The Challenges and Rewards of Business Sustainability P

The Challenges and Rewards of Business Sustainability P

What is a Sustainable Business?

 

A Sustainable business or green business, is a business that has minimal negative impact on the global or local environment, community, society, or economy.  A sustainable business embraces the concept of the triple bottom line approach to accounting. 

Many perceive the triple bottom line to create greater business value and to increase opportunities to serve those customers who lean toward environmentally sound solutions to everyday situations.



 

Business Sustainability Criteria

 

Many sustainable businesses embrace environmental policies.  A sustainable business is considered to be green if it matches the following four criteria:

 

  1. A sustainable business incorporates sustainability into all facets of it’s business.
  2. A sustainable business supplies environmentally friendly products or services that replace non-green products or services.
  3. A sustainable business is greener than it’s non-green competition.
  4. A sustainable business commits environmental practices in it’s business operations.

 

Business Sustainability in other words, is a business that meets the needs of the present, without compromising the ability of future generations to meet their own needs. 

 

Is Sustainability Social Responsibility?

 

Sustainability is often confused with corporate social responsibility, however the two are not the same.  While ethics, morality, and other social norms permeate CSR, sustainability only obliges businesses to make trade offs to safeguard the environmental equity of future generations.  Looking short term is the bane of sustainability.

Green business is seen as a mediator of economic versus environmental relationships in business.  Many feel that if embraced by all, sustainability would diversify our economy, even if it has little actual effect at lowering atmospheric Carbon levels.

 

What are Green Jobs?

 

“Green Jobs” definition is ambiguous at best, however most agree that green jobs should be linked to clean energy.  Because of this connection green jobs should contribute to the reduction of greenhouse gases.

Corporations can be seen as generators of not only “green energy”, but as producers of new realities which result from the technologies developed and deployed by these firms.

 

Sustainability is Environmental

 

Sustainable businesses main goal is to eliminate or decrease the environmental harm caused by the production and consumption of their goods.  The impact of such human activities is the greenhouse gases produced.

These gases can be measured in units of carbon dioxide and is often referred to as the carbon footprint.  Carbon footprint is usually defined as the total emissions caused by an individual, event, organization, or product, expressed as it’s carbon dioxide equivalent.

 

What are Green Initiatives?

 

Businesses take a wide range of green initiatives.  One of the most common examples is the act of “going paperless” or sending electronic correspondence instead of paper when possible.

Examples of sustainable business practices include repurposing used products, a great example is tuning up used commercial fitness equipment for resale.  Another would be revising production processes to eliminate waste, and choosing nontoxic raw materials and processes. 

For example, Canadian farmers found that hemp is a sustainable alternative to rapeseed in their traditional crop rotation.  Hemp grown for fiber or seed requires little or no pesticides or herbicides.

Sustainable business leaders also consider the “life cycle costs” for the items they produce.  Input costs must be considered in regards to regulations, energy use, storage, and disposal.

Designing for the Environment is also an important element of sustainable business practices.  This process enables users to consider a products potential environmental impacts and the process used to make that product.

The many green practices possibilities have led to considerable pressure being put upon companies from consumers, employees, government regulators and other stakeholders.  If given a choice, most customers will choose the “green product” if it is economically feasible.

 

What is Greenwashing?

 

Some companies have resorted to “greenwashing” instead of making actual and meaningful changes.  They simply market their products in ways that suggest green practices.

Greenwashing is a form of spin in which green PR or green marketing is used to promote the perception that an organization’s products, aims or policies are environmentally friendly.  Evidence that a business is greenwashing often comes when more money or time has been spent advertising being “green”, than is actually spent on environmentally sound practices. 

Greenwashing efforts can simply involve changing the name or label of a product evoking the environmental credibility of a product when it actually contains harmful chemicals.  Or greenwashing can be a multimillion dollar marketing campaign portraying a highly polluting company as eco-friendly.

 

Sustainability is Social

 

Companies that contribute to their communities, whether through employee volunteers or through charitable donations are considered to be socially sustainable.  Due to their community involvement, they are given social credibility toward being recognized as a sustainable business.

Businesses are often also recognized for encouraging education by employee training, and internships to mentor other community members.  These practices serve to increase education levels and quality of life in their community.

However to be truly sustainable, a business must foster a reverence for our natural resources and our environment.  The sustainable business reaches beyond social resources to enhance it’s reputation within the community it serves.

 

Sustainability Characteristics

 

Innovation & Technology

 

This inward examination of corporate sustainability practices focuses on a company’s ability to change its products and services making them produce less waste and emphasize sustainable best practices during all company activities.

 

Collaboration

 

This examines the formation of networks and partnerships with similar or partner companies to facilitate knowledge sharing and help propel innovation to new levels of achievement.

 

Process Improvement

 

Ongoing surveys help create improvement in the business processes which are essential to reduction in waste.   Enhanced employee awareness of your company sustainability plan further integrates the new and improved business processes.

 

Sustainability Reporting

 

Tracking progress made to embrace sustainability is necessary to report on company performance in achieving their goals.  Corporate sustainability goals are often incorporated into the corporate mission statement to further enhance the company sustainability strategy.

 

Greening the Supply Chain

 

To emphasize corporate adherence to their sustainability goal, procurement is a vital component of that strategy.  Sustainable procurement is a huge part of a company’s environmental impact, being much larger than the impact of the products they may consume.

Third party certifications, such as those given by the B Corporation (certification) model is a good example of one that encourages companies to focus on their sustainability issues and processes.  Companies could also implement an internal sustainability measurement and management system which included a forum for all stakeholders to discuss their sustainability issues.

 

Corporate Sustainability Strategies

 

Corporate sustainability strategies take advantage of sustainable revenue opportunities, protecting the value of the business against factors such as increasing energy costs.  A sound sustainability strategy also helps to mitigate the costs of meeting regulatory requirements, any changes in the way customers perceive brands and products, and the volatile price of resources.

Sustainability characteristics might not all be incorporated into a company’s Eco-strategy portfolio immediately. However their inclusion in your corporate sustainability strategy is very important to your corporate reputation.  The widely practiced sustainability characteristics include: Innovation, Collaboration, Process Improvement, Sustainability reporting, and Greening your supply chain. 

 

Triple top-line value production

 

Triple top-line values production establishes three requirements of sustainable business activities for companies.  These activities require financial benefits for the company, natural world betterment, and social advantages for employees and members of the local community. 

Each of these three components is recognized as equal in status.  While many businesses already embrace the triple bottom line approach to business sustainability, “triple top line” stresses the importance of initial process design and is a term attributable to McDonough and Braungart in their book Cradle to Cradle.

 

Nature-based knowledge and technology

 

This mimicry based principle involves the emulation of the natural world, adopting principles found in nature to help us grow our food, harness and use energy, and in building things and conducting business. 

The principles are also important for healing ourselves, and to help us process information and design our communities to exist in harmony with nature.

 

Products of service or products of consumption

 

Products of service are durable goods routinely leased by customer’s, that are made of technical materials and are returned to the manufacturer and re-processed into a new generation of products when they are worn out, obsolete, or simply no longer needed.

Products of consumption are shorter lived items made only of biodegradable materials. They can be broken down by organisms after the products lose their usefulness.  These products are also not hazardous to humans or our environmental health.

This principal requires that we manufacture only these two types of products and mandates the gradual reduction of products of service and their replacement with products of consumption as technological advancements allow us to do so.

 

Sustainable energy

 

This principle advocates for sustainable energy produced using solar, wind, geothermal and ocean energy that will be able to meet our future energy needs without negative polluting effects for life on earth.

 

Local-based organizations and economies

 

This principle envisions durable, beautiful and healthy communities, locally owned and operated businesses and locally managed non-profit organizations, partnering with regional corporations and shareholders.  All of these diverse groups working together in a web of partnerships and collaborations.

 

Continuous improvement process 

 

This principle envisions operational processes inside successful organizations which include provisions for constant advancements and upgrades as the company transacts its day-to-day business.  The continuous process of monitoring, analyzing, redesigning and implementing is used to ensure the success of Triple Top Line value production as conditions change and new opportunities emerge.

 

Challenges and Opportunities

 

Implementing sustainable business practices may have an effect on profits and a firm’s financial ‘bottom line’.  Initially, this financial challenge might make many corporate executives cringe.  However, during a time when environmental awareness is popular, green strategies are likely to be embraced by employees, consumers, and other stakeholders.

 

Environmental Performance Affects Economic Performance

 

In fact, according to many studies, a positive correlation exists between environmental performance and economic performance.  If an organization’s current business model is inherently unsustainable, becoming a truly sustainable business requires a complete makeover of the business model.

This presents a major challenge because of the differences between the old and the new model.  It also requires reviewing how the respective skills, resources and infrastructure needed may change with a new business model.  . A new business model can also offer major opportunities by entering or even creating new markets and reaching new customer groups.

Companies leading the way in sustainable business practices are taking advantage of sustainable revenue opportunities as they move into the future.  Recent surveys suggest that the demand for green products appears to be increasing, with 27% of respondents stating they are more likely to buy a sustainable product and/or service than 5 years ago.  Furthermore, sustainable business practices may attract talent to your business and generate tax breaks for your business.

 

Calculate Your Carbon Footprint

 

If you would like to calculate your Carbon Footprint, follow the link to the free carbon footprint calculator of the United States Environmental Protection Agency.  

 

Responsible Sustainability is Your Business Success Story P

Responsible Sustainability is Your Business Success Story P

Business Has a Sustainability Role

 

It’s become accepted that business has a role to play in improving the environment and dealing with climate change.  What is undecided is how to do that, and for some, what actions are expected.  Generally, companies are comfortable doing business as usual, and few want to threaten their competitiveness in favor of green virtue.

My point is that this is not an either or question.  A growing number of examples, from diverse industries, show that sustainable business practices can be good for business.  Many companies just do the right thing.  While others are spurred to act because their customers expect it.

A good example is Unilever which has developed washing-up fluids that use less water.  And their sales are growing fast, especially in water-scarce markets.  Most of us can name a favorite product or two whose brand is intimately associated with its green credentials.  My point is that sustainability can be much more, that it has a role in any and all sectors.

 

Brewery embraced sustainability reducing green house gas emissions by 30%

Sustainability Can Be Profitable

 

A major brewer identified 150 possible improvements that could reduce Green House Gas emissions—while saving $200 million over five years.  Implementation of the improvements was a major cost savings move which went directly to their bottom line.

 

Sustainability Programs Can Be Complicated

 

The nitty-gritty of sustainability programs can get complicated.  But the principles are actually pretty simple —and should be familiar to most business people.  First, and most important, is to acknowledge that sustainability is important.  The case is often not difficult to make.

In a recent survey of 340 executives, more than 90 percent said risk management—whether from consumers, regulators, or the market—was an important factor in pushing them toward sustainability initiatives.

 

Define Your Sustainability Goals

 

It is important to define targets that are both specific and achievable.  It’s much better to say “Eliminate X million pounds of packaging,” than to use the vague “Reduce the footprint of our packaging.”

A recent analysis found that only one in five companies in the S&P 500 had defined, long-term goals when it came to sustainability.  Despite the fact that more than a third (36 percent) said sustainability was a top-three priority.

 

Set Measurable Sustainability Goals

 

Once the decision is made, define your company sustainability priorities, setting measurable targets.  These should be easy to establish after evaluating their costs and benefits.  To make these goals easier to achieve you may need to create consistent incentives, including those related to executive compensation.

For example, Nike tracks its suppliers on a range of metrics, including quality, timeliness, cost—and sustainability.  Falter for long on any of these, and the consequence is fewer orders.  Result: many more suppliers are hitting their sustainability mark.

DuPont has no trouble justifying its sustainability initiatives to shareholders.  it’s sustainability initiatives are generating billions in revenue from products that reduce emissions.  Intel has a dedicated finance analyst whose job is to calculate the value of its sustainability efforts.

To reduce emissions and improve other environmental metrics in its food chain, Wal-Mart tracks not only Green House Gas output, but also it’s yield, water use, and other factors per ton of food produced.  In addition to achieving environmental improvements, it cut the price of food and vegetables in the United States by $3.5 billion.

 

Develop a Sustainability Culture

 

The point is this, real business sustainability efforts are core business efforts.   Because they are not always easy, they can help a company to raise its game and perform better in all kinds of ways.

 

Business people embracing sustainability as part of their business culture

In mid-2014, McKinsey did a study that found a strong correlation between resource efficiency and financial performance.  Their study discovered that companies with the most advanced sustainability strategies did best of all.

In a study for the Harvard Business School that drew similar conclusions about a higher return on equity and assets for higher-sustainability companies, the authors concluded, “developing a corporate culture of sustainability may be a source of competitive advantage in the long run.”

 

Sustainability Creates Value

 

To think of sustainability as a niche gets it wrong.  To do it right, your business sustainability goals need to be rigorous, goal-oriented, and accountable.  Evidence is building that sustainability initiatives work, and that they are an important factor in creating long-term value.

 

How to Bring Discipline to Your Sustainability Initiatives P

How to Bring Discipline to Your Sustainability Initiatives P

Why Your Business Should Embrace Sustainability

 

Sustainability has become a part of life for many companies.  For many, it’s simply a matter of meeting demands from customers seeking socially responsible goods and services.  For others, it’s about addressing pressure from stakeholders or pursuing their own corporate values.

For still others, business sustainability is a strategic responsibility, especially those in a resource-constrained environment.  Whatever the reason, sustainability is sufficiently pervasive that defining it and executing business programs, products, and practices with an eye to their environmental and social implications has become a demanding managerial exercise.

 

Sustainability Identifies Opportunities

 

For some, sustainability has identified opportunities that they might have otherwise missed.  Whether it was to cut costs, reduce risk, and generate revenues.  Consider the multinational consumer-goods company Unilever, which changed the shape of deodorant to use less plastic in packaging and created a concentrated laundry product that sharply reduces its use of water.

German pharmaceutical company Bayer expects to save more than $10 million a year with a resource-efficiency check it developed to improve operations by using by-products and reducing wastewater. Global chemical company DuPont has recorded $2 billion in annual revenue from products that reduce greenhouse gas emissions and another $11.8 billion in revenue from improvements in nondepletable resources.

 

Why Do Some Struggle Over Sustainability

 

To better understand the challenges that companies face with creating value from sustainability.  We worked with sustainability groups to identify managers to collaborate on analyzing their programs.

What we found is that companies often have more initiatives than they can effectively manage.  The sustainability movement is flexible, including everything from environmentalism, resource management, corporate governance, and human rights.

Some managers in different regions may be enthusiastic about their efforts without taking a company-wide perspective.  In most cases, their efforts are too fragmented to create much value, either for the company or for society.

 

How Sustainability Provides Solutions

 

Thankfully, that kind of problem’s solution is well known.  We found that if they applied performance management principles to their sustainability initiatives most companies would benefit.  Companies must keep their sustainability programs focused, set specific goals, create accountability for performance, and communicate the financial impact.

 

Where To Focus Must Be Agreed

 

Getting leadership attention to sustainability initiatives is one of the biggest challenges companies face.  In a recent report for the United Nations Global Compact, 84 percent of the 1,000 global CEOs surveyed agreed that business “should lead efforts to define and deliver new goals on global priority issues,” but only a third said that “business is doing enough to address global sustainability challenges.”

 

Why Do Some Fail To Focus

 

The problem at many companies is often one of focus.  Two-thirds of companies in a representative sample from the S&P 500 have more than 10 different sustainability focus topics.  Some have more than 30.

That’s too many, making it difficult to imagine how a sustainability agenda with more than 10 focus areas can break through and get the necessary buy-in from leadership to be successful.  If top management doesn’t prioritize, then departments won’t either.

The result is fragmented, decentralized, and not aligned with one another or with overall top-level goals.  This slows the social and environmental impact but also the economic value.  A recent McKinsey Global Survey found that companies having a unified strategy and no more than five strategic priorities were almost three times as likely to be among the strongest performers.  Both financially and on measures of sustainability.

Coca-Cola, for example, has set for itself a strategy it describes as “me, we, the world,” which is it’s approach to improving personal health and wellness among the communities in which it operates and the environment.

The company reports making material, tangible progress on metrics related to three specific areas of focus: “well-being, women, and water.”  The company does not ignore other issues such as climate change and packaging, but it has made it clear that this is where it wants to lead.

 

Why You Need To Analyze Your Value Chain

 

To develop your priorities, it’s important to start by analyzing what matters most along the entire value chain.  You can accomplish this through internal analysis and consultations with stakeholders, including customers, regulators, and nongovernmental organizations (NGOs).

This process should enable companies to identify their sustainability issues with the greatest long-term potential and thus to create a systematic agenda.  You don’t want to create a laundry list of vague desirables.

 

One Company, BASF Maps it's Sustainability Priorities

After consultations, BASF, the global chemical company, put together a “materiality matrix” exhibit which is shown above.  This chart ranked the importance of 38 sustainability-related issues, based on their importance to BASF and its stakeholders.

This type of exercise helps companies to recognize the important issues early and get internal stakeholders to agree on what will create the most value.  Their focus needn’t be mechanical but should instead reflect discussion on the strategic, reputational, and financial merits of different efforts.

 

Set Specific Sustainability Goals

 

After completing your initial analysis, the next step is to translate this information into external goals that can be distilled into business metrics. These goals should be specific, ambitious, and measurable against an established baseline, such as greenhouse-gas emissions.  Your goals should have a long-term orientation and be integrated into your business sustainability strategy. Finally, the intent of your goals should be unmistakable.

One company stated as a goal: “Reduce the impact of our packaging on the environment.”  From a different company came a sharper version: “Eliminate 20 million pounds of packaging by 2016.”

Along the same lines, “reducing emissions” is a vague and almost meaningless phrase.  It doesn’t say by how much the company should reduce emissions, by when, or compared with what benchmark.  The approach taken by another sustainability leader is stronger and more specific: “Reduce 2005 CO2 emissions by half by 2015.”

 

Build Internal Support For Your Sustainability Goals

 

It is important to build adequate internal support to meet your goals.  Our analysis found that the companies that excelled at meeting sustainability goals made sure that they involved the business leaders responsible for implementing them from the start.

One global manufacturer announced in 2010 that it would reduce greenhouse-gas emissions and energy consumption by 20 percent by 2020.  To reach their goal, they set up energy assessments and energy-management plans, established global programs to optimize procurement and building standards, trained and developed internal “champions” and coordinated best practices, and began to use renewable energy where possible.

They communicated their early wins internally through a newsletter and regular conference calls.  Four years into their ten-year effort, the project is already net present value positive.

 

Encourage Sustainability Innovation

 

Setting ambitious external goals motivates your organization.  It also forces resources to be allocated and promotes accountability.  An analysis of companies that are part of the Carbon Disclosure Project found that those that set external goals did better when it came to cutting emissions.  They also had better financial returns on such investments.

Stronger goals, seem to encourage innovation.  People may feel more motivated to find ways to meet them.  Lack of goals is a sustainability killer: “What gets measured gets managed” is as true of sustainability as it is for any other business function.

And yet that is not happening.  An independent analysis of S&P 500 companies suggests that as of this writing only one in five S&P 500 companies sets quantified, long-term sustainability goals.  Half of the companies do not have any published sustainability goals.

 

Communicate Sustainability’s Financial Impact

 

Despite growing evidence of the value of investing in sustainability, many executives still have doubts.  Senior management gives sustainability lip service but not capital if they do not see financial benefits. “Sustainability metrics can seem like random numbers and don’t do much,” one chemical-industry executive told us. “For our businesses, sustainability efforts have to compete directly with other demands, which means that financial impact is key.”

Nearly half of the research participants reported that the pressure of short-term earnings performance is at odds with sustainability initiatives.  A constructive response is to make the case that sustainability can pay for itself, and more.  This needs to be done rigorously, reinforced with fully costed financial data and delivered in the language of business.

 

Make Sustainability’s Business Case

 

This is much easier said than done.  At Intel, although business leaders were interested in saving water, they saw little financial justification to do so: water was cheap.  Advocates of the initiative were able to calculate that the full cost of water, including infrastructure and treatment, was much higher than the initial estimates.

Saving water, they argued, could create value in new and unexpected ways.  Because of those arguments, Intel went ahead with a major conservation effort.  The company now has a finance analyst who concentrates on computing the financial value of sustainability efforts.

Making the business case for sustainability might sound like an obvious thing to do, but apparently, it isn’t. Only around a fifth of survey respondents reported that the financial benefits are clearly understood across the organization.

 

Measure Sustainability’s Savings

 

Sustainability initiatives can be difficult to measure because savings or returns may be divided across different parts of the business.  Some benefits, such as an improved reputation, are indirect.  It is important, not only to quantify what can be quantified but also to communicate other kinds of value.

An initiative might improve the perception important stakeholders have of the company, the better to build consumer loyalty, nurture relationships with like-minded nonprofits, and inform policy discussions.

 

Create Sustainability Accountability

 

The top reason that respondents gave for their company’s failure to capture the full value of sustainability is the lack of incentives to do so, whether positive or negative. According to the United Nations Global Compact, only 1 in 12 companies links executive remuneration to sustainability performance.

While 1 in 7 rewards their suppliers for good sustainability performance. Among survey respondents, 1 in 3 named earnings pressure and lack of incentives as reasons for poor sustainability results; 1 in 4 named lack of key performance indicators and insufficient resources.

 

Exhibit Good Sustainability Practices

 

In this area, a number of companies exhibit good business sustainability practicesfrom which others learn.  Some are strong when it comes to tracking data and reporting indicators, tracking carbon emissions and energy use, monitoring water use and waste, and recycling.

Adidas demonstrates one useful approach.  The sporting-goods company breaks down its long-term goals into shorter-term milestones.  Its suppliers, for example, are given strategic targets three to five years ahead, as well as more immediate goals to encourage them to focus.  The effort makes it very clear what is expected of suppliers for the current year.

The beer company MillerCoors does something similar.  It tracks and quantifies progress in ten areas, ranging from water to energy to packaging to human rights, using its own sustainability-assessment matrix.  The idea is for MillerCoors to understand its performance, in quantitative terms, in areas that are often difficult to quantify.

 

The Hottest Green Trend is Sustainable Business Practices P

The Hottest Green Trend is Sustainable Business Practices P

Embrace Sustainable Business Practices

 

In a dramatic shift, the fastest growing environmental issue today is sustainable business practices.  While many issues are politically charged, including environmental matters, a major shift in public opinion is happening.

Dramatic changes are ongoing as a consequence of the last Presidential election that will result in less and different federal government regulation and enforcement of environmental matters.  This could include rolling back environmental regulation which was a popular campaign message with the majority that voted for the current President.

 

Environmental regulations may be decreased under the President Trump

Less Environmental Regulations

 

Against that backdrop of less environmental regulation, a national poll earlier this year found that more than half of Americans believe that climate change will not affect them.  Public perception is that “It’s just one of the thousands of other issues that are out there.”

Many political candidates are being advised that it’s not wise to lead with environmental issues, “the environment is not on the top 10 list of issues” that will drive voters.

 

Green Building Practices are Still Popular

 

Environmentally friendly green building practices have remained popular among the majority of consumers.   The sustainable building still maintains the cachet of being “the cool kid on the block.”

 

Environmentally friendly green building practices are still popular

Because of high energy costs and the focus of many on climate change, there is still a great deal of interest in green buildings.  Are you aware of any Sustainable Development projects in your community?

Don’t Ignore the Sustainability Gender Gap

 

There is a definite gender gap when it comes to this issue with women much more interested in sustainability than men.  An in house newsletter at a major mutual fund articulated, “Environmental issues are a top priority to woman customers across all other demographics.”

This is quite a dramatic consideration when women control more than 50% of the nation’s wealth.  A political pollster, just weeks ago distributed a blog post, “Sustainability Isn’t Red or Blue it is the Way to Women Voters.”

Millennials are actually interested in sustainability at higher numbers than women.  A recent market study reported 84% of millennials want to engage with businesses that are sustainable.

 

Voluntary Business Sustainability is Growing

 

Barron’s recently published an article about environmental, social and governance issues, “The New Allure of Sustainable Investing.”  During a legal symposium, a former Department of Justice deputy told a state bar group, voluntary business sustainability is ‘the’ fastest growing area of environmental law and maybe among all law practice areas.”

 

Sustainability is a Business Opportunity

 

Many companies receive inquiries from prospective customers about sustainability today than ever before. Today, environmental, and social issues are two of the fastest growing areas of interest for consumers when considering where they will spend their money.

As part of your Business Sustainability Practices, it is important to develop a written Business Sustainability Policy to clearly state your policy for your employees and customers.

 

Sustainability is a Growing Trend

 

This is not a micro trend, but rather should be viewed in a macro context.  With younger people driving the issue, this is an opportunity for corporations and small business to embrace sustainability.  It’s a win-win issue for both business and consumers.