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We all know how important sustainability is for organizations. Yet why do some organizations still struggle to incorporate sustainability into their management and business models? That’s what we will discuss in this video. We will introduce different pathways to becoming sustainable, and we will look at one example from Germany—the so-called Energiewende—as a path toward a sustainable future for the country. Furthermore, we will explore the organization’s role as a major contributor and key lever for sustainability. We will also analyze why some organizations fail to adapt and why internal and external pressures hinder their progress toward the triple bottom line.

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Emission Pathway and the Paris Agreement

Looking at the emission pathway toward the Paris Agreement, from the 1960s until the early 2000s there has been an increase in CO₂ emissions per year. We need to consider ways to cut this trajectory and reduce CO₂ emissions. Scientists have outlined various approaches to limit global warming to 1.5 °C or at most 2.0 °C. Each country and each player must decide on the path to achieve these reductions.

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Germany’s Energiewende

Germany, for example, uses the term Energiewende to describe its energy transition. A 2024 diagram from the German Environment Agency shows good progress in renewable energy usage for electricity production. However, there is still significant potential for improvement in the heating, cooling, and transportation sectors. Organizations play a major role here, because they are responsible for a large share of emissions through their products and processes, and they can act as key levers to achieve the triple bottom line of sustainability.

But if organizations need to act quickly to meet the Paris Agreement targets, why does the transition often seem slow? Why aren’t companies changing more swiftly?

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Why Is It Hard for Organizations to Change?

On a broad level, many factors can drive change, such as new competitors, changing markets, globalization, technological advances, social pressure (e.g., Fridays for Future), demographic shifts, political pressure (e.g., the European Green Deal), or economic turmoil (e.g., the 2008–2009 financial crisis).

Despite these forces, companies often find it difficult to change. Research by Michael Hannan and John Freeman on organizational ecology offers insights. It adapts ideas from population ecology and Darwinian evolution, suggesting that certain factors make an organization resistant to change.

They propose three phases in organizational evolution:

Variation:

Forces for change (competition, new technologies, social pressure, etc.) lead to new organizational forms.

Entrepreneurs may start companies, existing firms may imitate each other, or government may intervene.

Some variations succeed; others fail.

Selection:

Organizational forms compete for resources and market share.

Forms that best fit the environment survive; those that do not, fail.

Retention:

Survivors entrench what helped them succeed, developing routines and institutions.

Over time, this stability can create inertia that hinders adaptation when the environment changes again.

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Internal and External Constraints (Inertia)

Established organizations often face inertia—they are slower to reorganize than the environment changes. This can arise from:

Internal Constraints:

Sunk costs (plants, equipment, specialized personnel)

Limited information within large firms

Internal politics (e.g., subunit leaders resisting change)

Established culture and history

External Constraints:

Legal or fiscal barriers (market entry or exit restrictions)

Limited information about new technologies

Legitimacy issues (what the public or industry expects)

Collective rationality problems (what benefits one firm may not help the industry, or vice versa)

Because these constraints make change difficult, a fast-evolving environment (e.g., sudden societal demand for sustainability) can overwhelm established routines and institutions.

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Stakeholder Influence on Organizational Inertia

External stakeholders can also slow organizational change:

Employees: May resist if they feel threatened by new goals or fear job losses.

Professional Associations: May oppose change if members require retraining or if credentials become obsolete.

Competitors: Could maintain cheaper, unsustainable methods, raising competitive pressure on a firm attempting sustainability.

Suppliers: Might resist changes requiring significant investment or altering established processes.

Governments and Political Groups: Slow policy implementation or protective legislation can hinder change.

Shareholders, Banks, and Analysts: Often focus on short-term financial returns, viewing sustainability as risky or unprofitable.

Activists: While demanding sustainability, they may push changes that are too radical for firms to implement quickly.

Customers: May be unwilling to pay higher prices for sustainable products or services.

Trade Unions: Could fear job losses in traditional industries and resist transitions to new, more sustainable methods.

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Key Takeaways

Organizations contribute significantly to global emissions.

There are various pathways—national and organizational—to reducing emissions, such as Germany’s Energiewende.

Despite their potential for positive impact, organizations often face strong internal and external inertia.

Multiple stakeholders can slow or complicate the shift to sustainable practices.

Companies must balance these diverse interests when making the transition to sustainable organizational change.

Thank you very much.

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