MOST BUSINESS LEADERS now recognize that climate change is a grand challenge of the highest order. While there is vast potential for corporate action on this issue, relatively little is known in practical terms about how firms should go about managing their stakeholders to address environmental preservation.
In this article we will describe how a Brazilian cosmetics company has been working with its stakeholders to create positive impact on the Amazon rainforest. Founded in 1969, Natura & Co. is the world’s largest B-Corporation, with 2022 net revenue of US$7.4 billion. Recognized with the United Nations Champion of the Earth Award in 2015, it has also been the parent company for other purpose-driven brands including The Body Shop, Aesop and Avon. By aligning the interests of its stakeholders with its own, Natura is simultaneously achieving both financial and environmental aims.
Intrigued by the company’s innovative approach, we recently set out to assess how Natura aligns stakeholder interests to address environmental issues. In this article we will summarize our findings, which were recently published in Management Science.
The Tragedy of the Commons
Nobel Laureate Elinor Ostrom defined the commons as ‘land or resources belonging to or affecting the whole of a community.’ Her seminal work showed that governing the commons is complicated because, by definition, members of a community compete to use its resources while, at the same time, those resources must remain accessible to all. These features, she argued, lead to ill-defined property rights, weak incentives for preservation and, consequently, to what she called the ‘tragedy of the commons.’
The , per Ostrom, is that all stakeholders have incentives to exploit the community’s resources to the detriment of the common interest. This can — and has — led to the overexploitation and depletion of common resources. Today, this tragedy is
