Today, many companies acknowledge that they can play a significant role in addressing climate change and sustainability in general. Some have even begun proactively beating a path to transform their businesses, reaching for lofty goals such as zero waste, carbon neutrality, or even restoration of degraded ecosystems. Most, however, are only just starting to figure out what it means to be a sustainable business. In a previous post, I discussed the 5 levels of sustainability management maturity, through which a company must progress in pursuit of a sustainability transformation. So where should a company invest to successfully reach their sustainability goals?
In my opinion, there are four primary areas that you should consider when developing a sustainability investment plan: management infrastructure, eco-efficiency programs, strategic initiatives, and marketing programs. Clearly, there is a need to address these areas somewhat sequentially; you cannot successfully market sustainability before making strategic changes, and you cannot develop strategic initiatives without already having an appropriate management infrastructure in place. There is, however, room for overlap, and most mature companies manage to do all four in parallel.
There is an under-appreciated requirement for companies to invest in the appropriate management infrastructure and organizational culture to support a transformation to sustainability. While many companies are diving headfirst into eco-efficiency programs, we’ve noticed a dearth of investments in optimizing the organization’s structure for sustainability transformation and implementation. As previously discussed, the key points to developing such a structure are:
- Create a sustainability strategy that enhances your business
- Organize management for effective implementation
- Optimize processes for internal and external (supply chain) operations
- Measure and report your results
- Engage your employees and stakeholders around sustainability
- Communicate successes back to your customers
Sound easy? Well, we all know that this can be highly complex, painfully political, and your biggest roadblock if executive sponsors are not supportive and willing to invest in these management fundamentals as well.
These include programs to improve your company’s environmental footprint, such as:
- Energy use (sources and efficiency)
- Water use (sources, efficiency, release and conservation)
- Waste reduction (toxicity elimination, design for the environment, and recycling)
- Materials use (reuse, sources, and closed loop design)
- Social and community impact
Cost reduction, regulatory compliance and risk management often drive the business case for these programs, and consequently this is usually where most companies choose to start. To really reduce its environmental footprint, however, a company must look beyond its own boundaries and consider its suppliers’ environmental footprints as well. For very large companies, this can be an enormous undertaking that requires considerable time and investment. Wal-Mart for example, will take many years to drive sustainability into its 60,000-plus-supplier network.
Often, a company’s greatest opportunity lies in the innovations and transformations that result from sustainability thinking. While eco-programs can improve your company’s internal sustainability, strategic initiatives can have far greater leverage as their impact multiplies in the hands of your customers who consume, use, and finally dispose of your product. Just look at companies like InterfaceFLOR, whose modularized floor covering allows customers to make replacements only in high-traffic areas, thereby greatly reducing the amount of carpet being sent to landfill. Another example is in the IT industry, which contributes to approximately 2% of greenhouse gas emissions, but has the potential to reduce the remaining 98% with enabling technologies such as HP’s Halo telepresence, a video-conferencing solution that reduces the customer’s need for GHG-intensive travel. These examples show that the opportunities from sustainable thinking can not only create competitive products and services, but also have a far-reaching impact that enables end-users to be more sustainable.
When developing a portfolio of strategic initiatives, remember to consider a whole-systems approach. By this, I mean that your company’s offerings (products or services) should be developed with their life-cycle impact on the environment and ecosystem services in mind. While there are several systems approaches to choose from (e.g. Natural Capitalism and The Natural Step), they fundamentally come down to four broad categories:
- Efficiency – make products smaller, lighter, reusable, and more efficient
- Dematerialization – reduce material inputs, eliminate toxic outputs, and use closed-loop design principles
- Transmaterialization – create services out of products, providing customers with product benefit but eliminating the need to create more stuff
- Restoration – actively work to protect and restore ecosystem services that provide the natural capital to make your product or service (including supporting the surrounding communities)
Clearly, the scope of investment in such strategic initiatives is greatly dependent upon the nature of your business, and ultimately should be managed within the company’s overarching portfolio management strategy. This is, however, where most of the real sustainability transformation happens and where the greatest good (and profits) can be achieved.
Finally, you need to be able to tell your company’s story in a way that allows customers and other stakeholders to have confidence in your brand. Certainly, this can be one of the more controversial investment areas, as some companies have overly exaggerated their sustainability performance, resulting in accusations of greenwashing, while others have shied away from discussing their sustainability efforts, for fear of drawing fire from aggressive watchdogs. Marketing your company’s sustainability efforts, however, is about more than just messaging, it also includes:
- Developing a comprehensive strategy for branding your sustainability initiatives
- Understanding what motivates your customers to purchase your offering
- Determining how you want your customers to experience sustainability throughout your product’s lifecycle
- Defining how you want to relate sustainability to your core, existing business
While there are several brand strategy approaches to consider, the investment in a strong sustainability marketing strategy is not discretionary. It can bring sustainability to life for your company – both internally by aligning business units and employees, and externally by connecting with customers and suppliers. Implemented properly, it can also help create tremendous competitive advantage. GE’s Ecomagination and IBM’s Smarter Planet are two great examples of companies that have repositioned their brand, and aligned the organization around a new way of doing business – and their bottom lines are reaping the benefits from this smart investment.
As you prepare your 2010 budgets for sustainability, consider the big picture: How are you really going to get sustainability implemented in your company? As you work to align your organization around a shared vision of sustainable business, you will need to update your management infrastructure, improve operational efficiency, identify strategic plays and tell your story in a consistent and credible way. A holistic portfolio of sustainability investments will ensure that your sustainable business implementation is on the right track.
Image above was graciously borrowed from Marvel Comics, the publisher of the Fantastic Four.
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 Group brings a new framework for sustainability management that integrates strategy, operations, branding, measurement and organizational development to drive profitable business transformation.
Geoffrey Barneby is a Principal at FairRidge Group, with 15 years experience developing strategic business solutions. Geoff holds an MBA in International Business from the University of South Carolina in coordination with the Wirtschaftsuniversitat Wien.