![]() Date: 2025-02-07 Page is: DBtxt003.php txt00004549 | |||||||||
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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:
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?
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 Peter Burgess Founder CEO TrueValueMetrics RE: 3 big holes in most sustainability strategies 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 the accounting and reporting of 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
Greg Lavery Director Lavery Pennell RE: 3 big holes in most sustainability strategies Peter Point 2 is all about metrics - making sure that the actions of individuals within an organisation are aligned with the sustainability strategy. So we have indeed recognised the power of metrics to drive change. There are a lot of sustainability indices around these days (108 last time someone counted), such as the Dow Jones Sustainability Index, and more being created every week. So clearly there is no consensus yet as to the right metrics. Peter - how does one make sure that the right metrics are being used to represent the correct economic, social and environmental outcomes sought without a very long diverse list which is difficult to implement? Greg Peter Burgess Founder CEO TrueValueMetrics RE: 3 big holes in most sustainability strategies Dear Greg Over time the alphabet soup of acronyms change. I should be pretty good at acronyms giving my experience working with different parts of the global economy with the World Bank, UN and others who live on top of acronyms. But I completely tuned out KPI which, of course, turns out to be Key Performance Indicator. When I was a corporate CFO we used a slightly different set of words ... we called these things Key Item Controls I think there is a subtle difference between the increasingly popular 'indicators' and what we used to use in the context of key item control. Control implies something a lot more pro-active than 'indication'. As a corporate officer I was expected to 'get results' and for this we exerted control. I remember moving from the UK to Canada and the USA and moving from working in the 'accounting' department to working in the 'controllers' department. Again a not so subtle change in word and perhaps expectation. So mea culpa ... you have included the metrics dimension and I apologize Peter Peter Burgess Founder CEO TrueValueMetrics RE: 3 big holes in most sustainability strategies Dear Greg To continue: You mention that there are a lot of sustainability indices around ... 108 at last count. I have never liked indices as a part of the management toolbox. To me they are a way of presenting an 'average', and I argue that nothing is ever 'average'. If I live part of my time in the United States and part of my time in the UK, a typical index could easily conclude that I lived in the middle of the Atlantic, and I assure you that is wrong. I argue that part of the art of management is to 'move the average' and one does that by understanding all the data and fixing the 'low hanging fruit'. Surprise surprise the average changes. My experience doing this in the corporate setting was that massive changes in performance could be achieved rapidly, but the key was not to know more and more about the changes displayed by the index, but understanding what was going on inside the average. I see things from the perspective of a cost accountant more than an economist. To me, looking at correlations associated with the movement of indices lacks utility. Rather I want to dig down and get to grips with cause and effect at a granular level. I don't think there will be major management progress until deep granularity is the norm. From my perspective the DJ Sustainability Index are measures of result with no useful granularity for decision making. You are right that there is no 'consensus' about the right metrics. I don't look for consensus but rather for effectiveness. Going back to my work in the corporate arena, I was interested in getting improved performance. I was able to measure improved performance using the money profit accounts, but we got the improved performance by having all sorts of other metrics. For example, in the shipping department, the supervisor had amazing records about the mileage he got from every tire his trucks used. By using more expensive tires we reduced costs and increased the efficiency of his department and in turn increased my profits. This was not done based on consensus, but was effective. The top metric of money profit clearly needs to be complemented by measures that relate to people, planet, power, etc. I am working my way towards a concept of quantified value that embraces all of these, and that will eventually require some sort of consensus for widespread adoption. But before that happens, I want to have a huge number of subsidiary metrics that are analogous to the tire performance in the shipping department. I think the good news is that a lot of these are being developed and used ... and it is getting these into play that seems to me to be something that will be very useful. A couple of days ago someone in the green sustainable arena observed that while interest in these matters has increased rapidly over the past 10 years, when measuring actual results being achieved and the needle has hardly moved over this time. This was my experience in the corporate world ... management people would talk about their improved performance, but I could not see it in the results. It was not until there were subsidiary metrics in all the departments that top performance changed, and then it changed very rapidly and way more than anyone thought was possible. With respect to '... a long diverse list which is difficult to implement', I argue that the world needs better green sustainable performance, and there will be consensus about how to measure this. In the meantime we should have thousands of items that different people can use to change what they are doing for the better. Success will be achieved when the change is 'pulled' by thousands of people rather than a few top people in 'push mode' Everyone should be able to find something that moves the needle at the local point of activity, and then, when added up, also moves the big needle. Sorry this is so long, but the subject is important Peter | |||||||||
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