Management
Sustainability

3 big holes in most sustainability strategies ... Are there holes in your sustainability strategy?

Burgess COMMENTARY
My comment on this article

I like this essay, but in my view, it misses the key central issue of management. It misses the metrics dimension.

As long as business and society remain focused on the terrible trio of modern metrics, that is: (1) money profit performance for business; (2) stock prices in capital markets for investors; and (3) GDP growth for policy makers and pundits, then the progress and performance of everything will be unsatisfactory.

There absolutely must be reform of the prevailing core system of metrics so that impact on society and the ecosystem are given as much weight in law and practice as money wealth related measures. As a former Chartered Accountant (E&W) I am appalled at the way the accountancy profession has 'dropped the ball' over the past couple of decades and fervently hope they will get their act together and get serious about rethinking how the CFO function in corporate business does its accounting and reporting on both money profit and all the impact isses that are important.

I call my own effort in this space TrueValueMetrics Value Accountancy ... but nothing much is going to result unless the accountancy profession and those that hold CFO positions in the corporate world embrace substantial change to the core systems of measurement in society.

The community that embraces 'sustainability' tends to discount the power of metrics, and to the extent that they (we) engage in metrics, it is done as a necessary evil. To my mind, it is not at all surprising that there is little 'traction' for society, the environment and the rest when universal metrics for these matters elude us.

Peter Burgess

3 big holes in most sustainability strategies

Are there holes in your sustainability strategy?

If you are finding it tough to implement your sustainability agenda then you may be missing three vital enablers. Read on to learn how to address these omissions to accelerate your sustainability and profitability.

Many companies nowadays have successfully created their sustainability agenda – having developed a sustainability vision, identified their most relevant sustainability themes, set ambitious targets, established company policies, set up governance and developed a communications plan. Often companies have developed compelling annual sustainability reports having gathered examples of desired practice from around their companies. But many of these same companies (even those scoring well on sustainability indices) are failing to capture the full value that sustainability offers.

For example, in our Next Manufacturing Revolution (see www.nextmanufacturingrevolution.org) research we are finding that most companies think they are doing well, but when compared to actual benchmarks are often found to be seriously lacking. Good practice companies have achieved 70% or better improvements in energy, water, and waste per unit of production over the last 10 years.

When faced with this reality, companies ask:

• Why is our rate of improvement well behind our competitors’?
• Where are the big projects that will transform our cost base and our sustainability?
• How can we embed sustainability to fully harness the ideas and energy of our staff?
• Why is our sustainability spend not generating value?

1. Resources – both people and funding

People. Profitable sustainability programs require a mix of capabilities to succeed: A Systems perspective is needed to spot improvement opportunities. Engineering know-how is required to develop technical solutions, fit them into business circumstances and de-risk them. Commercial skills are needed to build robust economic cases. Change management skills are needed to implement new opportunities. And finally, successful companies have a sustainability program leader who is passionate about, and has experience developing successful profitable sustainable solutions– to bring all of the relevant parties together and drive the process.

Funding. Sustainability programs need funding – whether it be for suitably skilled staff or more energy efficient equipment. However, sustainability projects often fail to secure budget allocation when they compete with business-as-usual profit improvement activities such as new product development and plant expansion (which are often much riskier and have a longer payback period). Sustainability initiatives succeed when they have a separate funding allocation or funding decision process – ideally a rigorous stage gated process. This does not mean that the investment criteria are any lower; instead it avoids making difficult trade-offs between traditional forms of value creation (which are in most executives’ comfort zone) and value through sustainability.

To justify these resources, a rigorous high level business case is often required – showing the size of the profit improvement opportunities based on competitor good practice, as well as an estimate of the costs and payback period to achieve them.

2. Incentives – KPIs and culture

KPIs drive staff and executive behaviour and are vital in creating change. To enable KPIs, a baseline is needed as well as ongoing monitoring and reporting of performance in the relevant sustainability themes.

The culture of an organisation can also incentivise change. Culture is led by the most senior executives accompanied by engaged staff championing the new direction.

3. Processes – ideation, collection, development and sharing

Ideation. Profitable sustainability ideas can come from any staff member anywhere in a company, its suppliers, customers and external organisations. With a clearly defined aim, tight transparent selection criteria and engagement processes, the inputs of these groups can be efficiently and effectively harnessed.

Collection. Ideation alone is insufficient. Ideas need to be collected, recorded in a knowledge management system for future reference (and to avoid duplication), assessed and sent to the appropriate part of the company with appropriate feedback to the initiator.

Development of ideas. A stage gated pipeline for developing ideas provides a commonly understood pathway for projects which derisks them and improves their success rates.

Good practice sharing. A “not invented here culture”, internal competition or poor communication between divisions can mean that sustainability performance varies considerably across a company. Processes for sharing of successful ideas magnify the benefits of individual improvement projects.

Consider the following questions, which may reveal a sustainability gap in your organisation:

• Does your company’s sustainability team have all of the key skills identified above?
• Do sustainability projects lose out to business-as-usual profit improvement projects in your company’s capital/budget allocation process?
• Do your KPIs reflect the sustainability aims of your company?
• Is your culture consistent with your sustainability goals?
• Do the above key processes exist for your sustainability efforts?

If you think that you have a sustainability gap, you can contact us to discuss a different approach to accelerate your sustainability program while improving profits.

Greg Lavery
Greg.lavery@laverypennell.com
+44 (0)79 0016 3409