By Kathleen Miller Perkins, Miller Consultants & Bill Brewer, Summit Energy
Method. Whole Foods. Stonyfield Farms. These well-known consumer goods brands roll off the tip of the tongue when you think ‘sustainability.’ However, consumer goods companies aren’t the only businesses that benefit from a focus on sustainability. B2B companies are in a prime position for using sustainability initiatives to attain and retain their customer base. In fact, sustainability may be a more powerful tool over the long term for B2B companies than B2C companies.
Businesses of all shapes and sizes are reporting on the sustainability of the product or service they sell. However, when companies begin calculating their footprint, most find that they are implicitly reporting on the aggregate footprint of their suppliers. Many companies have found that the greatest opportunity for reducing their environmental impact and increasing social stewardship lies within their supply chain. According to David Rich, an associate at the World Resources Institute, “Many companies are finding that up to 80-90% of their total carbon emissions can be attributed to activities in their value chain.”
Suppliers to B2C companies – aka B2B companies – can help satisfy the sustainability goals of their customers by decreasing the environmental footprint of their product or service. Many of these sustainability efforts often lower energy and resource costs, which translates into higher profits. For example, pulp & paper manufacturer Georgia-Pacific worked with its customer Honest Tea to design packaging that was 41% lighter, which saved money on shipping and fuel costs.
In the B2B world, sustainability can be an invaluable tool for generating and retaining business. B2B companies typically have far fewer potential customers than B2C companies, and the magnitude of the purchases are greater. B2Bs can directly strengthen a business relationship with a valuable customer – or potential customer – by engaging with them to understand their sustainability objectives.
Unfortunately, most B2B’s don’t try to engage their customers. A recent Gallup survey showed that only 22% of B2Bs are emotionally engaged meaning that the customers are attached to the supplier have confidence in them believe that they have integrity and are proud to be associated with them. Only 13% are fully engaged, meaning that the customer is attached and loyal to the supplier and believes that this supplier is perfect for them. However, the opportunity is great for companies that can maximize customer relationships. The same research suggests that fully engaged customers deliver as much as a 23% premium over average customers, and the greatest engagement occurs when the vendor company has a positive impact on a client’s business through its services, products or interactions.
B2Bs have the opportunity to positively impact their customers through varied sustainability issues, including but not limited to greenhouse gas emissions and other key environmental metrics. Issues pertaining to social sustainability can play a role in cementing customer relationships as well. For example, many companies are pressing suppliers to trace the origins of their raw materials. The financial regulation bill that President Obama signed into law in July includes a measure requiring thousands of U.S. companies to disclose how they ensure that their products are free from “conflict minerals” from the Democratic Republic of the Congo. The sale of minerals such as tin, gold and tantalum, a mineral that goes into high tech products, has been responsible for a long and bloody war in the Congo. In fact, the latest KPMG study of trends in international corporate responsibility reporting revealed that over 90% of the 250 largest global companies (GL250) have a supply chain code of conduct based on the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines. These codes of conduct include items pertaining to ethics, governance, environmental and social issues.
If you’re a B2B company, why wait until your customers require you to incorporate sustainability into your business? Can there be value in being proactive and standing out from the pack? Show your customers that you continuously are looking for ways to increase the value that you bring them through sustainability.
- Ask your customers what is important to them in the sustainability arena. For example, if you find that carbon reduction is a priority of your most critical customers, think creatively about how reducing your company’s carbon might impact your customers’ footprint. Look for ‘best practices’ and engage your customers in brainstorming creative solutions.
- Stay informed about sustainability by keeping up with industry issues, regulations, legislation and national and global trends. If you hear of a new regulation that will affect your customers, explore ways you might help them comply.
- Engage your customers in ongoing conversation about how you are addressing sustainability and how you can strengthen your partnership with them through joint efforts. As an example, a beverage company that supplies Sam’s Club offered to help them design an environmental scorecard. Sam’s Club embraced the idea and will use the co-designed card to evaluate all their beverage suppliers.
B2Bs can effectively use sustainability to establish closer ties with customers and reduce operating costs. In fact, taking a strategic approach to sustainability not only can increase the strength of your current relationships, but also provide you access to new business and opportunity. What are your experiences in building closer ties with your customers through sustainability?
Kathy Miller is the CEO of Miller Consultants, a firm that assists with the organizational development and the leadership of change in support of sustainable practices. www.millerconsultants.com
Bill Brewer is Vice President at Summit Energy, a global company that provides sustainability and energy management services to businesses in a wide range of industries. www.summitenergygps.com