Building the Link between Technological Capacity Strategies and Innovation in Construction Companies

*Tugce Ercan*

### **Abstract**

Interest in construction industry innovation has been growing with the globalization and in parallel with change of the building production processes. However, despite its potential for gaining sustainable company performance, many construction companies have failed by management of innovation. In this context, the main theme of this study is to examine how technology capacity in construction companies changes according to the main innovation areas. The technology capacity and the integration of technology to organization is one of the main determinants of construction innovation. The main purpose of this study is to determine how the existence of different innovation areas in construction companies is related to the technology capacity features. A questioner survey was conducted to collect data from construction professionals, and they were asked assess their company's current position about technology capacity and activity level of predicted innovation areas—product, process, and organization. Independent sample t-test was employed to see the differentiation of technological capacity among different innovation types. The results indicate that the technology capacity of the construction companies, which are active in the fields of product, process, and organizational innovation, is in a varying strength.

**Keywords:** construction company, innovation, technology capacity, product innovation, process innovation

### **1. Introduction**

Construction activity in Turkey is undergoing a transformation due to changing lifestyles and evolving needs. In recent years, intelligent building systems, environmental buildings, modern living spaces, home-office systems, and entertainment and activity centers have become indispensable for modern projects in the direction of new tendencies in the sector. The importance of urban transformation in Turkey increased in housing market. In the first three quarters of 2017, the annual real growth by 10.2% in the domestic construction sector exceeded GDP growth of 7.4%. Turkish construction companies continue to operate actively in domestic as well as abroad. In 2017, the total value of projects undertaken by Turkish contractors increased by USD 1.6 billion compared to the previous year and amounted to

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*Sustainable Management Practices*

**References**

[1] Dawkins R. *Extended Selfish Gene*. Oxford: Oxford University Press; 2016

religious texts. In the Bible we are told to subdue the earth, whereas in the Quran we are placed at the centre of the world and given all the world's goods by God

[2] This belief is present in many

[3] Rozycki M. Paradigms of risk, hazards and danger. In: Hessami A, editor. Perspectives on Risk, Assessment & Management Paradigms. London:

[4] Rozycki M. Inertia in procurement risk management. In: Jabłoński A, editor. Sustainability and Scalability of Business Theory and Practice. New York: Nova Science Publishers Inc;

Intechopen Limited; 2018

2017

USD 14.7 billion. The construction sector is highly sensitive to economic activity. Production in the sector is generally in line with economic activity. However, in the recent years, activities in the sector depend on the internal dynamics of the market conditions.

When we compare the Turkish construction sector with other sectors, it is observed that it is slow in terms of innovative trends, and technology-oriented innovation development and adaptation remains to be seen. According to the research results of Genç et al., only 14.8% of Turkey construction sector professionals are sufficient with innovation level in the construction sector [1]. However, in today's market conditions, innovating and adapting to it is critical for sustainable firm performance. The construction sector, which also triggers the internal dynamics of the markets in the country, is expected to show improvement in innovation areas.

Drucker emphasized that innovation is a major responsibility of management in all industries [2]. With the new dynamics of competitive international markets, the importance of this responsibility has also increased for construction companies. As a result of rapid developments in technology, changes in the number and quality of the connections of the sub-markets in different geographies of the construction sector have been actualized. This change allows firms to participate in international competitive environments, creating different competitive conditions and making innovation an important means of competition. As Carbonara and Pellegrino indicated that market concentration seems to be positively correlated to the innovation in construction industry; however, the internal technology capacity is also a necessity. For example better innovation opportunities are created through new contracting systems, such as BIM-based procurement procedures [3]. Bengtsson emphasized the importance of coordinated construction logistics that might not only be to increase productivity but also to facilitate collaboration, learning, and innovation between interorganizational actors [4].

In this context, the main theme of this study is to examine how technology capacity in construction companies changes according to the main innovation areas. Technology capacity of the construction company is a decisive force for product, process, and organizational innovations. Effective use of technology in products and processes is a decisive factor in ensuring collaboration that ensures the innovation process. It is unrealistic for the construction company to manage the complex processes of construction project without technology support and to be successful in collaboration. In that case, the size of the innovation in the construction company is strongly linked to the technology capacity. However, there is a lack in literature on how technology capacity need is transformed among different innovation types. So the main purpose of this study is to determine how the existence of different innovation areas in the construction companies is related to the technology capacity features. Searching for answers on how the differentiation for technology capacity requirements for innovation types in construction companies can be called as sub-purpose of this study. Product, process, and organizational innovations have diverse technology needs for formation in construction business.

The technology capacity and the integration of technology to organization is one of the main determinants of construction innovation. As Holt insisted that "radical innovations are the result of technological impetus, whereas minor innovations that follow arise in response to market demand" [5]. In that case, innovation in construction is a phenomenon that takes place with technology capacity within the organization and market pressure. Market and customer demands create beginnings and opportunities for innovation, but they are not enough. Findings of the work will provide important practicalities for future theoretical work on innovation in construction.

**79**

*Building the Link between Technological Capacity Strategies and Innovation in Construction…*

**2. Technology capacity and innovation in construction companies:** 

Technology capacity is the managerial and organizational skills that an organization needs to efficiently utilize hardware and software technologies and to complement technological change processes [6]. Technology capacity, which we can define as the ability to find and use technology to maintain and achieve competitive advantage, is the use of the company's technical resources and all its technical functions to enhance and modernize the company's productivity and performance [7]. Whereas innovation is the application of new knowledge to the industry, this practice can take place in the forms of product, process, social, and

Technology capacity develops in company' processes and is reinforced with the old experience of the company. Jin and Zedtwitz propose three basic steps to describe the technology capacity in organizations: acquisition, analogy, and tech-

• Acquisition: Companies choose technologies from developed countries and acquire mature technology from multinational companies to reduce their entry

• Analogy: Companies absorb the transferred technology and distribute the

• Technology development: Firms develop and innovate their own new technologies, ultimately enabling domestic technology to compete with top-notch

In developing countries such as Turkey, construction firms often develop technology capacity in the forms of acquisition and analogy. "Technology development," which includes pure innovation, is proceeding in the form of purchases from

technologies, process technologies, and information technologies [8].

customers and to manage customer relationships more effectively [10].

of new ideas to the process and product is more difficult and slower [12].

Construction companies do not do laboratory work to develop radical new ideas,

Technology capacity is an array of information that includes both practical and theoretical knowledge as well as methods, procedures, experience, and physical devices and equipment. Technology capacity includes the company's superior and heterogeneous technical assets and is closely related to product technologies, design

Technology capacity, in this context, can be considered as the core capability that enables firms to develop and sell products and services valued by targeted

Technology capacity also refers to the ability to develop and design new products. It processes and updates the information about the physical world in unique ways and ensures that this information is converted into the desired designs and instructions. Thus, not only the technological capabilities but also the capabilities to expand the basic competencies effectively mobilize the technology flow and technological resources [11]. Moreover, technology capacity requires a deep scientific understanding. Unlike science, technology capacity is often implicit in firms' experiences and skills, as well as the ability to produce new knowledge [7].

For this reason, we can say that the strong tendency toward technology capacity will increase innovation efficiency. Innovation process and the ability to change construction companies are slower than in other manufacturing sectors. Adaptation

*DOI: http://dx.doi.org/10.5772/intechopen.88238*

**theoretical framework**

organizational change.

nology development [8].

risks and R&D investments.

technology into the company.

developed countries and other sectors.

innovations in developed countries [9].

*Building the Link between Technological Capacity Strategies and Innovation in Construction… DOI: http://dx.doi.org/10.5772/intechopen.88238*

### **2. Technology capacity and innovation in construction companies: theoretical framework**

Technology capacity is the managerial and organizational skills that an organization needs to efficiently utilize hardware and software technologies and to complement technological change processes [6]. Technology capacity, which we can define as the ability to find and use technology to maintain and achieve competitive advantage, is the use of the company's technical resources and all its technical functions to enhance and modernize the company's productivity and performance [7]. Whereas innovation is the application of new knowledge to the industry, this practice can take place in the forms of product, process, social, and organizational change.

Technology capacity develops in company' processes and is reinforced with the old experience of the company. Jin and Zedtwitz propose three basic steps to describe the technology capacity in organizations: acquisition, analogy, and technology development [8].


In developing countries such as Turkey, construction firms often develop technology capacity in the forms of acquisition and analogy. "Technology development," which includes pure innovation, is proceeding in the form of purchases from developed countries and other sectors.

Technology capacity is an array of information that includes both practical and theoretical knowledge as well as methods, procedures, experience, and physical devices and equipment. Technology capacity includes the company's superior and heterogeneous technical assets and is closely related to product technologies, design technologies, process technologies, and information technologies [8].

Technology capacity, in this context, can be considered as the core capability that enables firms to develop and sell products and services valued by targeted customers and to manage customer relationships more effectively [10].

Technology capacity also refers to the ability to develop and design new products. It processes and updates the information about the physical world in unique ways and ensures that this information is converted into the desired designs and instructions. Thus, not only the technological capabilities but also the capabilities to expand the basic competencies effectively mobilize the technology flow and technological resources [11]. Moreover, technology capacity requires a deep scientific understanding. Unlike science, technology capacity is often implicit in firms' experiences and skills, as well as the ability to produce new knowledge [7].

For this reason, we can say that the strong tendency toward technology capacity will increase innovation efficiency. Innovation process and the ability to change construction companies are slower than in other manufacturing sectors. Adaptation of new ideas to the process and product is more difficult and slower [12]. Construction companies do not do laboratory work to develop radical new ideas,

*Sustainable Management Practices*

conditions.

innovation areas.

USD 14.7 billion. The construction sector is highly sensitive to economic activity. Production in the sector is generally in line with economic activity. However, in the recent years, activities in the sector depend on the internal dynamics of the market

When we compare the Turkish construction sector with other sectors, it is observed that it is slow in terms of innovative trends, and technology-oriented innovation development and adaptation remains to be seen. According to the research results of Genç et al., only 14.8% of Turkey construction sector professionals are sufficient with innovation level in the construction sector [1]. However, in today's market conditions, innovating and adapting to it is critical for sustainable firm performance. The construction sector, which also triggers the internal dynamics of the markets in the country, is expected to show improvement in

Drucker emphasized that innovation is a major responsibility of management in all industries [2]. With the new dynamics of competitive international markets, the importance of this responsibility has also increased for construction companies. As a result of rapid developments in technology, changes in the number and quality of the connections of the sub-markets in different geographies of the construction sector have been actualized. This change allows firms to participate in international competitive environments, creating different competitive conditions and making innovation an important means of competition. As Carbonara and Pellegrino indicated that market concentration seems to be positively correlated to the innovation in construction industry; however, the internal technology capacity is also a necessity. For example better innovation opportunities are created through new contracting systems, such as BIM-based procurement procedures [3]. Bengtsson emphasized the importance of coordinated construction logistics that might not only be to increase productivity but also to facilitate collaboration, learning, and

In this context, the main theme of this study is to examine how technology capacity in construction companies changes according to the main innovation areas. Technology capacity of the construction company is a decisive force for product, process, and organizational innovations. Effective use of technology in products and processes is a decisive factor in ensuring collaboration that ensures the innovation process. It is unrealistic for the construction company to manage the complex processes of construction project without technology support and to be successful in collaboration. In that case, the size of the innovation in the construction company is strongly linked to the technology capacity. However, there is a lack in literature on how technology capacity need is transformed among different innovation types. So the main purpose of this study is to determine how the existence of different innovation areas in the construction companies is related to the technology capacity features. Searching for answers on how the differentiation for technology capacity requirements for innovation types in construction companies can be called as sub-purpose of this study. Product, process, and organizational innovations have diverse technology needs for formation in construction business. The technology capacity and the integration of technology to organization is one of the main determinants of construction innovation. As Holt insisted that "radical innovations are the result of technological impetus, whereas minor innovations that follow arise in response to market demand" [5]. In that case, innovation in construction is a phenomenon that takes place with technology capacity within the organization and market pressure. Market and customer demands create beginnings and opportunities for innovation, but they are not enough. Findings of the work will provide important practicalities for future theoretical work on innovation

innovation between interorganizational actors [4].

**78**

in construction.

but instead develop innovative solutions to solve everyday management problems. Innovation activity takes place in fractional and gradual stages in the construction companies' process [13].

The innovation in construction often has a particular tendency to be developed specifically at the project level (*ad hoc*), whereas in other production sectors, innovations are being developed in line with the ideas of employees, with their experience in production and service provision, and the challenges they face. In present market conditions, innovation and innovation management are admitted as an important tool in determining competitive advantage and organizational performance.

Barret et al. pointed out that there are many differences regarding innovation between the construction sector and other production sectors [14]. For example, in the building life cycle, the construction industry is constantly active and influential as a system; hence, a much larger proportion of the stakeholders must be involved in the innovation process, and innovation can arise in any area. Innovation in construction involves many actors, including governments, building material suppliers, designers, general contractors, specialist contractors, the labor workforce, owners, professional associations, private capital providers, end users of public infrastructure, vendors and distributors, testing service companies, educational institutions, certification bodies, and others. In their study on the role of stakeholder engagement in construction innovation, Widén et al. emphasized the need to develop communication plans as well as the formation of stakeholder engagement plans and strategies for prominent stakeholders as an integral part of construction innovation [15]. Therefore, innovation in construction takes more than the changes in people or ideas; the whole company must be organized in this direction, and the technological capacity of the company is one of the most important sources of innovation.

### **2.1 Basic innovation areas in construction companies**

There are different ways to classify innovation in project-based organizations. A common classification originating from manufacturing studies is to separate between product and process innovations [4]. The first is product innovation. Products of construction are mostly durable so that it is usually possible to defer replacement of an existing structure. Another reason is that products of construction are usually costly investments. Product innovation represents innovative product/service development and delivery to the marketplace. The product may be a physical one, or it may be a combination of physical product and service as well as construction. In the context of the construction company, the application of innovative design trends, the application of new materials, and the implementation of technological innovations that will increase productivity are possible activities in this innovation area. From another perspective product innovation in construction is knowledge about design science (knowledge of behavior of the nature and knowledge of strength, stability, cost, esthetics, and function of the combined materials in the nature) and the knowledge about construction materials [16]. Kuznets also pointed out the central role of product innovation in long-term economic growth [17]. Nam and Tatum pointed out that product innovation is perhaps the most important contributor to the technological progress of the construction companies [16]. Some of the product-focused innovations described by managers involved in this study's field work include the development of new construction methods in seismic isolator structures, hard fill applications, the development of new materials in prefabrication and the design of better fasteners, and the development of sustainable building materials.

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the sector.

**3. Methodology**

*Building the Link between Technological Capacity Strategies and Innovation in Construction…*

logical capability is a reference point for innovative buildings.

Nam and Tatum identified four key factors in product innovation in construction: owner's demands, problems, designer's bank of technology, and contractor's process technology [16]. The owner's demands are the key initiator of the innovation process for a constructed product. In a design company, key employees' techno-

The second basic innovation area is process innovation that is related to its capacity to be fast and flexible in construction processes. The knowledge about construction process—the methods for combining the materials, labor, equipment, tools, energy, new procurement systems, and other resources complete the basic elements of process innovation. It is able to provide standardization in building products and express the rapid adaptation of the changes in the project process in the organization. Being able to make different ways of construction methods from others is also considered as an important process innovation. Process innovation implies the development of internal processes and capabilities, including reengineering. Expert participants of this study indicated that enterprise resource planning (ERP) and system analysis and program (SAP) development applications for the organizational innovation in construction work, new hardware/software portfolio management information models, and proactive digital marketing strategies are developing elements for process innovation. Construction management; computer applications in design and construction, notably in computer-aided design and drafting (CADD); and integrating engineering and management data bases are also some examples for process innovation in construction. It is possible to say that lean construction and adaptation to Industry 4.0 area rising trends in

Finally, in the scope of this study, organizational innovation is discussed for the last basic innovation area. Organizational innovation can be interpreted as bringing the organizational structure into an innovative structure in general. It is important to design a target-oriented project organization structure. The development of collaborative work environments, major changes to the organizational structure, introduction of cross-functional teams, and outsourcing of major business functions are the other areas of activity to improve the technological infrastructure of

It also deals with the implementation of a new or significantly changed corporate strategy and is about advanced management techniques, for example, knowledge

This study is a descriptive research. The descriptive research study is typically concerned with determining the frequency with which something occurs or the relationship between variables to make predictions [18]. After conducting an extensive literature review, the problem statement, research framework and measurement parameters for research construct were determined. To predict the differentiation of technological capacity among different innovation types like product, process, and organization in construction companies, a sample survey

To assess the reliability of the research, Cronbach's alpha coefficient was employed. The reliability of the scales was measured by Cronbach's alpha, and these were compared to those in previous studies. The fact that the factor structure of a scale is appropriate for the theoretical underpinnings is a desirable component of studies on validity and reliability. Cronbach's *α*, as a measure of internal consistency, was also used to examine the reliability of the measurement scales. This value

communication channels and improve organizational structure.

management systems, Investors in People, etc.

such as a cross-sectional study was conducted.

*DOI: http://dx.doi.org/10.5772/intechopen.88238*

### *Building the Link between Technological Capacity Strategies and Innovation in Construction… DOI: http://dx.doi.org/10.5772/intechopen.88238*

Nam and Tatum identified four key factors in product innovation in construction: owner's demands, problems, designer's bank of technology, and contractor's process technology [16]. The owner's demands are the key initiator of the innovation process for a constructed product. In a design company, key employees' technological capability is a reference point for innovative buildings.

The second basic innovation area is process innovation that is related to its capacity to be fast and flexible in construction processes. The knowledge about construction process—the methods for combining the materials, labor, equipment, tools, energy, new procurement systems, and other resources complete the basic elements of process innovation. It is able to provide standardization in building products and express the rapid adaptation of the changes in the project process in the organization. Being able to make different ways of construction methods from others is also considered as an important process innovation. Process innovation implies the development of internal processes and capabilities, including reengineering. Expert participants of this study indicated that enterprise resource planning (ERP) and system analysis and program (SAP) development applications for the organizational innovation in construction work, new hardware/software portfolio management information models, and proactive digital marketing strategies are developing elements for process innovation. Construction management; computer applications in design and construction, notably in computer-aided design and drafting (CADD); and integrating engineering and management data bases are also some examples for process innovation in construction. It is possible to say that lean construction and adaptation to Industry 4.0 area rising trends in the sector.

Finally, in the scope of this study, organizational innovation is discussed for the last basic innovation area. Organizational innovation can be interpreted as bringing the organizational structure into an innovative structure in general. It is important to design a target-oriented project organization structure. The development of collaborative work environments, major changes to the organizational structure, introduction of cross-functional teams, and outsourcing of major business functions are the other areas of activity to improve the technological infrastructure of communication channels and improve organizational structure.

It also deals with the implementation of a new or significantly changed corporate strategy and is about advanced management techniques, for example, knowledge management systems, Investors in People, etc.

### **3. Methodology**

*Sustainable Management Practices*

companies' process [13].

performance.

innovation.

**2.1 Basic innovation areas in construction companies**

but instead develop innovative solutions to solve everyday management problems. Innovation activity takes place in fractional and gradual stages in the construction

specifically at the project level (*ad hoc*), whereas in other production sectors, innovations are being developed in line with the ideas of employees, with their experience in production and service provision, and the challenges they face. In present market conditions, innovation and innovation management are admitted as an important tool in determining competitive advantage and organizational

The innovation in construction often has a particular tendency to be developed

Barret et al. pointed out that there are many differences regarding innovation between the construction sector and other production sectors [14]. For example, in the building life cycle, the construction industry is constantly active and influential as a system; hence, a much larger proportion of the stakeholders must be involved in the innovation process, and innovation can arise in any area. Innovation in construction involves many actors, including governments, building material suppliers, designers, general contractors, specialist contractors, the labor workforce, owners, professional associations, private capital providers, end users of public infrastructure, vendors and distributors, testing service companies, educational institutions, certification bodies, and others. In their study on the role of stakeholder engagement in construction innovation, Widén et al. emphasized the need to develop communication plans as well as the formation of stakeholder engagement plans and strategies for prominent stakeholders as an integral part of construction innovation [15]. Therefore, innovation in construction takes more than the changes in people or ideas; the whole company must be organized in this direction, and the technological capacity of the company is one of the most important sources of

There are different ways to classify innovation in project-based organizations. A common classification originating from manufacturing studies is to separate between product and process innovations [4]. The first is product innovation. Products of construction are mostly durable so that it is usually possible to defer replacement of an existing structure. Another reason is that products of construction are usually costly investments. Product innovation represents innovative product/service development and delivery to the marketplace. The product may be a physical one, or it may be a combination of physical product and service as well as construction. In the context of the construction company, the application of innovative design trends, the application of new materials, and the implementation of technological innovations that will increase productivity are possible activities in this innovation area. From another perspective product innovation in construction is knowledge about design science (knowledge of behavior of the nature and knowledge of strength, stability, cost, esthetics, and function of the combined materials in the nature) and the knowledge about construction materials [16]. Kuznets also pointed out the central role of product innovation in long-term economic growth [17]. Nam and Tatum pointed out that product innovation is perhaps the most important contributor to the technological progress of the construction companies [16]. Some of the product-focused innovations described by managers involved in this study's field work include the development of new construction methods in seismic isolator structures, hard fill applications, the development of new materials in prefabrication and the design of better fasteners, and the develop-

**80**

ment of sustainable building materials.

This study is a descriptive research. The descriptive research study is typically concerned with determining the frequency with which something occurs or the relationship between variables to make predictions [18]. After conducting an extensive literature review, the problem statement, research framework and measurement parameters for research construct were determined. To predict the differentiation of technological capacity among different innovation types like product, process, and organization in construction companies, a sample survey such as a cross-sectional study was conducted.

To assess the reliability of the research, Cronbach's alpha coefficient was employed. The reliability of the scales was measured by Cronbach's alpha, and these were compared to those in previous studies. The fact that the factor structure of a scale is appropriate for the theoretical underpinnings is a desirable component of studies on validity and reliability. Cronbach's *α*, as a measure of internal consistency, was also used to examine the reliability of the measurement scales. This value is expected to be over 0.60 [19]. The reliability test results for the scales used in the research were above 0.60, which indicates that all factors have internal consistency (*α* = 0.944).

### **3.1 Field research: innovation areas and technology capacity link**

The survey asked construction professionals to assess their company's current position about technology capacity. This survey consisted of four sections: (1) demographic data of the respondents (specialization, education background, age, etc.), (2) company information (size, location, market, etc.), (3) assessment the levels of technology capacity of the construction company, and (4) assessment the applied innovation types. Survey questions of technology capacity were asked using a seven-point Likert scale (1, strongly disagree and 7, strongly agree). The presence of different innovation activity types were asked as dichotomous questions (0, Active and 1, Non-active).

In this study, Wang's technological capability measurement scale (with Cronbach's *α* value of 0.90) [10] was employed to assess the construction company' technological resources and abilities (**Table 1**). Wang's technological capacity measurement scale consists of 10 parameters referring to technological capability of the construction company like investment in R&D activities, on-the-job training opportunities, etc. **Figure 1** states the research framework of the study. According to the framework, this study assumed that technology capacity is a strong predictor for being innovation active in three basic innovation activity areas: product, process, and organization.

Statistical analyses were undertaken using the Statistical Package for the Social Sciences (SPSS). Independent sample t-tests were performed to test whether the mean values on each TC parameter for the groups were equal for:



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*Building the Link between Technological Capacity Strategies and Innovation in Construction…*

Regarding the scope of the study, the survey was sent to 150 members of the Turkish Contractors Association (TCA) and 150 members of Association of Turkish Consulting Engineers and Architects (ATCEA) via e-mail in a digital survey format. These associations represent a major portion of the civil engineering professionals in Turkey [20]. The pilot survey also revealed that most of the construction companies in Turkey apply innovation practices in a quantifiable manner. So there is no limitation for company size in this research as Mansfield suggests that the size of firms has little effect on innovation, at least when a firm is above some threshold size [21]. A total of 91 construction professionals actively working at construction companies in Turkey responded. Therefore, the survey's rate of response was 40%. The respondents were senior- and middle-level managers of construction companies

According to the demographics of the survey, 45.7% of the respondents were in the age range of 25-35 years, while 31.9% were in the age range of 36–45 years. About 58.6% of respondents were civil engineers and 13.8% of them were architects. When the survey participants' characteristics were examined, it was observed that 71.6% had more than 400 employees and 75.9% had a parent organization. The fields of activity of the participating firms are several such as housing construction, heavy construction, construction except housing, construction management, and design.

Product innovation represents the development and introduction of innovative products and services. According to the results of the study, 34 of the 91 production companies reported to be active in the field of product innovation. There were two ways of interpreting the results of the t-test. The first method was to compare the test significance level against the level of significance, which was set at 0.05. The

**4.1 Link between product innovation and technology capacity**

*DOI: http://dx.doi.org/10.5772/intechopen.88238*

**3.2 Sampling and data collection**

**Figure 1.**

*Research framework.*

listed in TCA and ATCEA.

**4. Basic research findings**

### **Table 1.**

*Wang et al. [10] technological capability measurement scale.*

*Building the Link between Technological Capacity Strategies and Innovation in Construction… DOI: http://dx.doi.org/10.5772/intechopen.88238*

*Sustainable Management Practices*

(0, Active and 1, Non-active).

process, and organization.

(*α* = 0.944).

is expected to be over 0.60 [19]. The reliability test results for the scales used in the research were above 0.60, which indicates that all factors have internal consistency

The survey asked construction professionals to assess their company's current position about technology capacity. This survey consisted of four sections: (1) demographic data of the respondents (specialization, education background, age, etc.), (2) company information (size, location, market, etc.), (3) assessment the levels of technology capacity of the construction company, and (4) assessment the applied innovation types. Survey questions of technology capacity were asked using a seven-point Likert scale (1, strongly disagree and 7, strongly agree). The presence of different innovation activity types were asked as dichotomous questions

In this study, Wang's technological capability measurement scale (with Cronbach's *α* value of 0.90) [10] was employed to assess the construction company' technological resources and abilities (**Table 1**). Wang's technological capacity measurement scale consists of 10 parameters referring to technological capability of the construction company like investment in R&D activities, on-the-job training opportunities, etc. **Figure 1** states the research framework of the study. According to the framework, this study assumed that technology capacity is a strong predictor for being innovation active in three basic innovation activity areas: product,

Statistical analyses were undertaken using the Statistical Package for the Social Sciences (SPSS). Independent sample t-tests were performed to test whether the

TC3. On-the-job training is provided frequently in our firm to improve the technical skills of employees

TC7. We are one of the leaders in construction industry to establish and upgrade technology standards

TC9. Compared with our major competitors, we have competitive and powerful technology strategy

TC10. We have strong capability to integrate external technological resources with in-house resources of our

mean values on each TC parameter for the groups were equal for:

a.Product innovation active and non-active

b.Process innovation active and non-active

**Technological capability measurement scale**

c.Organizational innovation active and non-active

TC1. We always make relatively heavy investment in R&D activities TC2. We have accumulated stronger and various technological skills

TC5. We have the ability to accurately predict future technological trends TC6. We are skillful in applying new technology to problem solving

TC8. We always lead technology innovation of the principal industry

*Wang et al. [10] technological capability measurement scale.*

TC4. We are qualified to attract and motivate talented experts

**3.1 Field research: innovation areas and technology capacity link**

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firm

**Table 1.**

### **3.2 Sampling and data collection**

Regarding the scope of the study, the survey was sent to 150 members of the Turkish Contractors Association (TCA) and 150 members of Association of Turkish Consulting Engineers and Architects (ATCEA) via e-mail in a digital survey format. These associations represent a major portion of the civil engineering professionals in Turkey [20]. The pilot survey also revealed that most of the construction companies in Turkey apply innovation practices in a quantifiable manner. So there is no limitation for company size in this research as Mansfield suggests that the size of firms has little effect on innovation, at least when a firm is above some threshold size [21].

A total of 91 construction professionals actively working at construction companies in Turkey responded. Therefore, the survey's rate of response was 40%. The respondents were senior- and middle-level managers of construction companies listed in TCA and ATCEA.

According to the demographics of the survey, 45.7% of the respondents were in the age range of 25-35 years, while 31.9% were in the age range of 36–45 years. About 58.6% of respondents were civil engineers and 13.8% of them were architects. When the survey participants' characteristics were examined, it was observed that 71.6% had more than 400 employees and 75.9% had a parent organization. The fields of activity of the participating firms are several such as housing construction, heavy construction, construction except housing, construction management, and design.

### **4. Basic research findings**

### **4.1 Link between product innovation and technology capacity**

Product innovation represents the development and introduction of innovative products and services. According to the results of the study, 34 of the 91 production companies reported to be active in the field of product innovation. There were two ways of interpreting the results of the t-test. The first method was to compare the test significance level against the level of significance, which was set at 0.05. The

alternative method was to compare the test t-statistics against the critical t value. It can be seen from **Table 2** that all the technology capacity parameters have significant level <0.05. When the technology capacity indicators of the companies that are active and not active in product innovation are examined, it is observed that the technology capacity of firms active in product innovation is high. To realize product innovation in construction companies, the parameters TC6 "the ability of application of new technologies in problem-solving" and TC5 "the ability to determine future technology trends and to determine the technology standards of the sector" become prominent. According to the empirical results, R&D investments and technology leadership strategies are ineligible in firms where product innovation has not been realized. The technology capacity of construction companies where the product innovation took place differentiates statistically (*p* < 0.05) in all technology capacity criteria from the companies that do not realize product innovation (**Table 2**).

### **4.2 Link between process innovation and technology capacity**

Process innovation involves reengineering function which means the development of internal operations and capabilities. According to the results of the study,


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**Table 3.**

*\*Statistical significant at level of <0.05.*

*Independent sample t-test analysis results for process innovation.*

*Building the Link between Technological Capacity Strategies and Innovation in Construction…*

47 of the 116 construction companies participated in the study reported that they were effective in the field of process innovation. When the technology capacity indicators of the companies that are active and not active in the process innovation are examined, it is observed that the technology capacity of the companies active in process innovation are higher in accordance with the results obtained in the product innovation. In order to realize process innovation in construction companies, the parameters TC5 "the ability to accurately predict future technological trends," TC10 "strong capability to integrate external technological resources with in-house resources of our firm," and TC9 "strong technology strategies" are fundamental. In the companies where process innovation did not take place, there was insufficient development in the field of innovation-oriented R&D investments and strong/various technical capabilities. In this type of construction companies, the intention of human resources to create initial ideas for innovation is weak. On the other hand, technology capacity of the construction companies where process innovation took place differentiates significantly (*p* < 0.05) in all TC criteria from the companies that did not perform process innovation (**Table 3**). Some examples

> **Levene's test for equality of variances**

TC1 Active (47) 5.19 3.27 0.074\* 5.72 0.000 2.03

TC2 Active 5.76 19.23 0.000\* 6.37 0.000 2.06 Non-active 3.70 6.27 0.000 TC3 Active 5.29 4.46 0.037\* 3.54 0.001 1.32 Non-active 3.97 3.52 0.001 TC4 Active 5.68 11.51 0.001\* 5.22 0.000 1.63 Non-active 4.04 5.15 0.000 TC5 Active 5.59 5.33 0.023\* 5.21 0.000 1.82 Non-active 3.77 5.17 0.000 TC6 Active 5.80 14.52 0.000\* 4.31 0.000 1.37 Non-active 4.43 4.26 0.000 TC7 Active 5.44 12.83 0.001\* 5.38 0.000 1.92 Non-active 3.52 5.32 0.000 TC8 Active 5.27 4.49 0.037\* 6.13 0.000 2.11 Non-active 3.15 6.09 0.000 TC9 Active 5.46 5.30 0.024\* 4.18 0.000 1.49 Non-active 3.97 4.13 0.000 TC10 Active 5.57 10.76 0.001\* 4.71 0.000 1.50 Non-active 4.06 4.64 0.000

**Mean F value Sig. t value Sig.** 

3.15 5.69 0.000

**t-test for equality of means**

**Mean difference**

**(twotailed)**

*DOI: http://dx.doi.org/10.5772/intechopen.88238*

**Technology capacity parameters**

**Process innovation**

Nonactive(44)

### **Table 2.**

*Independent sample t-test analysis results for product innovation.*

### *Building the Link between Technological Capacity Strategies and Innovation in Construction… DOI: http://dx.doi.org/10.5772/intechopen.88238*

47 of the 116 construction companies participated in the study reported that they were effective in the field of process innovation. When the technology capacity indicators of the companies that are active and not active in the process innovation are examined, it is observed that the technology capacity of the companies active in process innovation are higher in accordance with the results obtained in the product innovation. In order to realize process innovation in construction companies, the parameters TC5 "the ability to accurately predict future technological trends," TC10 "strong capability to integrate external technological resources with in-house resources of our firm," and TC9 "strong technology strategies" are fundamental. In the companies where process innovation did not take place, there was insufficient development in the field of innovation-oriented R&D investments and strong/various technical capabilities. In this type of construction companies, the intention of human resources to create initial ideas for innovation is weak. On the other hand, technology capacity of the construction companies where process innovation took place differentiates significantly (*p* < 0.05) in all TC criteria from the companies that did not perform process innovation (**Table 3**). Some examples


### **Table 3.**

*Independent sample t-test analysis results for process innovation.*

*Sustainable Management Practices*

(**Table 2**).

**Technology capacity parameters**

**Product innovation**

Non-active (57)

*Independent sample t-test analysis results for product innovation.*

alternative method was to compare the test t-statistics against the critical t value. It can be seen from **Table 2** that all the technology capacity parameters have significant level <0.05. When the technology capacity indicators of the companies that are active and not active in product innovation are examined, it is observed that the technology capacity of firms active in product innovation is high. To realize product innovation in construction companies, the parameters TC6 "the ability of application of new technologies in problem-solving" and TC5 "the ability to determine future technology trends and to determine the technology standards of the sector" become prominent. According to the empirical results, R&D investments and technology leadership strategies are ineligible in firms where product innovation has not been realized. The technology capacity of construction companies where the product innovation took place differentiates statistically (*p* < 0.05) in all technology capacity criteria from the companies that do not realize product innovation

Process innovation involves reengineering function which means the development of internal operations and capabilities. According to the results of the study,

TC1 Active (34) 5.50 3.277 0.074 5.582 0.000 2.06

TC2 Active 5.85 19.232 0.000 4.818 0.000 1.73 Non-active 4.12 5.324 0.000 TC3 Active 5.26 4.465 0.037 2427 0.017 0.96 Non-active 4.29 2.545 0.013 TC4 Active 5.79 11.510 0.001 4.290 0.000 1.44 Non-active 4.35 4.748 0.000 TC5 Active 5.88 5.337 0.023 5.150 0.000 1.86 Non-active 4.01 5.810 0.000 TC6 Active 6.00 14.521 0.000 4.11 0.000 1.36 Non-active 4.63 4.72 0.000 TC7 Active 5.67 12.830 0.001 4.91 0.000 1.85 Non-active 3.82 5.53 0.000 TC8 Active 5.50 4.496 0.037 5.389 0.000 1.99 Non-active 3.50 5.935 0.000 TC9 Active 5.70 5.301 0.024 4.154 0.000 1.53 Non-active 4.17 4.588 0.000

**Levene's test for equality of variances**

**Mean F value Sig. t value Sig.** 

3.43 5.96 0.000

**t-test for equality of means**

**Mean difference**

**(twotailed)**

**4.2 Link between process innovation and technology capacity**

**84**

**Table 2.**

of technological innovations adapted to management processes include adaptation of software portfolio management modules to integrated management systems, BIM maturity level, design, and development of ERP systems in the management of cash flows.

### **4.3 The link between organizational innovation and technology capacity**

The organizational innovation field can be interpreted as bringing the organizational structure into an innovative structure in general. When the link between management innovation and technology capacity is explored, it is understood that the existence of management innovation in the construction firms is directly linked to the technology capacity. The maturity level of the technology capacity of construction companies that make the management innovation is significantly different from the firms that tend to stay traditional in terms of management. Innovation in the field of management is triggered by the use of new technologies to correct problems and activities in the construction process (TC6).

As Hartman stated out that the problems in construction business have a dependency of constructional tasks on clients or a dependency of constructional tasks on locations [22]. The changing demands of clients may lead to problems that may offer opportunities to propose a solution with new technologies that meets the demands best and create innovations. In addition to being influenced by technological capacity, innovation in the organizational field provides a convenient structure in its application. An investment that can be developed and implemented for a single project will not be feasible for both the firm and the investor.

The strong technological capabilities of the company are a prominent parameter for innovation in the field of management (TC4). The technological skills such as programming, project management, analysis of big data, data models, business intelligence, information security applications, etc. that the construction company own are also providers for innovative organizational structures (**Table 4**).

Ranking of the most differentiated technology parameters among different innovation areas.

A ranking of the working technology capacity parameters was carried out to determine the relative importance of the various TC parameters as perceived by the respondents (**Table 5**). This ranking is shown in **Table 4**. This shows that the four most important attributes identified were "TC6. We are skillful in apply new technology to problem-solving," "TC5. We have the ability to accurately predict future technological trends," "TC2. We have accumulated stronger and various technological skills," and "TC4. We are qualified to attract and motivate talented experts."

### **4.4 Limitation of the study**

As with many studies of the construction industry, the selected research methods and data used in the studies can inhibit the generalization of the findings beyond the study sample [23]. First limitation effect on the study is the data gathering procedure. The surveys were not distributed to a random sample of the construction industry. And the second limitation of this study is that it was based on the measurement of the research constructs TC and INVACT using the survey respondents' own, perhaps biased, perceptions. Therefore, this research needs to be further examined using proper qualitative and quantitative measures instead of a self-assessment approach. Another significant point is that a larger sample size would provide greater reliability in the results.

**87**

**5. Conclusion**

*\*Statistical significant at level of <0.05.*

*Independent sample t-test analysis results for management innovation.*

**Product innovative active companies**

TC5 2 3

*Importance ranking of technology parameters among innovation areas.*

**Table 4.**

**Table 5.**

*Building the Link between Technological Capacity Strategies and Innovation in Construction…*

TC1 Active (54) 5.05 0.240 0.625\* 5.779 0.000 2.08 Non-active (37) 2.97 5.794 0.000 TC2 Active 5.59 5.550 0.021\* 6.061 0.000 2.02 Non-active 3.56 5.827 0.000 TC3 Active 5.16 4.272 0.042\* 3.260 0.002 1.24 Non-active 3.91 3.170 0.002 TC4 Active 5.62 6.270 0.014\* 5.891 0.000 1.81 Non-active 3.81 5.611 0.000 TC5 Active 5.46 1.863 0.176\* 5.167 0.000 1.84 Non-active 3.62 5.101 0.000 TC6 Active 5.75 12.772 0.001\* 4.754 0.000 1.51 Non-active 4.24 4.492 0.000 TC7 Active 5.35 2.283 0.134\* 5.744 0.000 2.05 Non-active 3.29 5.650 0.000 TC8 Active 5.11 0.458 0.500\* 5.958 0.000 2.11 Non-active 3.00 5.989 0.000 TC9 Active 5.51 1.128 0.291\* 5.551 0.000 1.89 Non-active 3.62 5.419 0.000 TC10 Active 5.53 2.813 0.097\* 5.387 0.000 1.69 Non-active 3.83 5.217 0.000

**Levene's test for equality of variances**

**Mean F value Sig. t value Sig.** 

**t-test for equality of means**

**(twotailed)**

**Organizational innovative active companies**

**Mean difference**

Innovation plays an important role in successfully responding to changes in the construction company's environment. Innovation is an important competitive edge and a prerequisite for organizational success [24]. Being open to changes and,

TC6 1 1 1

TC2 3 2 3 TC4 2

**Process innovative active companies**

*DOI: http://dx.doi.org/10.5772/intechopen.88238*

**Organization innovation**

**Technology capacity parameters**


*Building the Link between Technological Capacity Strategies and Innovation in Construction… DOI: http://dx.doi.org/10.5772/intechopen.88238*

### **Table 4.**

*Sustainable Management Practices*

of cash flows.

investor.

experts."

**4.4 Limitation of the study**

would provide greater reliability in the results.

innovation areas.

of technological innovations adapted to management processes include adaptation of software portfolio management modules to integrated management systems, BIM maturity level, design, and development of ERP systems in the management

The organizational innovation field can be interpreted as bringing the organizational structure into an innovative structure in general. When the link between management innovation and technology capacity is explored, it is understood that the existence of management innovation in the construction firms is directly linked to the technology capacity. The maturity level of the technology capacity of construction companies that make the management innovation is significantly different from the firms that tend to stay traditional in terms of management. Innovation in the field of management is triggered by the use of new technologies to correct

As Hartman stated out that the problems in construction business have a dependency of constructional tasks on clients or a dependency of constructional tasks on locations [22]. The changing demands of clients may lead to problems that may offer opportunities to propose a solution with new technologies that meets the demands best and create innovations. In addition to being influenced by technological capacity, innovation in the organizational field provides a convenient structure in its application. An investment that can be developed and implemented for a single project will not be feasible for both the firm and the

The strong technological capabilities of the company are a prominent parameter for innovation in the field of management (TC4). The technological skills such as programming, project management, analysis of big data, data models, business intelligence, information security applications, etc. that the construction company

own are also providers for innovative organizational structures (**Table 4**).

Ranking of the most differentiated technology parameters among different

A ranking of the working technology capacity parameters was carried out to determine the relative importance of the various TC parameters as perceived by the respondents (**Table 5**). This ranking is shown in **Table 4**. This shows that the four most important attributes identified were "TC6. We are skillful in apply new technology to problem-solving," "TC5. We have the ability to accurately predict future technological trends," "TC2. We have accumulated stronger and various technological skills," and "TC4. We are qualified to attract and motivate talented

As with many studies of the construction industry, the selected research methods and data used in the studies can inhibit the generalization of the findings beyond the study sample [23]. First limitation effect on the study is the data gathering procedure. The surveys were not distributed to a random sample of the construction industry. And the second limitation of this study is that it was based on the measurement of the research constructs TC and INVACT using the survey respondents' own, perhaps biased, perceptions. Therefore, this research needs to be further examined using proper qualitative and quantitative measures instead of a self-assessment approach. Another significant point is that a larger sample size

**4.3 The link between organizational innovation and technology capacity**

problems and activities in the construction process (TC6).

**86**

*Independent sample t-test analysis results for management innovation.*


### **Table 5.**

*Importance ranking of technology parameters among innovation areas.*

### **5. Conclusion**

Innovation plays an important role in successfully responding to changes in the construction company's environment. Innovation is an important competitive edge and a prerequisite for organizational success [24]. Being open to changes and, respectively, adapting to new conditions need to be the main component of the innovation strategy in construction industry. Secondly, developing technical aids and using them for problem solving is indispensable component for being innovative in construction business. Industry relationships and client demands have an extremely significant influence on construction innovation [23, 25, 26].

In order to produce innovation in a successful organization, different factors need to come together, and the knowledge assets of innovation should be managed effectively. The technology capacity covering the majority of the information assets of innovation is an important innovation enabler for construction companies. As a result of this study, it has been determined that the technology capacity of the construction companies, which are effective in the fields of product, process, and organizational innovation, is in a varying strength.

It has been predicted that product innovation activities in construction companies have increased and become active with the application of new technologies in problem solving. The use of innovative material and construction technique indoor or outdoor applications is possible by using the company's technology to solve problems in the emergence of this new product.

Process innovation, which is another innovation area, is developing especially due to integrating external technology resources with internal resources. For example, combining different project management modules with ERP, which is a holistic management system approach, will facilitate the implementation of an innovative system in the company's processes.

Finally, organizational innovation is an essential element for the formation and development of all kinds of innovation. The companies that are in the organizational innovation process have a high capacity to apply new technologies in problem solving, similar to the construction companies that perform product innovation. This means that the organization is open to change and can adapt to change. New project delivery models and organizational models are constantly evolving in the process of complex global construction projects. At this point, the management and perfection of multiple new connections of organizational change necessitate the adaptation of new technologies. As an example, IPD system applications are becoming a rising trend in the sector and necessitate the change and renewal of organizational structures. In this type of dramatic changes, the introduction of new BIM applications in communication and contract management processes becomes important for the project success.

Unlike other sectors, the construction sector is project-based, and the challenges brought by the cooperation and collaboration of stakeholders bring innovative developments to a standstill. The strengthening of both the technological infrastructure and the human resources in the context of the technological capacities of the construction companies is the main source for product, process, and organizational innovation.

Turkey as a developing country is in the process of harmonization with the European Union. In the process, according to the Republic of Turkey Ministry of Development's Tenth Development Plan (2014–2018), placing the concept of innovation in the construction sector, the locomotive of Turkey's economy, was in the main targets.

In this context, by supplying the production and service quality of the construction sector to international standards, supply and demand must be provided with a high-value-added and sustainable structure with an innovative approach. In order to maintain competitiveness abroad, focusing on high-quality and informationintensive projects is of great importance among the targets set by the ministry [27]. In this context, the fact that Turkish construction companies are active in innovation is gaining importance in terms of the economic plans of the sector and the

**89**

**Author details**

Faculty of Architecture, Yildiz Technical University, Istanbul, Turkey

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

\*Address all correspondence to: tugcesim@yahoo.com

provided the original work is properly cited.

Tugce Ercan

*Building the Link between Technological Capacity Strategies and Innovation in Construction…*

country. The development of new technologies for the use of new technologies in the solution of the problems at various stages of the construction project comes to

the fore in terms of both company and industry performances.

*DOI: http://dx.doi.org/10.5772/intechopen.88238*

*Building the Link between Technological Capacity Strategies and Innovation in Construction… DOI: http://dx.doi.org/10.5772/intechopen.88238*

country. The development of new technologies for the use of new technologies in the solution of the problems at various stages of the construction project comes to the fore in terms of both company and industry performances.

### **Author details**

*Sustainable Management Practices*

respectively, adapting to new conditions need to be the main component of the innovation strategy in construction industry. Secondly, developing technical aids and using them for problem solving is indispensable component for being innovative in construction business. Industry relationships and client demands have an

In order to produce innovation in a successful organization, different factors need to come together, and the knowledge assets of innovation should be managed effectively. The technology capacity covering the majority of the information assets of innovation is an important innovation enabler for construction companies. As a result of this study, it has been determined that the technology capacity of the construction companies, which are effective in the fields of product, process, and

It has been predicted that product innovation activities in construction companies have increased and become active with the application of new technologies in problem solving. The use of innovative material and construction technique indoor or outdoor applications is possible by using the company's technology to solve

Process innovation, which is another innovation area, is developing especially

Finally, organizational innovation is an essential element for the formation and development of all kinds of innovation. The companies that are in the organizational innovation process have a high capacity to apply new technologies in problem solving, similar to the construction companies that perform product innovation. This means that the organization is open to change and can adapt to change. New project delivery models and organizational models are constantly evolving in the process of complex global construction projects. At this point, the management and perfection of multiple new connections of organizational change necessitate the adaptation of new technologies. As an example, IPD system applications are becoming a rising trend in the sector and necessitate the change and renewal of organizational structures. In this type of dramatic changes, the introduction of new BIM applications in communication and contract management processes becomes

Unlike other sectors, the construction sector is project-based, and the challenges

brought by the cooperation and collaboration of stakeholders bring innovative developments to a standstill. The strengthening of both the technological infrastructure and the human resources in the context of the technological capacities of the construction companies is the main source for product, process, and organiza-

Turkey as a developing country is in the process of harmonization with the European Union. In the process, according to the Republic of Turkey Ministry of Development's Tenth Development Plan (2014–2018), placing the concept of innovation in the construction sector, the locomotive of Turkey's economy, was in

In this context, by supplying the production and service quality of the construction sector to international standards, supply and demand must be provided with a high-value-added and sustainable structure with an innovative approach. In order to maintain competitiveness abroad, focusing on high-quality and informationintensive projects is of great importance among the targets set by the ministry [27]. In this context, the fact that Turkish construction companies are active in innovation is gaining importance in terms of the economic plans of the sector and the

due to integrating external technology resources with internal resources. For example, combining different project management modules with ERP, which is a holistic management system approach, will facilitate the implementation of an

extremely significant influence on construction innovation [23, 25, 26].

organizational innovation, is in a varying strength.

problems in the emergence of this new product.

innovative system in the company's processes.

important for the project success.

tional innovation.

the main targets.

**88**

Tugce Ercan Faculty of Architecture, Yildiz Technical University, Istanbul, Turkey

\*Address all correspondence to: tugcesim@yahoo.com

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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[18] Churchill GA, Iacobucci D. Marketing Research: Methodological Foundation. 9th ed., USA: Chicago Dryden Press; 2005

[19] Nunally JC. Psychometric Theory. New York: McGraw-Hill; 1978

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[21] Mansfield E. Research and Innovation in the Modern Corporation. UK: Palgrave Macmillan; 1971

[22] Hartmann A. The role of organizational culture in motivating innovative behaviour in construction firms. Construction Innovation. 2006;**6**(3):159-172

[23] Miozzo M, Dewick P. Building competitive advantage: Innovation and corporate governance in European construction. Research Policy. 2002;**31**(6):989-1008

[24] Egbu CO. Managing knowledge and intellectual capital for improved organizational innovations in the construction industry: An examination of critical success factors. Engineering, Construction and Architectural Management. 2004;**11**(5):301-315

[25] Anderson F, Manseau A. A systemic approach to generation/transmission/ use of innovation in construction activities. In: Proceedings of the Third International Conference on Technology Policy and Innovation: Global Knowledge Partnership—Creating Value for the 21st Century; Austin, USA: LBJ School of Public Affairs. 1999

[26] Dubois A, Gadde L-E. The construction industry as a loosely coupled system: Implications for productivity and innovation.

Construction Management and Economics. 2002;**20**(7):621-632

[27] TBMM (Grand National Assembly of Turkey). 10th Development Plan, 2014-2018; Ankara, Turkey. 2013

**90**

*Sustainable Management Practices*

[1] Genç O, Bozkurt A, Coşkun H, Erdiş E. Türkiye İnşaat Endüstrisindeki country: A model. Research Policy.

[11] Kumiko M. Interlinkages between

systems, key components and component generic technologies in building competencies. Technology Analysis And Technology Management.

[12] Loosemore M. Construction innovation: Fifth generation

(1-9). DOI: 10.1061/(ASCE) ME.1943-5479.0000368

perspective. Journal of Management in Engineering. 2015;**31**(6):04015012-

[13] Pellicer E, Yepes V, Correa CL, Alarcón LF. Model for systematic innovation in construction companies. Journal of Construction Engineering and Management. 2014;**24**(2):23-36

[14] Barrett P, Sexton M, Lee A.

[16] Nam CH, Tatum CB. Toward understanding of product innovation process in construction. Journal of Construction Engineering and Management. 1989;**115**(4):517-534

[17] Kuznets S. Economic Growth of Nations: Total Output and Production Structure. Cambridge, Mass: Harvard

2014;**30**(5):04014018

University Press; 1971

Innovation in Small Construction Firms. 1st ed. London, UK: Spon Press; 2008

[15] Widén K, Olander S, Atkin B. Links between successful innovation diffusion and stakeholder engagement. Journal of Management in Engineering.

[10] Wang Y, Lo H-P, Zhang Q, Xue Y. How technological capability influences business performance: An integrated framework based on the contingency approach. Journal of Technology Management in China.

1980;**9**(3):254-277

2006;**1**(1):27-52

1994;**6**(1):107-120

İnovasyon Düzeyinin İnşaat Mühendisliği Penceresinden Görünümü, Çukurova University. Journal of the Faculty of Engineering and Architecture. 2015;**30**(2):183-189

[2] Drucker P. Innovation and

[4] Bengtsson SH. Coordinated construction logistics: An innovation perspective. Construction Management and Economics. 2019;**37**(5):294-307. DOI: 10.1080/01446193.2018.1528372

[5] Holt K. Product innovation management. Technical report. Organization for Economic

Co-operation and Development; Paris,

[6] Morrison A, Pietrobelli C, Rabellotti P. Global value chains and technological capabilities: A framework to study learning and innovation in developing countries. Oxford Development Studies.

[7] Afuah A. Mapping technological capabilities into product markets and competitive advantage: The case of cholesterol drugs. Strategic Management Journal.

[8] Jin J, Zedtwitz M. Technological capability development in China's mobile phone industry. Technovation.

[9] Linsu K. Stages of development of industrial technology in a developing

Row; 1985

**References**

France. 1983

2008;**36**(1):39-58

2002;**23**(2):171-179

2008;**28**(6):327-334

Entrepreneurship. New York: Harper &

[3] Carbonara N, Pellegrino R. The role of public private partnerships in fostering innovation. Construction Management and Economics. 2019;**37**(8):1-18. DOI: 10.1080/01446193.2019.1610184

**93**

**1. Introduction**

**Chapter 6**

**Abstract**

Evidence

Nonfinancial Reporting:

Theoretical and Empirical

*Nidžara Osmanagić Bedenik and Petra Barišić*

and therefore contributes to our knowledge and well-being.

green and sustainable business, contingency approach

**Keywords:** business value creation, shareholder, stakeholder, business reporting,

change, biodiversity loss, and various types of pollution, green and sustainable business has been developed to support management in the face of new challenges. Decision-makers outside and inside the company need business reports because they provide information on the business activity of a company. The system of business reporting includes financial and nonfinancial reports that are interrelated and aim to provide an integrative and comprehensive overview of the business activities of a company, their results, and consequences for people and the environment. Financial reporting on the business performance of companies was introduced several decades ago, after which it developed through diverse stages as voluntary reporting, mandatory reporting, and highly standardized reporting. Financial reporting reflects on the financial aspects of business activities. It includes a few

Since human activities have transformed the biosphere, leading to global climate

Nonfinancial reporting (NFR) is a relatively new topic in the business practice; it evolved a couple of decades ago. Initially, NFR was mostly disclosed on a voluntary basis. Because of deeper awareness regarding climate change and environmental challenges, as well as pressure from investors, customers, and competition, nonfinancial reporting developed from a voluntary to a mandatory highly standardized practice. This research sought to address the following questions: How understanding of business value creation determines business reporting? How sustainability approach manifests on the company level? What is nonfinancial reporting and why should companies care about it? What are the motivations and benefits for companies and for whom do they publish sustainability reports? What about experiences in public sector? How contemporary concepts of green, circular, and zero-waste economy influence business reporting? Which open questions do organizations face on the path of sustainability reporting? This study contributes to the discussion on NFR and stimulates paradigm shift from profitability toward sustainability as adopting a holistic perspective, respecting people and the planet. This research stimulates business community to invest time and energy into sustainability reporting and encourages scholars to explore new ways of business reporting

### **Chapter 6**

## Nonfinancial Reporting: Theoretical and Empirical Evidence

*Nidžara Osmanagić Bedenik and Petra Barišić*

### **Abstract**

Nonfinancial reporting (NFR) is a relatively new topic in the business practice; it evolved a couple of decades ago. Initially, NFR was mostly disclosed on a voluntary basis. Because of deeper awareness regarding climate change and environmental challenges, as well as pressure from investors, customers, and competition, nonfinancial reporting developed from a voluntary to a mandatory highly standardized practice. This research sought to address the following questions: How understanding of business value creation determines business reporting? How sustainability approach manifests on the company level? What is nonfinancial reporting and why should companies care about it? What are the motivations and benefits for companies and for whom do they publish sustainability reports? What about experiences in public sector? How contemporary concepts of green, circular, and zero-waste economy influence business reporting? Which open questions do organizations face on the path of sustainability reporting? This study contributes to the discussion on NFR and stimulates paradigm shift from profitability toward sustainability as adopting a holistic perspective, respecting people and the planet. This research stimulates business community to invest time and energy into sustainability reporting and encourages scholars to explore new ways of business reporting and therefore contributes to our knowledge and well-being.

**Keywords:** business value creation, shareholder, stakeholder, business reporting, green and sustainable business, contingency approach

### **1. Introduction**

Since human activities have transformed the biosphere, leading to global climate change, biodiversity loss, and various types of pollution, green and sustainable business has been developed to support management in the face of new challenges. Decision-makers outside and inside the company need business reports because they provide information on the business activity of a company. The system of business reporting includes financial and nonfinancial reports that are interrelated and aim to provide an integrative and comprehensive overview of the business activities of a company, their results, and consequences for people and the environment.

Financial reporting on the business performance of companies was introduced several decades ago, after which it developed through diverse stages as voluntary reporting, mandatory reporting, and highly standardized reporting. Financial reporting reflects on the financial aspects of business activities. It includes a few

basic financial statements: balance sheet, profit and loss account, cash flow statement, statement of changes in equity, and notes to the financial statements. The statements also complement each other, reflect monetary values, and refer to a specific time period, most often, annual or semiannual.

But the modern business economy, however, faces more comprehensive demands for nonfinancial reporting, which includes reporting on social and ecological aspects of business, i.e., sustainable business practice or sustainability. Business sustainability is often defined as the triple bottom line management, a process in which companies manage their financial, social, and ecological risks, threats, and opportunities. These three impacts are often called "Profit, People, and the Planet" or 3P—a syntagma introduced by Elkington in 1994. The concept of Corporate Social Responsibility (CSR) is being increasingly replaced by another concept, Holistic Corporate Responsibility (HCR). The trend of sustainability reporting is on the rise, but the tools are still being developed. Analyses of corporate responsibility reports in the world demonstrate a sharp increase: from 26 reports in 1992 to 5593 reports in 2010 to 9500 in 2015 [1]. Sustainable business success is constructed gradually by achieving ecological standards above the usual norms, forming value creation chains in a sustainable manner, developing eco-friendly products and services, introducing new business models, and opening new markets.

Sustainability business reporting is known under different names such as sustainability reporting, integrated reporting, and nonfinancial reporting. Global reporting initiative and triple bottom line are principles and standards that encompass reporting on business, social, and ecological activities, which have recently gained more importance and are applied increasingly. In general, sustainability information has to be perceived as credible and reliable to be meaningful and reduce information asymmetries. As a costly signal, assurance helps increase transparency and trust in the assured information [2].

Instruments of sustainability reporting include principles, guidelines, standards, and methods. Major organizations adopted the following guidelines: GRI sustainability reporting guidelines, United Nations Global Compact (UNGC), UN guidelines for business and human rights, OECD guidelines, ISO 26000 guidelines of the International Organization for Standardization, and the Tripartite Declaration of the International Labour Organization. Newer guidelines are presented through Integrated Reporting of the International Integrated Reporting Council (IIRC) that concise communication on how organizational strategy, management, success, and progress lead to value creation in the short, medium, and long term. GRI and IIRC cooperate as strategic partners.

The importance of nonfinancial reporting increases: more and more companies follow principles of sustainable development and sustainable business and provide NFR as well. In December 2014, the European Parliament adopted the Directive 2014/95/EU about nonfinancial reporting. Since January 1, 2017, companies of public interest with 500 or more employees have been including a nonfinancial statement in the management report. Nonfinancial reporting encompasses environmental and social aspects, the area of employee and human rights, anticorruption, and bribery measures, and it outlines its own business model, outcomes, and policy risks on the issues mentioned, as well as the variety of policies implemented by management and supervisory bodies [3].

This trend of making nonfinancial reporting a company's obligation raises the following questions: What is nonfinancial reporting and why should companies care about it? Why would companies invest an additional effort and report on social and ecological aspects of their business activity? What are the motivations and benefits for companies and for whom do they publish sustainability reports? How understanding of business value creation determines business reporting? How

**95**

maximized.

*Nonfinancial Reporting: Theoretical and Empirical Evidence*

sustainability approach manifests on the company level? What about experiences in public sector? How contemporary concepts of green, circular, and zero-waste economy influence business reporting? Which open questions do organizations face

and therefore contributes to overall world knowledge and well-being.

This study may be of interest to all stakeholders: management, owners and employees as internal stakeholders, and investors, customers, supply chain, insurers, trade unions, media, and local community as external stakeholders. Besides business community, this study may be of interest to academic community stimulating new national and international research projects and acquiring/developing

This chapter is organized as follows: The first part presents a context and a need for NFR: The purpose of the company and business value creation is a wider frame for business reports. Changes in business context and in understanding business purpose through sustainability approach lead to changes in business reports as well. The following section examines nonfinancial reports from business practice, their motives, stimulus and benefits, and stakeholders who are interested in NFR. In this part, sustainability reporting in the public sector is also explored. The third part addresses challenges of nonfinancial reporting, followed by a discussion. Lastly, conclusion provides resume, contribution, research limitation, and suggestions for

Value creation is often emphasized as the most important business objective. There are two different concepts of value creation in business, depending on the perspective of parties involved in value allocation [4]. Creating shareholder value is a concept according to which a company should only satisfy the interests of its owners achieving attractive financial returns in the short and long run. According to that concept, the enterprise is most commonly understood as an investment project with a pronounced financial aspect of activity, and business performance in that concept is most commonly measured by profitability or latterly economic value added (EVA) as the main indicator of success. Value-based management is a concept

For decades, it was thought that the main goal of the company is to make profit and to increase its financial value. Profitability is the primary goal of all business ventures [5]. A strong influence on today's understanding of profitability was made by the American economist and Nobel Prize winner Milton Friedman (1970), who wrote that "The social responsibility of business is to increase its profits" [6]. This attitude has resulted in the focus on profit and profitability, neglecting the way profit is generated as well as neglecting the consequences of such perspective focus. Profit has been, and often still is, accepted as the main business goal that has to be

Regarding the abovementioned, the aim of this study is to provide a contribution to the discussion of NFR, since NFR is a relatively new topic in the business practice and is still insufficiently explored due to its tools that are still being developed. The study objectives are to stimulate paradigm shift from profitability toward sustainability as adopting a holistic perspective, respecting people and the planet. As well, this research stimulates business community to invest time and energy into sustainability reporting and encourages scholars to explore new ways of business reporting

*DOI: http://dx.doi.org/10.5772/intechopen.87159*

on the path of sustainability reporting?

new perspectives.

future research.

**2. Business value creation**

**2.1 Financial value creation and financial reporting**

of a company's value based on discounted future cash flow.

*Sustainable Management Practices*

basic financial statements: balance sheet, profit and loss account, cash flow statement, statement of changes in equity, and notes to the financial statements. The statements also complement each other, reflect monetary values, and refer to a

But the modern business economy, however, faces more comprehensive demands for nonfinancial reporting, which includes reporting on social and ecological aspects of business, i.e., sustainable business practice or sustainability. Business sustainability is often defined as the triple bottom line management, a process in which companies manage their financial, social, and ecological risks, threats, and opportunities. These three impacts are often called "Profit, People, and the Planet" or 3P—a syntagma introduced by Elkington in 1994. The concept of Corporate Social Responsibility (CSR) is being increasingly replaced by another concept, Holistic Corporate Responsibility (HCR). The trend of sustainability reporting is on the rise, but the tools are still being developed. Analyses of corporate responsibility reports in the world demonstrate a sharp increase: from 26 reports in 1992 to 5593 reports in 2010 to 9500 in 2015 [1]. Sustainable business success is constructed gradually by achieving ecological standards above the usual norms, forming value creation chains in a sustainable manner, developing eco-friendly products and services, introducing new business models, and opening new markets. Sustainability business reporting is known under different names such as sustainability reporting, integrated reporting, and nonfinancial reporting. Global reporting initiative and triple bottom line are principles and standards that encompass reporting on business, social, and ecological activities, which have recently gained more importance and are applied increasingly. In general, sustainability information has to be perceived as credible and reliable to be meaningful and reduce information asymmetries. As a costly signal, assurance helps increase transparency

Instruments of sustainability reporting include principles, guidelines, standards, and methods. Major organizations adopted the following guidelines: GRI sustainability reporting guidelines, United Nations Global Compact (UNGC), UN guidelines for business and human rights, OECD guidelines, ISO 26000 guidelines of the International Organization for Standardization, and the Tripartite Declaration of the International Labour Organization. Newer guidelines are presented through Integrated Reporting of the International Integrated Reporting Council (IIRC) that concise communication on how organizational strategy, management, success, and progress lead to value creation in the short, medium, and long term. GRI and IIRC

The importance of nonfinancial reporting increases: more and more companies follow principles of sustainable development and sustainable business and provide NFR as well. In December 2014, the European Parliament adopted the Directive 2014/95/EU about nonfinancial reporting. Since January 1, 2017, companies of public interest with 500 or more employees have been including a nonfinancial statement in the management report. Nonfinancial reporting encompasses environmental and social aspects, the area of employee and human rights, anticorruption, and bribery measures, and it outlines its own business model, outcomes, and policy risks on the issues mentioned, as well as the variety of policies implemented by

This trend of making nonfinancial reporting a company's obligation raises the following questions: What is nonfinancial reporting and why should companies care about it? Why would companies invest an additional effort and report on social and ecological aspects of their business activity? What are the motivations and benefits for companies and for whom do they publish sustainability reports? How understanding of business value creation determines business reporting? How

specific time period, most often, annual or semiannual.

and trust in the assured information [2].

cooperate as strategic partners.

management and supervisory bodies [3].

**94**

sustainability approach manifests on the company level? What about experiences in public sector? How contemporary concepts of green, circular, and zero-waste economy influence business reporting? Which open questions do organizations face on the path of sustainability reporting?

Regarding the abovementioned, the aim of this study is to provide a contribution to the discussion of NFR, since NFR is a relatively new topic in the business practice and is still insufficiently explored due to its tools that are still being developed. The study objectives are to stimulate paradigm shift from profitability toward sustainability as adopting a holistic perspective, respecting people and the planet. As well, this research stimulates business community to invest time and energy into sustainability reporting and encourages scholars to explore new ways of business reporting and therefore contributes to overall world knowledge and well-being.

This study may be of interest to all stakeholders: management, owners and employees as internal stakeholders, and investors, customers, supply chain, insurers, trade unions, media, and local community as external stakeholders. Besides business community, this study may be of interest to academic community stimulating new national and international research projects and acquiring/developing new perspectives.

This chapter is organized as follows: The first part presents a context and a need for NFR: The purpose of the company and business value creation is a wider frame for business reports. Changes in business context and in understanding business purpose through sustainability approach lead to changes in business reports as well. The following section examines nonfinancial reports from business practice, their motives, stimulus and benefits, and stakeholders who are interested in NFR. In this part, sustainability reporting in the public sector is also explored. The third part addresses challenges of nonfinancial reporting, followed by a discussion. Lastly, conclusion provides resume, contribution, research limitation, and suggestions for future research.

### **2. Business value creation**

### **2.1 Financial value creation and financial reporting**

Value creation is often emphasized as the most important business objective. There are two different concepts of value creation in business, depending on the perspective of parties involved in value allocation [4]. Creating shareholder value is a concept according to which a company should only satisfy the interests of its owners achieving attractive financial returns in the short and long run. According to that concept, the enterprise is most commonly understood as an investment project with a pronounced financial aspect of activity, and business performance in that concept is most commonly measured by profitability or latterly economic value added (EVA) as the main indicator of success. Value-based management is a concept of a company's value based on discounted future cash flow.

For decades, it was thought that the main goal of the company is to make profit and to increase its financial value. Profitability is the primary goal of all business ventures [5]. A strong influence on today's understanding of profitability was made by the American economist and Nobel Prize winner Milton Friedman (1970), who wrote that "The social responsibility of business is to increase its profits" [6]. This attitude has resulted in the focus on profit and profitability, neglecting the way profit is generated as well as neglecting the consequences of such perspective focus. Profit has been, and often still is, accepted as the main business goal that has to be maximized.

Financial reporting on the business performance of companies was introduced a few more decades ago, after which it developed through several few stages as voluntary reporting, mandatory reporting, and highly standardized reporting. Financial reporting has a long history. In different parts of the world, the first financial statements were published as early as at the end of the nineteenth century. The intention to clearly outline and compare financial statements led to the passing of Generally Accepted Accounting Principles (GAAP, 1933), which provided a set of basic guidelines [7]. After World War II, as economic integration occurred and capital started to travel over national borders, it became necessary to harmonize financial statements internationally (IASC, 1973; IASB, 2001) and to devise *International Financial Reporting Standards* (IFRS, 2002). In order to improve cooperation in the international application of reporting standards, the *Accounting Standards Advisory Forum* was established (ASAF, 2013) [8]. The development of the economy and reporting standards as well as the development of international investments led to the development of financial auditing, certification, and testing of financial statements based on the international auditing standards (GAAS, IAASB, and ISAs). Financial statements reflect the financial position of the company and business performance, and they provide present accounting information. This arguably narrow view is powerfully reinforced by financial accounting systems that were well adapted to the industrial economy but were inadequate in the information economy [9].

Focus on financial value and financial goal is a predominantly short-time and a very narrow understanding of business fundamentals. It ignores the ways of achieving it and all the consequences for people and the planet: the search for profitability maximization justifies depletion of natural resources, water, air, soil, light, as well as noise, electromagnetic and other types of pollution, loss of biodiversity, and climate change and it ignores human rights and income inequality. It is necessary to change the current business paradigm and to employ a wider perspective that takes into account human rights and environmental issues.

### **2.2 Business context changes: sustainability approach**

Our planet could be seen as our billion stars hotel; we are called to behave as properly and well-educated guests, and as responsible guests, we have to respect and care about our hotel and leave it in the best condition for future visitors. There is a well-known 7th Generation Principle based on an ancient Iroquois philosophy that says the following: "In our every deliberation, we must consider the impact of our decisions on the next seven generations." [10] Models and theories of business traditionally have been silent on the subject of the environment. Silence, however, is no longer an option in the face of society's recognition of the potential cost that environmental damage may have on corporate profits [11].

Business context changes and therefore it requires business to change. The contingency approach is a management theory based on the idea that there is no single best way to manage; the most appropriate style of management is dependent on the context of the situation. Effective organizations must tailor their planning, organizing, leading, and controlling to their particular circumstances. Contingency theory is beneficial to organizations because of the potential for learning from specific situations and using these lessons to influence future management of the same or similar situations. The ability to adapt to external pressures and changes is also an advantage. The leaders must then work to integrate all these facets into a solution that is most appropriate for a specific circumstance [12].

In fact, we are facing the change from economies of scale, over economies of scope to economies of soul [6]. Actually, a soul economy is not a very new perspective. Tracing a seismic shift in American social thought, Sklansky (2002) wrote

**97**

*Nonfinancial Reporting: Theoretical and Empirical Evidence*

the book "Soul's Economy: Market Society and Selfhood in American Thought, 1820–1920" offering a new synthesis of the intellectual transformation entailed in the rise of industrial capitalism. As early as in 1922, Rudolf Steiner wrote the book "Soul Economy, Body, Soul, and Spirit in Waldorf Education," trying to integrate

Modern developments in the economy and society are marked by two phenomena: companies are becoming bigger and more powerful while social pressure for responsible business is becoming more pronounced. This unhealthy power in corporate hands results in ecological destruction, the loss of civil freedom, the erosion of democracy, and community disintegration [13]. According to the results of a research study [14], among 100 largest economies in the world, 51 are corporations and 49 are countries! Companies are more powerful than ever, and with power comes their responsibility for their own behavior toward people, the community, and the environment. A short-term focus on profit is detrimental for all [15], and it is necessary to establish balance between monetary and nonmonetary business objectives as well as between short-term, medium-term, and long-term goals. Sustainability reporting has its role here as it encompasses not only economic effects of the business activity of a company but also the effects on people, general

Even though it seems to us that sustainability is a modern concept and problem, the first requirements for sustainable business activity date back several centuries. Hans Carl von Carlowitz (1645–1714) is considered to be the founder of the sustainability principle. In his work *Sylvicultura oeconomica* from 1713, he demanded, due to the crisis in raw materials (wood), that one should only lumber so many trees as can be grown by reforestation and planting. This was the demand of 'sustainable' usage and sustainable forest management soon caught as a professional term. This principle from forestry gave rise to the motto 'to live off the interest, not the capital' [17]. The growing identification of sustainability as both a process and a goal ensures long-term human well-being [18]. Moreover, sustainability approach is important not only for human well-being, but for the well-being of other beings, and the planet itself. The contemporary terms of sustainability and sustainable development were coined in the early 1970s. The foundation of the definition of sustainability is the Brundtland report according to which sustainable development is that development which "…meets the needs of the present without compromising the ability of future generations to meet their own needs" [19]. In other words, the goal is improved better quality of life for everyone now, and for the generations to come. That is why modern business conditions demand a change in the dominant paradigm—from a reductionist focus on profit, toward a holistic perspective and a balance between economic, social, and ecological aspects of company's business accountability [20]. The modern business economy, however, faces ever clearer demands for nonfinancial reporting, which includes reporting on social and ecological aspects of business, i.e., sustainable business practices or sustainability. Former separation of economic, social, and environmental development is no longer acceptable anymore.

*DOI: http://dx.doi.org/10.5772/intechopen.87159*

material and immaterial perspectives.

community, nature, and the environment [16].

**2.3 Nonfinancial value creation and nonfinancial reporting**

Creating value for stakeholders is a broad concept that harmonizes different interests of particular stakeholder groups simultaneously. The company is considered an element of the environment so that this concept represents the foundation of sustainable business. According to that concept, business performance is viewed as a function of balance between economic, social, and ecological aspects of business activity. There is no doubt that companies do their business activities in an environment where there are numerous interrelations and relationships.

### *Nonfinancial Reporting: Theoretical and Empirical Evidence DOI: http://dx.doi.org/10.5772/intechopen.87159*

*Sustainable Management Practices*

Financial reporting on the business performance of companies was introduced a few more decades ago, after which it developed through several few stages as voluntary reporting, mandatory reporting, and highly standardized reporting. Financial reporting has a long history. In different parts of the world, the first financial statements were published as early as at the end of the nineteenth century. The intention to clearly outline and compare financial statements led to the passing of Generally Accepted Accounting Principles (GAAP, 1933), which provided a set of basic guidelines [7]. After World War II, as economic integration occurred and capital started to travel over national borders, it became necessary to harmonize financial statements internationally (IASC, 1973; IASB, 2001) and to devise *International Financial Reporting Standards* (IFRS, 2002). In order to improve cooperation in the international application of reporting standards, the *Accounting Standards Advisory Forum* was established (ASAF, 2013) [8]. The development of the economy and reporting standards as well as the development of international investments led to the development of financial auditing, certification, and testing of financial statements based on the international auditing standards (GAAS, IAASB, and ISAs). Financial statements reflect the financial position of the company and business performance, and they provide present accounting information. This arguably narrow view is powerfully reinforced by financial accounting systems that were well adapted to the industrial

Focus on financial value and financial goal is a predominantly short-time and a very narrow understanding of business fundamentals. It ignores the ways of achieving it and all the consequences for people and the planet: the search for profitability maximization justifies depletion of natural resources, water, air, soil, light, as well as noise, electromagnetic and other types of pollution, loss of biodiversity, and climate change and it ignores human rights and income inequality. It is necessary to change the current business paradigm and to employ a wider perspective that takes

Our planet could be seen as our billion stars hotel; we are called to behave as properly and well-educated guests, and as responsible guests, we have to respect and care about our hotel and leave it in the best condition for future visitors. There is a well-known 7th Generation Principle based on an ancient Iroquois philosophy that says the following: "In our every deliberation, we must consider the impact of our decisions on the next seven generations." [10] Models and theories of business traditionally have been silent on the subject of the environment. Silence, however, is no longer an option in the face of society's recognition of the potential cost that

Business context changes and therefore it requires business to change. The contingency approach is a management theory based on the idea that there is no single best way to manage; the most appropriate style of management is dependent on the context of the situation. Effective organizations must tailor their planning, organizing, leading, and controlling to their particular circumstances. Contingency theory is beneficial to organizations because of the potential for learning from specific situations and using these lessons to influence future management of the same or similar situations. The ability to adapt to external pressures and changes is also an advantage. The leaders must then work to integrate all these facets into a solution

In fact, we are facing the change from economies of scale, over economies of scope to economies of soul [6]. Actually, a soul economy is not a very new perspective. Tracing a seismic shift in American social thought, Sklansky (2002) wrote

economy but were inadequate in the information economy [9].

into account human rights and environmental issues.

**2.2 Business context changes: sustainability approach**

environmental damage may have on corporate profits [11].

that is most appropriate for a specific circumstance [12].

**96**

the book "Soul's Economy: Market Society and Selfhood in American Thought, 1820–1920" offering a new synthesis of the intellectual transformation entailed in the rise of industrial capitalism. As early as in 1922, Rudolf Steiner wrote the book "Soul Economy, Body, Soul, and Spirit in Waldorf Education," trying to integrate material and immaterial perspectives.

Modern developments in the economy and society are marked by two phenomena: companies are becoming bigger and more powerful while social pressure for responsible business is becoming more pronounced. This unhealthy power in corporate hands results in ecological destruction, the loss of civil freedom, the erosion of democracy, and community disintegration [13]. According to the results of a research study [14], among 100 largest economies in the world, 51 are corporations and 49 are countries! Companies are more powerful than ever, and with power comes their responsibility for their own behavior toward people, the community, and the environment. A short-term focus on profit is detrimental for all [15], and it is necessary to establish balance between monetary and nonmonetary business objectives as well as between short-term, medium-term, and long-term goals. Sustainability reporting has its role here as it encompasses not only economic effects of the business activity of a company but also the effects on people, general community, nature, and the environment [16].

Even though it seems to us that sustainability is a modern concept and problem, the first requirements for sustainable business activity date back several centuries. Hans Carl von Carlowitz (1645–1714) is considered to be the founder of the sustainability principle. In his work *Sylvicultura oeconomica* from 1713, he demanded, due to the crisis in raw materials (wood), that one should only lumber so many trees as can be grown by reforestation and planting. This was the demand of 'sustainable' usage and sustainable forest management soon caught as a professional term. This principle from forestry gave rise to the motto 'to live off the interest, not the capital' [17]. The growing identification of sustainability as both a process and a goal ensures long-term human well-being [18]. Moreover, sustainability approach is important not only for human well-being, but for the well-being of other beings, and the planet itself.

The contemporary terms of sustainability and sustainable development were coined in the early 1970s. The foundation of the definition of sustainability is the Brundtland report according to which sustainable development is that development which "…meets the needs of the present without compromising the ability of future generations to meet their own needs" [19]. In other words, the goal is improved better quality of life for everyone now, and for the generations to come. That is why modern business conditions demand a change in the dominant paradigm—from a reductionist focus on profit, toward a holistic perspective and a balance between economic, social, and ecological aspects of company's business accountability [20].

The modern business economy, however, faces ever clearer demands for nonfinancial reporting, which includes reporting on social and ecological aspects of business, i.e., sustainable business practices or sustainability. Former separation of economic, social, and environmental development is no longer acceptable anymore.

### **2.3 Nonfinancial value creation and nonfinancial reporting**

Creating value for stakeholders is a broad concept that harmonizes different interests of particular stakeholder groups simultaneously. The company is considered an element of the environment so that this concept represents the foundation of sustainable business. According to that concept, business performance is viewed as a function of balance between economic, social, and ecological aspects of business activity. There is no doubt that companies do their business activities in an environment where there are numerous interrelations and relationships.

Therefore, a company should not be viewed solely as an instrument of the owner, but as an organizational unity with influence on several groups that should function in symbiosis with one another [21]. Business performance should therefore be assessed based on the company's economic performance, environmental quality, and social justice [22].

The stakeholder theory proposes that the company should aim to satisfy the interests and needs of its stakeholders, as opposed to merely focusing on maximizing profit for the owners. The stakeholder theory implies that companies have the obligation to individuals and groups within and outside of companies, including owners, employees, customers, suppliers, creditors, and the wider community. The stakeholder concept was first used in 1963 in the internal memorandum at the Stanford Research Institute. According to that concept, the stakeholders are those groups without whose support the organization would cease to exist. Freeman advocates the ethical principle according to which the concept of corporate responsibility implies responsibility to all stakeholders [23]. Freeman is considered the father of stakeholder theory, which explains that stakeholders are individuals and groups affected by, or affecting, directly or indirectly, policies, activities, and decisions of the company. In that context, a company needs to create value for its stakeholders balancing their demands in decision-making and defining priorities. The stakeholder theory has become a dominant paradigm of corporate social responsibility and sustainability [24]. Moreover, the quality of relationship with stakeholders and the capacity to create long-term value are two sides of the same coin [25].

There is a consensus nowadays that financial statements can no longer be sufficient when it comes to business reporting because they do not reflect the entire business activity of a company. The information in financial statements reflects only short-term monetary aspects of business, but does not provide insight into environmental, social, and managerial aspects of business, which are, in the long term, much more important. Nonfinancial reporting is a 'must' in the modern economy for different groups of the general public as it reflects the responsibility of a company to conduct business activities in a sustainable way. On the basis of a sample of 200 senior executive managers across the world, and according to the results of a study conducted by The Economist, 87% of respondents agree that sustainability will become more important over the next 3 years [26]. Fifty-seven percent of respondents say that their firms use sustainability reporting as a basis for new business strategies. The results show that 49% of respondents report progress in meeting their environmental sustainability goals and 53% report progress toward social sustainability. There is growing evidence that sustainability reporting increases in significance. According to the results of KPMG from 2008, almost 80% of the world's largest 250 enterprises report on sustainability [26].

Sustainability report [27] is a report that provides information on economic, environmental, social, and managerial aspects of a company's performance. Sustainability reporting is a new task. Integrated report merges information on sustainability together with traditional financial information in a single report. It offers a comprehensive picture of value creation viewed across time [28]. The International Integrated Reporting Council (IIRC) defines an integrated report as one that 'brings together material information about an organization's strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates' [29]. In the case of nonassured sustainability information, integrated reporting positively affected professional investors' evaluation of a firm's sustainability performance, resulted in a higher weighting of this information, and led to higher investment-related judgments [2].

It is important to notice that only the reports that include all three dimensions of sustainability simultaneously can truly be referred to as 'sustainability reports,'

**99**

*Nonfinancial Reporting: Theoretical and Empirical Evidence*

reflecting a holistic perspective on business activity.

minants [2].

separate sustainability report.

and supervisory bodies.

**3.1 Motives and stimulus**

**3. Experiences from business practice**

unlike one-dimensional reports that only cover isolated aspects of sustainability. In that sense, the so-called sustainability reports often exclude important aspects of business activity, especially the economic aspects that are usually presented in a separate annual report [30]. The nonfinancial report provides stakeholders with an important and comprehensive overview of the position and characteristics of a company's business activity. In a nutshell, the common core of all these reports is their focus on social and ecological aspect of a company's business activity. While sustainability reports and nonfinancial reports can be disclosed autonomously, an integrated report represents a single report that includes not only social and ecological but also economic aspects. In that sense, integrated reports are comprehensive,

From a microperspective, studies indicate that firm size, growth opportunities, profitability, gender diversity on the board, or the assurance of nonfinancial reports positively correlate with the adoption of integrated reporting. From a macroperspective, several country-level determinants, such the legal system, value system, and the intensity of market coordination, have been considered as potential deter-

Recent research results indicate that the integration of sustainability and financial information did not lead to an improved acquisition of this type of information. However, the integration increased professional investors' potential access to sustainability information, because readers could not entirely opt out of encountering sustainability information during their information processing. This in itself remains an important objective of integrated reporting because, as our experiment indicated, a substantial number of professional investors showed no interest in the

In December 2014, the European Parliament adopted the 2014/95/EU Directive

There are different international and national initiatives for promoting sustain-

ability reporting: Global Reporting Initiative's, European Commission and the European Parliament, and many other organizations. Firms disclose corporate social responsibility information for two main reasons: (1) to conform to societal expectations and thereby ensure continued access to resources, such as capital, customer support, and so on and (2) to provide additional information that allows capital market participants to more accurately assess firms' financial prospects and risk profiles, potentially leading to higher share prices and higher firm values [31]. These two broad reasons for disclosure can be further explored using, respectively,

on nonfinancial reporting [3]. This Directive is part of a broader initiative of the European Union regarding corporate social responsibility, which includes a consistent approach to reporting and supporting smart, sustainable, and inclusive growth under Europe 2020 objectives. Since January 1, 2017, this Directive has made nonfinancial reporting in the entire European Union mandatory for public interest entities employing more than 500 people. According to the Directive, the disclosure of nonfinancial information is central for combining long-term profitability with social justice and environmental protection. Nonfinancial reporting includes ecological aspects, social and employee-related matters, respect for human rights, anticorruption measures, description of the business model, outcomes and risks of the policies on the above issues, and the diversity policy applied by the management

*DOI: http://dx.doi.org/10.5772/intechopen.87159*

### *Nonfinancial Reporting: Theoretical and Empirical Evidence DOI: http://dx.doi.org/10.5772/intechopen.87159*

*Sustainable Management Practices*

and social justice [22].

Therefore, a company should not be viewed solely as an instrument of the owner, but as an organizational unity with influence on several groups that should function in symbiosis with one another [21]. Business performance should therefore be assessed based on the company's economic performance, environmental quality,

The stakeholder theory proposes that the company should aim to satisfy the interests and needs of its stakeholders, as opposed to merely focusing on maximizing profit for the owners. The stakeholder theory implies that companies have the obligation to individuals and groups within and outside of companies, including owners, employees, customers, suppliers, creditors, and the wider community. The stakeholder concept was first used in 1963 in the internal memorandum at the Stanford Research Institute. According to that concept, the stakeholders are those groups without whose support the organization would cease to exist. Freeman advocates the ethical principle according to which the concept of corporate responsibility implies responsibility to all stakeholders [23]. Freeman is considered the father of stakeholder theory, which explains that stakeholders are individuals and groups affected by, or affecting, directly or indirectly, policies, activities, and decisions of the company. In that context, a company needs to create value for its stakeholders balancing their demands in decision-making and defining priorities. The stakeholder theory has become a dominant paradigm of corporate social responsibility and sustainability [24]. Moreover, the quality of relationship with stakeholders and the

capacity to create long-term value are two sides of the same coin [25].

of the world's largest 250 enterprises report on sustainability [26].

Sustainability report [27] is a report that provides information on economic, environmental, social, and managerial aspects of a company's performance. Sustainability reporting is a new task. Integrated report merges information on sustainability together with traditional financial information in a single report. It offers a comprehensive picture of value creation viewed across time [28]. The International Integrated Reporting Council (IIRC) defines an integrated report as one that 'brings together material information about an organization's strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates' [29]. In the case of nonassured sustainability information, integrated reporting positively affected professional investors' evaluation of a firm's sustainability performance, resulted in a higher weighting of this information, and led to higher investment-related judgments [2]. It is important to notice that only the reports that include all three dimensions of sustainability simultaneously can truly be referred to as 'sustainability reports,'

There is a consensus nowadays that financial statements can no longer be sufficient when it comes to business reporting because they do not reflect the entire business activity of a company. The information in financial statements reflects only short-term monetary aspects of business, but does not provide insight into environmental, social, and managerial aspects of business, which are, in the long term, much more important. Nonfinancial reporting is a 'must' in the modern economy for different groups of the general public as it reflects the responsibility of a company to conduct business activities in a sustainable way. On the basis of a sample of 200 senior executive managers across the world, and according to the results of a study conducted by The Economist, 87% of respondents agree that sustainability will become more important over the next 3 years [26]. Fifty-seven percent of respondents say that their firms use sustainability reporting as a basis for new business strategies. The results show that 49% of respondents report progress in meeting their environmental sustainability goals and 53% report progress toward social sustainability. There is growing evidence that sustainability reporting increases in significance. According to the results of KPMG from 2008, almost 80%

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unlike one-dimensional reports that only cover isolated aspects of sustainability. In that sense, the so-called sustainability reports often exclude important aspects of business activity, especially the economic aspects that are usually presented in a separate annual report [30]. The nonfinancial report provides stakeholders with an important and comprehensive overview of the position and characteristics of a company's business activity. In a nutshell, the common core of all these reports is their focus on social and ecological aspect of a company's business activity. While sustainability reports and nonfinancial reports can be disclosed autonomously, an integrated report represents a single report that includes not only social and ecological but also economic aspects. In that sense, integrated reports are comprehensive, reflecting a holistic perspective on business activity.

From a microperspective, studies indicate that firm size, growth opportunities, profitability, gender diversity on the board, or the assurance of nonfinancial reports positively correlate with the adoption of integrated reporting. From a macroperspective, several country-level determinants, such the legal system, value system, and the intensity of market coordination, have been considered as potential determinants [2].

Recent research results indicate that the integration of sustainability and financial information did not lead to an improved acquisition of this type of information. However, the integration increased professional investors' potential access to sustainability information, because readers could not entirely opt out of encountering sustainability information during their information processing. This in itself remains an important objective of integrated reporting because, as our experiment indicated, a substantial number of professional investors showed no interest in the separate sustainability report.

In December 2014, the European Parliament adopted the 2014/95/EU Directive on nonfinancial reporting [3]. This Directive is part of a broader initiative of the European Union regarding corporate social responsibility, which includes a consistent approach to reporting and supporting smart, sustainable, and inclusive growth under Europe 2020 objectives. Since January 1, 2017, this Directive has made nonfinancial reporting in the entire European Union mandatory for public interest entities employing more than 500 people. According to the Directive, the disclosure of nonfinancial information is central for combining long-term profitability with social justice and environmental protection. Nonfinancial reporting includes ecological aspects, social and employee-related matters, respect for human rights, anticorruption measures, description of the business model, outcomes and risks of the policies on the above issues, and the diversity policy applied by the management and supervisory bodies.

### **3. Experiences from business practice**

### **3.1 Motives and stimulus**

There are different international and national initiatives for promoting sustainability reporting: Global Reporting Initiative's, European Commission and the European Parliament, and many other organizations. Firms disclose corporate social responsibility information for two main reasons: (1) to conform to societal expectations and thereby ensure continued access to resources, such as capital, customer support, and so on and (2) to provide additional information that allows capital market participants to more accurately assess firms' financial prospects and risk profiles, potentially leading to higher share prices and higher firm values [31]. These two broad reasons for disclosure can be further explored using, respectively,

legitimacy theory and agency theory. Legitimacy theory encapsulates the idea that firms have to conform to societal norms in order to prosper [32], whereas agency theory focuses on explaining the motivations and actions of both agents (i.e., managers) and principals (i.e., investors) [33].

The question of motivation is a question of purpose and true meaning of sustainability reporting. Maybe it is legitimate to ask the following question: "Why would companies invest an additional effort and report on social and ecological aspects of their business activity?" [34]. Indeed, there are many reasons, arguments, and theories on corporate social responsibility, which go beyond companies' financial responsibility to shareholders. These reasons include a new level of consciousness, growing and visible pressure of the environment, lack of policies in the protection of the public good, and material risks, including the risk to reputation. Corporate social responsibility undoubtedly helps some companies to find new opportunities of value creation to ensure permanent business. These companies set their goals publicly and take into account serious global problems such as climate change to distinguish themselves from less responsible companies [35]. Other similar companies were simply set up by visionary entrepreneurs with social responsibility as their foundation [36].

Sustainability reporting has significant internal and external benefits. Internal benefits include the following [37]:


External benefits include the following [37]:


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*Nonfinancial Reporting: Theoretical and Empirical Evidence*

5.Better quality products and processes: 28%

6.Ability to attract best-quality employees: 26%

7.Improved relations with regulators/legislators: 19%

8.Greater attractiveness to investors as a whole: 17%

The results of this survey have shown that only 4% of respondents did not adopt

International comparison in sustainability reporting widens perspectives and provides new knowledge. Factors that influence sustainability reporting are corporate characteristics, general context factors, country-specific impact factors, and internal factors [41]. A comprehensive research study on sustainability reporting in 11 Central and Eastern Europe and 2 Western Europe countries provides significant contribution to theory and practice. According to this study, economic development, globalization level, civil society, cultural differences, and regional patterns

The quality of NFR practices was investigated in Poland and Romania prior to the European Directive's adoption. The authors found that prior regulation, local institutional characteristics, ownership, industry, and auditors have an impact on the

are examined as the determinants of sustainability reporting [42].

sustainable practices, and only 6% of respondents expected no benefits in that relation. The same study asked the respondents to rank the importance of sustainability-related goals at their firms and 57% mentioned environmental footprint of products, 52% mentioned improved energy efficiency, 51% mentioned developing new products to help reduce social and environmental problems, and finally, 50% said improving the impact of operations on surrounding local communities and 50% said improving the impact of operations on surrounding environments. Communicating their organizations' performance on sustainability to investors and stakeholders was among top long-term benefits (61%). It is considered that customers and the government have a key impact on the introduction and adoption of sustainability practices, while within the organization, the biggest responsibility is on the CEO (33%) and company's board (26%). Of course, it is also interesting to explore the most significant impediments to achieving more sustainability objectives. The following barriers are the most significant: the fear that sustainable business practice will increase business costs in relation to competition (40%); difficulties devising useful targets, measures, and controls to entrench sustainability in the organization (36%); and problems aligning social and environmental efforts with financial ones (31%). The final conclusion is that today's leading companies align their business strategy with social and ecological needs. According to Mark Kramer, founder of FSG, "It used to be easy to say that you cannot do anything because of competitive pressures. You can no longer argue that it is impossible for business to do this because many have. [39]" Both the European Commission and the European Parliament have been actively promoting NFR, not only for the benefit of society but also as a means to improve the competitiveness and innovation of

1.Ability to attract new customer base/retain existing one: 37%

4.Ability to identify and manage reputational risks: 29%

*DOI: http://dx.doi.org/10.5772/intechopen.87159*

2.Improved shareholder value: 34%

3.Increased profitability: 31%

businesses in the European Union [40].

According to the results of a survey conducted by The Economist among 1254 executive managers in the world in 2007, the biggest benefits from adopting sustainable practices were reported in the following areas [38]:

*Nonfinancial Reporting: Theoretical and Empirical Evidence DOI: http://dx.doi.org/10.5772/intechopen.87159*


*Sustainable Management Practices*

managers) and principals (i.e., investors) [33].

responsibility as their foundation [36].

• Increased understanding of risks and opportunities

External benefits include the following [37]:

• Improving reputation and brand loyalty

and tangible and intangible assets

tions about sustainable development

tainable practices were reported in the following areas [38]:

benefits include the following [37]:

nance failures

impacts

legitimacy theory and agency theory. Legitimacy theory encapsulates the idea that firms have to conform to societal norms in order to prosper [32], whereas agency theory focuses on explaining the motivations and actions of both agents (i.e.,

The question of motivation is a question of purpose and true meaning of sustainability reporting. Maybe it is legitimate to ask the following question: "Why would companies invest an additional effort and report on social and ecological aspects of their business activity?" [34]. Indeed, there are many reasons, arguments, and theories on corporate social responsibility, which go beyond companies' financial responsibility to shareholders. These reasons include a new level of consciousness, growing and visible pressure of the environment, lack of policies in the protection of the public good, and material risks, including the risk to reputation. Corporate social responsibility undoubtedly helps some companies to find new opportunities of value creation to ensure permanent business. These companies set their goals publicly and take into account serious global problems such as climate change to distinguish themselves from less responsible companies [35]. Other similar companies were simply set up by visionary entrepreneurs with social

Sustainability reporting has significant internal and external benefits. Internal

• Emphasizing the link between financial and nonfinancial performance

• Streamlining processes, reducing costs and improving efficiency

norms, codes, performance standards, and voluntary initiatives

• Influencing long-term management strategy and policy, and business plans

• Benchmarking and assessing sustainability performance with respect to laws,

• Avoiding being implicated in publicized environmental, social, and gover-

• Comparing performance internally, and between organizations and sectors

• Mitigating—or reversing—negative environmental, social, and governance

• Enabling external stakeholders to understand the organization's true value,

• Demonstrating how the organization influences and is influenced by expecta-

According to the results of a survey conducted by The Economist among 1254 executive managers in the world in 2007, the biggest benefits from adopting sus-

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The results of this survey have shown that only 4% of respondents did not adopt sustainable practices, and only 6% of respondents expected no benefits in that relation. The same study asked the respondents to rank the importance of sustainability-related goals at their firms and 57% mentioned environmental footprint of products, 52% mentioned improved energy efficiency, 51% mentioned developing new products to help reduce social and environmental problems, and finally, 50% said improving the impact of operations on surrounding local communities and 50% said improving the impact of operations on surrounding environments. Communicating their organizations' performance on sustainability to investors and stakeholders was among top long-term benefits (61%). It is considered that customers and the government have a key impact on the introduction and adoption of sustainability practices, while within the organization, the biggest responsibility is on the CEO (33%) and company's board (26%). Of course, it is also interesting to explore the most significant impediments to achieving more sustainability objectives. The following barriers are the most significant: the fear that sustainable business practice will increase business costs in relation to competition (40%); difficulties devising useful targets, measures, and controls to entrench sustainability in the organization (36%); and problems aligning social and environmental efforts with financial ones (31%). The final conclusion is that today's leading companies align their business strategy with social and ecological needs. According to Mark Kramer, founder of FSG, "It used to be easy to say that you cannot do anything because of competitive pressures. You can no longer argue that it is impossible for business to do this because many have. [39]" Both the European Commission and the European Parliament have been actively promoting NFR, not only for the benefit of society but also as a means to improve the competitiveness and innovation of businesses in the European Union [40].

International comparison in sustainability reporting widens perspectives and provides new knowledge. Factors that influence sustainability reporting are corporate characteristics, general context factors, country-specific impact factors, and internal factors [41]. A comprehensive research study on sustainability reporting in 11 Central and Eastern Europe and 2 Western Europe countries provides significant contribution to theory and practice. According to this study, economic development, globalization level, civil society, cultural differences, and regional patterns are examined as the determinants of sustainability reporting [42].

The quality of NFR practices was investigated in Poland and Romania prior to the European Directive's adoption. The authors found that prior regulation, local institutional characteristics, ownership, industry, and auditors have an impact on the quality of disclosures. Poland experienced a higher extent of voluntary reporting, but Romania faced prior regulatory demands for nonfinancial reporting. The authors suggested that the overall disclosure score is higher for Romania, which provides support for the importance of regulations to strengthen the spread and quality of NFR [43].

A report from the European Sustainable Development Network characterizes Poland as a country that integrated CSR into national strategy documents [44]. There is a growing recognition in Poland of the notion that a business must be responsible like any other party and play an active and positive role in society [43]. Responsible Business Forum, operating since 2000, is the first nongovernmental organization in Poland that provides in-depth focus on the CSR issues [45]. On the other hand, the social reports issued in Romania were not considered credible. Also, the general information regarding the environmental impact included in the annual reports is coined as 'incomplete and irrelevant to users and mostly generic' [43].

Authors also identify proof of stakeholder pressure as an institutional factor of NFR, in the case of trade unions, and establish that pressures from the community or society at large are not yet a determinant institutional factor in Poland and Romania. For the Romanian subsample, authors notice a relationship between company size and quality of disclosures. The content of the Polish reports indicates that reporters' experience and the presence and use of voluntary reporting standards and guidance have a positive influence on the quality of reports [43].

The sustainability reporting practices of Turkish nonfinancial companies show that the main factors influencing sustainability reporting are listing on the Corporate Governance Index (CGI), having a sustainability committee, the type of industry, the size of the company, and profitability, whereas leverage is not [46].

The research study of 500 largest European firms found that firms are more predisposed to disclose more CSR information in countries with better investor protection, higher levels of democracy, more effective government services, higher quality regulations, more press freedom, and a lower commitment to environmental policies. Authors' analysis of the association of different levels of CSR disclosure with share prices indicates that a high level of CSR disclosure is associated with higher share prices, whereas a low level of CSR disclosure in sensitive industries is associated with lower share prices—compared to no disclosure [47].

Market participants find CSR disclosures more informative in countries where investors are in a better position to voice their concerns and where there is better regulation and more effective government implementation of regulations [47].

Firms in countries that show a greater commitment to an environmental agenda could be more likely to disclose more CSR information to reflect the local social concerns and to respond to higher levels of stakeholder pressure to provide information. However, in more environmentally committed countries, CSR-related issues are more likely to lead to negative financial consequences and managers may fear that additional CSR disclosure will play into the hands of potential litigants. For example, the 2010 Gulf of Mexico oil spill cost BP billions of dollars [47].

Firms are likely to disclose higher levels of CSR information if they are larger, are more profitable, have high book-to-market firms, are more leveraged, use older equipment, spend more on capital, and operate in environmentally sensitive industries [47]. If they belong to environmentally sensitive industries, they tend to provide more comprehensive social and environmental disclosure regarding the impact produced by their business to reduce the potential concern by the communities in which they are rooted and to gain respect on the market and thus legitimize their actions [48]. As it is shown, motives for sustainable NFR and CSR reporting vary; determinants and incentives differ as well.

Organizations have the freedom to choose the standards of reporting. They can develop their own standards of NFR as well. Since these standards are currently

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*Nonfinancial Reporting: Theoretical and Empirical Evidence*

evolving, competing, and converging in some aspects [49], the analysis by Hales et al. provides useful insights and synthesis of developments in external reporting standards for corporate sustainability performance [50]. GRI estimates to have information on about half of all reports applying its guidelines [51]. The GRI's publicly accessible registry currently lists 13,528 organizations, 53,098 reports, and

**3.2 For whom: investors, customers, employees, and other stakeholders**

company's published information on sustainable development [56].

In recent years, it has become increasingly common for companies to disclose information about their nonfinancial performance and to engage in sustainability reporting alongside traditional financial reporting [2]. Among such powerful stakeholders identified as influencing NFR are governments, nongovernmental organizations, multinational companies, regulatory agencies, the EU Global Reporting Initiative, auditors, shareholders, and the media [43]. Investors are the key addressees of such reporting, and there is initial evidence that they consider

According to the research, the interests of investors, customers, and employees are common subjects of studies [54]. As for investors, studies explored what investors are interested in when it comes to nonfinancial reporting. Findings suggest that 64.5% investors regularly assess ecological and social aspects of business, but only 35.5% conduct a modest analysis of these aspects or conduct no analysis at all [55]. The 2014 PwC survey shows that 61% of US investors are not satisfied with the

Customers also show great interest in sustainability, and recent data on customer

• 72% of customers are interested in learning what companies are doing in

• 75% of customers would more likely purchase products and services from companies that are making a great effort to adopt environmentally conscious

• 82% of consumers are more likely to purchase a product that demonstrates a company's corporate social responsibility initiatives than one that does not.

• 93% of Americans reported having done something to conserve energy in

According to the same study, the younger generation shows an even stronger

Employees are also very important stakeholders. Many future employees use ecological policies to measure corporate values. In 2007, it was reported that 92% of students and entry-level workers were seeking an environment-friendly company for employment [58]. According to SHRM 2011 survey [3], 89% of organizations assessed the importance of sustainable strategy as "important" or "very important" in creating a positive employer who attracts talents. Regarding future employees, there is an interesting survey result: 70% of millennial job seekers said that a firm's community image is an important determinate in job selection. It is obviously apparent that sustainability message and image have an impact on attracting the best talent [59]. When companies were asked to rank three most important stakeholders in their sustainability initiatives, employees ranked second with 22% of

*DOI: http://dx.doi.org/10.5772/intechopen.87159*

nonfinancial information value relevant [53].

trends are clear in that respect [57]:

practices.

terms of sustainability and "going green."

their household in the past year.

trend of green consumption.

31,991 GRI reports [52].

### *Nonfinancial Reporting: Theoretical and Empirical Evidence DOI: http://dx.doi.org/10.5772/intechopen.87159*

*Sustainable Management Practices*

quality of disclosures. Poland experienced a higher extent of voluntary reporting, but Romania faced prior regulatory demands for nonfinancial reporting. The authors suggested that the overall disclosure score is higher for Romania, which provides support for the importance of regulations to strengthen the spread and quality of NFR [43]. A report from the European Sustainable Development Network characterizes Poland as a country that integrated CSR into national strategy documents [44]. There is a growing recognition in Poland of the notion that a business must be responsible like any other party and play an active and positive role in society [43]. Responsible Business Forum, operating since 2000, is the first nongovernmental organization in Poland that provides in-depth focus on the CSR issues [45]. On the other hand, the social reports issued in Romania were not considered credible. Also, the general information regarding the environmental impact included in the annual reports is coined as 'incomplete and irrelevant to users and mostly generic' [43]. Authors also identify proof of stakeholder pressure as an institutional factor of NFR, in the case of trade unions, and establish that pressures from the community or society at large are not yet a determinant institutional factor in Poland and Romania. For the Romanian subsample, authors notice a relationship between company size and quality of disclosures. The content of the Polish reports indicates that reporters' experience and the presence and use of voluntary reporting standards

and guidance have a positive influence on the quality of reports [43].

associated with lower share prices—compared to no disclosure [47].

example, the 2010 Gulf of Mexico oil spill cost BP billions of dollars [47].

vary; determinants and incentives differ as well.

The sustainability reporting practices of Turkish nonfinancial companies show that the main factors influencing sustainability reporting are listing on the Corporate Governance Index (CGI), having a sustainability committee, the type of industry, the size of the company, and profitability, whereas leverage is not [46]. The research study of 500 largest European firms found that firms are more predisposed to disclose more CSR information in countries with better investor protection, higher levels of democracy, more effective government services, higher quality regulations, more press freedom, and a lower commitment to environmental policies. Authors' analysis of the association of different levels of CSR disclosure with share prices indicates that a high level of CSR disclosure is associated with higher share prices, whereas a low level of CSR disclosure in sensitive industries is

Market participants find CSR disclosures more informative in countries where investors are in a better position to voice their concerns and where there is better regulation and more effective government implementation of regulations [47].

Firms in countries that show a greater commitment to an environmental agenda could be more likely to disclose more CSR information to reflect the local social concerns and to respond to higher levels of stakeholder pressure to provide information. However, in more environmentally committed countries, CSR-related issues are more likely to lead to negative financial consequences and managers may fear that additional CSR disclosure will play into the hands of potential litigants. For

Firms are likely to disclose higher levels of CSR information if they are larger, are more profitable, have high book-to-market firms, are more leveraged, use older equipment, spend more on capital, and operate in environmentally sensitive industries [47]. If they belong to environmentally sensitive industries, they tend to provide more comprehensive social and environmental disclosure regarding the impact produced by their business to reduce the potential concern by the communities in which they are rooted and to gain respect on the market and thus legitimize their actions [48]. As it is shown, motives for sustainable NFR and CSR reporting

Organizations have the freedom to choose the standards of reporting. They can develop their own standards of NFR as well. Since these standards are currently

**102**

evolving, competing, and converging in some aspects [49], the analysis by Hales et al. provides useful insights and synthesis of developments in external reporting standards for corporate sustainability performance [50]. GRI estimates to have information on about half of all reports applying its guidelines [51]. The GRI's publicly accessible registry currently lists 13,528 organizations, 53,098 reports, and 31,991 GRI reports [52].

### **3.2 For whom: investors, customers, employees, and other stakeholders**

In recent years, it has become increasingly common for companies to disclose information about their nonfinancial performance and to engage in sustainability reporting alongside traditional financial reporting [2]. Among such powerful stakeholders identified as influencing NFR are governments, nongovernmental organizations, multinational companies, regulatory agencies, the EU Global Reporting Initiative, auditors, shareholders, and the media [43]. Investors are the key addressees of such reporting, and there is initial evidence that they consider nonfinancial information value relevant [53].

According to the research, the interests of investors, customers, and employees are common subjects of studies [54]. As for investors, studies explored what investors are interested in when it comes to nonfinancial reporting. Findings suggest that 64.5% investors regularly assess ecological and social aspects of business, but only 35.5% conduct a modest analysis of these aspects or conduct no analysis at all [55]. The 2014 PwC survey shows that 61% of US investors are not satisfied with the company's published information on sustainable development [56].

Customers also show great interest in sustainability, and recent data on customer trends are clear in that respect [57]:


According to the same study, the younger generation shows an even stronger trend of green consumption.

Employees are also very important stakeholders. Many future employees use ecological policies to measure corporate values. In 2007, it was reported that 92% of students and entry-level workers were seeking an environment-friendly company for employment [58]. According to SHRM 2011 survey [3], 89% of organizations assessed the importance of sustainable strategy as "important" or "very important" in creating a positive employer who attracts talents. Regarding future employees, there is an interesting survey result: 70% of millennial job seekers said that a firm's community image is an important determinate in job selection. It is obviously apparent that sustainability message and image have an impact on attracting the best talent [59]. When companies were asked to rank three most important stakeholders in their sustainability initiatives, employees ranked second with 22% of

replies, after consumers who ranked first with 37% replies, while owners ranked third with 15% of replies [60].

It is worthy to note that sustainability reporting is no 'magic tool' simultaneously fulfilling communication and management functions; instead, attempts to reach all audiences with a single document are doomed to fail, ushering in 'jack-of-all-trades master of none' [51]. Simply calling for integrated, high-frequency, high-complexity reporting is misguided as there are trade-offs between conciseness and completeness [61]. Nevertheless, there are positive effects of integrated reporting on the effectiveness of sustainability management, thus creating long-term firm value [62].

### **3.3 Sustainability reports in the public sector**

In the private sector, both financial and sustainability reports are usually published annually, strengthening the case for their integration, although this is not mandatory. Many local governments in Germany issue sustainability reports at multiyear intervals [63]. Sustainability reporting is on the rise throughout the public sector. International frameworks such as the United Nations Sustainable Development Goals (specifically SDG target 12.6) call for increased reporting by all types of institutions [51].

France recently mandated all municipalities with more than 50,000 inhabitants to periodically produce sustainability reports [64]. A study about sustainability reporting by local governments investigated in Amsterdam, Basel, Dublin, Freiburg, Nuremberg, and Zurich suggests that sustainability reporting can benefit organizational change, management, and communication yet also lead to 'fatigue' and discontinuation [51]. Commitment to sustainability reporting is a vital step toward creating 'vibrant cities' [65]. The six analyzed 'early adopters' all initiated sustainability reporting voluntarily. Over the years, each deliberately made different major design choices. Zurich started with sustainability reporting in 2004, Basel and Amsterdam in 2005, Nuremberg in 2009, and Dublin in 2010 [51].

The analysis of content quality showed a mixed picture. Most reports addressed questions of context, public policies, organizational performance, and outlook to some degree. In Zurich, switching from multiyear to annual reports brought reduced coverage of context and outlook issues. Freiburg's report stands out since it pays detailed attention to (select) public policies and organizational performance, while lacking city-level outcome indicators—a context feature common to most sustainability reports. From one edition to another, reports usually discuss long-term trends through a set of indicators (ranging from 21 in Basel to over 100 in Nürnberg). In addition to such continuity in monitoring, Nürnberg's reports contain changing focus themes (e.g., 'education') [51].

For the dissemination of reports, all local governments recently used websites and social media. Usually, this involves making reports available for download (with Dublin's not existing in print); only Zurich visualizes its data on a dedicated dashboard [51].

The disclosures are required to be made in the form of a nonfinancial statement or of a nonfinancial report and to include a brief description of the entity's business model and its policies in relation to environmental, social, and employee matters, respect for human rights, procedures to counteract corruption and bribery and their outcomes, risks and risk management related to those matters, and nonfinancial key performance indicators [43].

### **4. Challenges of nonfinancial reporting**

Nonfinancial reporting is a relatively new task for companies and is connected with few open questions. Some of them are general challenges caused by general framework change; some of them are more specific.

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industry reports indicate that this group is growing quickly [66].

business [72]. Thus, new paradigm is not only a talk; it is a walk as well.

• Design out waste and pollution

• Regenerate natural systems

further use, and to recover energy [75].

• Keep products and materials in use

Circular economy is the next general challenging perspective; it aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources, and designing waste out of the system. Underpinned by a transition to renewable energy sources, the circular model builds economic, natural, and social capital. It is based on three principles [73]:

On March 4, 2019, the European Commission adopted a comprehensive report on the implementation of the Circular Economy Action Plan. The report presents the main achievements under the Action Plan and sketches out future challenges to shaping our economy and paving the way toward a climate-neutral, circular economy where pressure on natural and freshwater resources as well as ecosystems is minimized [74]. Zero-waste economy is also one dimension of paradigm shift. The objectives are to recycle more and create less waste and to recover materials rather than waste them. To minimize waste means to reuse it, to recycle it for

The next open question deals with research studies in this area. An increasing number of companies that decide to disclose nonfinancial reports allow research to be conducted in that area as well. Since there are different standards and

Paradigm shift in our perceiving finds its reflection in economy and business. Green economy and green business, circular economy, and zero-waste economy are new perspectives on the path to sustainable business with new requirements toward companies. Green is more than just a color. It is a way of doing business and a way of life, which respects and maintains balance in the environment. Green strategies that respond to increased consumer interest are green products, recycled/refurbished products, and the green process—green strategies do matter to eco-consumers and

Green economy is the way to reduce environmental risks and ecological scarcities; it is low carbon, resource efficient, and socially inclusive [67]. It is a system of economic activities related to the production, distribution, and consumption of goods and services that result in improved human well-being over the long term, while not exposing future generations to significant environmental risks or ecological scarcities [68]. Green economy is described as an economy in which economic growth and environmental responsibility work together in a mutually reinforcing fashion while supporting progress on social development [69]. It presents an attractive framework to deliver more recourse efficient, lower carbon, less environmentally damaging, more socially inclusive societies [70]. Moreover, it is suggested that proper measurement of the green economy needs to move beyond GDP as the central measure of progress and to better track the 'transformational green economy.' Bhutan's Gross National Happiness Index, developed from the 33 indicators in the next domains: psychological well-being, health, education, time use, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards, is example of innovative and sustainable measurement of national progress. Introduced by Bhutan with support from 68 member states, UN adopted in 2011 a General Assembly Resolution, calling for a 'holistic approach to development' [71]. Green Economy from EU Commission Perspectives encompasses seven dimensions that ensure the path to sustainable

*DOI: http://dx.doi.org/10.5772/intechopen.87159*

*Nonfinancial Reporting: Theoretical and Empirical Evidence DOI: http://dx.doi.org/10.5772/intechopen.87159*

*Sustainable Management Practices*

third with 15% of replies [60].

**3.3 Sustainability reports in the public sector**

replies, after consumers who ranked first with 37% replies, while owners ranked

ness of sustainability management, thus creating long-term firm value [62].

SDG target 12.6) call for increased reporting by all types of institutions [51].

and Amsterdam in 2005, Nuremberg in 2009, and Dublin in 2010 [51].

France recently mandated all municipalities with more than 50,000 inhabitants to periodically produce sustainability reports [64]. A study about sustainability reporting by local governments investigated in Amsterdam, Basel, Dublin, Freiburg, Nuremberg, and Zurich suggests that sustainability reporting can benefit organizational change, management, and communication yet also lead to 'fatigue' and discontinuation [51]. Commitment to sustainability reporting is a vital step toward creating 'vibrant cities' [65]. The six analyzed 'early adopters' all initiated sustainability reporting voluntarily. Over the years, each deliberately made different major design choices. Zurich started with sustainability reporting in 2004, Basel

The analysis of content quality showed a mixed picture. Most reports addressed questions of context, public policies, organizational performance, and outlook to some degree. In Zurich, switching from multiyear to annual reports brought reduced coverage of context and outlook issues. Freiburg's report stands out since it pays detailed attention to (select) public policies and organizational performance, while lacking city-level outcome indicators—a context feature common to most sustainability reports. From one edition to another, reports usually discuss long-term trends through a set of indicators (ranging from 21 in Basel to over 100 in Nürnberg). In addition to such continuity in monitoring, Nürnberg's reports contain changing focus themes (e.g., 'education') [51]. For the dissemination of reports, all local governments recently used websites and social media. Usually, this involves making reports available for download (with Dublin's not existing in print); only Zurich visualizes its data on a dedicated dashboard [51].

The disclosures are required to be made in the form of a nonfinancial statement or of a nonfinancial report and to include a brief description of the entity's business model and its policies in relation to environmental, social, and employee matters, respect for human rights, procedures to counteract corruption and bribery and their outcomes, risks and risk management related to those matters, and nonfinancial

Nonfinancial reporting is a relatively new task for companies and is connected with few open questions. Some of them are general challenges caused by general

It is worthy to note that sustainability reporting is no 'magic tool' simultaneously fulfilling communication and management functions; instead, attempts to reach all audiences with a single document are doomed to fail, ushering in 'jack-of-all-trades master of none' [51]. Simply calling for integrated, high-frequency, high-complexity reporting is misguided as there are trade-offs between conciseness and completeness [61]. Nevertheless, there are positive effects of integrated reporting on the effective-

In the private sector, both financial and sustainability reports are usually published annually, strengthening the case for their integration, although this is not mandatory. Many local governments in Germany issue sustainability reports at multiyear intervals [63]. Sustainability reporting is on the rise throughout the public sector. International frameworks such as the United Nations Sustainable Development Goals (specifically

**104**

key performance indicators [43].

**4. Challenges of nonfinancial reporting**

framework change; some of them are more specific.

Paradigm shift in our perceiving finds its reflection in economy and business. Green economy and green business, circular economy, and zero-waste economy are new perspectives on the path to sustainable business with new requirements toward companies. Green is more than just a color. It is a way of doing business and a way of life, which respects and maintains balance in the environment. Green strategies that respond to increased consumer interest are green products, recycled/refurbished products, and the green process—green strategies do matter to eco-consumers and industry reports indicate that this group is growing quickly [66].

Green economy is the way to reduce environmental risks and ecological scarcities; it is low carbon, resource efficient, and socially inclusive [67]. It is a system of economic activities related to the production, distribution, and consumption of goods and services that result in improved human well-being over the long term, while not exposing future generations to significant environmental risks or ecological scarcities [68]. Green economy is described as an economy in which economic growth and environmental responsibility work together in a mutually reinforcing fashion while supporting progress on social development [69]. It presents an attractive framework to deliver more recourse efficient, lower carbon, less environmentally damaging, more socially inclusive societies [70]. Moreover, it is suggested that proper measurement of the green economy needs to move beyond GDP as the central measure of progress and to better track the 'transformational green economy.' Bhutan's Gross National Happiness Index, developed from the 33 indicators in the next domains: psychological well-being, health, education, time use, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards, is example of innovative and sustainable measurement of national progress. Introduced by Bhutan with support from 68 member states, UN adopted in 2011 a General Assembly Resolution, calling for a 'holistic approach to development' [71]. Green Economy from EU Commission Perspectives encompasses seven dimensions that ensure the path to sustainable business [72]. Thus, new paradigm is not only a talk; it is a walk as well.

Circular economy is the next general challenging perspective; it aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources, and designing waste out of the system. Underpinned by a transition to renewable energy sources, the circular model builds economic, natural, and social capital. It is based on three principles [73]:


On March 4, 2019, the European Commission adopted a comprehensive report on the implementation of the Circular Economy Action Plan. The report presents the main achievements under the Action Plan and sketches out future challenges to shaping our economy and paving the way toward a climate-neutral, circular economy where pressure on natural and freshwater resources as well as ecosystems is minimized [74]. Zero-waste economy is also one dimension of paradigm shift. The objectives are to recycle more and create less waste and to recover materials rather than waste them. To minimize waste means to reuse it, to recycle it for further use, and to recover energy [75].

The next open question deals with research studies in this area. An increasing number of companies that decide to disclose nonfinancial reports allow research to be conducted in that area as well. Since there are different standards and

guidelines for such reporting and companies are free to choose reporting standards, it is often difficult to collect and process data furthermore to compare different reports. There is a clear need to improve the comparability of the indicators disclosed in corporate sustainability reports, particularly among corporations in the same sector [76]. It should also be stressed that studies and findings obtained represent an encouragement to other companies in the process of disclosing nonfinancial reports.

The next question includes the type of data and information that are disclosed, the way the data are collected and processed, and the way they are presented—in a qualitative and/or quantitative form. IT support plays a very important role in that process because collecting data for NFR is often done manually, which makes the preparation of the documents harder and slower. The process of NFR is for every company the challenge to rethink and redesign business activities and to report about their effort in this area. Quantity of information is the challenge as well: 'the more information there is in a report about individual, social, environmental, and economic impacts, policies, and practices, the greater is the likelihood of information overload for readers' [77].

### **5. Discussion**

Our environment changes: we are witnessing a climate change causing unexpected droughts and floods, glacial meltdowns, migrations of population, a drastic decrease in biodiversity, unlimited expansion, and growth of business, which contributes to the destruction of nature and animal habitats. The pollution of air, water, and soil, as well as light, noise, and electromagnetic pollution, is different forms of environmental pollution caused by human activity or, more precisely, caused by company activities. Therefore, companies today face great challenges because they can transform undesirable trends in the economy and society into socially and ecologically responsible creation of new activities and long-term jobs, inventions, and new methods of production and consumption. A growing number of companies publish their sustainability business reports. For some companies, this led to innovations, better risk management, new business opportunities, and an enhanced capacity to create value in the future. But the companies are not the only ones who publish the sustainability reports; sustainability business reports are on the rise throughout the public sector as well.

There are more and more stakeholders that influence on NFR like governments, nongovernmental organizations, multinational companies, regulatory agencies, the EU Global Reporting Initiative, auditors, shareholders, and the media. Specific questions with regard to NFR encompass standards of reporting, ways to measure the company's sustainability efforts, type of data, and IT support. Since there are several different standards of NFR, every company has to choose one to follow or to create their own reporting standards, which is a complex task. On those standards, different factors will have their influence, and those are corporate characteristics, general context factors, country-specific impact factors, and internal factors, and, further, economic development, globalization level, civil society, cultural differences, and regional patterns.

Companies and nonprofit organizations are called to publish NFR for their stakeholders, especially for investors, customers, employees, and wider community. Published NFR is an argument in favor of organization's sustainability orientation and responsibility for people and planet in creating long-term values.

**107**

ability reporting.

*Nonfinancial Reporting: Theoretical and Empirical Evidence*

The aim of this study is to provide a contribution to the discussion of NFR. The purpose of the study is to stimulate companies on the path of sustainable business and sustainable reports that reflects their efforts in social and ecological business dimensions. The aim is also to stimulate wider research that could contribute to a shift in perspective from mechanistic to a holistic

In the past, economic growth often seemed to depend on using up natural resources as though supplies were unlimited. The result is a 'resource crisis,' with a threat of shortages and rising prices. Today, growing numbers of citizens and economists are looking to different economic models, where wealth can be created without harming the environment. According to the European Commission, the Europe 2020 strategy emphasizes smart, sustainable, and inclusive growth as a way to overcome the structural weaknesses in Europe's economy, improve its competitiveness and productivity, and underpin a sustainable social market economy. Not only Europe, but the whole planet needs smart, sustainable, and

The foundation of business is value creation. Creating financial value for owners

Dominant understanding of business value creation determinates business reporting: financial reports reflect monetary and short-term aspects of business value creation, which is only one dimension of business activities, important for shareholders. Nonfinancial reports discover existing social and environmental aspects of business activities and reflect nonmonetary and long-term values important for all stakeholders. They manifest sustainability approach on the business level. Nonfinancial reporting is still done on a voluntary basis, but from 2017, it was an obligation for EU companies with more than 500 employees or for companies of special public interest. They include ecological aspects, social and employee-related matters, respect for human rights, anticorruption measures, description of the business model, outcomes and risks of the policies on the above issues, and the diversity policy applied by the management and supervi-

Contemporary concepts of green, circular, and zero-waste economy influence business reporting and led companies to innovations, better risk management, new business opportunities, and an enhanced capacity to create value in the future. Every organization on the path of sustainability reporting meets general and specific open questions regarding NFR: implementation of contemporary sustainability concepts into business strategy, ways to measure company's sustainability efforts, type of data, and IT support are some of them. NFR is still in development;

This study contributes to the discussion on dominant business value creation and ways to measure and communicate it. It stresses the need for paradigm shift from mechanistic, monetary short-term view to holistic long-term view, and it points out the business responsibility for people and planet and for future generations. This research stimulates profit and nonprofit organizations to publish NFR pointed at their benefits and incentives. Scholars from academic community are encouraged to conduct further research to help organize and implement sustain-

is a widely accepted business goal measured with profit and communicated in financial reports. Because of changes in environment, more and more companies choose to create sustainable values for stakeholders and communicate it by nonfi-

*DOI: http://dx.doi.org/10.5772/intechopen.87159*

**6. Conclusions and suggestions**

paradigm.

inclusive growth.

sory bodies.

nancial or sustainable reports.

business experience is still insufficient.

### **6. Conclusions and suggestions**

*Sustainable Management Practices*

nonfinancial reports.

tion overload for readers' [77].

out the public sector as well.

**5. Discussion**

guidelines for such reporting and companies are free to choose reporting standards, it is often difficult to collect and process data furthermore to compare different reports. There is a clear need to improve the comparability of the indicators disclosed in corporate sustainability reports, particularly among corporations in the same sector [76]. It should also be stressed that studies and findings obtained represent an encouragement to other companies in the process of disclosing

The next question includes the type of data and information that are disclosed, the way the data are collected and processed, and the way they are presented—in a qualitative and/or quantitative form. IT support plays a very important role in that process because collecting data for NFR is often done manually, which makes the preparation of the documents harder and slower. The process of NFR is for every company the challenge to rethink and redesign business activities and to report about their effort in this area. Quantity of information is the challenge as well: 'the more information there is in a report about individual, social, environmental, and economic impacts, policies, and practices, the greater is the likelihood of informa-

Our environment changes: we are witnessing a climate change causing unexpected droughts and floods, glacial meltdowns, migrations of population, a drastic decrease in biodiversity, unlimited expansion, and growth of business, which contributes to the destruction of nature and animal habitats. The pollution of air, water, and soil, as well as light, noise, and electromagnetic pollution, is different forms of environmental pollution caused by human activity or, more precisely, caused by company activities. Therefore, companies today face great challenges because they can transform undesirable trends in the economy and society into socially and ecologically responsible creation of new activities and long-term jobs, inventions, and new methods of production and consumption. A growing number of companies publish their sustainability business reports. For some companies, this led to innovations, better risk management, new business opportunities, and an enhanced capacity to create value in the future. But the companies are not the only ones who publish the sustainability reports; sustainability business reports are on the rise through-

There are more and more stakeholders that influence on NFR like governments, nongovernmental organizations, multinational companies, regulatory agencies, the EU Global Reporting Initiative, auditors, shareholders, and the media. Specific questions with regard to NFR encompass standards of reporting, ways to measure the company's sustainability efforts, type of data, and IT support. Since there are several different standards of NFR, every company has to choose one to follow or to create their own reporting standards, which is a complex task. On those standards, different factors will have their influence, and those are corporate charac-

teristics, general context factors, country-specific impact factors, and

and responsibility for people and planet in creating long-term values.

society, cultural differences, and regional patterns.

internal factors, and, further, economic development, globalization level, civil

Companies and nonprofit organizations are called to publish NFR for their stakeholders, especially for investors, customers, employees, and wider community. Published NFR is an argument in favor of organization's sustainability orientation

**106**

The aim of this study is to provide a contribution to the discussion of NFR. The purpose of the study is to stimulate companies on the path of sustainable business and sustainable reports that reflects their efforts in social and ecological business dimensions. The aim is also to stimulate wider research that could contribute to a shift in perspective from mechanistic to a holistic paradigm.

In the past, economic growth often seemed to depend on using up natural resources as though supplies were unlimited. The result is a 'resource crisis,' with a threat of shortages and rising prices. Today, growing numbers of citizens and economists are looking to different economic models, where wealth can be created without harming the environment. According to the European Commission, the Europe 2020 strategy emphasizes smart, sustainable, and inclusive growth as a way to overcome the structural weaknesses in Europe's economy, improve its competitiveness and productivity, and underpin a sustainable social market economy. Not only Europe, but the whole planet needs smart, sustainable, and inclusive growth.

The foundation of business is value creation. Creating financial value for owners is a widely accepted business goal measured with profit and communicated in financial reports. Because of changes in environment, more and more companies choose to create sustainable values for stakeholders and communicate it by nonfinancial or sustainable reports.

Dominant understanding of business value creation determinates business reporting: financial reports reflect monetary and short-term aspects of business value creation, which is only one dimension of business activities, important for shareholders. Nonfinancial reports discover existing social and environmental aspects of business activities and reflect nonmonetary and long-term values important for all stakeholders. They manifest sustainability approach on the business level. Nonfinancial reporting is still done on a voluntary basis, but from 2017, it was an obligation for EU companies with more than 500 employees or for companies of special public interest. They include ecological aspects, social and employee-related matters, respect for human rights, anticorruption measures, description of the business model, outcomes and risks of the policies on the above issues, and the diversity policy applied by the management and supervisory bodies.

Contemporary concepts of green, circular, and zero-waste economy influence business reporting and led companies to innovations, better risk management, new business opportunities, and an enhanced capacity to create value in the future. Every organization on the path of sustainability reporting meets general and specific open questions regarding NFR: implementation of contemporary sustainability concepts into business strategy, ways to measure company's sustainability efforts, type of data, and IT support are some of them. NFR is still in development; business experience is still insufficient.

This study contributes to the discussion on dominant business value creation and ways to measure and communicate it. It stresses the need for paradigm shift from mechanistic, monetary short-term view to holistic long-term view, and it points out the business responsibility for people and planet and for future generations. This research stimulates profit and nonprofit organizations to publish NFR pointed at their benefits and incentives. Scholars from academic community are encouraged to conduct further research to help organize and implement sustainability reporting.

### **6.1 Limitations and suggestions for future research**

There are few limitations of this study. The first one is in the gap between growing number of research studies on NFR and their comparability, since the researcher observes different industries, sectors, countries, etc. and in this process uses different approaches. Another limitation is the obstacle to compare different reports since there are different standards and guidelines for such reporting and companies are free to choose their own reporting standards. The third limitation is the high level of generality regarding NFR, and it would be interesting to observe specific industries and their NFR habits. And the last one is the exclusive focus on the motives for NFR without analyzing whether they are financially oriented or they are the expression of a business model.

There are some suggestions and questions for future research on NFR: Does and how global and national culture influences sustainability reporting? Are there specific characteristics on NFR for branches, size of the organization, level of profitability, or gender diversity on the board? How can scholars encourage the implementation of NFR? Is there any connection with NFR in specific countries and their GDP? Do countries with higher level of GDP have a higher level of NFR?

### **Author details**

Nidžara Osmanagić Bedenik\* and Petra Barišić Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia

\*Address all correspondence to: nosmanagic@efzg.hr

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

**109**

*Nonfinancial Reporting: Theoretical and Empirical Evidence*

[8] Comparability in International Accounting Standards—A Brief History [Internet]. Available from: http://www.fasb.org/jsp/FASB/Page/ SectionPage&cid=1176156304264

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[13] Korten DC. When Corporations Rule the World. 1st ed. Kumarin Press Inc./Berreth-Koehle; 1995. p. 99

[14] Anderson S, Cavanagh J. Report on the top 200 corporations. [Internet]. 2000. Available from: http://www. corporations.org/system/top100.html

[15] Bakan J. The Corporation: The Pathological Pursuit of Profit and Power. Free Press; 2005. p. 41

[16] Osmanagic Bedenik N et al. The Role of Controlling and IT Support in Non-financial Reporting. Zagreb: Veble;

[17] Colsman B. Nachhaltigkeitscontrolling, Strategien, Ziele,

[Accessed: 2018-08-15]

2018. p. 8

Bridge Papers; 2008. p. 3

[12] Contingency Approach to Management [Internet]. Available from: https://www.encyclopedia.com/ management/encyclopedias-almanacstranscripts-and-maps/contingencyapproach-management [Accessed:

[Accessed: 2018-10-15]

2018-08-12]

2018-08-10]

*DOI: http://dx.doi.org/10.5772/intechopen.87159*

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[2] Reimsbach D, Hahn R, Gürtürk A. Integrated Reporting and Assurance of Sustainability Information: An experimental study on

professional investors' information processing. European Accounting Review. 2018;**27**(3):559-581. DOI: 10.1080/09638180.2016.1273787

[3] European Union. Directive 2014/95/ EU of the European Parliament and of the Council pf 22 October 2014. Official Journal of the European Union. 2014. Available from: https:// eur-lex.europa.eu/legal-content/EN/ TXT/?uri=CELEX%3A32014L0095.

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*Nonfinancial Reporting: Theoretical and Empirical Evidence DOI: http://dx.doi.org/10.5772/intechopen.87159*

### **References**

*Sustainable Management Practices*

**6.1 Limitations and suggestions for future research**

they are the expression of a business model.

There are few limitations of this study. The first one is in the gap between growing number of research studies on NFR and their comparability, since the researcher observes different industries, sectors, countries, etc. and in this process uses different approaches. Another limitation is the obstacle to compare different reports since there are different standards and guidelines for such reporting and companies are free to choose their own reporting standards. The third limitation is the high level of generality regarding NFR, and it would be interesting to observe specific industries and their NFR habits. And the last one is the exclusive focus on the motives for NFR without analyzing whether they are financially oriented or

There are some suggestions and questions for future research on NFR: Does and how global and national culture influences sustainability reporting? Are there specific characteristics on NFR for branches, size of the organization, level of profitability, or gender diversity on the board? How can scholars encourage the implementation of NFR? Is there any connection with NFR in specific countries and their GDP? Do countries with higher level of GDP have a higher level of NFR?

**108**

**Author details**

Nidžara Osmanagić Bedenik\* and Petra Barišić

provided the original work is properly cited.

\*Address all correspondence to: nosmanagic@efzg.hr

Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

[1] Szekely N, vom Brocke J. What can we learn from corporate sustainability reporting? Deriving propositions for research and practice from over 9,500 corporate sustainability reports published between 1999 and 2015 using topic modelling technique. PLoS One. 2017;**12**(4):e0174807. DOI: 10.1371/ journal.pone.0174807

[2] Reimsbach D, Hahn R, Gürtürk A. Integrated Reporting and Assurance of Sustainability Information: An experimental study on professional investors' information processing. European Accounting Review. 2018;**27**(3):559-581. DOI: 10.1080/09638180.2016.1273787

[3] European Union. Directive 2014/95/ EU of the European Parliament and of the Council pf 22 October 2014. Official Journal of the European Union. 2014. Available from: https:// eur-lex.europa.eu/legal-content/EN/ TXT/?uri=CELEX%3A32014L0095. [Accessed: 2017-06-06]

[4] Kochalsky C, editor. Green Controlling and Finance. CH-Beck; 2016. p. 76

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[47] De Villiers C, Marques A. Corporate social responsibility, country-level predispositions, and the consequences of choosing a level of disclosure. Accounting and Business Research. 2016;**46**(2):167-195. DOI: 10.1080/00014788.2015.1039476

[48] Manes-Rossi F, Tiron-Tudor A, Nicolò G, Zanellato G. Ensuring more sustainable Reporting in Europe using non-financial disclosure—De facto and De jure evidence. Sustainability. 2018;**10**:1162. DOI: 10.3390/su10041162

[49] Joshi S, Li Y. What is corporate sustainability and how do firms practice it? A management accounting research perspective. Journal of Management Accounting Research. 2016;**28**(2):1-11.

[50] Hales J, Matsumura EM, Moser DV, Payne R. Becoming sustainable: A rational decision based on sound information and effective processes? Journal of Management Accounting Research. 2016;**28**(2):13-28. DOI:

[51] Niemann L, Hoppe T. Sustainability

reporting by local governments: A magic tool? Lessons on use and usefulness from European pioneers. Public Management Review. 2018;**20**(1):201-223. DOI: 10.1080/14719037.2017.1293149

[52] Global Reporting Initiative. Sustainability disclosure database [Internet]. Available from: http://

DOI: 10.2308/jmar-10496

10.2308/jmar-51394

**112**

[60] Barić A. Corporate social responsibility and stakeholders: Review of the last decade (2006-2015). De Gruyter Open. Business Systems Research. 2017;**8**(1):133-146. p. 138. DOI: 10.1515/bsrj-2017-0011

[61] Perego P, Kennedy S, Whiteman G. A lot of icing but little cake? Taking integrated Reporting forward. Journal of Cleaner Production. 2016;**136**(Feb.):53-64. DOI: 10.1016/j. jclepro.2016.01.106

[62] Churet C, Eccles RG. Integrated reporting, quality of management, and financial performance. Journal of Applied Corporate Finance. 2014;**26**(1):56-64

[63] Plawitzki JK. Welcher Voraussetzungen Bedarf Es in Deutschen Kommunen Für Die Erstellung Eines Nachhaltigkeitsberichtes? [What conditions are required in German local governments for the elaboration of a sustainability report?] [Bachelor thesis]. Lüneburg: Leuphana Universität; 2010. p. 17

[64] CGDD (Commissariat Général au Développement Durable). Premiers Éléments Méthodologiques Pour L'élaboration Du Rapport Sur La Situation En Matière de Développement Durable À L'usage des Collectivités Territoriales et EPCI À Fiscalité Propre de plus de 50 000 Habitants. Paris: Service de l'Économie, de l'Évaluation et de l'Intégration du Développement Durable; 2012

[65] Ballantine J. The value of sustainability reporting by cities. Cities Today. 2014. December 1. p. 4. Available from: http://cities-today.com/2014/12/ value-sustainability-reporting-cities/

[66] Borin N, Lindsey-Mullikin J, Krishnan R. An analysis of consumer reactions to green strategies. Journal of Product & Brand Management. 2013;**22**(2):118-128. DOI: 10.1108/10610421311320997

[67] UNEP. Towards a Green Economy: Pathway to Sustainable Development and Poverty Eradication [Internet]. 2011. Available from: https:// sustainabledevelopment.un.org/index. php?page=view&type=400&nr=7&me nu=35 [Accessed: 2019-03-21]

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[69] ICC comments on the UNEP draft Green Economy Report. International Chamber of Commerce [Internet]. Available from: https://iccwbo. org/publication/icc-comments-onthe-unep-draft-green-economyreport-2011/. p. 7. [Accessed: 2019-03-21]

[70] Georgeson L, Maslin M, Poessinouw M. The global green economy: A review of concepts, definitions, measurement methodologies and their interactions. Geography and Environment. 2017;**4**(1):e00036. p. 4 [Internet]. Available from: https://rgs-ibg. onlinelibrary.wiley.com/doi/ pdf/10.1002/geo2.36 [Accessed: 2019-03-22]

[71] Bhutan's Gross National Happiness Index. Oxford Poverty & Human Development Initiative [Internet].

Available from: https://ophi.org. uk/policy/national-policy/grossnational-happiness-index/ [Accessed: 2019-04-08]

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[76] Roca LC, Searcy C. An analysis of indicators disclosed in corporate sustainability reports. Journal of Cleaner Production. 2012;**20**:103-118

[77] de Villiers C, Rinaldi L, Unerman J. Integrated reporting: Insights, gaps and an agenda for future research. Accounting, Auditing & Accountability Journal. 2014;**27**(7):1042-1067. p. 1045. DOI: 10.1108/AAAJ-06-2014-1736

**115**

**Chapter 7**

School

**Abstract**

*Robin Attfield and Kate Attfield*

particularly in a Steiner education community.

these examples in equality and diversity.

management practices

**1. Introduction**

Principles of Equality: Managing

Equality and Diversity in a Steiner

Principles of equality are examined in the context of managing equality and diversity in practice. Our case study is the Cardiff Steiner School, an independent international school located in Wales, UK with educational values guided by the philosophers and educationalists Rudolf Steiner and Millicent Mackenzie. The sustainable management referred to and assessed in this chapter is the School's management structure and the related School pedagogical operation, with the founding Steiner value of human justice informing these. We argue that at this School the management of equality and diversity reflects theories of Diversity and Equality Management, with School managers aspiring to encourage respect for all. We appraise the philosophical and spiritual values of the founders in relation to equality and diversity, in order to demonstrate the visionary ideals of these philosophers and the extent to which their beliefs live on sustainably in contemporary society, and

**Keywords:** principles of equality, equality of consideration, Rudolf Steiner's philosophy of education, Millicent Mackenzie, Steiner school equality and diversity

When people talk about 'the principle of equality' in the abstract, what they really mean depends on which version or variety of equality they have in mind. Indeed there is a whole array of different principles (see [1, 2]). Prominent principles include equality of opportunity and equality of consideration, while equality of treatment and equality of outcome will also receive mention. In this chapter, management examples are brought to bear, to illustrate pertinent issues about equality and diversity, examples that are drawn from the Welsh independent school, the Cardiff Steiner School. These issues are found to be raised by or around its equality and diversity policy (itself comprising part of our case study), as well as its core collaborative management and unique pedagogical system. The underlying established values of the School are discussed in the case study, examining examples of the management of: the School's daily practices, the School's qualification and the School mandate structure, all of which illustrate the fundamental grounding of

### **Chapter 7**

*Sustainable Management Practices*

Available from: https://ophi.org. uk/policy/national-policy/grossnational-happiness-index/ [Accessed:

[72] Environment and Economics. European Commission [Internet]. Available from: http://ec.europa.eu/ environment/enveco/studies.htm

[73] Re-thinking Progress: The Circular Economy. Ellen Macarthur Foundation [Internet]. Available from: https:// www.ellenmacarthurfoundation.org/ circular-economy/concept [Accessed:

[74] Circular Economy: Implementation of the Circular Economy Action Plan [Internet]. European Commission; 2019. Available from: http://ec.europa. eu/environment/circular-economy/ index\_en.htm [Accessed: 2019-04-09]

[75] Jassim AK. Sustainable Solid Waste Recycling [Internet]. Available from: https://www.intechopen.com/books/ skills-development-for-sustainablemanufacturing/sustainable-solidwaste-recycling [Accessed: 2019-04- 09]. DOI: 10.5772/intechopen.70046

[76] Roca LC, Searcy C. An analysis of indicators disclosed in corporate sustainability reports. Journal of Cleaner Production. 2012;**20**:103-118

[77] de Villiers C, Rinaldi L, Unerman J. Integrated reporting: Insights, gaps and an agenda for future research. Accounting, Auditing & Accountability Journal. 2014;**27**(7):1042-1067. p. 1045. DOI: 10.1108/AAAJ-06-2014-1736

[Accessed: 2019-04-28]

2019-04-08]

2019-04-09]

**114**

## Principles of Equality: Managing Equality and Diversity in a Steiner School

*Robin Attfield and Kate Attfield*

### **Abstract**

Principles of equality are examined in the context of managing equality and diversity in practice. Our case study is the Cardiff Steiner School, an independent international school located in Wales, UK with educational values guided by the philosophers and educationalists Rudolf Steiner and Millicent Mackenzie. The sustainable management referred to and assessed in this chapter is the School's management structure and the related School pedagogical operation, with the founding Steiner value of human justice informing these. We argue that at this School the management of equality and diversity reflects theories of Diversity and Equality Management, with School managers aspiring to encourage respect for all. We appraise the philosophical and spiritual values of the founders in relation to equality and diversity, in order to demonstrate the visionary ideals of these philosophers and the extent to which their beliefs live on sustainably in contemporary society, and particularly in a Steiner education community.

**Keywords:** principles of equality, equality of consideration, Rudolf Steiner's philosophy of education, Millicent Mackenzie, Steiner school equality and diversity management practices

### **1. Introduction**

When people talk about 'the principle of equality' in the abstract, what they really mean depends on which version or variety of equality they have in mind. Indeed there is a whole array of different principles (see [1, 2]). Prominent principles include equality of opportunity and equality of consideration, while equality of treatment and equality of outcome will also receive mention. In this chapter, management examples are brought to bear, to illustrate pertinent issues about equality and diversity, examples that are drawn from the Welsh independent school, the Cardiff Steiner School. These issues are found to be raised by or around its equality and diversity policy (itself comprising part of our case study), as well as its core collaborative management and unique pedagogical system. The underlying established values of the School are discussed in the case study, examining examples of the management of: the School's daily practices, the School's qualification and the School mandate structure, all of which illustrate the fundamental grounding of these examples in equality and diversity.

We suggest that the selected principles of equality are worthy of discussion against an underlying Steiner philosophical education backdrop that both values innovative thinking and expresses such thinking itself. While not flawless (because some of Steiner's approach to teaching is considered outdated and unsuitable in today's terms), Steiner propounded the core value of mutual reverence between children and teachers in connection with a teaching and learning operation, and this can be explored in today's terms in relation to equality and diversity. Issues arising within the School community as well as issues of the wider society relating to equality and diversity illustrate and challenge the principles of equality mentioned above, principles, that is, of equality of opportunity, treatment, outcome and consideration.

Our methodology is interdisciplinary, comprising a blend of methods. These include philosophical analysis, used to sift principles of equality and related understandings of diversity, specification of some contextually relevant legislation, and a sociological case study of the application of relevant principles of Rudolf Steiner and Millicent Mackenzie in the Cardiff Steiner School, conducted through a review of sample School management structures and practices, supported by interviews in the form of informal personal communications. There is a literature from Diversity and Equality Management; we draw on this, and on principles of equality, stemming from the work of Peter Singer in this field [2], as well as the earlier work of Michael Young [3]. Out of the extensive literature on Steiner, relevant works are limited to those with a bearing on education and related principles, as opposed to his works in several other fields, including those of business and medicine. Little has been written about Millicent Mackenzie, but, as we shall argue, her work and characteristic stance as a Professor of (what later became) Cardiff University helped generate not only the existence but also the ethos of the Cardiff Steiner School. What has not been done previously is to bring together some widely recognised principles of equality and diversity with the philosophy of education of Rudolf Steiner and of Millicent Mackenzie, and with their concrete application in a particular school and its sustainable management. The research question we are addressing is whether a defensible principle of equality which at the same time provides appropriately for diversity can be successfully integrated into the management of a school, with positive educational outcomes. On this interdisciplinary undertaking, a blend of philosophy, sociology, and theories of education and management, we now embark.

### **2. The distinctive field and context of this research**

### **2.1 The case study**

We have selected a case study for our research in order to assess the management of equality and diversity in a single setting, and to examine principles of equality, and the principle of equality of consideration as the prevalent interpretation of equality in this instance. The Cardiff Steiner School is an 'exemplifying case' where particular research questions can be posed, and social processes identified and analysed [4]. The case study embodies the philosophical and educational values of Steiner and of Mackenzie in their seeming visionary views of reverence and educational autonomy and a complex bridging of the modern-day values of equality and diversity. We scrutinise the School equality and diversity policy, selected daily School practices, the School's qualification, and the management and leadership structure of the School, in accordance with the human resources management system of Diversity and Equality Management. The case in question is opportune

**117**

*Principles of Equality: Managing Equality and Diversity in a Steiner School*

in both its complexity, its particular nature and its locality. We do not claim that the case study is representative, but rather that some aspects are transferable to other cases; what can be seen as useful is the theory that emerges from our findings [5, 6].

Strategic human resources management theory has supported the implementation of DEM (Diversity and Equality Management) practice since the (American) Civil Rights Act 1964 [7]. Recent research argues that DEM, and so widened diversity, to some degree facilitates improved performance. Three recent examples of sustainable management research studies, those of Richard et al. [7], Konrad et al. [8] and Ali and Konrad [9], each assess a different social group of women, minority ethnic and disabled people, and the potential outcomes of diversity advancement. The three given reasons for DEM are compliance with legality, the gaining of symbolic acceptance, and the accelerating of organisational performance.

In our case, the legality aspect is significant, with the (UK) Equality Act, as well as Welsh Government regulations, needing to be complied with. The second element is symbolic legitimacy, i.e., the organisation's perceived emphasis on diversity to justify its purpose, which derives from the prevalent cultural values and knowledge of the relevant community. The third component is about exhibiting a diverse employee cohort, as representative of the customer base (in our case the local and international community). Here, diverse representation and its assumed empathy with the customer base enable productivity and innovation at a strategic level; this

Konrad et al. [8] examine how DEM is implemented, in accordance with one's own perceived organisational climate. They find a disconnection between theory and practice, where diversity strategies do not link to business aims. An example of the introduction of diversity into the workplace is gender mainstreaming. Lombardo and Meier [10] explain that where organisations are new, and where senior management is favourably disposed, gender mainstreaming is easier to initiate. De Boise [11] argues that gender mainstreaming has sometimes failed across Europe, when women are not appointed to decision-making positions where they can make a real impact; their (token) presence is not sufficient in generating such value. Richard et al. [7] similarly discuss the short-sightedness of a 'one size fits all' approach, and the lack of meaning in its implementation if token diversity is the extent of the programme. The management literature is considered as a point of reference throughout this chapter.

**2.3 The philosophy of education of Rudolf Steiner and of Millicent Mackenzie**

the Austrian philosopher and educator (1861–1925). The first Steiner School

The School's world-view is based on the far-sighted teachings of Rudolf Steiner,

(otherwise known as Waldorf School) was established in Germany in 1919. Steiner's ideas for education were founded on recognising the development of humankind (human individuals) according to his ideals of 'Liberty', one part of the 'Threefold Social Order' reinterpreted by Steiner in 1919. 'Liberty' meant the promotion of free-thinking culture, religion and education, 'Equality' would guide the equitable legal system, and 'Fraternity' would inform reciprocal economic life [12]. The three concepts diverge noticeably from one another, and more importantly from more modern conceptions of equality, and so it is his ideas for liberty in education that we focus on here. Steiner advocated the natural play and natural conceptual development of children, notions that remain different from those of mainstream State education. According to Steiner's philosophy, children develop within three distinct seven-year periods, hence the three stages of education, kindergarten

*DOI: http://dx.doi.org/10.5772/intechopen.86748*

is 'a business case for diversity' [7, 9].

**2.2 Literature**

in both its complexity, its particular nature and its locality. We do not claim that the case study is representative, but rather that some aspects are transferable to other cases; what can be seen as useful is the theory that emerges from our findings [5, 6].

### **2.2 Literature**

*Sustainable Management Practices*

management, we now embark.

**2.1 The case study**

**2. The distinctive field and context of this research**

We have selected a case study for our research in order to assess the management of equality and diversity in a single setting, and to examine principles of equality, and the principle of equality of consideration as the prevalent interpretation of equality in this instance. The Cardiff Steiner School is an 'exemplifying case' where particular research questions can be posed, and social processes identified and analysed [4]. The case study embodies the philosophical and educational values of Steiner and of Mackenzie in their seeming visionary views of reverence and educational autonomy and a complex bridging of the modern-day values of equality and diversity. We scrutinise the School equality and diversity policy, selected daily School practices, the School's qualification, and the management and leadership structure of the School, in accordance with the human resources management system of Diversity and Equality Management. The case in question is opportune

consideration.

We suggest that the selected principles of equality are worthy of discussion against an underlying Steiner philosophical education backdrop that both values innovative thinking and expresses such thinking itself. While not flawless (because some of Steiner's approach to teaching is considered outdated and unsuitable in today's terms), Steiner propounded the core value of mutual reverence between children and teachers in connection with a teaching and learning operation, and this can be explored in today's terms in relation to equality and diversity. Issues arising within the School community as well as issues of the wider society relating to equality and diversity illustrate and challenge the principles of equality mentioned above, principles, that is, of equality of opportunity, treatment, outcome and

Our methodology is interdisciplinary, comprising a blend of methods. These include philosophical analysis, used to sift principles of equality and related

understandings of diversity, specification of some contextually relevant legislation, and a sociological case study of the application of relevant principles of Rudolf Steiner and Millicent Mackenzie in the Cardiff Steiner School, conducted through a review of sample School management structures and practices, supported by interviews in the form of informal personal communications. There is a literature from Diversity and Equality Management; we draw on this, and on principles of equality, stemming from the work of Peter Singer in this field [2], as well as the earlier work of Michael Young [3]. Out of the extensive literature on Steiner, relevant works are limited to those with a bearing on education and related principles, as opposed to his works in several other fields, including those of business and medicine. Little has been written about Millicent Mackenzie, but, as we shall argue, her work and characteristic stance as a Professor of (what later became) Cardiff University helped generate not only the existence but also the ethos of the Cardiff Steiner School. What has not been done previously is to bring together some widely recognised principles of equality and diversity with the philosophy of education of Rudolf Steiner and of Millicent Mackenzie, and with their concrete application in a particular school and its sustainable management. The research question we are addressing is whether a defensible principle of equality which at the same time provides appropriately for diversity can be successfully integrated into the management of a school, with positive educational outcomes. On this interdisciplinary undertaking, a blend of philosophy, sociology, and theories of education and

**116**

Strategic human resources management theory has supported the implementation of DEM (Diversity and Equality Management) practice since the (American) Civil Rights Act 1964 [7]. Recent research argues that DEM, and so widened diversity, to some degree facilitates improved performance. Three recent examples of sustainable management research studies, those of Richard et al. [7], Konrad et al. [8] and Ali and Konrad [9], each assess a different social group of women, minority ethnic and disabled people, and the potential outcomes of diversity advancement. The three given reasons for DEM are compliance with legality, the gaining of symbolic acceptance, and the accelerating of organisational performance.

In our case, the legality aspect is significant, with the (UK) Equality Act, as well as Welsh Government regulations, needing to be complied with. The second element is symbolic legitimacy, i.e., the organisation's perceived emphasis on diversity to justify its purpose, which derives from the prevalent cultural values and knowledge of the relevant community. The third component is about exhibiting a diverse employee cohort, as representative of the customer base (in our case the local and international community). Here, diverse representation and its assumed empathy with the customer base enable productivity and innovation at a strategic level; this is 'a business case for diversity' [7, 9].

Konrad et al. [8] examine how DEM is implemented, in accordance with one's own perceived organisational climate. They find a disconnection between theory and practice, where diversity strategies do not link to business aims. An example of the introduction of diversity into the workplace is gender mainstreaming. Lombardo and Meier [10] explain that where organisations are new, and where senior management is favourably disposed, gender mainstreaming is easier to initiate. De Boise [11] argues that gender mainstreaming has sometimes failed across Europe, when women are not appointed to decision-making positions where they can make a real impact; their (token) presence is not sufficient in generating such value. Richard et al. [7] similarly discuss the short-sightedness of a 'one size fits all' approach, and the lack of meaning in its implementation if token diversity is the extent of the programme. The management literature is considered as a point of reference throughout this chapter.

### **2.3 The philosophy of education of Rudolf Steiner and of Millicent Mackenzie**

The School's world-view is based on the far-sighted teachings of Rudolf Steiner, the Austrian philosopher and educator (1861–1925). The first Steiner School (otherwise known as Waldorf School) was established in Germany in 1919. Steiner's ideas for education were founded on recognising the development of humankind (human individuals) according to his ideals of 'Liberty', one part of the 'Threefold Social Order' reinterpreted by Steiner in 1919. 'Liberty' meant the promotion of free-thinking culture, religion and education, 'Equality' would guide the equitable legal system, and 'Fraternity' would inform reciprocal economic life [12]. The three concepts diverge noticeably from one another, and more importantly from more modern conceptions of equality, and so it is his ideas for liberty in education that we focus on here. Steiner advocated the natural play and natural conceptual development of children, notions that remain different from those of mainstream State education. According to Steiner's philosophy, children develop within three distinct seven-year periods, hence the three stages of education, kindergarten

(willing through imitation), lower school (feeling through imagination) and upper school (thinking through authority) [13]. For Steiner, learning was fundamentally linked to dignity and respect; it involved inviting children to learn as individuals, and encouraging their maturing emotional and intellectual development through creativity [14]. The high regard and value given by teachers to learners (as well as to their colleagues) can be seen in modern terms as an interpretation of a type of just treatment. This will be explored in depth below.

In 1904, Millicent Mackenzie (1863–1942) became the first woman to be appointed Professor in England and Wales, at Cardiff University. She was another philosopher and educator, and in addition established the regional Suffragettes of Cardiff, and the University Settlement of Cardiff. Mackenzie asserted values of the meaningful equal worth of human beings, particularly in relation to women, and to children. She can be seen as another visionary thinker of her time [15]. It was because Mackenzie directly responded to Steiner's entreaty for the chance to trial his educational philosophy, that Steiner education became established first in the UK, and thereafter worldwide. She invited him to an education conference in 1922 in Oxford, and consequently the second Steiner school anywhere was founded in 1925 [16]. Again, her values and campaigns are explored later in the chapter.

Mackenzie was neither messenger nor administrative facilitator; she was a visionary educationalist with independent values which complemented those of Steiner. She believed in freedom in education for children; in creativity and in recognising their developing autonomy, based on their wider sense of spiritual awareness. Her underlying value was of meaningful equality and deference towards children [17]. We discuss Mackenzie's significance partly because in parallel to other academic disciplines, women have sometimes been 'omitted' from history, which has to some degree been the case here; only through searching through records has Mackenzie's input now come to light. This is arguably illustrative of the prevalent systemic sexism of which we are a part [18]. Mackenzie asserted her influential support for Steiner's educative ideals, and wished to help him in his determined request for establishing Steiner education, externally to the then single existing school of its kind [16].

### **2.4 Welsh statutory education policies**

While Steiner principles of reverence are core to Steiner education, both Welsh and British legislation and values underlying statutory education policies also inform the management and operation of Steiner Schools in these countries. This is also in accordance with the first reason for DEM systems; the school in question is seen to consider legal duties and guidance carefully [30]. The Independent Schools Standards (Wales) Regulations (2003) lays out clear statutory obligations, and the Independent Schools Registration and Operation Guidance (2014) and the Special Educational Needs Code of Practice for Wales (2004) provide guidance which the School elects to follow. The ESTYN Inspectorate is the Welsh schools' inspecting body that scrutinises 'standards, wellbeing and attitudes to learning, teaching and learning experiences, care, support and guidance, and leadership and management' against the obligations of quality and standards of an independent Welsh school [19].

### **3. Principles of equality and diversity**

### **3.1 The principle of equality of opportunity**

The equality and diversity policy refers to the conceptually limited and older principle that is widely being superseded, that of equality of opportunity.

**119**

(see above).

*Principles of Equality: Managing Equality and Diversity in a Steiner School*

This principle rejects discrimination between applicants for jobs or for entrance to schools and universities, except on relevant grounds such as merit. The principle of equality of opportunity might be seen as exemplified in procedures such as the selective 11 plus examination system, which used to be regarded (and is still often regarded) as providing equal access to Grammar School education to all who undergo this test. This test was believed to offer equal opportunities to all applicants, regardless of gender, class or religion, but in fact at least one of its components, the IQ test, has turned out to favour candidates from middle-class families because it is to some degree a test of middle-class knowledge. In his *Theory of Justice* Rawls [1] talks about 'fair equality of opportunity', and may be interpreted as supporting theoretically egalitarian procedures of this kind. However, this principle was much earlier rejected by Michael Young [3] as liable to generate a radically divided society, which he called 'the meritocracy', a society divided between people whose advancement was due to their socially recognised 'merit' on the basis of employment of the Principle of Equality of Opportunity, and the rest of society, left

UK employment law nevertheless requires recognition of this value in public organisations, allowing, for example, any applicant to apply for a post in a public authority. But, as we would argue, the successful applicant would often have a class advantage involving 'cultural capital'; they may have an advantaged understanding of the value of education, appropriate command of language, easier access to the education system, private funding opportunities, and/or established social networks [20]. In order to demonstrate compliance, organisations have, since the 1980s, adopted 'equal opportunity policies' (and many still have such policies), with, for example, the development of anti-discriminatory awareness and the

'Equal opportunities' policies in public organisations have remained in place; this has shielded these organisations in law in terms of their demonstrating their prevention of unlawful discrimination. But arguably no more ambitious interpretation of 'equality' was generally propounded, introduced or achieved either in this legislation or in the resulting practices. Despite welcoming its rejection of overt discrimination, following Young [3] and Singer [2] we regard the Principle of Equality of Opportunity as inadequate, for the reasons given in this section, and also as failing to facilitate the kinds of equality favoured by Steiner and Mackenzie

In absolute contrast, the Principle of Equality of Outcome aims at a levelling up or down of any population to which it is applied, such that those affected end up with equal achievements. But this Principle pays insufficient account to differences of inheritance, environment, culture and need, and thus to diversity. (When it is claimed that principles of equality and diversity are liable to conflict, this is the kind of principle of equality that lends this claim credibility.) In the context of the Cardiff Steiner School, this Principle might, for example, involve the adoption of a goal that all higher aged pupils achieve the same end qualification; but this would not be a useful or meaningful principle to be applied within the School, and would in fact diminish the strength and value of the end qualification, for which there is no desire. It would also counter the need for differentiation within class teaching and learner understanding at all levels, and could instead mean students being given the solutions to problems, rather than letting them learn at their own pace. This principle is therefore inappropriate in this context as it does not allow for the

value of individual achievement, and also could not be applied in practice.

*DOI: http://dx.doi.org/10.5772/intechopen.86748*

with no basis to complain about their powerlessness.

appearance of morally approved values, current at that time.

**3.2 The principle of equality of outcome**

### *Principles of Equality: Managing Equality and Diversity in a Steiner School DOI: http://dx.doi.org/10.5772/intechopen.86748*

*Sustainable Management Practices*

treatment. This will be explored in depth below.

**2.4 Welsh statutory education policies**

**3. Principles of equality and diversity**

**3.1 The principle of equality of opportunity**

(willing through imitation), lower school (feeling through imagination) and upper school (thinking through authority) [13]. For Steiner, learning was fundamentally linked to dignity and respect; it involved inviting children to learn as individuals, and encouraging their maturing emotional and intellectual development through creativity [14]. The high regard and value given by teachers to learners (as well as to their colleagues) can be seen in modern terms as an interpretation of a type of just

In 1904, Millicent Mackenzie (1863–1942) became the first woman to be appointed Professor in England and Wales, at Cardiff University. She was another philosopher and educator, and in addition established the regional Suffragettes of Cardiff, and the University Settlement of Cardiff. Mackenzie asserted values of the meaningful equal worth of human beings, particularly in relation to women, and to children. She can be seen as another visionary thinker of her time [15]. It was because Mackenzie directly responded to Steiner's entreaty for the chance to trial his educational philosophy, that Steiner education became established first in the UK, and thereafter worldwide. She invited him to an education conference in 1922 in Oxford, and consequently the second Steiner school anywhere was founded in 1925

[16]. Again, her values and campaigns are explored later in the chapter.

Mackenzie was neither messenger nor administrative facilitator; she was a visionary educationalist with independent values which complemented those of Steiner. She believed in freedom in education for children; in creativity and in recognising their developing autonomy, based on their wider sense of spiritual awareness. Her underlying value was of meaningful equality and deference towards children [17]. We discuss Mackenzie's significance partly because in parallel to other academic disciplines, women have sometimes been 'omitted' from history, which has to some degree been the case here; only through searching through records has Mackenzie's input now come to light. This is arguably illustrative of the prevalent systemic sexism of which we are a part [18]. Mackenzie asserted her influential support for Steiner's educative ideals, and wished to help him in his determined request for establishing Steiner education, externally to the then single existing school of its kind [16].

While Steiner principles of reverence are core to Steiner education, both Welsh

and British legislation and values underlying statutory education policies also inform the management and operation of Steiner Schools in these countries. This is also in accordance with the first reason for DEM systems; the school in question is seen to consider legal duties and guidance carefully [30]. The Independent Schools Standards (Wales) Regulations (2003) lays out clear statutory obligations, and the Independent Schools Registration and Operation Guidance (2014) and the Special Educational Needs Code of Practice for Wales (2004) provide guidance which the School elects to follow. The ESTYN Inspectorate is the Welsh schools' inspecting body that scrutinises 'standards, wellbeing and attitudes to learning, teaching and learning experiences, care, support and guidance, and leadership and management' against the obligations of quality and standards of an independent Welsh school [19].

The equality and diversity policy refers to the conceptually limited and older principle that is widely being superseded, that of equality of opportunity.

**118**

This principle rejects discrimination between applicants for jobs or for entrance to schools and universities, except on relevant grounds such as merit. The principle of equality of opportunity might be seen as exemplified in procedures such as the selective 11 plus examination system, which used to be regarded (and is still often regarded) as providing equal access to Grammar School education to all who undergo this test. This test was believed to offer equal opportunities to all applicants, regardless of gender, class or religion, but in fact at least one of its components, the IQ test, has turned out to favour candidates from middle-class families because it is to some degree a test of middle-class knowledge. In his *Theory of Justice* Rawls [1] talks about 'fair equality of opportunity', and may be interpreted as supporting theoretically egalitarian procedures of this kind. However, this principle was much earlier rejected by Michael Young [3] as liable to generate a radically divided society, which he called 'the meritocracy', a society divided between people whose advancement was due to their socially recognised 'merit' on the basis of employment of the Principle of Equality of Opportunity, and the rest of society, left with no basis to complain about their powerlessness.

UK employment law nevertheless requires recognition of this value in public organisations, allowing, for example, any applicant to apply for a post in a public authority. But, as we would argue, the successful applicant would often have a class advantage involving 'cultural capital'; they may have an advantaged understanding of the value of education, appropriate command of language, easier access to the education system, private funding opportunities, and/or established social networks [20]. In order to demonstrate compliance, organisations have, since the 1980s, adopted 'equal opportunity policies' (and many still have such policies), with, for example, the development of anti-discriminatory awareness and the appearance of morally approved values, current at that time.

'Equal opportunities' policies in public organisations have remained in place; this has shielded these organisations in law in terms of their demonstrating their prevention of unlawful discrimination. But arguably no more ambitious interpretation of 'equality' was generally propounded, introduced or achieved either in this legislation or in the resulting practices. Despite welcoming its rejection of overt discrimination, following Young [3] and Singer [2] we regard the Principle of Equality of Opportunity as inadequate, for the reasons given in this section, and also as failing to facilitate the kinds of equality favoured by Steiner and Mackenzie (see above).

### **3.2 The principle of equality of outcome**

In absolute contrast, the Principle of Equality of Outcome aims at a levelling up or down of any population to which it is applied, such that those affected end up with equal achievements. But this Principle pays insufficient account to differences of inheritance, environment, culture and need, and thus to diversity. (When it is claimed that principles of equality and diversity are liable to conflict, this is the kind of principle of equality that lends this claim credibility.) In the context of the Cardiff Steiner School, this Principle might, for example, involve the adoption of a goal that all higher aged pupils achieve the same end qualification; but this would not be a useful or meaningful principle to be applied within the School, and would in fact diminish the strength and value of the end qualification, for which there is no desire. It would also counter the need for differentiation within class teaching and learner understanding at all levels, and could instead mean students being given the solutions to problems, rather than letting them learn at their own pace. This principle is therefore inappropriate in this context as it does not allow for the value of individual achievement, and also could not be applied in practice.

### **3.3 The principle of equality of treatment**

A lesser-rated rung on the equality ladder according to Singer [2], but perhaps more applicable principle of equality here, is the Principle of Equality of Treatment. This Principle requires for example pupils to be treated equally, receiving, for example, the same teaching and the same provisions, despite their differences of ability, aptitude and need. (This is another principle of equality which conflicts with respect for diversity.) There have sometimes been salutary motivations for adherence to this principle, such as a wish to avoid deference to some people because of the status into which they have been born, and relative contempt for others because of their lowlier status. But differential treatment grounded in irrelevant differences can be avoided without all differences being ignored; and respect for all, far from implying becoming blind to differences, frequently involves taking differences into account, and responding accordingly. Steiner's advocacy of equal 'reverence' for all implies just such sensitivity to different abilities, aptitudes and needs, and thus a principle of respecting diversity of ability, aptitude and need, rather than one of equality of treatment.

The UK Government's Equality Act 2010 became law, with the introduction of 'protected characteristics', that is, nine types of social groups eligible for legal protection in practice. The School Policy accordingly includes these categories. There is no mention of the principle or practice of equality of treatment in this legislation or other related legal guidance, and maybe this is why numerous public organisations continue to use the language of 'equal opportunities', even though they now have to incorporate the protected characteristics in their operation in a proactive sense. It may be that there remains a limited conceptual understanding of affording disadvantaged groups particular attention in terms of prohibiting discriminatory conduct, and their being offered equal access accordingly.

### **3.4 The principle of equality of consideration**

Steiner's stance was later well articulated by the more recent philosopher, Peter Singer. As mentioned earlier, Singer [2] divided principles of equality into distinct and precise varieties. The principle that largely supersedes that of equality of opportunity, and also of equality of treatment, according to what may be regarded as a broader interpretation of fairness, is the Principle of Equality of Consideration. In philosophical terms, this principle involves 'giving equal weight in our moral deliberations to the like interests of those affected by our actions' ([2], p. 21). Since greater weight attaches to unsatisfied basic needs, such needs are prioritised over, for example, desires not corresponding to needs of this kind [21]. This principle, like the Principle of Equality of Opportunity, rejects discrimination on the basis of race, class or gender, but goes importantly beyond it in seeking to give equal consideration to those who, even if they theoretically enjoy equal opportunities, have very different needs, which are often unsatisfied. The Principle of Equality of Consideration well reflects the stances of Steiner and Mackenzie, embodies provision for respecting diversity, and incorporates the features that give their attractiveness to principles of equality, without preventing appropriate respect for otherness. This Principle overcomes the defects of the Principles of Equality of Opportunity, Treatment and Outcome, objections to which (as presented above) thus count as arguments in its favour. At the same time it captures the widespread intuitive endorsement of fairness, honoured across most if not all societies, without being tainted with arbitrary forms of discrimination such as those based on status, class, wealth, caste or gender. As such it should, we suggest, itself be endorsed.

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*Principles of Equality: Managing Equality and Diversity in a Steiner School*

Examples of the application of this principle include the establishment of the Paralympic Games. Games reflecting merely equality of opportunity would almost inevitably see disabled athletes unable to benefit from the theoretical ability to compete on an equal basis with able-bodied athletes [22]. But consideration of the needs of disabled athletes has led to Games in which people with disabilities can compete on an equal footing with others who have comparable disabilities. The institution of Paralympic Games has vindicated the stated values of the Games of 'Determination, Inspiration, Courage and Equality'; and the kind of equality in question can reason-

This example also bears out how proper provision can be made for diversity without adoption of relativism. To adopt a relativism of perspectives in a would-be attempt to uphold recognition of diversity would in fact simultaneously imply the lack of a basis for recognition of diversity from all other perspectives (i.e., other than those which distinctively honour relevant kinds of diversity), and thus the complete absence of any *universal* basis for respecting diversity. But the kind of respect for diversity displayed in the Paralympic Games is based on acceptance of the principle of equality of consideration, which itself implies respect for diversity, and can be regarded as a universalistic principle, acceptable both to the able-bodied and the disabled, and to majorities and minorities alike, irrespective of divergences

**3.5 Welsh government requirements and the principle of equality of** 

The Welsh Government may have intended the values of the Principle of Equality of Consideration in its advisory Special Educational Needs Code of Practice for Wales (2004). This arguably goes further than the Equality Act in addressing individuals and allowing them to perform according to a platform of policies to attain equal learning achievements based on students' own merit. This addresses four pre-identified pupil categories: 'More Able and Talented', 'Additional Learning Needs', 'English as an Additional Language', and 'Looked After Children'. Relatedly the School policy states '*The philosophical principle of equality of consideration is adopted by the School. This takes into account all people's types of need. People are encouraged and supported to fulfil the capacities and potential that they have*'. The Policy, in line with the School Access Plan, reminds the School of its obligation positively to consider the requirements of any child with a disability to access all areas of the School that children without a disability can access. This section of the Policy, required by the Independent Schools Registration and Operation Guidance (2014), allows independent schools the chance to gradually improve upon ease of access to physical entrances and the accessibility of the curriculum. The School has in fact attempted to counter an individualised model of disability, and rather, recognise disability as a socio-political issue, where the provider is responsible for implementing plans of modern designs for wide and easy access for all, such as building ramps for all access points [23]). The UK Equality Act's protection of the protected characteristics could be seen to be somewhat selective and exclusionary, in that there remain certain groups with social characteristics that are neither mentioned nor protected. This could be seen to allow such groups to be discriminated against (for example, larger people). Hence the Act may not fully take into account the Principle of Equality of Consideration, despite making considerable progress towards honouring it. Because of its encouragement of tolerance, and fostering of independently held positive values, the Policy goes further than the Equality Act in aiming to achieve equality of consideration, and in observing some groups who remain legally unprotected, where it states: '*In addition, the School will seek to* 

*DOI: http://dx.doi.org/10.5772/intechopen.86748*

ably be interpreted as Equality of Consideration.

of perspective.

**consideration**

### *Principles of Equality: Managing Equality and Diversity in a Steiner School DOI: http://dx.doi.org/10.5772/intechopen.86748*

*Sustainable Management Practices*

equality of treatment.

**3.3 The principle of equality of treatment**

A lesser-rated rung on the equality ladder according to Singer [2], but perhaps more applicable principle of equality here, is the Principle of Equality of Treatment. This Principle requires for example pupils to be treated equally, receiving, for example, the same teaching and the same provisions, despite their differences of ability, aptitude and need. (This is another principle of equality which conflicts with respect for diversity.) There have sometimes been salutary motivations for adherence to this principle, such as a wish to avoid deference to some people because of the status into which they have been born, and relative contempt for others because of their lowlier status. But differential treatment grounded in irrelevant differences can be avoided without all differences being ignored; and respect for all, far from implying becoming blind to differences, frequently involves taking differences into account, and responding accordingly. Steiner's advocacy of equal 'reverence' for all implies just such sensitivity to different abilities, aptitudes and needs, and thus a principle of respecting diversity of ability, aptitude and need, rather than one of

The UK Government's Equality Act 2010 became law, with the introduction of 'protected characteristics', that is, nine types of social groups eligible for legal protection in practice. The School Policy accordingly includes these categories. There is no mention of the principle or practice of equality of treatment in this legislation or other related legal guidance, and maybe this is why numerous public organisations continue to use the language of 'equal opportunities', even though they now have to incorporate the protected characteristics in their operation in a proactive sense. It may be that there remains a limited conceptual understanding of affording disadvantaged groups particular attention in terms of prohibiting discriminatory

Steiner's stance was later well articulated by the more recent philosopher, Peter Singer. As mentioned earlier, Singer [2] divided principles of equality into distinct and precise varieties. The principle that largely supersedes that of equality of opportunity, and also of equality of treatment, according to what may be regarded as a broader interpretation of fairness, is the Principle of Equality of Consideration. In philosophical terms, this principle involves 'giving equal weight in our moral deliberations to the like interests of those affected by our actions' ([2], p. 21). Since greater weight attaches to unsatisfied basic needs, such needs are prioritised over, for example, desires not corresponding to needs of this kind [21]. This principle, like the Principle of Equality of Opportunity, rejects discrimination on the basis of race, class or gender, but goes importantly beyond it in seeking to give equal consideration to those who, even if they theoretically enjoy equal opportunities, have very different needs, which are often unsatisfied. The Principle of Equality of Consideration well reflects the stances of Steiner and Mackenzie, embodies provision for respecting diversity, and incorporates the features that give their attractiveness to principles of equality, without preventing appropriate respect for otherness. This Principle overcomes the defects of the Principles of Equality of Opportunity, Treatment and Outcome, objections to which (as presented above) thus count as arguments in its favour. At the same time it captures the widespread intuitive endorsement of fairness, honoured across most if not all societies, without being tainted with arbitrary forms of discrimination such as those based on status, class, wealth, caste or gender. As such it should,

conduct, and their being offered equal access accordingly.

**3.4 The principle of equality of consideration**

**120**

we suggest, itself be endorsed.

Examples of the application of this principle include the establishment of the Paralympic Games. Games reflecting merely equality of opportunity would almost inevitably see disabled athletes unable to benefit from the theoretical ability to compete on an equal basis with able-bodied athletes [22]. But consideration of the needs of disabled athletes has led to Games in which people with disabilities can compete on an equal footing with others who have comparable disabilities. The institution of Paralympic Games has vindicated the stated values of the Games of 'Determination, Inspiration, Courage and Equality'; and the kind of equality in question can reasonably be interpreted as Equality of Consideration.

This example also bears out how proper provision can be made for diversity without adoption of relativism. To adopt a relativism of perspectives in a would-be attempt to uphold recognition of diversity would in fact simultaneously imply the lack of a basis for recognition of diversity from all other perspectives (i.e., other than those which distinctively honour relevant kinds of diversity), and thus the complete absence of any *universal* basis for respecting diversity. But the kind of respect for diversity displayed in the Paralympic Games is based on acceptance of the principle of equality of consideration, which itself implies respect for diversity, and can be regarded as a universalistic principle, acceptable both to the able-bodied and the disabled, and to majorities and minorities alike, irrespective of divergences of perspective.

### **3.5 Welsh government requirements and the principle of equality of consideration**

The Welsh Government may have intended the values of the Principle of Equality of Consideration in its advisory Special Educational Needs Code of Practice for Wales (2004). This arguably goes further than the Equality Act in addressing individuals and allowing them to perform according to a platform of policies to attain equal learning achievements based on students' own merit. This addresses four pre-identified pupil categories: 'More Able and Talented', 'Additional Learning Needs', 'English as an Additional Language', and 'Looked After Children'. Relatedly the School policy states '*The philosophical principle of equality of consideration is adopted by the School. This takes into account all people's types of need. People are encouraged and supported to fulfil the capacities and potential that they have*'. The Policy, in line with the School Access Plan, reminds the School of its obligation positively to consider the requirements of any child with a disability to access all areas of the School that children without a disability can access. This section of the Policy, required by the Independent Schools Registration and Operation Guidance (2014), allows independent schools the chance to gradually improve upon ease of access to physical entrances and the accessibility of the curriculum. The School has in fact attempted to counter an individualised model of disability, and rather, recognise disability as a socio-political issue, where the provider is responsible for implementing plans of modern designs for wide and easy access for all, such as building ramps for all access points [23]). The UK Equality Act's protection of the protected characteristics could be seen to be somewhat selective and exclusionary, in that there remain certain groups with social characteristics that are neither mentioned nor protected. This could be seen to allow such groups to be discriminated against (for example, larger people). Hence the Act may not fully take into account the Principle of Equality of Consideration, despite making considerable progress towards honouring it. Because of its encouragement of tolerance, and fostering of independently held positive values, the Policy goes further than the Equality Act in aiming to achieve equality of consideration, and in observing some groups who remain legally unprotected, where it states: '*In addition, the School will seek to* 

*prevent prejudice and discrimination on the grounds of the socio-economic class, size and appearance of School members*'. The aim is to ensure that no negative discrimination will be tolerated by anyone in the School in any capacity; this concern also reflects a parallel, if localised, aim to address and challenge the hierarchical, negative assumptions one may make, however inadvertently, when occupying a position of advantage.

A pertinent example is the socio-economic class position that people who attend a Steiner school normally have. The presence of working-class members is moderately unusual, partly because as an independent charitable organisation, the School remains inaccessible to many, despite the existence of School bursaries. If such working-class members have different apparent material values and general use of language, then they could be visibly conspicuous in their difference. For members of a Steiner community, who may assume equal valuation of and respect towards others, this could serve as a useful test, to challenge their implicit assumptions about what is 'admissible', and whether in fact they fall into a hierarchical trap of assuming a sense of superiority in some aspects of social life.

In terms of '*the School (seeking) to prevent prejudice and discrimination on the grounds of … size and appearance of School members*,' another envisageable example within the community could be that of heterosexual couples where the woman is taller than the man. This situation challenges Westernised established stereotypes of the 'romantic ideal', where men are the physically, mentally and perhaps even intellectually strong 'masculine' partner, where they hold responsibility and ownership on behalf of women, that is, they follow the normative part of hegemonic masculinity [24]. Accordingly, women should, in contrasting parity be slim, pretty, emotional, vulnerable and 'feminine', and follow the normative role of subservient femininity.

These concepts can be seen to have justified centuries of division of labour between women and men, at least since Aristotle in ancient Athens onwards and more recently on the part of founder sociologist Harriet Martineau 1802–1876, for example, where she wrote about the 'political non-existence of women' [25], and educationalist and philosopher Millicent Mackenzie. Thomas [15] summarises Mackenzie's clear observation of institutional sexism justified by patriarchal society of the early 1900s. We may assume we have moved away from these antiquated notions, and yet the lingering norm is perhaps that males 'ought to be' taller or at least the same height as their female spouses in order to uphold 'normality'. Here we may be forced to reflect on our own prejudices that we apply to ourselves and others who surround us [26].

Another example of the importance of the equality of consideration is where people are respected as equally valid and 'normal' in a changing society, and recognised according to their own reality. As an example, Halberstam [27, 28] writes about the 'normal behaviour' of masculinity, and that rather than some lesbian women impersonating this, a trait of 'female maleness' is a valid and established identity. Cultural normative values behind the established understanding of fixed trait identities are perceived by some minority groups to be 'identity fictions', that is, at odds with user groups' own interpretations of fluctuating, and more complex, modernised identities. The School community is familiar with same gender parents; they are to an extent an understandable norm, and also have legal protection. This is possibly less judged as it is increasingly understood, as pioneers pave the way for establishing normalities.

### **3.6 The principle of equality of treatment and 'colour blindness'**

A further undesirable example in relation to the principle of equality of treatment could be found in the form of a 'colour-blind approach' where for example

**123**

*Principles of Equality: Managing Equality and Diversity in a Steiner School*

black recipients used to be treated as if they were white recipients in normalising a community existence according to the white majority, and in treating people all the same. Ignoring racial difference may have prohibited directly racist conduct, but failed to recognise individual identities, or to value minority ethnic difference [29]. Richard et al. [7] argue that organisations implementing DEM practices should not make the mistake of ensuring that 'one size fits all'; organisations ought to differentiate between minority social characteristics, rather than assuming that having one type of minority representation allows an organisational claim of 'diversity'. The opposite to a 'colour-blind' approach is multiculturalism [30]: the proactive recognition and addressing of the diverse nature of society, together with an expectation of meaningful access and citizenship for all. This means that in this sense, one could propose that the opposite of equality of treatment here is the meaningful recognition and addressing of *diversity*, where rather than not being treated unfavourably, one receives positive recognition for being different. The Policy states … '*Difference and diversity are valued …. Where a child has diverse 'protected characteristics', as well as aspects outside of the Equality Act, such as certain food requirements, these will be accepted, and children and students will be individually respected accordingly*'*.*

A current interpretation of Diversity questions 'objectivised' established knowledge, and recognises that many assumptions are subjectively formed according to established and changing cultural values. An example of some of society's failure to recognise the subjectivity of societal 'facts' is that, before 1968, being gay in the UK was criminal, according to law. In 1968 when the DSM-II (the American classification of mental disorders) defined being gay as a mental illness, it *ceased* to be criminal behaviour in the West, and *became* a mental disorder for 19 years. Then in 1987, homosexuality was removed from the DSM-II, although in 1988 the Thatcher Conservative Government introduced Section 28 of the Local Government Act stating that a local authority 'shall not … promote the teaching in any state school of the acceptability of homosexuality as a pretended family relationship'. In direct response to this, also in 1988, Stonewall was established in the UK, a prominent gay

Significantly in 1988, while the UK was seen to have taken a step backwards, Denmark became the first country in the world to give legal recognition to samegender partnerships. The UK eventually followed from 1997, first with same-gender partners being recognised in relation to immigration. These examples illustrate the extent of normative values changing according to prominent tolerances, and not necessarily progressively or supportively towards the minority in question. However in accordance with the UK Equality Act 2010, diversity is recognised and protected, and society has partially followed suit and in particular within the School

In parallel, in 2002, the UK Government recognised that 'transsexuality' was not a mental disorder, whereas prior to this it had been assumed to be. In the same way, issues such as those surrounding transgender people challenge society's thinking further. Hines [31] found that many general practitioners still believe that *being* transgender is to have mental ill-health. The protected characteristic 'gender reassignment' has brought this group of people into the mainstream, by the legalising of their protection; yet 'gender fluidity' is not a protected status. Lobby group and UK campaign charity 'Gendered Intelligence' established in 2008 went some way towards the societal understanding of the notion of gender diversity. Arguably however, we have to think very differently nowadays, if we are to accept that gender can fluctuate. Respecting difference meaningfully means not being unnerved when

*DOI: http://dx.doi.org/10.5772/intechopen.86748*

**3.7 Diversity**

rights campaigning body.

community in question.

### *Principles of Equality: Managing Equality and Diversity in a Steiner School DOI: http://dx.doi.org/10.5772/intechopen.86748*

black recipients used to be treated as if they were white recipients in normalising a community existence according to the white majority, and in treating people all the same. Ignoring racial difference may have prohibited directly racist conduct, but failed to recognise individual identities, or to value minority ethnic difference [29]. Richard et al. [7] argue that organisations implementing DEM practices should not make the mistake of ensuring that 'one size fits all'; organisations ought to differentiate between minority social characteristics, rather than assuming that having one type of minority representation allows an organisational claim of 'diversity'. The opposite to a 'colour-blind' approach is multiculturalism [30]: the proactive recognition and addressing of the diverse nature of society, together with an expectation of meaningful access and citizenship for all. This means that in this sense, one could propose that the opposite of equality of treatment here is the meaningful recognition and addressing of *diversity*, where rather than not being treated unfavourably, one receives positive recognition for being different. The Policy states … '*Difference and diversity are valued …. Where a child has diverse 'protected characteristics', as well as aspects outside of the Equality Act, such as certain food requirements, these will be accepted, and children and students will be individually respected accordingly*'*.*

### **3.7 Diversity**

*Sustainable Management Practices*

advantage.

*prevent prejudice and discrimination on the grounds of the socio-economic class, size and appearance of School members*'. The aim is to ensure that no negative discrimination will be tolerated by anyone in the School in any capacity; this concern also reflects a parallel, if localised, aim to address and challenge the hierarchical, negative assumptions one may make, however inadvertently, when occupying a position of

A pertinent example is the socio-economic class position that people who attend a Steiner school normally have. The presence of working-class members is moderately unusual, partly because as an independent charitable organisation, the School remains inaccessible to many, despite the existence of School bursaries. If such working-class members have different apparent material values and general use of language, then they could be visibly conspicuous in their difference. For members of a Steiner community, who may assume equal valuation of and respect towards others, this could serve as a useful test, to challenge their implicit assumptions about what is 'admissible', and whether in fact they fall into a hierarchical trap of

In terms of '*the School (seeking) to prevent prejudice and discrimination on the grounds of … size and appearance of School members*,' another envisageable example within the community could be that of heterosexual couples where the woman is taller than the man. This situation challenges Westernised established stereotypes of the 'romantic ideal', where men are the physically, mentally and perhaps even intellectually strong 'masculine' partner, where they hold responsibility and ownership on behalf of women, that is, they follow the normative part of hegemonic masculinity [24]. Accordingly, women should, in contrasting parity be slim, pretty, emotional, vulnerable and 'feminine', and follow the normative role of subservient femininity. These concepts can be seen to have justified centuries of division of labour between women and men, at least since Aristotle in ancient Athens onwards and more recently on the part of founder sociologist Harriet Martineau 1802–1876, for example, where she wrote about the 'political non-existence of women' [25], and educationalist and philosopher Millicent Mackenzie. Thomas [15] summarises Mackenzie's clear observation of institutional sexism justified by patriarchal society of the early 1900s. We may assume we have moved away from these antiquated notions, and yet the lingering norm is perhaps that males 'ought to be' taller or at least the same height as their female spouses in order to uphold 'normality'. Here we may be forced to reflect on our own prejudices that we apply to ourselves and others

Another example of the importance of the equality of consideration is where people are respected as equally valid and 'normal' in a changing society, and

recognised according to their own reality. As an example, Halberstam [27, 28] writes about the 'normal behaviour' of masculinity, and that rather than some lesbian women impersonating this, a trait of 'female maleness' is a valid and established identity. Cultural normative values behind the established understanding of fixed trait identities are perceived by some minority groups to be 'identity fictions', that is, at odds with user groups' own interpretations of fluctuating, and more complex, modernised identities. The School community is familiar with same gender parents; they are to an extent an understandable norm, and also have legal protection. This is possibly less judged as it is increasingly understood, as pioneers pave the way for

A further undesirable example in relation to the principle of equality of treatment could be found in the form of a 'colour-blind approach' where for example

**3.6 The principle of equality of treatment and 'colour blindness'**

assuming a sense of superiority in some aspects of social life.

**122**

who surround us [26].

establishing normalities.

A current interpretation of Diversity questions 'objectivised' established knowledge, and recognises that many assumptions are subjectively formed according to established and changing cultural values. An example of some of society's failure to recognise the subjectivity of societal 'facts' is that, before 1968, being gay in the UK was criminal, according to law. In 1968 when the DSM-II (the American classification of mental disorders) defined being gay as a mental illness, it *ceased* to be criminal behaviour in the West, and *became* a mental disorder for 19 years. Then in 1987, homosexuality was removed from the DSM-II, although in 1988 the Thatcher Conservative Government introduced Section 28 of the Local Government Act stating that a local authority 'shall not … promote the teaching in any state school of the acceptability of homosexuality as a pretended family relationship'. In direct response to this, also in 1988, Stonewall was established in the UK, a prominent gay rights campaigning body.

Significantly in 1988, while the UK was seen to have taken a step backwards, Denmark became the first country in the world to give legal recognition to samegender partnerships. The UK eventually followed from 1997, first with same-gender partners being recognised in relation to immigration. These examples illustrate the extent of normative values changing according to prominent tolerances, and not necessarily progressively or supportively towards the minority in question. However in accordance with the UK Equality Act 2010, diversity is recognised and protected, and society has partially followed suit and in particular within the School community in question.

In parallel, in 2002, the UK Government recognised that 'transsexuality' was not a mental disorder, whereas prior to this it had been assumed to be. In the same way, issues such as those surrounding transgender people challenge society's thinking further. Hines [31] found that many general practitioners still believe that *being* transgender is to have mental ill-health. The protected characteristic 'gender reassignment' has brought this group of people into the mainstream, by the legalising of their protection; yet 'gender fluidity' is not a protected status. Lobby group and UK campaign charity 'Gendered Intelligence' established in 2008 went some way towards the societal understanding of the notion of gender diversity. Arguably however, we have to think very differently nowadays, if we are to accept that gender can fluctuate. Respecting difference meaningfully means not being unnerved when

we cannot tell if someone is female or male, or if we believe them to be a different gender from the one they are portraying, and that it no longer matters.

Accordingly the School encourages the use of 'they' and 'them' as gender neutral terms across written and verbal communication, and pupils are referred to as 'child', or 'student' upon entering class six [23]. And the Policy states '*The protected characteristic of 'gender reassignment' is understood and respected. This policy extends its protection and respect to members of the community with a fluctuating or fluid gender, where one's gender identity shifts, and is not fixed*'. This is a pertinent example of a newly known minority group in the focus of public attention, that until recently may have been the topic of derision. Society may be slowly realising that this minority group has an equally valid and rational identity to others, and therefore one requiring acceptance and respect; the School community is no exception.

An ironic parallel example to the above is the fact that during Mackenzie's working life, women were the 'minority' group, and similarly treated with derision when they attempted to become visible and hold positions within society. Mackenzie fought against the institutionalised status quo with her individual belief in egalitarianism and liberty for women. In being appointed to Cardiff University Senate following her professorship of 1904, it was here that Mackenzie could prompt the strongly contested, yet laboriously slow progressive opportunities of women students and colleagues. Mackenzie also established work projects for women and girls of the lower classes in the Cardiff University Settlement project, a programme managed UK wide (normally for men of the lower classes) by philanthropists with an aim to reduce the socio-economic divide between classes. But in 1908 Mackenzie co-established the Cardiff and Vale Suffragists; this action perhaps illustrates her disputing women's discrimination and related prejudice the most clearly. She began with 70 members, and by 1914 she had 1200 members [32].

Mackenzie seems to have continued to defend values of respecting diversity as being central to a type of education that enabled individuals to become aware of and explore all parts of society: 'The tyranny of … fixed ideas and prejudices disturb the balance of life, and render impossible that state of freedom which can only result when a unified will animates the whole being' ([17], p. 28). Mackenzie asserted that it was the role of education to challenge and enable a balanced perspective, and hence in the longer term to rid society of its discrimination and intolerance.

Mackenzie wrote of Steiner that his ideas on 'freeing the pupil' ([17], p. xi) were in accord with her own views of promoting a moral education. She stated 'we are all more conscious of the demand for freedom as coming from the young, and more ready to consider the validity of this demand than ever before' ([17], p. 24). Mackenzie wrote that the ultimate goal of 'freedom' for citizens is to be understood in spiritual terms, because this is where balance, consideration and creativity can be facilitated. This, as the crucial element for the basis of education, means that the young people of society will understand this intellectual and spiritual path, and become wiser than the current generation, "and those once started on the road that leads thitherward will not easily be induced to relinquish the quest" ([17], p. 27).

### **4. Steiner's education and the Cardiff Steiner school**

### **4.1 Steiner's education**

Steiner explained at the time of the first established school "that the characteristic feature of the (Waldorf-Astoria Cigarette Factory) School lies in its educational principles, based on the knowledge of man(*sic*). … (which) are closely connected

**125**

ficulty or inadequacy.

*Principles of Equality: Managing Equality and Diversity in a Steiner School*

with the most fundamental human impulses" ([33], p. 11). That is, the nature and the potential of humanity are taught to children, through person-centred, chronological, creative, and experiential methods of *head, heart* and *hands*; a foundational spiritual connection underlies this educative system. Steiner's understanding of the spiritual core of humanity reflects the education offered, which in turn becomes the spiritual core of the school [34]. Experiential learning involves the slow and controlled introduction of risk, enabling children to learn from *doing,* and to further natural development. Steiner recognised the capacity of humankind, and therefore the requirement, to treat children with reverence. This can enable their subsequent full engagement with increasing joy and wonder at the world that surrounds them. "When … the emotional and volitional aspects of human experience combine with thinking, children are able to form an inner connection with what

Values diverse from the norm are thereby present in this education. Through the presentation of authentic stories of global mythologies for example, and the teacher offering an implicit balance, children can find their own answers to the ambiguities of life. Reverence for children by the teacher is partly an instrument enabling individual understanding, as is reverence for teachers by the children. Reverence is also explicitly present, in the underlying respect afforded for all racial and cultural identities [34]. In discussing the globally multi-cultural curriculum, Masters [35] states that for example in the study of a spiritual geography, countries' ethnic backgrounds are recognised and valued, and religious faiths of indigenous communities explored and respected. International Steiner teacher work visits reinforce this recognition of diversity, where the aims are to learn from international educational initiatives according to, for example, individual cultures' portrayals of their own

The Cardiff Steiner School claim that their ethos, guided by Steiner, and in line with the values of Mackenzie, is of an informed, progressive, and inclusive urban school, working to a city timetable [23, 36]. In terms of being *informed*, staff and some of the wider community study academic theories and application of anthroposophy for their personal development, where teachers base their work on spiritual knowledge, and some study philosophy. While anthroposophy is not taught to children, Steiner explained how its aims are not just theoretical, but "that these (are) meant to enter social life quite directly and practically," in the form of teachers understanding child development and in their approach to education ([33], p. 3). Also, the School recognises and celebrates its origins in the form of mothers wishing to start a Steiner kindergarten in one parent's living room, 21 years ago, and from that, of women establishing a social business and managing the beginnings of a Steiner school; the community has grown in persistence and collaborative strength. The School could be seen as *progressive* where the Certificate of Steiner Education has been adopted and implemented in order to maintain meaningful Steiner education throughout children's school life, and where young people can progress to university as independent, balanced and critical thinkers. Also, a collaborative management system invites decisions and decision making to be respected and welcomed, and trust is afforded amongst core mandating groups, thus avoiding any sense of dif-

The School claims to be *inclusive* in the implementation of its fees system. The School has one of the lowest fee levels in Steiner schools UK wide, and is significantly lower than other independent schools; they also fundraise for a bursary to enable accessibility. Parents are invited to talks on educative and child

*DOI: http://dx.doi.org/10.5772/intechopen.86748*

they study" ([34], p. 125).

streams of history, thus avoiding ethnocentrism [35].

**4.2 The Cardiff Steiner school ethos**

### *Principles of Equality: Managing Equality and Diversity in a Steiner School DOI: http://dx.doi.org/10.5772/intechopen.86748*

*Sustainable Management Practices*

we cannot tell if someone is female or male, or if we believe them to be a different

terms across written and verbal communication, and pupils are referred to as 'child', or 'student' upon entering class six [23]. And the Policy states '*The protected characteristic of 'gender reassignment' is understood and respected. This policy extends its protection and respect to members of the community with a fluctuating or fluid gender, where one's gender identity shifts, and is not fixed*'. This is a pertinent example of a newly known minority group in the focus of public attention, that until recently may have been the topic of derision. Society may be slowly realising that this minority group has an equally valid and rational identity to others, and therefore one requiring acceptance and respect; the School community is no exception.

Accordingly the School encourages the use of 'they' and 'them' as gender neutral

An ironic parallel example to the above is the fact that during Mackenzie's working life, women were the 'minority' group, and similarly treated with derision when they attempted to become visible and hold positions within society. Mackenzie fought against the institutionalised status quo with her individual belief in egalitarianism and liberty for women. In being appointed to Cardiff University Senate following her professorship of 1904, it was here that Mackenzie could prompt the strongly contested, yet laboriously slow progressive opportunities of women students and colleagues. Mackenzie also established work projects for women and girls of the lower classes in the Cardiff University Settlement project, a programme managed UK wide (normally for men of the lower classes) by philanthropists with an aim to reduce the socio-economic divide between classes. But in 1908 Mackenzie co-established the Cardiff and Vale Suffragists; this action perhaps illustrates her disputing women's discrimination and related prejudice the most clearly. She began

Mackenzie seems to have continued to defend values of respecting diversity as being central to a type of education that enabled individuals to become aware of and explore all parts of society: 'The tyranny of … fixed ideas and prejudices disturb the balance of life, and render impossible that state of freedom which can only result when a unified will animates the whole being' ([17], p. 28). Mackenzie asserted that it was the role of education to challenge and enable a balanced perspective, and hence in the longer term to rid society of its discrimination and

Mackenzie wrote of Steiner that his ideas on 'freeing the pupil' ([17], p. xi) were in accord with her own views of promoting a moral education. She stated 'we are all more conscious of the demand for freedom as coming from the young, and more ready to consider the validity of this demand than ever before' ([17], p. 24). Mackenzie wrote that the ultimate goal of 'freedom' for citizens is to be understood in spiritual terms, because this is where balance, consideration and creativity can be facilitated. This, as the crucial element for the basis of education, means that the young people of society will understand this intellectual and spiritual path, and become wiser than the current generation, "and those once started on the road that leads thitherward will not easily be induced to relinquish the quest" ([17], p. 27).

Steiner explained at the time of the first established school "that the characteristic feature of the (Waldorf-Astoria Cigarette Factory) School lies in its educational principles, based on the knowledge of man(*sic*). … (which) are closely connected

gender from the one they are portraying, and that it no longer matters.

with 70 members, and by 1914 she had 1200 members [32].

**4. Steiner's education and the Cardiff Steiner school**

**124**

**4.1 Steiner's education**

intolerance.

with the most fundamental human impulses" ([33], p. 11). That is, the nature and the potential of humanity are taught to children, through person-centred, chronological, creative, and experiential methods of *head, heart* and *hands*; a foundational spiritual connection underlies this educative system. Steiner's understanding of the spiritual core of humanity reflects the education offered, which in turn becomes the spiritual core of the school [34]. Experiential learning involves the slow and controlled introduction of risk, enabling children to learn from *doing,* and to further natural development. Steiner recognised the capacity of humankind, and therefore the requirement, to treat children with reverence. This can enable their subsequent full engagement with increasing joy and wonder at the world that surrounds them. "When … the emotional and volitional aspects of human experience combine with thinking, children are able to form an inner connection with what they study" ([34], p. 125).

Values diverse from the norm are thereby present in this education. Through the presentation of authentic stories of global mythologies for example, and the teacher offering an implicit balance, children can find their own answers to the ambiguities of life. Reverence for children by the teacher is partly an instrument enabling individual understanding, as is reverence for teachers by the children. Reverence is also explicitly present, in the underlying respect afforded for all racial and cultural identities [34]. In discussing the globally multi-cultural curriculum, Masters [35] states that for example in the study of a spiritual geography, countries' ethnic backgrounds are recognised and valued, and religious faiths of indigenous communities explored and respected. International Steiner teacher work visits reinforce this recognition of diversity, where the aims are to learn from international educational initiatives according to, for example, individual cultures' portrayals of their own streams of history, thus avoiding ethnocentrism [35].

### **4.2 The Cardiff Steiner school ethos**

The Cardiff Steiner School claim that their ethos, guided by Steiner, and in line with the values of Mackenzie, is of an informed, progressive, and inclusive urban school, working to a city timetable [23, 36]. In terms of being *informed*, staff and some of the wider community study academic theories and application of anthroposophy for their personal development, where teachers base their work on spiritual knowledge, and some study philosophy. While anthroposophy is not taught to children, Steiner explained how its aims are not just theoretical, but "that these (are) meant to enter social life quite directly and practically," in the form of teachers understanding child development and in their approach to education ([33], p. 3). Also, the School recognises and celebrates its origins in the form of mothers wishing to start a Steiner kindergarten in one parent's living room, 21 years ago, and from that, of women establishing a social business and managing the beginnings of a Steiner school; the community has grown in persistence and collaborative strength. The School could be seen as *progressive* where the Certificate of Steiner Education has been adopted and implemented in order to maintain meaningful Steiner education throughout children's school life, and where young people can progress to university as independent, balanced and critical thinkers. Also, a collaborative management system invites decisions and decision making to be respected and welcomed, and trust is afforded amongst core mandating groups, thus avoiding any sense of difficulty or inadequacy.

The School claims to be *inclusive* in the implementation of its fees system. The School has one of the lowest fee levels in Steiner schools UK wide, and is significantly lower than other independent schools; they also fundraise for a bursary to enable accessibility. Parents are invited to talks on educative and child developmental aspects, and there is a parent body that meets with the School Management Team. Parents report a feeling of a 'palpable community': a unique experience to those new to the School [23]. The School is an urban city school; it recognises its parent community and works according to their working timetable. The ethos could be seen to be founded on recognitions of equality and diversity in that both role models (Steiner and Mackenzie) believed in respect, the fulfilling of opportunities, additional care and support, and the recognition and promotion of groups and peoples. In terms of the third virtue of DEM practices as mentioned above, the school also appears to represent the diverse local and international community it serves through its own staff diversity, with gender and national diversity well represented [9, 33, 36].

### **4.3 Structure of the school**

The School asserts that its ethos informs its structure, in that its community has purposefully sought an informed, progressive and inclusive leadership and management system. This is based on modernising Steiner principles of egalitarianism. It is neither a hierarchy, which is the ladder system of State sector Steiner schools in England and indeed some other English Steiner independent schools, nor a collective, where there is equality-based, unanimous community-wide decision making, such as the Quakers (the Religious Society of Friends) have [37].

Neither is it the traditional model of a British Steiner school which has something similar to a collective consensus decision making through the College of Teachers, the central body made up of staff of a Steiner school. Steiner schools have gradually realised that while egalitarian minded, such systems have produced slow decision making, or indeed non-decisions. The Association of Waldorf Schools North America [38] has advocated a mandate structure for many years, where collaborative decision making is made by three constitutional mandating groups, of the Board of Trustees (voluntary overseeing governors), College of Teachers (staff body) and Administration (office managers). They logically delegate specific responsibilities to mandate groups made up of members of those three bodies [13]. An example of devolved decision making with accountability via the mandate structure is where College is responsible for pedagogical governance. That is, all governance level educational decision making is made by College; subsequently, College is accountable to Trustees, who are in turn accountable to the wider membership, according to British Company law.

In the Cardiff Steiner School, tying these three bodies together is the collaborative and devolved leadership body, the School Management Team. This is made up of two administrative managers, alongside three Educational Co-ordinators, for the three School faculties, Upper School, Lower School and Early Years. Educational Co-ordinators are not line managers; rather, staff working within faculties are expected to trust in and respect the advice of educational co-ordinators based on their experience and thorough knowledge of Steiner pedagogy, planning, monitoring systems and professional working. After some improvements, the system appears to generally work productively and positively, bearing trust and accountability in mind, with a clear division and clarity of roles; again principles of equality and diversity are held to be at the core of the mandate structure of School management, not least with respect to such egalitarian practices as delegation, co-operation and accountability [36].

### **4.4 Examples of daily educational work practices**

Steiner wrote: "Reverence awakens a power of sympathy in the soul through which we draw towards us qualities in the beings around us, qualities which would

**127**

*Principles of Equality: Managing Equality and Diversity in a Steiner School*

otherwise remain concealed" ([14], p. 28). Daily educational work practices serve to exemplify the principles of equality and diversity, and we interpret these practices as fulfilling Steiner's intended meaning of a 100 years ago. Four examples are here highlighted. Children of Steiner schools recite a Steiner saying as a daily morning verse. The Lower School verse is centred on developing their personalities and knowledge assisted by 'humankind', and growing through the welcome exchange of ideas and development of equanimity. Similarly, staff of Steiner schools also have a daily morning verse that they recite together, and this focusses on their recognition of the wonder of the world, and of their personal strength in relaying this to their learners through awe, fervour, patience, responsiveness, and commitment to facilitating child lived experience. Equality and diversity are at the heart of both of these customs, which have been recited daily by Steiner children and teachers, all

A third example of a daily School practice instilled by values of diversity and equality of consideration is the application of additional learning support for some pupils. The Additional Learning Needs teacher (a recurrent presence) advises other teachers about particular differentiation, that is, a flexibility in wider teaching to endorse the reverence given to the child. The Steiner approach to children with an additional learning need is that the label does not determine who the child is. Rather, the approach is person-centred and recognises diversity; there is an expectation that any child can progress and learn, and can develop their humanity [33]. A fourth daily practice embodying equality of consideration is the interpretation and application of competition in the curriculum. Competitive games promote combined endeavour, as opposed to individual ego. The joy is in the game, where both sides become energised to exceed their own skills, and where all participants' efforts are individually acknowledged by the other players [34]. These practices play a central role in the management of Steiner schools, including the Cardiff Steiner School [36]. Another practice exemplifies how education for sustainability is delivered in the School. Children are taken daily on visits to nearby countryside, for there is no substitute for experience of the natural world as a key to learning to cherish it sustainably, and to preserve rather than subvert its cycles. Relatedly, the School seeks to embody sustainable approaches in its management practices [39].

Steiner education is different from the UK educational system, and is also different from the majority of British schools. The School has adopted a unique external formal assessment system at Further Education level, enabling students to access Higher Education, and so University. Cardiff became the fourth Steiner School in the UK to adopt the New Zealand Certificate of Steiner Education, NZCSE, with other British and German Steiner schools following suit, and is the single school in Wales offering this educative system. According to the 'Lisbon Recognition Convention' international Further Education qualifications are recognised by Universities where countries are members of this agreement. The UK is one of these, as are 56 other member and non-member countries of the Council of Europe,

In contrast with Principles such as Equality of Outcome, the final School qualification is given deep consideration and moderated at three separate stages, allowing pupils to achieve their formally measured units differentially, and not always passing a required minimum level. The upper school system works according to the application of pre-university levels of level one, two and three, and for an occasional project at level four (for an advanced piece of work that is equivalent to a first-year university module). The educative core is based on the continuation of purely Steiner

*DOI: http://dx.doi.org/10.5772/intechopen.86748*

around the world, for almost a 100 years.

**4.5 The school qualification**

including New Zealand [40].

### *Principles of Equality: Managing Equality and Diversity in a Steiner School DOI: http://dx.doi.org/10.5772/intechopen.86748*

*Sustainable Management Practices*

well represented [9, 33, 36].

**4.3 Structure of the school**

developmental aspects, and there is a parent body that meets with the School Management Team. Parents report a feeling of a 'palpable community': a unique experience to those new to the School [23]. The School is an urban city school; it recognises its parent community and works according to their working timetable. The ethos could be seen to be founded on recognitions of equality and diversity in that both role models (Steiner and Mackenzie) believed in respect, the fulfilling of opportunities, additional care and support, and the recognition and promotion of groups and peoples. In terms of the third virtue of DEM practices as mentioned above, the school also appears to represent the diverse local and international community it serves through its own staff diversity, with gender and national diversity

The School asserts that its ethos informs its structure, in that its community has purposefully sought an informed, progressive and inclusive leadership and management system. This is based on modernising Steiner principles of egalitarianism. It is neither a hierarchy, which is the ladder system of State sector Steiner schools in England and indeed some other English Steiner independent schools, nor a collective, where there is equality-based, unanimous community-wide decision making,

Neither is it the traditional model of a British Steiner school which has something similar to a collective consensus decision making through the College of Teachers, the central body made up of staff of a Steiner school. Steiner schools have gradually realised that while egalitarian minded, such systems have produced slow decision making, or indeed non-decisions. The Association of Waldorf Schools North America [38] has advocated a mandate structure for many years, where collaborative decision making is made by three constitutional mandating groups, of the Board of Trustees (voluntary overseeing governors), College of Teachers (staff body) and Administration (office managers). They logically delegate specific responsibilities to mandate groups made up of members of those three bodies [13]. An example of devolved decision making with accountability via the mandate structure is where College is responsible for pedagogical governance. That is, all governance level educational decision making is made by College; subsequently, College is accountable to Trustees, who are in turn accountable to the wider mem-

In the Cardiff Steiner School, tying these three bodies together is the collaborative and devolved leadership body, the School Management Team. This is made up of two administrative managers, alongside three Educational Co-ordinators, for the three School faculties, Upper School, Lower School and Early Years. Educational Co-ordinators are not line managers; rather, staff working within faculties are expected to trust in and respect the advice of educational co-ordinators based on their experience and thorough knowledge of Steiner pedagogy, planning, monitoring systems and professional working. After some improvements, the system appears to generally work productively and positively, bearing trust and accountability in mind, with a clear division and clarity of roles; again principles of equality and diversity are held to be at the core of the mandate structure of School management, not least with respect to such

Steiner wrote: "Reverence awakens a power of sympathy in the soul through which we draw towards us qualities in the beings around us, qualities which would

egalitarian practices as delegation, co-operation and accountability [36].

**4.4 Examples of daily educational work practices**

such as the Quakers (the Religious Society of Friends) have [37].

bership, according to British Company law.

**126**

otherwise remain concealed" ([14], p. 28). Daily educational work practices serve to exemplify the principles of equality and diversity, and we interpret these practices as fulfilling Steiner's intended meaning of a 100 years ago. Four examples are here highlighted. Children of Steiner schools recite a Steiner saying as a daily morning verse. The Lower School verse is centred on developing their personalities and knowledge assisted by 'humankind', and growing through the welcome exchange of ideas and development of equanimity. Similarly, staff of Steiner schools also have a daily morning verse that they recite together, and this focusses on their recognition of the wonder of the world, and of their personal strength in relaying this to their learners through awe, fervour, patience, responsiveness, and commitment to facilitating child lived experience. Equality and diversity are at the heart of both of these customs, which have been recited daily by Steiner children and teachers, all around the world, for almost a 100 years.

A third example of a daily School practice instilled by values of diversity and equality of consideration is the application of additional learning support for some pupils. The Additional Learning Needs teacher (a recurrent presence) advises other teachers about particular differentiation, that is, a flexibility in wider teaching to endorse the reverence given to the child. The Steiner approach to children with an additional learning need is that the label does not determine who the child is. Rather, the approach is person-centred and recognises diversity; there is an expectation that any child can progress and learn, and can develop their humanity [33]. A fourth daily practice embodying equality of consideration is the interpretation and application of competition in the curriculum. Competitive games promote combined endeavour, as opposed to individual ego. The joy is in the game, where both sides become energised to exceed their own skills, and where all participants' efforts are individually acknowledged by the other players [34]. These practices play a central role in the management of Steiner schools, including the Cardiff Steiner School [36].

Another practice exemplifies how education for sustainability is delivered in the School. Children are taken daily on visits to nearby countryside, for there is no substitute for experience of the natural world as a key to learning to cherish it sustainably, and to preserve rather than subvert its cycles. Relatedly, the School seeks to embody sustainable approaches in its management practices [39].

### **4.5 The school qualification**

Steiner education is different from the UK educational system, and is also different from the majority of British schools. The School has adopted a unique external formal assessment system at Further Education level, enabling students to access Higher Education, and so University. Cardiff became the fourth Steiner School in the UK to adopt the New Zealand Certificate of Steiner Education, NZCSE, with other British and German Steiner schools following suit, and is the single school in Wales offering this educative system. According to the 'Lisbon Recognition Convention' international Further Education qualifications are recognised by Universities where countries are members of this agreement. The UK is one of these, as are 56 other member and non-member countries of the Council of Europe, including New Zealand [40].

In contrast with Principles such as Equality of Outcome, the final School qualification is given deep consideration and moderated at three separate stages, allowing pupils to achieve their formally measured units differentially, and not always passing a required minimum level. The upper school system works according to the application of pre-university levels of level one, two and three, and for an occasional project at level four (for an advanced piece of work that is equivalent to a first-year university module). The educative core is based on the continuation of purely Steiner education where pupils learn about the development of human kind, in an experiential way that allows for a wide consciousness of interlocking subjects, rather than narrowly defined and disconnected learning areas which may be passively absorbed.

The Steiner education aim is to shape young adults into developing an independent mind, an ability to debate and to consider others' positions through non-judgmental exploration, a strong sense of community, a physical sense of movement and their own being, a deep sense of creativity, a broad and in-depth general knowledge, as well as an advanced understanding of their 'extension subjects', that is, subjects they specialise in at the upper end of their education. Pupils are given the chance to achieve their targets allowing for categories of disadvantage that could apply to them [41], yet are still dependent on their own individual commitment, scholarship and hard work. This system again follows the principle of equal consideration; a student whose attendance is extremely poor may not achieve the certificate, irrespective of their work level. Conversely, students could still achieve a level of excellence at each level, without passing all learning outcomes, where certain types of testing prove too problematic. The assessment criteria test individual pupils in an all-round way, which allows individuals to excel in some testing environments rather than others, such as in essays, reports, presentations, debates, film making, performance, illustrations and projects (not an exhaustive list) [42].

The Cardiff Steiner School maintains that the management of the Certificate is equality- and diversity-based, and involves multiple layers of delegation, cooperation and accountability, and Steiner educational values. The Upper School Educational Coordinator manages the teaching programme, and moderates upper school teachers' learning outcomes and assessments of work. An internal moderator checks samples of work further. Random samples of work are then continuously sent to the New Zealand accreditation body SEDT for further layers of accountability, with respect to student work quality and standardisation of assessment [36, 42].

### **5. Conclusions**

### **5.1 Conclusion**

The purpose of Steiner education is to inform and nurture children and young people to give them 'love for the world and for (their) fellows … (to develop) gentleness and quiet inner patience, (and to aim) for selfless co-operation' ([14], p. 212). Children's development is understood to be centred around their 'head, heart and hands'; their intellectual capacity is directed by their powers of empathy, patience and consideration, and these in turn are influenced by their physical awareness (not least of the natural world around them) and their ability to express themselves creatively. This leads them to reflective clarity and knowledge, ready to enter the world as young adults.

The Cardiff Steiner School strives to follow DEM systems, arguably in a principled rather than superficial way; the DEM tenets (as advocated in the recent literature of sustainable management practices) of legal compliance, symbolic value and organisational productivity (in this case the tenet of ensuring the School's viability) are visibly followed, but strict adherence to this management theory may occasionally fall short of the basis of humanity on which Steiner's philosophy was founded [9, 33]. Steiner's principle of reverence for everyone including children (a principle endorsed also by Mackenzie) has been shown to embody the Principle of Equality of Consideration, and equally that of Respect for Diversity; and these principles have been shown to be embedded and embodied in the operation and educational management of the Cardiff Steiner School in multiple contexts. Our case study and in particular the examples we have presented illustrate how these principles, which

**129**

**Author details**

Robin Attfield1

\* and Kate Attfield2

able management of at least one Steiner School.

2 Cardiff Metropolitan University, Cardiff, United Kingdom

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

\*Address all correspondence to: attfieldr@cardiff.ac.uk

1 Cardiff University, Cardiff, United Kingdom

provided the original work is properly cited.

*Principles of Equality: Managing Equality and Diversity in a Steiner School*

currently enjoy legislative support, at least in Wales, are realised and implemented throughout the School, both in its teaching and in its management processes.

We have used management theory as a basis from which to assess the philosophical notions of equality and diversity, and investigate the purpose these can have in a modern school. We have sought to inform an audience with interests in management and sustainability about Steiner's (and Mackenzie's) educational philosophies, illustrated by the modern sustainable management practice of the Cardiff Steiner School. As we have shown, there is an underlying pervasive message of equality and respect for diversity deriving from the founding values of both Mackenzie and Steiner, which have in some ways been adapted into modern terms, but in another sense are timeless and remain as originally expressed. The modern Steiner community upholds these in modern Wales, in line with the requirements of Welsh Government legislation, and contemporary interpretations of both equality and diversity. The philosophical principle of equality of consideration, which we have shown to be far superior to rival principles of equality, informs the practice of this School on a sustainable basis, in an ongoing pursuit of both diversity and equality.

It lay outside the scope of our research to establish that successful educational outcomes are invariably generated within the Cardiff Steiner School, let alone in other Steiner schools. For example, while our interviews point in this direction, they were indicative rather than conclusive. There again, a longitudinal study of the careers of Cardiff Steiner School ex-students would be needed before such success could be demonstrated beyond doubt, and other Steiner schools would need to be subjected to parallel studies. Further, with respect to the dimension of sustainability, the sustainability of individual Steiner schools requires a worldwide system of such schools and its attainment of a critical mass sufficient to withstand localised problems and upheavals; and while this requirement may be well on the way to being achieved, another paper would be required to investigate how close it is to complete fruition. Nonetheless significant progress has been made in the space available in showing how the pursuit of equality and diversity enhance the sustain-

*DOI: http://dx.doi.org/10.5772/intechopen.86748*

**5.2 Limitations of this research**

### *Principles of Equality: Managing Equality and Diversity in a Steiner School DOI: http://dx.doi.org/10.5772/intechopen.86748*

currently enjoy legislative support, at least in Wales, are realised and implemented throughout the School, both in its teaching and in its management processes.

We have used management theory as a basis from which to assess the philosophical notions of equality and diversity, and investigate the purpose these can have in a modern school. We have sought to inform an audience with interests in management and sustainability about Steiner's (and Mackenzie's) educational philosophies, illustrated by the modern sustainable management practice of the Cardiff Steiner School. As we have shown, there is an underlying pervasive message of equality and respect for diversity deriving from the founding values of both Mackenzie and Steiner, which have in some ways been adapted into modern terms, but in another sense are timeless and remain as originally expressed. The modern Steiner community upholds these in modern Wales, in line with the requirements of Welsh Government legislation, and contemporary interpretations of both equality and diversity. The philosophical principle of equality of consideration, which we have shown to be far superior to rival principles of equality, informs the practice of this School on a sustainable basis, in an ongoing pursuit of both diversity and equality.

### **5.2 Limitations of this research**

*Sustainable Management Practices*

education where pupils learn about the development of human kind, in an experiential way that allows for a wide consciousness of interlocking subjects, rather than narrowly defined and disconnected learning areas which may be passively absorbed. The Steiner education aim is to shape young adults into developing an independent mind, an ability to debate and to consider others' positions through non-judgmental exploration, a strong sense of community, a physical sense of movement and their own being, a deep sense of creativity, a broad and in-depth general knowledge, as well as an advanced understanding of their 'extension subjects', that is, subjects they specialise in at the upper end of their education. Pupils are given the chance to achieve their targets allowing for categories of disadvantage that could apply to them [41], yet are still dependent on their own individual commitment, scholarship and hard work. This system again follows the principle of equal consideration; a student whose attendance is extremely poor may not achieve the certificate, irrespective of their work level. Conversely, students could still achieve a level of excellence at each level, without passing all learning outcomes, where certain types of testing prove too problematic. The assessment criteria test individual pupils in an all-round way, which allows individuals to excel in some testing environments rather than others, such as in essays, reports, presentations, debates, film making,

performance, illustrations and projects (not an exhaustive list) [42].

The Cardiff Steiner School maintains that the management of the Certificate is equality- and diversity-based, and involves multiple layers of delegation, cooperation and accountability, and Steiner educational values. The Upper School Educational Coordinator manages the teaching programme, and moderates upper school teachers' learning outcomes and assessments of work. An internal moderator checks samples of work further. Random samples of work are then continuously sent to the New Zealand accreditation body SEDT for further layers of accountability, with respect to student work quality and standardisation of assessment [36, 42].

The purpose of Steiner education is to inform and nurture children and young people to give them 'love for the world and for (their) fellows … (to develop) gentleness and quiet inner patience, (and to aim) for selfless co-operation' ([14], p. 212). Children's development is understood to be centred around their 'head, heart and hands'; their intellectual capacity is directed by their powers of empathy, patience and consideration, and these in turn are influenced by their physical awareness (not least of the natural world around them) and their ability to express themselves creatively. This leads them to reflective clarity and knowledge, ready to enter the world as young adults. The Cardiff Steiner School strives to follow DEM systems, arguably in a principled rather than superficial way; the DEM tenets (as advocated in the recent literature of sustainable management practices) of legal compliance, symbolic value and organisational productivity (in this case the tenet of ensuring the School's viability) are visibly followed, but strict adherence to this management theory may occasionally fall short of the basis of humanity on which Steiner's philosophy was founded [9, 33]. Steiner's principle of reverence for everyone including children (a principle endorsed also by Mackenzie) has been shown to embody the Principle of Equality of Consideration, and equally that of Respect for Diversity; and these principles have been shown to be embedded and embodied in the operation and educational management of the Cardiff Steiner School in multiple contexts. Our case study and in particular the examples we have presented illustrate how these principles, which

**128**

**5. Conclusions**

**5.1 Conclusion**

It lay outside the scope of our research to establish that successful educational outcomes are invariably generated within the Cardiff Steiner School, let alone in other Steiner schools. For example, while our interviews point in this direction, they were indicative rather than conclusive. There again, a longitudinal study of the careers of Cardiff Steiner School ex-students would be needed before such success could be demonstrated beyond doubt, and other Steiner schools would need to be subjected to parallel studies. Further, with respect to the dimension of sustainability, the sustainability of individual Steiner schools requires a worldwide system of such schools and its attainment of a critical mass sufficient to withstand localised problems and upheavals; and while this requirement may be well on the way to being achieved, another paper would be required to investigate how close it is to complete fruition. Nonetheless significant progress has been made in the space available in showing how the pursuit of equality and diversity enhance the sustainable management of at least one Steiner School.

### **Author details**

Robin Attfield1 \* and Kate Attfield2


\*Address all correspondence to: attfieldr@cardiff.ac.uk

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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## *Edited by Muddassar Sarfraz, Muhammad Ibrahim Adbullah, Abdul Rauf and Syed Ghulam Meran Shah*

This book encapsulates the advanced concept of sustainable management and will enlighten readers to understand this concept for practical applications. The book's salient features are as follows:

	- Differentiates adaptive sustainable measures and management practices
	- Assesses inertia with respect to economic development
	- Constructs the linkage between technological strategies and innovation among construction companies
	- Elucidates the principles of equality, elaborating the managing of equality and diversity in a Steiner school

Published in London, UK © 2019 IntechOpen © chameleonseye / iStock

Sustainable Management Practices

Sustainable Management

Practices

*Edited by Muddassar Sarfraz, Muhammad Ibrahim Adbullah,* 

*Abdul Rauf and Syed Ghulam Meran Shah*