of
inventories (waste)
When does the
customer want the
product to be delivered?
Production only to respond to specific demand
Suggested tools: just-in-time production, kanbancontrol system, setup-time reduction (and SMED tool)
5. Seek
perfection
Continuously seek
ways to create value,
while the waste is all
eliminated
How can even more
value be created?
Continuous improvement (kaizen) of the products/
services offered to the customers and of the processes
Suggested tools: 5S, poka-yoke (error-proofing)solutions, procedures standardization, PDCA cycle
Lean Thinking 1575 L
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responsible for the quality of his own workbefore it is sent to the next step of the process).
8. Unused human potential: unused employee
minds and creativity. Suggested tools:
empowerment and training.
In addition to “muda,” lean thinking considers
the existence of two other dimensions of inter-
vention in the battle against waste and wasteful
practices (Hill 2011): “mura” (imbalance or
unevenness in the pace or the quality of the output
of an operation) and “muri” (to overburden or to
cause strain on equipment or operators). To elim-
inate “muri,” the solution is the pull approach,
implemented by means of a just-in-time produc-
tion system. To identify and eliminate “mura” is
necessary to standardize processes, to level the
production (heijunka), in order to eliminate their
variability.
According to Womack and Jones (1996), the
five basic principles/steps of lean thinking are
(1) identify value, (2)map the value stream, (3) cre-
ate flow, (4) establish a pull approach, and (5) seek
perfection. They are summarized in Table 1.
Hines et al. (2004) emphasize the difference
between lean at a strategic level (lean thinking)
and lean at an operational level (lean production),
with its set of tools that focus in providing value
for the customer (see Fig. 2). They also state that
other improvement approaches (such as six
sigma, theory of constraints, total productive
maintenance (TPM), total quality control/
management (TQC, TQM), etc.) “can be (and
have been) used in conjunction with lean” since
“any concept that provides customer value can be
in line with a lean strategy” (Hines et al. 2004,
p. 1006).
CapacityDrum-Buffer-Rope,
TOC
ResponsivenessAgile, Postponement
LeanThinking
5 Principles
LeanProduction
LevelScheduling,
Kanban,Takt Time,
etc.
Variability6σ, SPC
AvailabilityTPM
Prod. ControlMRPl+II, ERP, APS
QualityTQM, TQC
OperationalLevel (Tools):
Eliminate Waste
Strategic Level:Understand Value
Lean Thinking, Fig. 2 A framework for lean (Hines et al. 2004)
L 1576 Lean Thinking
Key Issues
Womack et al. (1990) state that the success of
Japanese firms is due to lean thinking, their core
management philosophy. Lean thinking aims to
combine the craft production advantages of
highly skilled and customized work with the
mass production low cost advantages. It does so
through the elimination of the activities that, in
the value stream, do not add value to the customer
or end user (“muda”), through the standardization
of unbalanced processes (“mura”) and through
a better capacity – load alignment in overburden
processes (“muri”).
Lean thinking, as a minimizing waste manage-
ment philosophy, may be related to some of the
UNGC CSR principles (UNGC 2010), namely,
those in the environmental area. However, its
main focus is still the value created for the cus-
tomer, by improving the quality of products and
services and reducing costs and delays, not envi-
ronmental efficiency. The development of prac-
tices to reduce energy consumption, for example,
is still not considered in many of the lean organi-
zations as a tool to reduce waste, nor is energy
included in the list of sources of waste (Ohno
1988; Womack and Jones 1996), which has
been extensively used by lean thinking practi-
tioners. Wills (2009) suggested a similar list
with seven environmental wastes (energy,
water, materials, garbage, transportation, emis-
sions, and biodiversity) and a set of tools, based
on the tools of lean, to help to reduce waste and
increase the “value for the environment.”
In an influential study, Rothenberg et al.
(2001) examined the relationship between lean
manufacturing practices and environmental per-
formance as measured in terms of air emissions
and resource use. Their findings suggest that
there is a negative association between lean man-
agement and reduction of air emissions of vola-
tile organic compounds. In particular, they found
that lean plants are more likely to resist the large
capital expenditures for pollution abatement
equipment that would reduce emissions beyond
what is required by current regulation. This is so
because some goals of lean production may be in
conflict with environmental performance. For
example, given that the use of water in some
processes is critical to product quality, lean plants
are likely to trade off greater water consumption
in those areas for superior quality (Rothenberg
et al. 2001).
Although the majority of the main benefits of
lean thinking reported by Womack et al. (1990)
pertain to operational efficiency, some of them,
in particular the reduction of accidents at work
and the increased involvement, motivation, and
Lean Thinking 1577 L
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participation of people, are related to CSR
issues. Womack et al. (1990) seem to have
a somewhat optimistic idea of the impact of
lean thinking managerial style on worker con-
ditions, as do other authors. For instance, Zadeh
(2004, p. 8) states that “because lean
manufacturing requires employees to learn
new skills, it would put upward pressure on
wages and improve management’s behavior
toward workers.” Among the implications of
lean thinking and just-in-time on the factory,
it is possible to count the shrinkage in the num-
ber of traditional unskilled manual jobs and the
blurring of the distinction between blue- and
white-collar work in the jobs that remain in
consequence of the increasing reliance on new
technology for production and stock control
(Huzzard 2003).
There are, however, researchers that point out
several detrimental consequences for the
employees. For example, it may be said that
responsibility for setting standard operating
times remains outside the control of the work
group (Huzzard 2003). The lean thinking
approach follows the principles of standardiza-
tion, economies of scale, and Tayloristic methods
of work organization. It exhibits high intensity of
work, central control over flows and paces, and
short cycle times, and has been described as
“management-by-stress” approach (Huzzard
2003).
Critics of lean thinking point out several
other negative aspects (Huzzard 2003): it seg-
ments the workforce, thus undermining solidar-
ity; it involves a broadening of skills, but not
a deepening of them; the kaizen process implic-
itly involves the establishment of a new division
of labor with an elite performing the kaizen tasks;
growing wage differentials between core and
peripheral (largely female) workers; unrestricted
duration and flexibility of working hours; and
a lack of a role for unions in work design.
Huzzard (2003, p. 34) concludes that “if such
accounts are a more accurate depiction of
organizational realities under lean thinking, it
seems difficult to envisage how it might be
compatible with improvements in the quality of
working life.”
Future Directions
The “reduce waste and wasteful practices while
improving the value creation” philosophy is, in
theory, easily transferred to any organization,
independently of the sector in which it operates.
However, tools and main methods of lean think-
ing are not easily transferred to certain types of
organizations, like the services organizations
(healthcare, financial, knowledge-intensive,
etc.), the low-volume manufacturing organiza-
tions, and organizations in the public sector. In
effect, there is a need to adapt tools and methods
(and create new ones) for these kinds of organi-
zations since they only use a small number of
tools from lean production (such as 5S, VSM).
There is also a need to rewrite the list of eight
types of waste for these organizations since the
traditional list, originally published by Ohno
(1988), is not suited for them.
The application of lean to a supply chain is
also a topic that has been receiving great atten-
tion. Issues like the international sourcing oppor-
tunities, with long lead times, the high number of
actors, the bullwhip effect, and the diversity of
organizational styles are somewhat difficult to
tackle. In the same way, different sections of the
supply chain may be affected by different types
of “muda,” and the traditional accounting sys-
tems do not recognize “muda” in the same way
lean thinking does (specially with inventories,
time, and rework). Therefore, the identification
and elimination of “muda” may be difficult and
that is why much development is still expected in
this area. The same happens to the current trend
of greening operations and supply chains.
There is also an ongoing debate concerning
the concepts of lean supply chain, agile supply
chain, and leagile supply chain. Some authors
argue that they are mostly the same concept;
others state the differences between them.
There is a need for clarification and theory
consolidation.
Another important future development per-
tains to CSR aspects related to lean thinking.
Lean can potentiate the greening of operations
and supply chains due to its waste reduction
approach. However, its main focus is to improve
L 1578 Learning About the “Life” of Various Populations
value to the customer, and there is still work to be
done when it comes to adapt lean thinking to
consider a triple bottom line approach in the
definition of value.
Cross-References
▶Competitive Advantage
▶Corporate Social Responsibility
▶Kaizen
▶ Plan-Do-Check-Act (PDCA) Cycle
▶ Supply Chain Management
▶TQM
▶Waste Management
References and Readings
Hill, A. (2011). The encyclopedia of operations manage-ment. Upper Saddle River, NJ: Pearson Education.
Hines, P., Holweg, M., & Rich, N. (2004). Learning to
evolve: A review of contemporary lean thinking. Inter-national Journal of Operations & Production Man-agement, 24(10), 994–1011.
Huzzard, T. (2003). The convergence of the quality ofworking life and competitiveness – A current Swedishliterature review. Stockholm: National Institute for
Working Life.
Ohno, T. (1988). The Toyota production system: Beyondlarge-scale production. Cambridge, MA: Productivity
Press.
Rothenberg, S., Pil, F. K., & Maxwell, J. (2001). Lean,
green, and the quest for superior environmental per-
formance. Production and Operations Management,10(3), 228–243.
UNGC. (2010). The UNGC Annual review. United
Nations Global Compact.
Wills, B. (2009).Green intentions: Creating a green valuestream to compete and win. Boca Raton: CRC Press.
Womack, J., & Jones, D. (1996). Lean thinking. NewYork: Simon & Schuster.
Womack, J., Jones, D., & Roos, D. (1990). The machinethat changed the world. New York: Rawson
Associates.
Zadeh, S. (2004). The path to corporate responsibility.
Harvard Business Review, 12, 2–10.
Learning About the “Life” of VariousPopulations
▶Ecology
Learning of the Life Cycles of VariousPopulations
▶Ecology
Learning Organization
▶ Integrative Management Approach of CSR
Learning Systems
▶Communities of Practice
Legal and Ethical Responsibilities
▶Compliance/Legal Compliance
Legal Compliance
▶Compliance/Legal Compliance
Legal Theory
▶Legitimacy Theory
Legislation
▶New Zealand Resource Management Act 1991
Legitimacy
▶License to Operate
▶ Social License
▶Trust
Legitimacy Theory 1579 L
Legitimacy Theory
Adriana Schiopoiu Burlea1 and Ion Popa2
1University of Craiova, Craiova, Dolj,
Romania2Academy of Economics Studies,
Bucharest, Romania
Synonyms
Corporate governance; Institutional theory;
Legal theory; Sustainable development; Trust;
Voluntary social and environmental disclosures
L
Definition
Suchman (1995, p. 574) considers that “Legitimacy
is a generalized perception or assumption that
the actions of an entity are desirable, proper, or
appropriate within some socially constructed
system of norms, values, beliefs, and definitions.”
In our conception, legitimacy theory has the
role of explaining the behavior of organizations
in implementing and developing voluntary social
and environmental disclosure of information in
order to fulfill their social contract that enables
the recognition of their objectives and the survival
in a jumpy and turbulent environment.
Social perceptions of the organization’s
activities are reported in accordance with the
expectations of society. In the situation when the
organization’s activities do not respect social and
moral values, the organization is severely
sanctioned by society; these sanctions may
even lead to the failure of the organization. The
organization has to justify its existence through
legitimate economical and social actions that do
not jeopardize the existence of the society in
which it operates, nor the natural environment.
Introduction
The new economic, social, and environmental chal-
lenges given to organizations and to governments
mean that they have to respect the rules, values, and
norms of society and to voluntarily disclose social
and environmental information in order to prove
their compliance. Legitimacy theory has the role of
providing an explanation of the disclosure of social,
economic, and environmental information.
The global financial crisis and the instability of
financial markets put pressure on organizations to
reevaluate their value systems and to emphasize
the importance of legitimacy. The correlation of
tangible financial resources with intangible
legitimacy resources is important for shaping
a new organizational vision. Many scholars have
criticized the promotion of legitimacy theory in this
respect (Mobus 2005; Owen 2008). Legitimacy
theory was sometimes seen only as a “plausible
explanation of managerial motivations” without
any real effort to determine how a disclosure “. . .may or may not promote transparency
and accountability towards non-capital provider
stakeholder groups” (Owen 2008, p. 248).
Legitimacy theory is a theoretical construct used
for making viable predictions. Thus, organizations
must voluntarily disclose social and environmental
information in order to consider their legitimacy as
a resource. The relationship between legitimacy
and resources attracted and still attracts the
attentions of social and accounting researchers
(Lindblom 1994; Mobus 2005; Tilling and
Tilt 2010). In their opinion, the disclosure of
information must be accompanied by concrete
actions realized in compliance with social and
environmental norms and values.
The abstract nature of legitimacy makes it very
difficult to discover the mechanism by which the
organizations are motivated to voluntarily disclose
social and environmental information. The organi-
zation often associates the symbolic representation
of its image with its culture and considers that in
order to attain legitimacy it is necessary only to
improve its culture and to promote it in the external
environment.
Legitimacy theory has a very rich disciplinary
background based on management theory, institu-
tional theory, and stakeholder theory. Strategically
speaking, the sustainability of legitimacy theory is
based on the management heritage that connects
traditional norms and values with modern ethics.
L 1580 Legitimacy Theory
Therefore, this chapter lays out the different
answers to the following questions:
• When should an organization be considered
legitimate?
• When is an organization considered legitimate?
Who affect its legitimacy?
• Is legitimacy an objective or an end for the
organization?
Paradoxically, the crucial role of the
legitimacy of organizations, institutions, and
society’s survival is motivated, unfortunately,
by negative social and environmental phenomena
generated by the lack of legitimacy. The
legitimacy literature suggests that the
survival of an organization depends on its
legitimation processes and on how the continuous
pressures and challenges are managed. The
purpose of the legitimation processes is to obtain
and maintain the stakeholders’ approval.
Key Issues
Why Does an Organization Need Social
Approval in Order to Develop Its Legitimate
Activities?
The entire life cycle of the organization reflects on
the organization’s image. Legitimacy, as a status or
condition (Lindblom 1994), cannot be confused
with any institution because the legitimacy exists
only by power of the organization’s credibility and
virtue. The legitimacy operates in an institutional-
ized environment created by the stakeholders,
which exert their internal and external pressure.
Legitimacy theory, even if it is used for voluntary
disclosure of social and environmental norms and
values, does not have to be considered by the cor-
poration as a panacea that solves their social and
environmental problems in order to demonstrate to
the stakeholders that the activity they develop is
ethical and respects certain norms and values.
On the contrary, legitimacy has been considered
as one of the conditions for the acceptance of
corporations’ actions by stakeholders.
It is not difficult to identify organizational
motives for disclosure of environmental informa-
tion in the media and in corporate annual reports
because these motives are found in the life cycle
of the organization, which is reflected in its
reputation and pressure from external and
internal stakeholders.
The real difficulty consists of the homogeni-
zation of the organization’s activities, norms,
values, and culture with the norms, values, and
culture of the society in which it acts.
Taking into consideration that legitimacy con-
sists of a final social acceptability, we can affirm
that legitimacy becomes an end for the organization
and, consequently, is a prefinal objective because
the finality of this objective means the failure of the
organization.
Legitimacy theory acts on two levels:
• At an organizational level, we have strategic
legitimacy theory (SLT).
• At amacro level, there is institutional legitimacy
theory (ILT).
The strategic level of legitimacy develops in the
internal environment of the organization, and
the institutional level of legitimacy develops in the
external environment. Blending those two levels
falls upon the reflection of the organization’s
image in society. Thus, the fact that an organization
has legitimacy means that it is perceived and
accepted by the stakeholders and society as having
the right to exist and perform moral activities.
The acceptance is a mutual process: on one
hand, an organization has legitimacy if it is
accepted by the society, and on the other hand,
the society is accepted by an organization if it
offers some social and economic advantages.
The expectations of society are not only
moral but also economic because an organiza-
tion, operating within a certain society, is mor-
ally obliged to ensure the survival and prosperity
of the respective society. On the other hand,
society has to provide the appropriate human,
material, and legal resources for the organiza-
tion in order to assure normal operating condi-
tions and profit.
When the organization considers that society
can no longer provide the appropriate level of
resources (e.g., competent human resources), it
leaves it (delocalization). When the same organiza-
tion does not obey the rules of the same society, it
risks losing its legitimacy and even its existence is
jeopardized.
Legitimacy Theory 1581 L
L
The credibility of an organization depends on its
legitimate activities in consonance with the moral
rules of the society. The power of an organization
consists of its legitimacy that is not necessarily
a legal validity, but a tacit respect of legal and
voluntary moral norms (Gunningham et al. 2004).
Legitimacy Types
From the affirmation and justification stages of its
existence until ensuring its own survival, an orga-
nization goes through different types of legitimacy
(Zucker 1987; Suchman 1995) that are justified by
the multiple types of perception of this mechanism
according to the present interests of society and
individuals and by the importance that society and
the stakeholders give to the organization.
First of all, the organization needs to attain
a cognitive legitimacy, which is intended to expandits moral legitimacy that justifies its social exis-
tence, and therefore, in order to ensure its own
survival (in context with internal and externallegitimacy), the organization is involved in the
construction and development of its pragmatic
legitimacy (see Fig. 1).In Fig. 1, the different types of legitimacy are
correlated with organizational internal and exter-
nal environments. The reflection of the organiza-
tional image in its external environment enhances
or repairs cognitive legitimacy. The organization
aims to achieve recognition from its main stake-
holders (e.g., employees, customer, media, and
financial institutions) for short-term projects with
an immediate and powerful visibility. These
short-term projects are designed to prepare the
ground for sustainable capacity development.
Legitimacy operates at many levels, but for an
organization, it is very important to act in conso-
nance with industry standards. For example, the
environmental incidents produced by companies
like Exxon Valdez, Shell, BHP Limited, and
Alcoa have had a negative impact on the entire
industry image, being perceived as a pollutant and
irresponsible industry. The negative media cover-
age of these incidents generated an increase of
concerns of society about social and environmental
responsibilities and put pressure on the organiza-
tions to include detailed disclosure of the environ-
mental information in their annual report. In this
context, the legitimacy is an important intangible
resource, and like any resource, it must be man-
aged carefully, especially if the organization’s
image has been affected by major incidents
(Tilling and Tilt 2010).
The economic, social, and environmental chal-
lenges require organizations to manage responsibly
some risks which may affect their legitimacy. The
other corporate scandals (i.e., BP Oil Spill, Bhopal
Disaster, Parmalat, Arther Andersen, HealthSouth
Corporation, KPMG, The AIG, and Enron) are
the consequences of not taking into consideration
legitimacy theory.
Internal and external knowledge are put
together for improving the life cycle of the legiti-
macy, taking into consideration past experiences
and future strategies. The interconnection between
the legitimacy types and the internal and external
environment of the organization proved the impor-
tance of moral legitimacy in sustaining pragmatic
legitimacy. The strong relationship that exists
between the organization and the values of the
society in which it activates makes the solidity of
the legitimacy to be based on viable inputs and
outputs of the organization and often acts as
a constraint factor for the other organizational
activities, but in consensus with society’s values
(Dowling and Pfeffer 1975).
The quality of the legitimacy depends on the
management of the organization that has the role
to assure the interaction between the internal and
external environment and to prevent, in time, the
erosion of its image and implicitly of its pragmatic
legitimacy. Therefore the management of the orga-
nization and the management of legitimacy are
interrelated and critically influence one another to
fulfill economic, social, and environmental goals.
Aldrich and Fiol (1994) configured
social-political legitimacy as a process by which
all stakeholders, including the government, should
accept and support the activity of an organization,
only if it is in consent with existing norms, rules,
and national and international laws.
Public pressure should not be perceived as
a punitive factor or in a negative sense; it should
be considered a support factor for the organiza-
tion’s legitimacy and in the reduction of the risks
which have the potential to negatively impact its
External environment(society looking in)
Internal environment(managers looking out)
Cognitive Legitimacy
Moral Legitimacy
Pragmatic Legitimacy
Enhance/ Defence/Repair
Create/Gain
Mentain/Extend
Legitimacy Theory,Fig. 1 The life cycle of
legitimacy
L 1582 Legitimacy Theory
image. The improvement of the communication
process between the organization and society
should be realized both by actions motivated by
legitimation tactics and by disclosure of informa-
tion in the annual report.
The Instability of Legitimacy
Legitimation is the process by which an organiza-
tion obtains its legitimacy. During this complex
process, the legitimacy passes from the creation
and extension stages to the maintaining one and
continues with actions that justify, motivate, and
defend its position. Therefore, “organisational legit-
imacy is a valued but problematic resource”
(Ashforth and Gibbs 1990, p. 191) and is difficult
to attain, but it is more difficult to maintain and
improve.
Cognitive legitimacy is the foundation of the
visible symbols of legitimacy. Thus, cognitive
legitimacy is difficult to attain and, at the
same time, it is sustainable only if it exceeds
a minimum threshold. If cognitive legitimacy is
difficult to attain, then pragmatic legitimacy is
difficult to control because of its external visibility,
and moral legitimacy is difficult to overcome
because of its normative evaluation (see Fig. 1).
In the present economic and social conditions,
when the organizations operate in an increasingly
turbulent environment, legitimacy, especially
pragmatic legitimacy, becomes increasingly unsta-
ble. To survive in this unstable environment, the
organization must adhere to norms and overcome
the superficial barriers raised by conformity
(Suchman 1995). The organization must pass
from a symbolic and inaccurate disclosure to
a formal compliance disclosure in its effort to
gain and maintain legitimacy.
The fact that stakeholders’ pragmatic legitimacy
influences the organization’s pragmatic legitimacy
implies a huge effort for the organization to survive.
The normative standard of the organization’s
conduct constructs the moral legitimacy and
contributes to the creation of an organizational
culture that supports the decision-making process.
The degree of stability of the organizational
legitimacy depends on the following factors:
• The quality of the organizational management
• The efficient allocation of resources and
efficient use of the scarce resources
• The solidity of normative standards of conduct
• The increase of the visibility of socially respon-
sible activities in the external environment
simultaneously with its regulatory autonomy
The instability of legitimacy is generated by the
fluctuation of the organizational power and author-
ity over its stakeholders. The positive relationship
that exists between legitimacy and power forces the
organization to take into consideration the approval
or disapproval of the stakeholders in the decision-
making process. This interdependence escalates
organizational legitimacy into a phenomenon
difficult to manage, but legitimacy can be
Legitimacy Theory 1583 L
L
constructed over time, taking into account the
evolution of social norms and values.
The instability of legitimacy is present in every
phase of the legitimacy process. For example,
establishing and maintaining legitimacy are two
phases of the legitimacy process in which the
organization needs to win and keep the support
of the stakeholders for its activities. In the next
phases, extending and defending legitimacy, theorganization must fight against all challenges.
Ashforth and Gibbs (1990, p. 180) consider that
extending legitimacy is important “to win the
confidence and support of wary potential
constituents” and, in the mean time, legitimacy
must be defended from the negative impact of
corporate scandals. Thus, the strategic nature of
voluntary social and environmental disclosures is
reflected in the annual reports.
The intangible form of legitimacy makes more
difficult the iterative process of voluntary social
and environmental disclosures. Therefore, the
instability of legitimacy is a ubiquitous process
that marks the organization’s activities from
beginning to end.
The Relationship Between Legitimacy Theory
and Stakeholder Theory
The power exercised by stakeholders on the legiti-
macy of an organization has been recognized both
by the organizations and society. Hybels (1995,
p. 243) considers that relevant stakeholders influ-
ence the organizational legitimacy by the control
they exercise on the organization’s activities.
First of all, the power of media is widely recog-
nized as having the strongest influence on organi-
zational legitimacy. The customer perceives
organizational legitimacy not only by its activities
but by the image that the media promotes in the
organization’s external environment. Investorsperceive legitimacy as a threat while they are
involved in the legitimacy process. These dual
positions of investors can generate a potential
conflict between the following actors: manager
and investors, manager and media, and investors
and media. Community expectations are changing
every day and organizational legitimacy depends
on its degree of adaptation to a dynamic
environment.
Organizational legitimacy in stakeholder rela-
tionships (Mitchell et al. 1997) is based on the
following elements:
• The mutual contractual relationship
• The stakeholders’ interest on the organization
• The risk assumed by stakeholders
• The moral claim
The idea is that the stakeholders do not confer
legitimacy on an organization, but its activities are
able to provide legitimacy. The role of stake-
holders is to accept the legitimacy and to sustain
the existence of the organization. Therefore, the
stakeholders’ perceptions of the activities of the
organization must be in consensus with their
needs. The pressure that stakeholders exert on the
organization does not lead to the attaining of the
organizational legitimacy but is a barrier between
ethical and unethical activities of the organization.
The role of active and passive stakeholders in
obtaining andmaintaining legitimacy is reflected in
the support of organizational socially responsible
practices (Mitchell et al. 1997; Suchman 1995).
Stakeholder expectations are motivated by the
message conveyed by a responsible image of the
organization. The lack of transparency of social and
environmental activities has a negative impact on
stakeholders’ behavior. For example, if the
stakeholders do not have an overview of social
environmental activities of organization, they
cannot measure the results and their objectives are
difficult to achieve. Moreover, the negative
incidents reflected by corporate scandals lead to
a strong negative reaction from both active and
passive stakeholders.
The influence of stakeholders on the intensity
of coverage of a negative phenomenon is recog-
nized as an amplifying factor of the negative
impact. For example, the influence of media in
spreading a negative phenomenon depends on
the intensity of the attention paid by the media to
this phenomenon. As a phenomenon is given more
attention, the greater is the negative impact on the
community. The community perceives the magni-
tude of the negative phenomenon not depending
on its real consequences but according to how the
media presents it. Legitimacy theory is the tool
that manages the stakeholders’ perceptions of the
needs for attaining the organizational legitimacy.
L 1584 Legitimacy Theory
Thus, legitimacy offers to an organization the right
to perform its activities in consensus with stake-
holders’ interests (Suchman 1995).
Future Directions
Strategic actions will be strictly bounded by the
institutional environment and by accountability
requirements. Therefore, it is important to note
that the long-term impact of legitimacy on the
economic and financial performance of the organi-
zation will generate many internal conflicts of the
multidimensional construct of legitimacy, which
will influence the transition from legitimacy to
illegitimacy and from illegitimacy to legitimacy.
Thus, the role of independent media in driving the
legitimacy of the organizations will be very impor-
tant only if accompanied by the other stakeholders,
community, and government regulators.
Other studies should concern the role of
the stakeholders in the manipulation of the
community’s perception of the organizational
legitimacy. Stakeholders can act to prevent the
loss of legitimacy and not destroy the image of an
organization. The role of stakeholders becomes
a vital one in the prevention and reduction of
illegitimate risks, and the organizations will have
the opportunity of a precise action at every level of
legitimacy based on the evolution and changes of
the values and expectations of society as a whole.
In this context, trust becomes an element in shaping
organizational legitimacy, and it reflects organiza-
tional behavior.
Legitimation strategy is a very important
mechanism that influences the perception of
the organization by its stakeholders. Thus, the
factors that help or impede the organization in
attaining, maintaining, and defending its legiti-
macy should be explored through empirical
investigations.
Cross-References
▶Business for Social Responsibility
▶Business Judgment Rule
▶Compliance/Legal Compliance
▶Ethical CSR
▶Management
▶ Servant Leader/Servant Leadership
▶ Stakeholder Theory
▶Trust
References and Readings
Aldrich, H. E., & Fiol, C. M. (1994). Fools rush in? The
institutional context of industry creation. Academy ofManagement Review, 19, 645–670.
Ashforth, B. E., & Gibbs, B. W. (1990). The double-edge
of organizational legitimation’. Organization Science,1, 177–194.
Dowling, J., & Pfeffer, J. (1975). Organizational legiti-
macy: Social values and organizational behavior.
Pacific Sociological Review, 18, 122–136.Gunningham, N., Kagan, R., & Thornton, D. (2004).
Social licence and environmental protection: Why
businesses go beyond compliance. Law and SocialInquiry, 29, 307–341.
Hybels, R. C. (1995). On legitimacy, legitimation, and
organizations: A critical review and integrative
theoretical model. Academy of Management Journal,Best Conference Proceedings, 38, 241–245.
Lindblom, C. K. (1994). The implications of organiza-
tional legitimacy for corporate social performance
and disclosure. In Critical Perspectives on AccountingConference, New York.
Mitchell, R., Agle, B. R., & Wood, D. J. (1997).
Toward a theory of stakeholder identification and
salience: Defining principles of who and what really
counts. Academy of Management Review, 22,853–886.
Mobus, J. L. (2005). Mandatory environmental disclo-
sures in a legitimacy theory context. Accounting,Auditing, and Accountability Journal, 18(4),492–517.
Owen, D. (2008). Chronicles of wasted time? A personal
reflection on the current state of, and future prospects
for social and environmental accounting research.
Accounting Auditing and Accountability Journal,21(2), 240–267.
Suchman, M. (1995). Managing legitimacy: Strategic and
institutional approaches. Academy of ManagementReview, 20(3), 57l–610.
Tilling, M. V., & Tilt, C. A. (2010). The edge of legiti-
macy: Voluntary social and environmental reporting
in Rothman’s 1956–1999 annual reports. Account-ing, Auditing, and Accountability Journal, 23(1),55–81.
Zucker, L. G. (1987). Institutional theories of
organizations. Annual Review of Sociology, 13,443–464.
License to Operate 1585 L
Legitimate Authority
▶Authority Versus Bureaucracy
Legitimate Power
▶Authority Versus Bureaucracy
Lending for Poverty Eradication,Professor Muhammad Yunus
▶Grameen Bank
L
Leveraged Buyouts
▶ Private Equity
Liability
▶Accountability
▶ Stakeholder Accountability
Liability to Loss in Property
▶Risk Management, Environmental
Liberal Egalitarianism
▶Ethical Theories
Libertarianism
▶Ethical Theories
License to Operate
Anne Ellerup Nielsen
Department of Language and Business
Communication, Centre for Corporate
Communication, Aarhus, Denmark
Synonyms
Legitimacy; Permission to operate; Social license
to operate
Definition
In many textbooks and articles about Corporate
Social Responsibility (CSR), “license to operate”
is a frequently used concept used to indicate the
limit of behavior established for a company to
gain recognition and acceptance in its surround-
ings. More specifically, a “license to operate”
may be defined as “Grant of permission to under-
take a trade or carry out a business activity, sub-
ject to regulation or supervision by the licensing
authority.” However, this definition does not take
into account the numerous social aspects and the
dynamics embedded in the concept from
a theoretical and practical perspective. In the
following text we get deeper into the meaning
of the concept from an institutional and legiti-
mate perspective.
Introduction
In most countries, business licenses are granted to
companies by government authorities on the
basis of their professional competence and abili-
ties to meet certain standards set by law or regu-
lation. However, in a CSR context, the concept of
“social license” has emerged as more pertinent
concept which stresses the growing societal
dimension integrated in business management
and operations. “Social license” is addressed as
a right to operate according to “the degree to
L 1586 License to Operate
which a corporation and its activities are accepted
by local communities, the wider society, and
various constituent groups” (Gunningham et al.
2003). Following this notion, a “social license to
operate” becomes a complement to the official
legally based license issued by government
authorizes in that a social license is granted
beyond compliance. In the social sense and
since there are no one-fits-all formal limits for
an organization to receiving “a license to oper-
ate” it is a fluid and socially constructed concept
based on cultural habits and conventions.
Key Issues
“License to operate” is paramount in new institu-
tionalism, which has gained an important posi-
tion in organizational theory. According to
sociologists Powell and Di Maggio, corporations
are considered as social institutions that require
institutional legitimacy in order to survive
(1991). Adopting a new perspective on organiza-
tion theory and sociology defined as “new insti-
tutionalism” they reject classical economics and
seek to explain organizational behavior as
a product of cognitive and cultural changes
(ibid). New institutionalism deals with the influ-
ence that institutions have on human behavior
through rules, norms, and established conven-
tions. The increasing pressure that organizations
meet from their stakeholders with regard to tak-
ing socially responsible initiatives is challenging
their legitimacy and only balanced by their ability
to respond to these stakeholders’ tacit needs and
expectations. It is this ability that many compa-
nies, scholars, journalists, and analysts refer to as
“a license to operate.” “License to operate” is
thus addressed as a relevant concept in political
and more particularly in institutional theory.
According to the neoclassical model of market
economy, businesses’ primary role is to make
profits for their shareholders and to create eco-
nomic wealth for the business benefiting society
as a secondary spin-off of their activities. Within
this reasoning, social problems are to be
addressed and handled by governments. A large
body of CSR literature which saw the light of day
in the 1960s and 1970s is highly inspired by
neoclassical thinking and liberal democracy in
which an instrumental and utility maximization
approach to CSR management research and prac-
tice is predominant. However, with the last
20 years of globalization and increased empow-
erment of corporations, winds have blown with
more political, integrative, and ethical
approaches toward businesses’ role in society.
According to Garriga and Mele (2004) who
have mapped the theoretical landscape of CSR,
these global changes have, if not replaced, at least
supplemented the instrumental approach to busi-
nesses’ CSR management research and practice.
Among these the political approach in which the
“license to operate” is a cornerstone focuses par-
ticularly on businesses and their connection and
interaction with society. In order to keep their
“license to operate,” businesses must hence dem-
onstrate their legitimacy by responding to stake-
holders in their local and global environment.
Garriga and Mele (2004) point out two major
political theories which have influenced organi-
zations’ role and responsibility in the local and
global society. Corporate constitutionalism and
corporate citizenship have both broadened the
scope of corporate responsibility and paid atten-
tion to the impact of organizations’ social power
outside organizational borders.
Corporate Constitutionalism and Corporate
Citizenship
The growing institutional status of organizations
can be considered in light of the changes of soci-
ety that have taken place during the last two to
three decades, especially in European countries.
In their article about implicit and explicit CSR,
Matten and Moon (2008) have studied sociolog-
ical aspects of CSR including how the economic
and political changes have influenced corporate
social behavior. Politically, the decreasing capac-
ity of the welfare state to handle social problems,
for example, job integrating and unemployment,
has stimulated the corporate world to take part in
restoring the legitimacy of the political system.
Furthermore, education, health care, and environ-
mental issues have inspired the proliferation of
actors and networks, decentralized processes, and
License to Operate 1587 L
L
self-regulation of businesses resulting in a vague
of deregulation and privatization during the
1990s and 2000s in many countries across
Europe. Financial changes in the European econ-
omies also partly explain the European busi-
nesses’ increasing contribution and interference
in social regulation. The growth of socially
responsible investment and focus on CSR aspects
by investment companies motivate business to
engage in CSR programs in order to enhance
their shareholder image and position themselves
as good corporate citizens. Finally, cultural
changes, that is, the increasing expectations and
hence standardizations of health and safety, envi-
ronment policies and focus on human rights, etc.,
are behind the more explicit focus on CSR in
Europe. European businesses’ CSR practices,
hence, overlap with the American CSR model,
where businesses since the 1920s and in the form
of corporate philanthropy have undertaken mas-
sive corporate social actions that from
a European perspective may seem overwhelming
and usually an issue left in the hands of national
governments. Yet, in recognition that national
governments can no longer on their own bear
the burden of societal issues resulting from
increased immigration, fiscal pressures, etc.,
without contribution from the corporate world,
European business have been exposed to norma-
tive, isomorphic, and mimetic pressures. Isomor-
phism is rooted in mathematics and signals that
one structure can be extended from one domain to
another so that if two objects are isomorphic, then
a property which is true of one object is also true
of the other. This pressure that has grown with the
transfer and imitation of behaviors from business
practices in one environment to those of another
has forced companies to adopt more explicit CSR
procedures and policies adapted from American
corporations to a European and more govern-
ment-driven context than in the USA (Matten
and Moon 2008). Companies’ investment in
legitimacy is thus constantly negotiated in rela-
tion to the changes and emergences taken place
in the contextual environment where they oper-
ate. Consequently, what it took to earn a license
to operate and deserve legitimacy 20 years ago
is thus incomparable with what it takes in
today’s global world where a growing number
of social activities and projects are initiated and
managed beyond the power and influence of
national governments. But how does the
“licence to operate” concept relate to the con-
cept of legitimacy? This will be the main issue
in the following section.
Legitimacy
As it appears above, legitimacy and a “licence to
operate” may be considered as two sides of the
same coin. Legitimacy is a multifaceted concept
that is conceived differently in different contexts
according to the situation and the problem to
which organizations are confronted. Its overlap
to the “license to operate” concept is obvious.
Suchman (1995) who has demonstrated a special
interest in studying legitimacy, characterizes it
as a “process whereby an organization justifies
to a peer or superordinate system its right to
exist, reintroducing the ‘grant’ or ‘permission’
element we saw above in the definition of
‘license.’” However, the two concepts are not
completely overlapping. While legitimacy
focuses on how an organization is perceived by
its stakeholders at any point in time, a “license to
operate” is something that the organizations has
acquired or owns according to its doings in the
eyes of its stakeholders. Suchman defines legit-
imacy as “a generalized perception or assump-
tion that the actions of an entity are desirable,
proper, or appropriate within some socially
constructed system of norms, values, beliefs
and definitions” (Suchman 1995). The definition
of legitimacy as a social construction stresses its
fluid and contextual nature as a correlation
between a set of behaviors and shared beliefs
of some social group, whereby there is no guar-
antee for an organization to retain legitimacy by
its constituencies unless they share common
interpretations of what are the beliefs, attitudes,
and values that are shared and to which extent
they are shared. Following Suchman, corporate
legitimacy may take three forms, pragmatic,
cognitive, and moral legitimacy, and is
grounded in three types of reasoning or assess-
ments: (a) pragmatic assessments of stakeholder
relations, (b) normative evaluations of moral
L 1588 License to Operate
propriety, and (c) cognitive definitions of appro-
priateness and interpretability (Suchman 1995).
(a) Pragmatic legitimacy articulates an exchangeof legitimacy between an organization and its
stakeholders which they value in terms of
their self-interested benefits from the organi-
zation’s activities. In order to ascribe prag-
matic legitimacy to an organization,
stakeholders scrutinize the practical conse-
quences (e.g., cost savings or payment) of
these activities on them. Consequently, the
organization has an interest in influencing
stakeholders and the wider public’s assess-
ments of the benefits they may gain from the
social engagements of the organization.
(b) Moral legitimacy is based on a positive nor-
mative judgment of the organization and its
activities. While pragmatic legitimacy is
based on instrumentalism and self-interest
of the stakeholders in relation to the activities
of an organization, moral legitimacy is more
altruistic in nature and based on judgments
about whether the organization’s activities
result in societal benefits according to the
socially constructed value system of the
stakeholders. Moral legitimacy includes dif-
ferent subtypes of legitimacy: (a) consequen-
tial legitimacy related to the accomplishment
of an organization, (b) procedural legitimacy
garnered to an organization on the basis of
the processes adopted to realize effective-
ness, (c) structural legitimacy based on an
organization’s socially constructed capacity
to perform specific tasks, and (d) personal
legitimacy gained by an organization
according to the charisma of its leader(s).
Delegated to an organization on the basis of
its capacity and willingness to enter into pub-
lic discussions, moral legitimacy is granted to
organizations that deliberate rather than
manipulate their public (Palazzo and Scherer
2006).
(c) The third type of legitimacy, cognitive
legitimacy, points to legitimacy earned
through behavior that is necessary and inev-
itable in business life and therefore taken
for granted by the public. Accordingly,
Suchman distinguishes two forms of
cognitive legitimacy which link to compre-
hensibility and taken-for-grantedness,respectively (Suchman 1995).While compre-
hensible legitimacy is provided for organiza-
tions that prove coherent, understandable,
and meaningful in their activities, taken-for-
grantedness implies their automatic adapta-
tion to mainstream social expectations and
procedures. However, since cognitive legiti-
macy operates at the subconscious level, it is
difficult to manage and control directly.
Suchman’s description of legitimacy thus pro-
vides insights into the myriad and fluidity embed-
ded in corporate legitimacy and that businesses
have to live up to in order to earn their license to
operate. In the following, further details of how
a license to operate may be granted at different
levels and within different issues of CSR will be
presented.
Issues and Practices of CSR
In Archie B. Carroll’s key reference article “The
Pyramid of Corporate Social Responsibility:
Toward the Moral Management of Organiza-
tional Stakeholders” (Carroll 1991) published in
Business Horizon, he conceptualizes CSR as
a pyramid composed of four layers of responsi-
bilities that businesses are expected to accom-
plish. From the bottom of the pyramid,
businesses have economic, legal, ethical, and
philanthropic responsibilities. His layered
approach gives us a rough picture of the premises
and conditions under which a license to operate is
granted by stakeholders to organizations.
(a) Economic responsibility. Since making
a profit is embedded in doing business, the
practice of demonstrating economic respon-
sibility can hardly be considered as an activ-
ity that may prompt a license to operate.
Taken for granted, the effort of generating
a profit and benefiting society through creat-
ing jobs and welfare may be considered as an
example of cognitive legitimacy, because as
pointed out by Caroll (1991), it is required
from businesses in general.
(b) Legal responsibility is also required from
businesses and thus not an issue that is nego-
tiable with stakeholders. However, although
License to Operate 1589 L
L
it is required that businesses comply with the
law and that if they do, they are in the legal
sense entitled to a license to operate, it is in
some part of the world a challenge in itself to
live up to compliance. In Asia and certain
Third World countries, corruptive behavior
toward government or local authorities can
be more the rule than an exception. Conse-
quently, the violation of regulation and cor-
ruption practices is common procedure and
therefore not necessarily a hindrance to gain
a license to operate in the social sense. In
opposition, norms and habits in Western cul-
tures, minor violations at the local level is
more or less accepted and even taken for
granted under certain circumstances when
businesses want to negotiate with NGOs,
suppliers, and do business with locals. Con-
sequently, what is a prerequisite for gaining
a license to operate in one culture is negotia-
ble in other cultures.
(c) Ethical Responsibility. In Carroll’s sense,
organizations are not obliged, hence only
expected to demonstrate ethical responsibil-
ity (Carroll 1991). In practice, ethical respon-
sibilities “embody those standards, norms or
expectations that reflect a concern for what
consumers, employees, shareholders, and the
community regards as fair, just, or in keeping
with the respect or protection of stakeholders
‘moral rights.’” Ethical responsibility is thus
demonstrated by businesses that take initia-
tives above the law to promote societal goals,
for example, environmental management in
order to fight climate change, community
involvement in sports clubs to reduce obesity,
employee relations to improve the working
conditions, corporate governance initiatives
such as, establishing codes of ethics, social
reporting, etc. As these initiatives are
connected to the cultural and business con-
ventions which are practiced in a community,
this type of social engagement is likely to
foster the “social license to operate” of an
organization in accordance with its corporate
social performance, and with the degree of
recognition it enjoys by stakeholders in the
community. The “social license” that an
organization’s corporate social performance
record inspires by its stakeholders is propor-
tional with the expectations and norms of
social engagement that exist in the commu-
nity where it belongs. Ethical responsibility is
thus likely to provide both a moral or prag-
matic legitimacy depending on whether an
ethical engagement is motivated by self-
interest for the organization and/or its stake-
holders. With the growing disempowerment
of government regulators, businesses’ volun-
tary social initiatives have augmented the
displacement of ruling conventions and stan-
dards for what it takes to gain a license to
operate.
(d) Philanthropic responsibility is neither
claimed, neither expected from businesses,
but following Carroll (1991) it is desired
that they act as good corporate citizens by
engaging in activities that are likely to pro-
mote human welfare and goodwill. Donating
to global or local communities in order to
support good deeds have been part of good
corporate citizenship in the American society
for years, but charitable contributions
through giving campaigns and donation pro-
grams are increasingly initiated by European
corporations. From a license to operate per-
spective philanthropy is thus more a question
of granting reputational legitimacy to busi-
nesses than about providing them with
a license in the legal or even the social
sense. Even though the levels for gaining
a license to operate are disparate and cultur-
ally bound to the conventions and norms in
a society, philanthropic responsibility is still
mainly considered beyond the limit of what is
required of businesses.
In spite of establishing a hierarchical demar-
cation between economic, legal, ethical, and phil-
anthropic responsibility, respectively, Carroll’s
pyramid (1991) does not help us in setting stan-
dard for where to draw a fixed limit below or
above the levels and degrees of responsibility
that organizations must accomplish in order to
gain their license to operate. It remains
a question of how their stakeholders interpret
what the limits are for good and bad social
L 1590 License to Operate
business behavior in a given community and to
which extent the organizations are perceived to
live up to the norms and standards for demon-
strating economical, legal, ethical, and philan-
thropic responsibility within this community.
The importance of approaching the concept of
license to operate to the domains and levels of
Carrols models of CSR and corporate citizenship
is its demonstration of how these levels tend to
dislocate once they are transferred into licenses
of operate in practice. As pointed out above,
legitimacy and “license to operate” are based on
assessments and values that are socially
constructed and thus subject to different social
and cultural interpretations and understandings.
It does not mean, however, that “license to oper-
ate” is of no use. On the contrary, the notion is
widely used by researchers and practitioners to
signal where they themselves or constituent
groups establish the limits between business and
society, and how these limits come to determine,
activate, and construct what it takes for an orga-
nization to gain a license to operate in some
community of shared beliefs and attitudes.
Future Directions
As the limits of expectations concerning corpora-
tions’ CSR engagement are constantly redefined,
new standards and norms for how corporations are
to behave emerge with the movement of society
toward explicit CSR in light of globalization, pri-
vatization, and neoliberalism. As pointed out by
distinctive management researchers Porter and
Kramer (2006), there is already an increasing pres-
sure on corporations to adopt CSR as a business
case and as a competitive strategy. For the same
reason the exploitation of a close tie between
a social issue and a corporation’s business is
increasingly accepted and perceived as a great
opportunity to both leverage its resources and ben-
efit society. Through spread and implementation
of this trend we may expect that, from
a competitive perspective, corporations seeking
to gain a license to operate will be faced with
still more sophisticated practices of corporate
social methods and initiatives. Therefore, the
disclosure and transparency of best practices of
CSR is an emergent issue that has set the corporate
agenda for discussing more explicitly CSR chal-
lenges in relation to corporate strategy, implemen-
tation, organization, and communicating
processes. Several CSR researchers who are par-
ticularly interested in studying the link between
strategizing, organizing, implementing, and com-
municating CSR, for example, Morsing et al.
2008, Nielsen and Thomsen 2011, Du et al.
2010, etc., have contributed to demonstrate that
engaging in dialogue through networking,
cocreating, negotiating CSR with stakeholders is
increasingly important in reputation management.
Time will show whether such interactions will
result in new national and international standards
and regulations for how much it takes for
a corporation to gain a license to operate.
Cross-References
▶Carroll, A.B.
▶Corporate Citizenship
▶Corporate Social Responsibility
▶CSR Communication
▶Legitimacy Theory
▶ Philanthropic CSR
▶ Pyramid of CSR
References and Readings
Carroll, A. B. (1991). The pyramid of corporate social
responsibility: Towards the moral management of
organizational stakeholders. Business Horizons, 34(July/August), 39–48.
DiMaggio, P. J., & Powell, W. W. (1991). Introduction.
In W. W. Powell & P. J. DiMaggio (Eds.), The newinstitutionalism in organizational analysis (pp. 1–38).Chicago: University of Chicago Press.
Du, S., Bhattacharya, C. B., & Sen, S. (2010). Maximizing
business returns to corporate social responsibility
(CSR): The role of CSR communication. InternationalJournal of Management Reviews, 12(1), 8–19.
Garriga, E., & Mele, D. (2004). Corporate social respon-
sibility theories: Mapping the territory. Journal ofBusiness Ethics, 53, 51–71.
Gunningham, N., Kagan, R., & Thornton, D. (2003).
Social license and environmental protection: Whybusinesses go beyond compliance. London: Centre
Lobbying 1591 L
for Analysis of Risk and Regulation, London School of
Economics and Political Science.
Matten, D., & Moon, J. (2008). Implicit and explicit CSR:
A conceptual framework for a comparative under-
standing of corporate social responsibility. Academyof Management Review, 33(2), 404–424.
Morsing, M., Schultz, M., & Nielsen, K. (2008). The
‘Catch 22’ of communicating CSR: Findings from
a Danish study. Journal of Marketing Communica-tions, 14(2), 97–111.
Nielsen, A. E., & Thomsen, C. (2011). Sustainable devel-
opment: The role of network communication. Corpo-rate Social Responsibility and EnvironmentalManagement, 18, 1–10.
Palazzo, G., & Scherer, A. G. (2006). Corporate legiti-
macy as deliberation: A communicative framework.
Journal of Business Ethics, 66, 71–88.Porter, M. E., & Kramer, M. R. (2006). Strategy and
society: The link between competitive advantage and
corporate social responsibility. Harvard BusinessReview, 84(12), 78–92.
Suchman, M. C. (1995). Managing legitimacy: Strategic
and institutional approaches. Academy of ManagementReview, 20, 571–610.
L
Life Cycle Assessment Models▶ Sustainability Assessment Models
Life Cycle Engineering
▶ Product Life Cycle
Life on Earth
▶Natural Environment
Like an Organ
▶Organic
Like an Organism
▶Organic
Limiting Impacts
▶Mitigation
Livable
▶Organic
Livelihood
▶ Sustainability (World Commission on Envi-
ronment and Development Definition)
Living Planet
▶Natural Environment
Living Wage
▶Minimum Wage
Lobbying
Matthias S. Fifka
Cologne Business School (CBS), Dr. J€urgen
Meyer Endowed Chair for International Business
Ethics and Sustainability, Koeln, Germany
Synonyms
Government relations; Lobbyism; Public interest
representation; Special interest representation
L 1592 Lobbying
Definition
There is no universally accepted definition
of lobbying, since the understanding of what
lobbying is and what activities it encompasses
varies significantly. Moreover, lobbying can
come in many forms. Generally, it is possible to
distinguish between direct and indirect lobbying.
The former consists of a “communication [. . .]
between the organization’s representative and
the governmental decision maker” (Hrebenar
and Scott 1990, p. 69). Thus, there is direct
contact – either in person or through communi-
cation media – between the governmental deci-
sion maker and the organization’s representative.
The latter can be a lobbyist directly employed
by the company or hired from an external firm,
but also an employee of the firm whose prime
occupation does not consist of lobbying, such as
a manager. Especially high-ranking managers
often have easy access to political decision
makers and enjoy credibility advantages over
hired lobbyists, which is why they also become
active in the transmission of interests.
In contrast, indirect lobbying or grass rootslobbying takes a different path. It can be seen as
the attempts of groups to generate public pressure
on governmental decision makers. This is usually
done by mobilizing the public in general or an
organization’s members in specific in their role as
voters, based on the assumption that politicians
will be inclined to pay attention to those who are
responsible for their reelection. Moreover, grass
roots lobbying can be more authentic since the
concerns are articulated by the people themselves
and not by a lobbyist. However, artificially gen-
erated mobilization is likely to have only little
credibility and thus is referred to as astro turf
lobbying.As pointed out, the understanding of lobbying
varies significantly with the respective national
context. In continental Europe, for example, the
word “lobbying” usually has a very negative con-
notation to it, because it is associated with undue
political influence. In Anglo-Saxon countries by
comparison, lobbying is more often seen as an
essential element of the political process. The US
Senate (1956, p. 22), as one of the major targets of
national as well as international lobbying efforts,
has clearly articulated this view: “Lobbying [. . .]
is, in its proper use, a necessary and beneficial
adjunct to the orderly processes of government.”
This perception can mostly be attributed to the
long tradition of lobbying in Anglo-Saxon
democracies.
Introduction
The word “lobbying” originates from the English
word “lobby,” the hall of parliament, where
already in the seventeenth century people were
waiting to petition politicians and to ask favors.
Due to these origins, lobbying traditionally and
still today is sometimes considered to solely
encompass efforts directed at the legislativebranch of government. Nevertheless, the execu-
tive branch also is frequently addressed by lob-
byists. Here, the respective efforts are mostly
targeted at departments and agencies as they are
responsible for converting rather broad legisla-
tion into specific rules and regulations, which the
lobbyists seek to influence. The top ranks of the
executive, such as presidents or prime ministers,
are subject to lobbying to a much lesser degree,
since they are usually regarded as representatives
of a state in its entirety and not particular inter-
ests. There is dispute about whether the judicialbranch can also be a target of lobbying. Tradition-
ally, there had been the “myth of the nonpolitical
judicial system” (Mack 1997, p. 193). For
moral reasons, the judiciary did not seem to be
the appropriate platform for the transmission of
special interests. However, in the 1960s, citizen
groups increasingly discovered the possibility to
pursue their interests bymaking use of the judicial
system. Thus, four forms of lobbying can be
identified in specific.
Legislative lobbying aims at addressing mem-
bers of parliament or their staff in order to influ-
ence the law-making process. This can happen at
different stages. Interest groups often become
active in the first step of the legislative process
already and initiate laws themselves. For that
purpose, they provide legislators with prepared
bills, additional material and statements by
Lobbying 1593 L
L
experts on why the respective law is necessary.
The challenge here is to identify the respective
politicians who might be willing to submit the
respective bill drawn by the interest group. In
a second step, lobbyists try to influence the
drafting of bills. In this context, they benefit
from the fact that politicians have to deal with
a large number of proposed laws in a short time
and can neither get profound insights in all mat-
ters nor obtain the relevant in-depth information.
Thus, they rely onmaterial provided by lobbyists,
who often enjoy an “information advantage” over
the politician. Nevertheless, lobbyists have to
provide correct information in order not lose
their credibility and access to lawmakers with it.
The third step of the process consists of the work
in committees or work groups, where bills are
discussed before they reach the full plenum. Lob-
byists meet with the respective members, try to
convince them of their position and thus forge
a bill that reflects the interests they represent.
Lobbyists can also try to “kill a bill” on this
stage so that it is never presented to parliament
in its entirety. The final stage, the actual vote in
parliament, is the last step in the process. Here
lobbyists mostly become active when a close vote
is expected and the possibility exists to tilt the
decision in one’s favor by convincing individual
politicians to vote for or against the respective bill.
Executive lobbying is less common than its
legislative counterpart, but is still of significant
importance. This type of lobbying is unique since
it is strongly party-bound. Usually, the executive
branch, at least on higher levels, is dominated by
the party or parties in power, whereas in parlia-
ment there are usually more parties to be found.
As pointed out above, most executive lobbying
focuses on departments and agencies. Since they
can enact (“quasi-judicial power”) and enforce
regulation, they are an important target. Often
interest groups are affected more by specific reg-
ulation than the rather broad laws made in
parliament.
As pointed out above, there is dispute on
whether targeting the judicial branch should
also be seen as lobbying. Legal provisions on
lobbying do not consider activities directed at
the judiciary as lobbying, as can be demonstrated
by the US Lobbying Disclosure Act of 1995.
It defines lobbying as “any written or oral commu-
nication (including an electronic conversation) to
a covered executive branch official or a covered
legislative branch official that is made on behalf
of a client with regard.” Although not considered
lobbying by legal definition, judicial lobbying
has become a political reality and is being used
for the transmission of interests. There are several
forms of judicial lobbying. Many judicial sys-
tems, especially in the Anglo-Saxon world,
allow the filing of so-called friend of the courtbriefs (amicus curiae). They permit a third party
that is not directly involved in a case to state its
opinion if it can demonstrate that it will be
impacted by the respective decision. Moreover,
interest groups try to influence the appointment or
election of judges, especially those in higher
office. Instead, filing a lawsuit cannot generally
be considered to be a form of lobbying, since it
can have manifold purposes and mostly is
apolitical.
Like direct lobbying, grass roots lobbying also
comes in many forms. As pointed out above,
grass roots lobbying mostly focuses on elected
politicians, based on the assumption that they are
seeking election or reelection and will listen to
the voters. Thus, the legislative branch is the
primary target of this form of lobbying: “In each
legislator’s eyes, the wants and needs of her or his
own constituents are paramount. Satisfying them
is key to the legislator’s ‘bottom line’ – reelec-
tion” (Mack 1997, p. 187). There is dispute on the
question whether grass roots lobbying only con-
sists of the attempt to mobilize the members of
one’s own interest group or the public in general.
Kollman (1998, p. 3) considers grass roots lob-
bying as “attempts by interest group leaders to
mobilize citizens outside the policymaking com-
munity to contact or pressure public officials
inside the policymaking community.” According
to this definition, grass roots lobbying aims at
citizens in general. Targeting them can have
more impact, but is more costly and technically
more difficult than solely addressing a group’s
members. In both cases, voters are urged to write
letters or e-mails to their political representatives
or to call them in order to communicate a specific
L 1594 Lobbying
standpoint. Other possibilities are fundraising or
campaign support to help certain politicians to
obtain or maintain office. Finally, the initiation
of demonstrations or boycotts can be aimed at
transmitting a certain interest or to garner politi-
cal attention for a specific issue.
Key Issues
The key controversy with regard to lobbying is
the question of its role and appropriateness in the
political process. On the one side, it can be
regarded as an essential element that permits
political participation as well as the articulation
and transmission of interests. The right to petition
the government is included in the constitution of
most democracies. On the other side, lobbying
can be seen as an instrument of undue influence,
which primarily can be used by well-organized
and financially powerful pressure groups that
often pursue narrow interests. Again, it could be
argued that this is a justified mechanism that pro-
tects small groups against a tyranny of the
majority.
Often, lobbying is described as the fifth power,
referring to the media often being considered the
fourth power, aside from the legislative, execu-
tive, and judicial branches. However, other than
the three institutionalized powers, the media and
lobbyism are hardly subject to legal restrictions.
A core problem of placing limitations on lobby-
ing is the difficulty of defining, monitoring, and
sanctioning it. Thus, questions like these arise:
When a politician meets a representative of an
interest group is that always a form of lobbying?
Do invitations that politicians receive necessarily
attempt to lobby them?
Despite these difficulties, governments have
made attempts to regulate lobbying and to make
it more transparent. Some important examples
shall be given here. In the USA, the LobbyingDisclosure Act of 1995 defines if a person is to be
considered a lobbyist under the law: “Any indi-
vidual who is employed or retained by a client for
financial or other compensation for services that
include more than one lobbying contact, other
than an individual whose lobbying activities
constitute less than 20% of the time engaged in
the services provided by such individual to that
client over a 6-month period.” These persons
have to register with Congress and regularly fill
out a form stating under whom they became
active and the amount they received as fee for
their services. Organizations in turn have to pro-
vide information on whom they hired as lobbyists
and on their respective expenditures, so that
a cross-check is possible. This does not restrict
the scope of lobbying itself, but it allows for the
possibility to legally pursue violations and reign
in uncontrolled lobbying. Moreover, it makes
lobbying more transparent. The extent to which
companies and associations are engaged becomes
visible, since the reports filed are accessible for
everyone, either in printed form or online.
In the European Union, registration of lobby-
ists happens on a voluntary basis, which has been
heavily criticized by those who demand manda-
tory registration like in the USA. The European
Parliament has spoken out for obligatory regis-
tration, but such a step has been denounced by the
European Commission. Thus, in June 2011, the
Parliament and the Commission have launched
a joint online platform and have called for volun-
tary registration by organizations and individuals
who seek to influence the political decision-
making process. The incentive for registering
voluntarily is getting easy access to the parlia-
mentary buildings. Registration is also connected
to signing a code of conduct. Furthermore, regis-
tered lobbyists have to disclose their income from
lobbying and the share of individual clients in it
on an annual basis. The register can be viewed
online and fosters transparency of the lobbying
process (European Union 2012).
There is also specific regulation within some
member states of the European Union. In Ger-
many, for example, registration is also voluntary
and is reduced to representatives of associations.
Calls for obligatory registration have been
voiced, but they have not been translated into
legislation so far. In France, as another example,
we do not even find the possibility of voluntary
registration. Although professional lobbying is
quite young there, especially in comparison to
Anglo-Saxon countries, it has grown
Lobbying 1595 L
L
considerably since 1980. Several parliamentary
initiatives have been taken and bills on regulation
have been introduced, but none has been adopted
so far. Likewise, statutory registration has been
discussed in Great Britain, but the British
parliament has also not agreed to make any
respective laws.
An important reason for why parliaments are
not inclined to place limitations upon lobbying is
the so-called revolving-door phenomenon, which
is another key issue with regard to lobbying. It
describes the practice that legislators and regula-
tors become lobbyists after their careers in the
legislative or executive branch, and vice versa.
Especially in departments and agencies it is not
uncommon that former lobbyists or industry pro-
fessionals obtain governmental positions. They
are hired by government for their expertise and
their experience with private industry. Often,
they serve as transmitters for governmental inter-
ests into the companies for which they once
worked. In turn, former governmental decision
makers are hired as lobbyists because of their
acquaintance with political processes and their
access to politicians in office. In the USA, since
1998, almost half of the members of Congress
who left office have registered as lobbyists. Con-
sequentially, limitations on using the revolving
door have been established in the USA in order to
prevent that a tight relationship between govern-
ment and private industry develops over time.
The rules mostly require former politicians who
become lobbyists and vice versa to wait for a
certain amount of time – normally 2 years –
before they can become active on issues they
once were concerned with (White House 2009).
This, however, is an exception in international
comparison, since most countries do not
regulate switching between the private and the
public sector.
Overall, lobbying itself has become a large
private sector industry that has been growing
considerably, which is another controversial
issue. Due to the tight registration and disclosure
requirements, there is profound data available
for the US Opensecrets.org (2012), a nonprofit
organization that compiles data from the official
public lobbying records and aggregates it, which
has calculated that total lobbying spending has
increased from $1.44 billion in 1998 to $3.32
billion in 2011, though recently a stagnation can
be observed. In the same period, the number of
active registered lobbyists has risen from 10,408
to 12,654, but had reached its peak already in
2007 at 14,840. In the European Union, there is
heavy dispute on the number of lobbyists,
since registration is voluntary. Siim Kallas,
Vice-President of the European Commission,
has estimated that there are about 15,000 active
lobbyists, while the two professional associations
of lobbyists – the European Public Affairs
Consultancies Association and the Society of
European Affairs Professionals – only have
a membership of 1,000 lobbyists and estimate
that an additional 500 nonmembers are active,
bringing the total number to only 1,500 overall
(EurActiv 2008). Nevertheless, this latter esti-
mate is too low, since by the beginning of May
2012, 4,741 lobbyists had voluntarily registered
in the EU Transparency Register established in
June of 2011 (European Union 2012).
The increasing importance and professionali-
zation of lobbying can also be seen in the fact that
universities offer courses to prepare students for
a lobbying career. Usually, the respective courses
are integrated into Public Affairs or Public
Relations degrees. Aside from these courses of
study, many active lobbyists also hold law
degrees since legal matters are core to their
profession.
Future Directions
One of the core issues regarding lobbying in the
future is the effort to make it more transparent.
Especially after the large lobbying scandal
around Jack Abramoff became public in the
USA in 2006, calls for more openness and regu-
lation increased, especially in the Western world.
However, as pointed out above, in most jurisdic-
tions there is a strong hesitation toward manda-
tory registration and the disclosure of clients and
income generated from lobbying. Thus, sugges-
tions to foster transparency have mostly been of
voluntary nature.
L 1596 Lobbying
In the business world, companies have
begun to voluntarily disclose information on
their lobbying activities in their sustainability
and corporate social responsibility (CSR) reports.
International reporting standards and guidelines
have driven that development by calling for such
disclosure. The Global Reporting Initiative
(GRI), as the most prominent international
reporting standard, considers information on
“public policy positions and participation in
public policy development and lobbying” (2011,
p. 38), a core objective of disclosure. Moreover,
companies are asked to provide information on
the “total value of financial and in-kind contribu-
tions to political parties, politicians, and related
institutions by country” (2011, p. 38).
The ISO 26000 (2010) as a voluntary and non-
certifiable standard for CSR contains a section on
fair operating practices. It demands transparency
on policies and activities related to lobbying and
political participation. Moreover, it explicitly
asks companies to establish policies which man-
age the activities of people who are hired to lobby
on the organization’s behalf. Finally, the ISO
26000 recommends that companies refrain
from contributions which could exert undue
influence on politicians or policymakers in favor
of specific interests or could be perceived as an
attempt to do so.
Therefore, lobbying clearly has become an
issue of CSR. However, this has mostly hap-
pened so far with regard to transparency and
improved disclosure. Concerning the develop-
ment and implementation of internal manage-
ment systems that design and control the
lobbying policies and efforts of companies, as
laid down by the ISO 26000, significant efforts
still have to be made. In this context, there is
sufficient potential for future research targeted
at developing the respective strategies and oper-
ational measures.
Another issue that has not received adequate
attention so far – neither by business nor by
academia – is the concept of socially responsible
lobbying. Here, lobbying is seen as an effective
instrument of CSR, based on the promotion of
policies that serve a wider social interest. Thus,
businesses use their power and political access
not to pursue their own narrow business interests
but to support social, environmental, and eco-
nomic issues. The underlying idea of socially
responsible lobbying is that businessmen or
their spokesmen enjoy more clout on the political
level than representatives from nongovernmental
organizations or citizen groups do. Frequently,
the term social lobbying is used as a synonym
for socially responsible lobbying, which can be
misleading, however. Social lobbying, especially
in an Anglo-American context, usually describes
traditional lobbying that is taking place at social
events such as dinners, sports tournaments, and
receptions.
Socially responsible lobbying is connected to
several advantages that other instruments of
CSR, for example, the establishment of founda-
tions, sponsoring, and cause-related marketing,
do not offer. First of all, it is rather inexpensive,
since all that is required is the manager’s or
lobbyist’s time. The respective person can
often use the possibility to promote social or
environmental issues when conferring with
a governmental decision maker on company-
related economic interests. Second, as pointed
out above, company representatives usually
benefit from easy access to politicians and
bureaucrats and can thus articulate concerns that
might not be heard or only receive little attention
otherwise. Third and most important,
a company’s CSR initiative can be much more
effective, when done in coordination with the
government, as Vogel (2008, p. 41) points out:
“[L]obbying needs to become a critical compo-
nent of a CSR strategy. It is not enough
for companies to engage in sophisticated private
initiatives, however strategic [. . .]. Without
government support, many socially beneficial
corporate programs will have limited impact.”
The gravest problem with regard to socially
responsible lobbying is credibility. Neither
governmental decision makers nor the public
might trust the effort of a company representa-
tive to promote social or environmental con-
cerns. This skepticism can mostly be
attributed to the rather negative image of lob-
bying, which is usually associated with the pur-
suit of narrow business interests. To address
Local-Community Actors and CSR 1597 L
this problem, businesses can lobby on eco-
nomic, social, and environmental issues that
are clearly of importance to them and target
their efforts at external conditions that are via-
ble for their success. This way, social value and
business benefit can be created at the same
time. The effectiveness is leveraged by the
cooperation between business and government
and the potential inclusion of civil society
actors. Overall, socially responsible lobbying
can be judged as a very powerful tool of CSR
that is still underestimated and underused, but
enjoys significant future prospects.
Cross-References
▶Corporate Social Responsibility
▶Global Reporting Initiative
▶ ISO 26000
L
References and ReadingsEurActiv (2008). EU lobbyists scramble over their exact
numbers. http://euractiv.com/pa/eu-lobbyists-scram-
ble-exact-numbers/article-173152. Accessed 3 May
2012.
European Union (2012). Transparency register. http://
europa.eu/transparency-register/index_en.htm. Accessed
1 May 2012.
Hrebenar, R. J., & Scott, R. P. (1990). Interest grouppolitics in America. Englewood Cliffs: Prentice Hall.
International Organization for Standardization (ISO).
(2010). Guidance on social responsibility. Geneva:ISO.
Kollman, K. (1998). Outside lobbying – public opinion &interest group strategies. Princeton: Princeton Univer-sity Press.
Mack, C. S. (1997). Business, politics, and the practice ofgovernment relations. Westport: Quorum Books.
Opensecrets.org (2012). Lobbying database. http://www.
opensecrets.org/lobbying/index.php. Accessed 2 May
2012.
The Global Reporting Initiative. (2011). Sustainabilityreporting guidelines. Amsterdam: Global Reporting
Initiative.
United States Senate (1956). Report of the select commit-
tee for contribution investigation. In 48th congress
second session, Washington, DC.
Vogel, D. (2008). Socially responsible lobbying. HarvardBusiness Review, Feb, p. 41.
White House (2009). Ethics. http://www.hitehouse.gov/
issues/ethics/. Accessed 2 May 2012.
Lobbyism
▶Lobbying
Local Agenda 21
▶Region
Local Community
▶Region
Local Food
▶Locally Grown/Locally Raised
Local Food Movement
▶Locally Grown/Locally Raised
Local Governance
▶Territorial Social Responsibility and Territo-
rial Small and Medium-Sized Enterprises
Local Sustainable Development
▶Region
Local-Community Actors and CSR
▶NGOs and CSR
L 1598 Locally Grown/Locally Raised
Locally Grown/Locally Raised
Martin Quinn
Business School, Dublin City University,
Glasnevin, Dublin, Ireland
Synonyms
Food patriotism; Local food; Local food move-
ment; Locally raised; Regional food
Definition
Locally grown (or local) food refers to efforts to
build self-reliant food systems in a particular area
or region. Local food may be organically grown,
but this is not necessarily so to define it as local or
locally grown. The term “food systems” refers
not only to production and consumption of food,
but also to ecological, historical, and political
factors particular to an area or region. This
implies that any understanding of local food
systems will be grounded in contextual factors
and any analysis of such systems will not be
value-free or universal. Feenstra (2002) defines
a local food system as “a collaborative effort
to build more locally based, self-reliant food
economies – one in which sustainable food
production, processing, distribution and con-
sumption is integrated to enhance the economic,
environmental and social health of a particular
place.” Additionally, as locally grown food
aspires to realize self-reliance, the local economy
and society are arguably enhanced. Locally
grown food is also associated with broader
sustainable agriculture, which involves food pro-
duction using methods that are not harmful to the
environment, provide fair wages and respect
workers and supports local communities.
Introduction
Locally grown food is an alternative to large-
scale corporate agricultural models where food
producers are more separated from end con-
sumers. In the corporate agricultural model,
multiple levels of processors/manufacturers, dis-
tributors, and retailers separate the food producer
and consumer. This separation removes the qual-
ity control of food away from producers and
toward distributors. In contrast, locally grown
food and local food systems redevelops the rela-
tionship between end consumers and food pro-
ducers. This relationship is at its most visible in
the local farmers’ markets now commonplace
across Europe and the USA.
As noted in the definition above, the concept
of locally grown food must be analyzed in the
context of a local food system. A local food
system is more than agricultural production,
rather a set of processes up and down the food
chain which is contextual and collaborative.
Lyson (2005) uses the term “civic agriculture,”
which also embodies the social nature of a local
food system. For example, a preference to buy
locally grown food will help support local
employment. The term “local food movement”
is used by many writers to describe the collective
members of a local food system whose common
goal is to promote the local food economy. The
local food movement includes not just producers
and consumers, but also community gardens,
food co-ops, farmers’ markets, and seed-savers
groups.
A key tenet of the local food movement is to
separate the benefits of economic progress in
food production from potential disadvantages.
Historically, locally grown food was the principal
method of food production. For example, early
European planters in the USA grew, raised, and
processed all food requirements on the planta-
tion. Over time, advances in food production
technologies and increased availability of faster
transportation (e.g., railroads, followed by auto-
mobiles and highways) meant excess food could
be sold for profit and transported to other regions
for centralized processing. Today, refrigeration
and air transport make it possible to ship fresh
produce on a global scale. Thus, over time, a local
food economy transformed into a regional one
and can now be viewed on a global scale. An
irony of a regional or international food economy
Locally Grown/Locally Raised 1599 L
is that locally grown food may be shipped hun-
dreds of miles/kilometers to a distribution or
processing center to find its way back to a local
grocery shelf, where it is cheaply available.
Although cheap food is an advantage to con-
sumers, it can be argued that a sizeable portion
of the economic benefits of food produced in
a region may leave that region. During the
1970s, economist E.F. Schmacher promoted the
notion of “local economies” as an alternative to
regional or global economies. Local economies,
as noted by DeLind (2006), can “reframe an
economic orientation with more ecological and
cultural understandings of people in place.” In
essence, this means characteristics of locally
grown food are not subsumed by a globally ori-
ented marketplace. On the other hand, local food
movements are not advocating a return to food
shortages nor against sharing food resources with
other localities.
L
Key IssuesAs with other sustainability issues, the locally
grown food movement has increased in popular-
ity in the past decade or so. It can be argued that
a direct result of the increasing awareness of
locally grown foods is that consumers have an
increased choice of local food products, more
ways to buy, better quality products, and
improved product knowledge. Similarly, local
producers’ margins may have improved due to
cutting out links in the distribution chain. There
are several issues around locally grown food
ideals, which are subject to ongoing debate and
are discussed below.
Defining “Local”
The definition of “local” is problematic. Unlike
organically grown foods which must comply with
rigorous certification standards, inspection pro-
cesses and labeling, locally grown food means
different things to different people. In
a geographic sense, local is regarded as position
with regard to surrounding objects, or a place,
district, neighborhood, or region. Legal authori-
ties such as the US Department of Agriculture
and the European Commission for Agriculture
and Rural Development do not offer, nor adopt,
a definition of local in the context of agricultural
production.
US not-for-profit organization Sustainable
Table proposes locally grown food can be
described as a series of concentric circles. The
first circle is growing food at home; the next
circle is food grown in the immediate commu-
nity; subsequent circles relate to food grown in
the state, region, and then country. This interpre-
tation of local is flexible in that the meaning of
the term local can be adapted depending on
factors such as seasons and climate, for example,
some countries may produce certain fruits in
northerly regions in summer time, but year-
round in southerly regions. A related interpreta-
tion of local is by distance. Local food producers
may interpret local as the distance within which
they can reasonably transport their produce;
a days-goods-distance (400 miles, 600 km) is
a common measure. An issue with definitions of
local based on distance is that it can be argued
that local has little to do with distance or area. For
example, the area of Great Lakes in Canada
would subsume many European countries. Addi-
tionally, when many countries have adjoining
borders, as in mainland Europe, local may
include produce from another country.
Local can also be interpreted in terms of ecol-
ogy, whereby locally grown food is defined in
terms of climate, soil type, or watershed. The
World Wildlife Fund (WWF) defines such
regions as ecoregions. An ecoregion is
a “relatively large unit of land or water containing
a distinct assemblage of natural communities and
species, with boundaries that approximate the
original extent of natural communities.” Thus
an ecoregion includes the notion of
a community, which includes people and places,
and is possibly a more unifying concept of local
and more in line with concept of a local food
system as noted by Feenstra (2002).
Where local is defined relative to distance,
ambiguity can be introduced by industrial-scale
food production and distribution. Locally grown
food may be grown and harvested close to the
point of purchase and/or consumption but may
L 1600 Locally Grown/Locally Raised
have traveled a considerable distance through
processing and distribution systems before
returning to the locality. Local food advocates
propose that adequate product labeling may
address this issue by indicating the origin of the
food and the location of processing. In some
cases, the place of origin and place of processing
food is restricted by law to specific localities or
regions, for example, Champagne wine and Cam-
embert cheese to regions of France and Feta
cheese to Greece. Under European Union law,
local food products may be granted a Protected
Geographical Status which implies that only
foods originating and processed in the region
are permitted to trade as such.
Locavores
The origin of the term “locavore” is attributed to
Jessica Prentice, a chef and food writer from the
San Francisco area, who first used the term on
World Environment Day (June 5) in 2005.
A locavore is someone who eats locally grown
or locally produced food. The meaning of local is
problematic, as described above, but a locavore is
typically considered to consume and or/produce
local produce within a 100-mile (160-km) radius.
The word has been formally recognized by the
Oxford American Dictionary since 2007.
The locavore movement proposes numerous
advantages of consuming locally grown food,
some of which are described in more detail
below. Locally grown food is arguably fresher
and tastier, which in turn offers a higher nutri-
tional value. The variety of food is likely to be
broader, as producers focus less on high-yield,
longer-life food varieties. The local economy
retains money within the region and arguably
costs – monetary, social, and environmental –
are lower. Finally, as many local producers use
more traditional or organic farming practices,
local soil is likely to be better sustained.
Labeling
Product labeling is a general consumer issue. For
locally grown food, labeling is complicated given
the ambiguity in defining the precise meaning of
local. Further complication is added by the fact
that large retailers increasingly offer organic
produce. While products may be labeled (and
certified) as organic, this does not imply locally
grown food. Even, if produce were labeled with
the precise locality of origin, it may not be certain
that the produce is entirely local. Thus, the term
locally grown is considered by retailers and pro-
ducers as embracing the growing/raising process
as local. Seed, for example, is thus excluded from
the meaning of local. Until labeling improves to
a full “farm-to-fork” system, local food (in a strict
interpretation) may be best sourced from local
family farms, farmers’ markets and cooperatives,
and community agriculture schemes.
Impacts of Local Food Systems
As noted in the introduction, local food systems
may (re-)develop the relationship between
end consumers and producers, which may
have impacts on the immediate local economy.
The impacts of local food and local food systems
do however extend beyond the locality or region.
The following are some of main impacts, both
locally and beyond.
1. Food quality is increased, due mainly to fresh-
ness. The time from harvest to consumption is
greatly reduced – to a matter of minutes if self-
grown. Preservation of local growing/
harvesting methods also helps maintain land
quality and retention of local varietals.
2. Locally grown food encourages polyculture
(or multiple-cropping) to meet the varied
demand of consumers. Multiple-cropping and
multiuse land (e.g., animals and crops)
improves crop rotation which in turn increases
land fertility and results in more sustainable
farming and land use. Commercial-scale
monoculture, on the other hand, has been crit-
icized as unsustainable and harmful to land.
3. The cost to the consumer of locally grown
food raises several issues. While subject to
debate, the cost of locally grown food can be
more expensive. One reason for the lower
costs of food produced through large-scale
agriculture is that large-scale farms may be
in receipt of subsidies and price supports.
A premium price for local food may make it
less attractive to consumers with less dispos-
able income. Continued growth in the sale and
Locally Grown/Locally Raised 1601 L
L
consumption of local food will ultimately be
driven by the general laws of supply and
demand, with declining price likely in the
longer term (Oberholtzer et al. 2007). Michael
Pollan (2006), in The Omnivores Dilemma,questions whether cost of locally grown food
is in fact the issue. According to Pollan (2006),
US citizens spend on average 10 % of their
income on food compared to 20 % in the
1950s. This shift in expenditure may be
a matter of prioritizing consumer spending
more on goods such as cell phones and other
personal electronics.
4. If more food is grown locally in developed
nations, this may impact growers who export
in developing nations. This may be particu-
larly so in the case of cash crops (i.e., crops
grown solely for sale). The opposing argument
is that developing nations themselves can mar-
ket their produce more locally.
5. An argument in support of locally grown food
is that it has potentially less environmental
impact due to less transportation require-
ments. This can be misleading as any environ-
mental assessment should consider the total
effects of production and distribution on the
environment. The following examples are rep-
resentative of the issues to be considered in
evaluating the environmental impacts.
(a) Fruits grown locally in greenhouses using
artificial heat and light may have a higher
carbon footprint than similar fruits grown
in a warmer climate and transported long
distances to the market. Using renewable
energy to provide artificial light and heat
would nullify any CO2 emissions, thus
making the locally grown option
preferable.
(b) Studies in New Zealand have shown that
the production methods used in dairy and
sheep farms is at least twice as efficient in
terms of CO2 emissions, even if produce is
shipped half way across the globe to
Europe. This is due, in the main, to the
fact that New Zealand producers have nat-
urally clover-rich pastures and thus use
substantially less fertilizers and feed com-
pared to their European counterparts.
(c) A study by engineers at Carnegie Mellon
University has shown that a vegetarian
diet (including nonlocally grown produce)
may contribute a lower carbon footprint
than a standard locally grown diet. Thus
“what” is eaten may be more favorable in
terms of environmental impact.
These brief examples reveal the complexity of
evaluating the environmental impacts of locally
grown food and food systems. If two food prod-
ucts have identical production methods, locally
grown produce will have a lower carbon footprint
as transportation is decreased, but such compar-
atives are relatively uncommon.
Future Directions
DeLind (2010) offers some caution on the direc-
tion of the local food movement. She discusses
three areas of emphasis where the movement may
be distancing itself from its roots and ideals.
First, DeLind (2010) raises some concerns on
locavores. Popular films (e.g., Supersize Me, Fast
Food Nation) and books (e.g., OmnivoresDilemma, In Defense of Food by Michael Pollan
2006) and the media portray individuals as hav-
ing the power to change the monoculture prac-
tices of large-scale agriculture. This, DeLind
(2010) argues, deflects responsibility away from
existing political and power structures whichmay
be more relevant to actual change. She also states
that locavores may have insufficient information
and knowledge to fulfill the role of a locavore.
The popular media just referred to may provide
checklists or instructions on what to eat, which is
orientated toward, and fosters, individuality.
This, in turn, removes the “local” sense for
locally grown/local food, where community is
a vital component.
Next, DeLind (2010) cites what she refers to
as the “Walmart” emphasis – Walmart being
a large US and global retailer. Walmart, Tesco
(a European retailer) and other large retailers sell
what they call locally grown food. Availability of
locally grown food in such stores aligns low price
with the objectives of locavores. Retailers fre-
quently promote local growers in the advertising,
L 1602 Locally Grown/Locally Raised
but the relationship between grower and the com-
pany is likely to be no different than with large
industrial-scale producers. The primary concern
expressed by DeLind (2006, 2010) is that large
business is in danger of taking control over defin-
ing “local.” This removes local people and ecol-
ogy from the meaning of local and replaces it
with a corporate understanding. There is also
a danger that local markets for locally grown
food become subsumed by the very commercial
organizations and structures they set out to
counteract.
A final concern expressed by DeLind (2010) is
the Pollan emphasis, with reference to books of
“super-heros” of the local food movement, such
as Michael Pollan. While Pollan’s work is the
emphasis of Delind’s discussion, it can be taken
as a metaphor for the visibility and accessibility
popular writing has generated in the local food
movement. Writers like Pollan can be
commended for their efforts in acquainting the
public at large with large-scale agriculture and
providing valid links between agriculture and
health. Alternatives to large-scale agriculture
have also been outlined by such writers. An
issue with “following” the particular offerings
of one writer or other may, like the Walmart
emphasis, pose a threat to the “local” in local
food. The introduction to this entry noted how
local food systems are more than the production
of food, they also incorporate ecological, histor-
ical, and political factors of the locality. Increas-
ing popularity of the local food movement and its
superhero writers threatens to dilute these basic
local elements: in the words of Delind (2010) “to
reconnect to context – to the soil, to work, to
history or to place.”
The cautions offered by DeLind (2010) reflect
the effects of growth in popularity of the local
food movement. Such effects are encountered by
any movement as it grows and takes on
a celebrity effect, particularly in the age of ubiq-
uitous internet access and social networking. The
key point raised by DeLind (2010) is that the
local food movement needs to manage or
reinvigorate the sense of local community and
economy into locally grown food.While farmers’
markets and similar outlets for locally grown
food continue to expand, they are a long way
from the scale and resources of large business.
Retailers like Walmart are proposing to use their
distribution systems to transport local foods to
their stores, rather than have trucks driven by
local producers empty. Whether or not this
retains the local in local food to a sufficient
degree is a matter for future debate. Locally
owned and run markets and outlets are likely to
remain for the near future, but the threat of the
increased participation of large multiples in the
local food movement is one of their greatest
challenges.
Cross-References
▶Carbon Emissions
▶Carbon Footprint
▶ Fair Trade
▶Organic
References and Readings
Delind, L. B. (2006). Of bodies, place, and culture: Re-
situating local food. Journal of Agricultural and Envi-ronmental Ethics, 19, 121–146.
Delind, L. B. (2010). Are local food and the local food
movement taking us where we want to go? Or are we
hitching our wagons to the wrong stars? Agricultureand Human Values, 28(2), 273–283.
Feenstra, G. (2002). Creating space for sustainable food
systems: Lessons from the field. Agriculture andHuman Values, 19, 99–106.
Lyson, T. A. (2005). Civic agriculture and community
problem solving. Culture and Agriculture, 27, 92–98.Oberholtzer, L., Dimitri, C., & Greene, C. (2007). Price
premiums hold on as US organic produce market
expands. In A. Wellson (Ed.), Organic agriculture inthe U.S (pp. 71–95). New York: Nova.
Pollan, M. (2006). The omnivores dilemma. London:
Bloomsbury.
Prentice, J. (2006). Full moon feast: Food and the hungerfor connection. Vermont: Chelsea Green.
Schumacher, E. F. (1973). Small is beautiful: A study ofeconomics and if people mattered. New York: Harper
& Row.
Sustainabletable, What is local?, http://www.sustaina-
bletable.org/issues/eatlocal/. Accessed 19 Apr 2010.
WWF, Deliniations of ecoregions, http://www.
worldwildlife.org/science/ecoregions/delineation.html.
Accessed 20 Apr 2010.
Locusts 1603 L
Locally Raised
▶Locally Grown/Locally Raised
Locusts
Gayle C. Avery1 and Harald Bergsteiner2
1Institute for Sustainable Leadership, MGSM,
Macquarie University, Macquarie Park,
NSW, Australia2Institute for Sustainable Leadership, Australian
Catholic University, Pymble, Sydney,
NSW, Australia
Synonyms
Anglo/US capitalism; Neoliberal capitalism;
Private equity firms (pejorative)
LDefinition
In the business context, the term “locust” refers in
a pejorative sense to firms that focus totally on
their own short-term interests at the expense of
other stakeholders, the environment, and future
generations. Locusts do not create value but gen-
erally destroy value, at least in the long run.
Locusts essentially keep the profits and socialize
the losses arising from their activities. In specific
contexts, such as in Germany, this destructive
insect metaphor refers primarily to private equity
groups, hedge funds, investment banks, and even
individuals who acquire control over healthy
enterprises, strip their assets, and make short-
term profits using sophisticated financial
instruments.
Introduction
From biblical times, locusts have symbolized
destruction – rapidly swarming onto green fields
and stripping them bare. According to National
Geographic, these insects are related to grasshop-
pers, but the unique behavior of locusts makes them
feared and hated. Normally loners, locusts eventu-
ally congregate into mobile swarms in their so-
called gregarious phase when environmental con-
ditions are green and lush. These swarms wreak
havoc, devastating crops and agriculture, and ulti-
mately producing famine and starvation. Many
kinds of locusts operate all over the world, but the
desert locust is possibly the most notorious. In
groups of 40–80 million insects per square kilome-
ter, desert locust swarms can cover up to 1,200 km2
(460 square miles), eating about 192 million kilo-
grams (423 million pounds) of plants every day.
How does this metaphor relate to business?
The term “locust” has only recently started to
enter mainstream business language. In 2001,
John Elkington proposed four insect metaphors
to describe the behavior of organizations in his
corporate chrysalis taxonomy: the destructive
caterpillars and locusts and the regenerative but-
terflies and honeybees. In Elkington’s chrysalis
economy, corporate locusts destroy economic,
environmental, and social value as a result of
the unsustainable business model that they fol-
low. These industrial insects are often hard to
recognize as threatening, until after a period of
developing in relative isolation, they “swarm
together” and overwhelm the social or economic
systems in which they operate. The 2007–2008
global financial crisis (GFC) provides an example
of how the short-term greedy behavior of many
banks had coalesced into a systemic threat to the
global economy. Indeed, the actions of these
banks – supported and encouraged by politicians,
investors, and others – almost brought the global
financial system to the point of collapse.
Key Issues
Locusts tend to believe that the “business of busi-
ness is business,” as Charles Handy (2002)
reminds us. This blinds locust managers to the
need to conserve resources for future generations,
protect the environment, or consider social needs
such as people’s health and well-being (think of
the tobacco companies).
L 1604 Locusts
Corporate locusts exploit and destroy all
forms of capital – natural, human, social, and
economic. The amazing thing about corporate
locusts is that they rarely see the damage they
leave in their wake, and even if they did, they are
likely to dismiss it simply as unavoidable
“collateral damage” in pursuing the short-term
interests of managers and investors. With such
a mindset, they cannot learn from mistakes or
heed warning signals.
In 2004, the then Deputy Chancellor of
Germany, Franz M€untefering, heavily criticized
the behavior of certain private investors, private
equity firms, and investment banks in a political
speech he gave. Whether it was a coincidence
or he was following Elkington, in doing
so, M€untefering used the German word
“Heuschrecken” (meaning locust). This unflatter-
ing term formed part of a criticism of neoliberal
market economics and, in particular, of the activ-
ities of specific private equity firms. According to
M€untefering and many others, these firms and
individuals destroy corporate value by focusing
on the short term, reducing the substance of
healthy businesses, and then, they let the compa-
nies die once the locusts have gorged themselves
on their substance. By the next year, the online
news magazine Stern had published an article
outing so-called locust companies.
The term locust has now entered popular dis-
course in Germany despite resistance from
employers and economists. Popular support for
M€untefering’s critical perspective on corporate
locusts lies at 75% in some opinion polls. The
term has been popularized and is widely used
within Germany in discussions critical of
Anglo/US capitalism. The term locust is also
creeping into major economic writing in the
English and American media (e.g., New YorkTimes, Daily Mail, and The Economist) and is
used by some trade unions.
In addition to Elkington’s writings, the term
locust now appears in academic writing. For
example, Avery and Bergsteiner’s (2011) book,
Honeybees and Locusts, contrasts two diametri-
cally opposed approaches to leading a business.
These are more generally known as Anglo/US
capitalism on the locust side and Rhineland
capitalism on the honeybee side. Based on obser-
vations of successful organizations, the wisdom
of management thinkers, and the results of empir-
ical studies, Avery and Bergsteiner show how the
honeybee and locust approaches to business are
diametrically opposed on 23 elements. The ele-
ments work together in the form of a pyramid
built on a base of 14 value-adding foundation
practices that can be introduced at any time that
management decides to do so. Three examples of
the foundation elements include taking a long-
term perspective in decisions, strategy, and cor-
porate actions; considering the interests of a wide
range of stakeholders; and valuing one’s people.
The base of the pyramid is topped by six higher-
level practices that arise only in the presence of
some or all of the foundation practices. Higher-
level practices include high levels of trust,
devolved and consensual decision making,
retaining and sharing the firm’s knowledge,
teamwork at all levels of the organization, and
fostering a corporate culture that allows these
practices to flourish. The third level of the pyra-
mid is comprised of three key performance
drivers that directly affect what the customer
experiences: innovation, staff engagement, and
quality. The 23 elements in turn constitute
a mutually self-reinforcing and self-optimizing
bundle of interdependent practices that beget
five critical performance outcomes necessary
for long-term corporate and stakeholder wealth –
brand and reputation, customer satisfaction,
financial performance, long-term shareholder
returns, and stakeholder value. Like Albert
(1993) and other prominent economists, these
authors conclude that the locust approach,
although well entrenched, delivers inferior out-
comes when compared with honeybee practices
and is not sustainable.
According to John Monks (2008), General
Secretary of the European Trade Union Confed-
eration, locust thinking is embedded in politics
and many businesses and needs to be reined in.
The close involvement of major corporate power
in politics at all levels in many countries includ-
ing in the USA ensures that the locust ideology
influences many decisions. Lobbyists have staved
off environmental laws on the grounds that they
Locusts 1605 L
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will harm business or jobs. They have attempted
to discredit scientists – classic examples include
the anti-climate change advocates, the pro-
tobacco lobby, or the resistance of banks to
greater regulation following the GFC. Monks is
calling for a sophisticated offensive against the
locusts. He argues that part of the offensive
involves more people understanding what is
really going on; if they were informed, people
would be demanding more ethical practices from
big business. For example, they would not allow
Goldman Sachs and others to hide activities off
their balance sheets from investors, regulators,
and tax authorities.
Among the corporate destructive behaviors
regarded as locust-like are the actions of many
private equity and hedge fund firms. According to
The Economist (2005), private equity groups and
hedge funds emphasize “quick money, short term
results, and the highest possible returns for their
investors,” without consideration for what it
means for their prey. “Buy it, strip it, and flip
it,” is said to be the industry credo. This repre-
sents a shift in value and profit to the present,
disregarding the future. Typically, business
locusts acquire a company and saddle the firm
with the debt from its acquisition that may result
in downgrading the firm’s investment status,
thereby raising its cost of doing business.
Managers need to generate strong cash flow and
to control expenditure tightly so that the debt can
be serviced. Sometimes, this is successful, but in
other cases, the debt destroys the firm one way or
another. Cash flow may be inadequate to service
the debt despite management’s efforts, or the
bank offering the debt may unexpectedly call it
in. Hedge funds are even more short term in their
business horizons and use their access to capital
to “flip” their investments considerably faster
than the 3–5 years typical of private equity firms.
The locust debate about private equity has led to
increased transparency, but in Germany, the indus-
try is still viewed with skepticism and resentment,
thereby creating an ongoing obstacle to making
private equity deals, according to a TowersWatson
(2010) review. When one private equity group
floated the idea of laying off about half of its
workforce, it caused an outcry in Germany.
The locust behavior of many firms is
compounded by the unhelpful behavior of many
stock exchanges and their minions. The value of
erstwhile stock exchanges in facilitating the sup-
ply of capital for investment is being progres-
sively eroded by stock exchanges degenerating
into little more than casinos. The objective of
a gambler is to win a bet. In the case of stock
exchanges, this means betting on whether stock
prices will rise or fall. Huge sums of money now
change hands on the basis of betting intervals that
are measured in microseconds, where the moni-
toring and the decision to buy/sell is no longer
made by humans but by computers. Such gam-
blers are not in the least interested in the long-
term future of an organization or its employees,
suppliers, customers, or other stakeholders. Their
exclusive focus is on their short-term gain. And
yet, as Stern (2006) has observed, we are
extending ownership rights to speculators who
would not hesitate to send a company into obliv-
ion if it suited their short-term interests. Monk
refers to Denmark, which has increased tax rates
on short-term investments in an effort to discour-
age the microsecond, automated, short-term trad-
ing so favored by the financial sector.
In many parts of the world, locust behavior is
admired, propagated, and imitated. Regrettably,
many managers do not know of any alternatives –
such as following honeybee principles. This
reflects poorly on business schools worldwide
that still preach the locust philosophy and tech-
niques. As a result, locust thinking permeates
much of what is taught in leading business
schools – namely, that unfettered short-term
greed is good. This places much of the responsi-
bility for locust behavior on business educators,
as the late Sumantra Ghoshal (2005: 75) from the
London School of Economics wrote:
“Business schools do not need to do a great deal
more to help prevent future Enrons; they need only
to stop doing a lot they currently do. They do not
need to create new courses; they need to simply
stop teaching some old ones. But, before doing any
of this, we – as business school faculty – need to
own up to our own role in creating Enrons. Our
theories and ideas have done much to strengthen
the management practices that we are all now so
loudly condemning.”
L 1606 Long Hours Without Overtime
Similar words could be used to advise business
schools to drop courses extolling locust behavior
from their curricula – and teach locust leadership
as something students need to be able to recog-
nize and be wary of.
Future Directions
Largely as a result of the recent GFC, but also
because of the increasing power of pension funds
and sovereign funds, both of which by their very
nature must think and act long term, pressures are
increasing on corporations to adopt more respon-
sible and sustainable behaviors. One example of
such a driver is the Norwegian government “pen-
sion” fund, Norges Bank Investment Manage-
ment (NBIM). NBIM manages the surplus
wealth from Norway’s large petroleum income,
which has since been turned into the govern-
ment’s pension fund. NBIM is the largest Euro-
pean fund and one of the largest in the world. The
fund receives a very high transparency rating of
10 and invests in line with prescribed ethical
guidelines. Companies that the fund invests in
are closely monitored by an ethics council, and
NBIM may withdraw its funds from companies
operating in conflict with its 2004 guidelines. The
guidelines cover violation of human rights, cor-
ruption, environmental damage, child labor, and
other ethical considerations. The NBIM fund has
withdrawn its investment funds from a wide
range of companies in many countries deemed
to be violating its ethical code. NBIM provides
a possible blueprint for the future.
Cross-References
▶Corporate Social Irresponsibility
▶Corporation as Psychopath
▶Elkington, John
▶ Private Equity Firms (Pejorative)
▶Rhineland Business Model/Rhineland
Leadership
▶ Stakeholder Thinking
References and Readings
Albert, M. (1993). Capitalism vs. Capitalism: HowAmerica’s obsession with individual achievement andshort-term profit has led it to the brink of collapse.New York: Four Walls Eight Windows.
Anonymous. (2005). Locust versus locust: American
investors fight each other over Celanese. http://www.
economist.com/node/4010780. Accessed 14 Jan 2011.
Anonymous. (2010). Germany – can the locusts deliver?
Towers Watson. http://www.towerswatson.com/
research/2170. Accessed 14 Jan 2011.
Avery, G. C., & Bergsteiner, H. (2011). Sustainable lead-ership: Honeybee and locust approaches, Interna-tional version. New York: Routledge.
Elkington, J. (2001). The chrysalis economy: How citizenCEOs and corporations can fuse values and valuecreation. Oxford: Captstone Publishing.
Ghoshal, S. (2005). Bad management theories are
destroying good management practices. Academy ofManagement Learning & Education, 4(1), 75–91. 75.
Handy, C. (2002). What’s a business for? Harvard Busi-ness Review, 80(12), 48–55.
Monks, J. (2008). Locusts versus labor: Handling the new
capitalism, speech given at Harvard, 16 April. http://
www.etuc.org/a/4882. Accessed 14 Jan 2011.
National Geographic. (n. d.). http://animals.national-
geographic.com/animals/bugs/locust.html. Accessed
14 Jan 2011.
Stern, S. (2006). The short-term shareholders changing the
face of capitalism. Financial Times, March 28, 11.
Long Hours Without Overtime
▶ Sweatshops
Longevity
▶ Sustainability (World Commission on Envi-
ronment and Development Definition)
Long-Term Business Vision
▶Corporate Social Responsibility Strategy
Low-Wage Labor 1607 L
Long-Term Strategy
▶Corporate Social Performance
Loop-Closing
▶Waste Valorization
Low-Wage Labor
▶ Sweatshops
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