The Fundamentals of a Corporate Sustainability Program

Recently Xerox, Waste Management (WM), and Arizona State University hosted the Executive Sustainability Summit, a conference for managers in the private and public sectors working on environmental and social issues. I was asked by Xerox to attend and give my thoughts on what I heard and saw. 

The day kicked off with some big picture thoughts on sustainability from WM SVP Duane Woods and Xerox’s global vice president of Environment, Health and Safety, Patty Calkins PDF file. As a long-standing sustainability exec and thought leader, Calkins has a good perspective on what it takes to implement a successful environmental strategy. She laid out four “critical fundamentals to any sustainability program.”

Calkins’ four principles are:

  • Take a quantitative approach. As she said, even though we’re sick of hearing it, the old saying “what gets measured gets done” has proved to be true every time.
  • Keep a value-chain focus. Think beyond the four walls of the company to look at impacts up the supply chain and down through customer use and end of product life. 
  • Be economically driven. If initiatives don’t help the business, they won’t be sustainable by any definition.
  • Seek quick payback and easy wins. Show success quickly.

I agree in principle on these, but wanted to elaborate on them and add my perspective. Starting with good quantitative data is critical, and marrying that with a value chain perspective creates a powerful starting point for sustainability thinking. These are definitely the two big fundamentals. Really knowing where your footprint lies – and it rarely is centered within your own operations – helps identify the true risks and opportunities for your business.

The third and fourth principles are solid, but are more nuanced in execution. Yes, sustainability has to be economically viable -- to be obvious, if a company did things that weren’t profitable, it wouldn’t survive, so it wouldn’t be around to provide environmental or social benefits. But we need a broader sense of what’s included in the “economics” of strategic and tactical sustainability actions. 

The typical cost/benefit analysis that most companies use is fundamentally broken in two ways: it doesn’t take into account either long-term benefits (strategic investments that pay off later) or intangible value (brand enhancement or customer and employee loyalty, for example). The “hurdle rates” we apply to capital investments are ignored for many common strategic decisions, such as investing in innovation and R&D, building a presence in a new geographic or product market, or engaging in brand-building activities and advertising. These all may have longer payback periods than the typical two-year hurdle rate. Like these investments, sustainability initiatives can also be both “economically-driven” and take larger strategic benefits into account.

For example, sustainability leaders are helping customers lower their environmental impacts, which may entail using less of their product (in my next article on this event, I’ll explore how both Xerox and Waste Management are doing exactly that). This kind of cutting-edge initiative is absolutely economically driven -- maintaining or growing market share by satisfying customers is a good thing -- but it could take time to make the transition.