You’re probably already familiar with the ongoing debates over greenwashing, and the various sustainability standards that enable companies to credibly avoid this label. We discussed these issues in the recent post “How green is my product?” But what about services? Do they matter, and do we need to care? After all, isn’t sustainability just concerned with tangible products that use up or destroy the planet’s resources?
Well, take a look at these statistics (for the US economy in 2008):
Sector | GDP by Sector (%)
Agriculture | 0.9
Industry | 20.6
Services | 78.5
So, even if we do a fantastic job improving the sustainability of our entire industrial sector, we will still be impacting less than a quarter of our overall economic activity.
This is also where most corporate sustainability initiatives tend to get hung up. It’s easy to identify improvements when it comes to tangible things like energy, water and waste, but it’s difficult to move beyond these to start improving the services footprint in any company. This is partly because services are typically support functions, and are not usually subject to the same continued scrutiny as mainline functions. In addition, the direct footprint of service functions often pales in comparison to the total footprint of an average manufacturing company – it’s usually only 20% or less of the total (this number varies, but is based on recent work with a large beverage company). This is particularly true if you only look at Scope I and Scope II emissions.
If you look at the big picture, however, you can see that overall there are many more “service jobs” in the US economy than “industrial jobs.” Consider the following labor force statistics (US economy, 2007, excluding unemployed):
Occupation | Proportion of Total Workforce (%)
Managerial and Professional | 35.5
Technical, Sales and Admin | 24.8
Services | 16.5
Manufacturing, Mining, Transportation & Crafts| 24.0
Farming, Forestry & Fishing | 0.6
So, although service jobs may have a lower direct impact on greenhouse gas emissions than industrial jobs, there are about three times as many of them, meaning that their aggregate impact is probably about the same as the total footprint of industry.
In addition, unless we include service, managerial and support functions in our drive to improve sustainability, we will be missing 75% of the opportunity for improvements – and, more importantly, at least 75% of the concurrent potential for innovative (and transformative) solutions. Far from being a low carbon-intensity/low opportunity area, the service functions in any business are often the key to identifying and driving breakthrough change. Excluding them from the sustainability change equation means that only the quick-hit, short-term cost reduction opportunities will be found. This approach would miss the real opportunities for transformative change, the ones achieved by using sustainability as a lens to remake your entire organization.
At FairRidge Group, we are finding that the biggest challenge most of our clients face is in exactly this area. The struggle to get sustainability out of the sustainability department – and integrated into day-to-day operational and strategic thinking, where it can focus on driving top line growth, not just cost reduction through eco-efficiencies – is the defining issue. We will cover this issue in more detail in future blog posts.
Today, relatively few companies are looking beyond eco-efficiency cost savings to the huge potential market for transformative, innovation-driven solutions. The companies that are have rethought this equation and have one thing in common: they see sustainability as a strategic opportunity that engages their entire organization in redefining the products and services they offer. Some examples from the technology sector are worth reviewing…
- Consider how IBM, with its Smarter Planet program, emphasizes the role technology (and IBM) can play in creating smarter, more innovative solutions to age-old infrastructure design challenges.
- Also, a recent Gartner report identified other tech companies – specifically HP, BT and Fujitsu – that are also starting to focus on opportunities to use IT to drive innovations in sustainability outside of the immediate footprint of tech products themselves.
- Gartner found that only 2% of global carbon emissions come directly from IT, but that IT has a key role to play in reducing the other 98%. “Those that look at the wider 98 per cent solutions will drive real innovation and help reduce the overall environmental footprint of their company,” said Simon Mingay, Research Vice President at Gartner.
So, the commercial world is starting to wake up to the importance – and huge business opportunity – inherent in tackling the existing service and support infrastructure. We also now know that you should care if your plumber is sustainable. But, how do you find out if they are? And what should you do if you are a plumber (or one of the myriad of other service/support industries) to advertise that you are doing your part?
As with all “green” products there is, as yet, no dominant standard for sustainable services or service providers. Perhaps the most interesting development in this area, however, is the B Corporation. This emerging standard certifies the company, rather than the individual service or product (you can read more about it in this earlier TriplePundit.com post). To qualify, a company must:
- Meet comprehensive and transparent social and environmental performance standards.
- Institutionalize stakeholder interests.
These stakeholder interests get baked into the company’s governing documents, so it is likely the company will continue to practice what it preaches in terms of sustainability, even when management and markets change. The key here is that B Corporations recognize that to be truly sustainable, you have to commit 100% of your business to being sustainable – not just the 25% that makes the most mess.
It seems to me that this offers a glimpse of the future – a recognition that the sustainability revolution won’t be done until all the old assumptions of what is productive and sustainable have been challenged and re-engineered. If only 25% of what we do is to make stuff, how could we stop there? The last 75% contains just as many old assumptions – and just as many opportunities for restorative footprints and rising profits – as the first 25% of the “stuff” economy.
How far along do you think we are in addressing these challenges? Sound off in the comments.
FairRidge Group is a team of management, strategy, and change experts focused on business transformation through the practical application of sustainability for operational improvement and strategic innovation. FairRidge brings a new framework for sustainability management that integrates strategy, operations, branding, measurement and organizational development to drive profitable business transformation.
Peter Whitehead is a Principal at FairRidge Group, with 25 years of management consulting, entrepreneurial and executive management experience. Peter earned a double honors degree in Industrial Engineering and Economics at the University of Birmingham, UK.