Last December, I wrote an article called "
Sustainability 101: The Human Problem," which outlined seven actions and principles that help companies embark on their environmental sustainability journey. The last action was "Focus on the Dollar Spent on the Margin," and it could not be more relevant today.
Companies want to ensure the greatest environmental and economic return on each dollar (and hour) spent on sustainability. So which individuals or groups can you influence to support your sustainability efforts? Which individuals or groups pose the greatest business risk with respect to your environmental performance? Where do you start?
Companies should start by evaluating their stakeholders and then taking some counterintuitive actions: Initiating partnerships with some groups they often contest, enlisting the support of those who pose a high business risk, and creating networks to enable others to improve their stewardship. Collectively, this strategy will improve your company's environmental performance.
Thinking strategically about engaging entities beyond employees, customers or shareholders has not been a hallmark of corporations over the last 100 years. And thinking more specifically about a company's business risk related to poor environmental or social performance was even less important. Consider the
Cuyahoga (the 40th anniversary of the river of fire was just two weeks ago), the tobacco industry's cover-up exposed by "60 Minutes" in the '90s, Erin Brockovich, or "A Civil Action." The last century was the "Era of Externalities," where many companies assumed a limitless landscape, literal and theoretical, for their model of production and consumption, thanks to centuries of economic textbooks that espoused the same.
Companies are actors in society, just like any other, with a vast array of relationships. Shareholders, employees, managers, executives, creditors and unions all gain and lose by a company's financial performance. Labor, social and environmental non-governmental organizations, state and federal governments and regulators all depend on companies to help them meet goals defined internally or by legislation for the public good. Suppliers, customers and contractors look to companies for livelihoods and products and services. Neighbors looks to companies for what they don't produce -- congestion, toxic emissions and noise. These relationships are marked by a range of sentiments from trust, appreciation and loyalty to skepticism, frustration and anger.
For each of these entities, businesses have varying degrees of influence. They can alter the behavior of a supplier more easily than that of a regulator, for example. In turn, each of these stakeholders pose varying levels of business risk to a company with regards to corporate environmental performance. With some exceptions, many "20th century" companies would often approach stakeholders primarily by ignoring them. Considering the influence and risk factors above, their strategy might be summed up as follows:
20th Century Organization chart by S. Linaweaver and B. Bate.
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A company cannot get away with the same type of behavior today. "Twenty-first Century" organizations face just as many, if not more, stakeholders. More importantly, the degree of knowledge available and the ability of a single individual to garner widespread visibility has increased exponentially. No one can be ignored.
A great example of this shift is in the recent trial over oil waste in the Amazon. From the 1960s to the '80s, Texaco drilled over 300 wells in Ecuador, generating $20 billion in revenue, by some estimates. When they left the country in 1992, residents claim they also left over 18 billion gallons of waste in nearly 1,000 open pits. Texaco thought it addressed the situation by spending about $40 million and capping 200 pits in 1998. When Chevron bought Texaco in 2001, it inherited the liability, one that has grown much larger in the 21st century.
Today Chevron faces a $27 billion lawsuit by 30,000 Ecuadoreans regarding the waste pits. The arguments of indigenous groups battling Chevron can be found easily on the web, and the suit has been covered prominently in the Financial Times, The Economist, and Business Week. Type "Chevron Ecuador pollution" into Google and you get 60,000 hits, a concept that did not exist for anyone pumping oil for Texaco in Ecuador in the '60s and '70s. It is a concept very real to those in San Ramon in 2009.
What, then is the strategy? How do you manage relationships with stakeholders that are at times both ubiquitous and distant? Do you engage everyone, from a three-person green activist group in Mendocino to seven nuns in Dublin to a mutual fund representing $20 billion in investment? And if you do engage them, what do you say? You may not have inherited a legacy of oil ponds in Ecuador, but every industry, and every company, has its impacts, unintended or otherwise. And every company can benefit from thinking strategically about how to engage.
For groups where you have high influence and they represent a low business risk with respect to your environmental performance, such as some suppliers or partners, you want to provide them with tools and frameworks to ensure environmental leadership. Creating networks of individuals and groups who collaborate and share their learning best accomplishes this. In short, your best move is to enable this group, so that they become better stewards. Wal-Mart's Sustainable Value Networks are a good example of this. Your goal here is to engender trust and have this group collectively lower overall business risk with minimal oversight, allowing you to have the capacity to focus in other areas as well.
For those groups that represent a low business risk and where you have low influence, (there are relatively few, and any placed in this group would immediately cry otherwise) you want to acknowledge and move on. Acknowledgment is key, however, because it costs next to nothing and helps shift this group into the high influence category. For example, you could ask a neighbor - yes, a person who lives in a house next to one of your plants or offices - to be a member of a sustainability council or network mentioned above.
For those on the ground that pose a high risk to your business, based on your environmental performance, and where you have a high degree of influence, your goal is to reduce the risk these groups pose to your business. Where a 20th century organization would have powered over, mandated, or muzzled, you want to
enlist by creating a shared understanding of the challenges you face, educating and inspiring them so that you can develop mutual accountability for a successful outcome. This group may include employees or contractors or a supplier. Make potential problems part of your solution, where employees see a new environmental regulation not as a burdensome check, but as a way the company can out behave the competition and increase share price, benefiting both the company and the employee.
21st Century Organization chart by S. Linaweaver and B. Bate.
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Journalists, regulators, government agencies at all levels, and environmental and social NGOs -- these all fall under the last group -- people that pose a high risk to your business with respect to environmental performance, whether through a boycott, a damning report, a destructive policy, or a plant shutdown. Here you can exercise very little influence. Moreover, these ranks are growing by the day, as more and more people learn how to use social media and promote their ire of the day. What if Erin Brockovich had Twitter? She does now.
With this group, attempting to shift them to the left and lower their business risk is typically futile and unwise. The goal is to
initiate: Take the first step in opening a partnership, listen and establish a relationship of transparency, the exact opposite of distraction. For example, if an activist NGO is publicizing a report about a trace chemical in one of your products that you have been addressing but still persists, explain your situation and discuss the trade-offs. Let people know that you acknowledge their concern, and outline the specific challenges you face in resolving the problem at hand. While some organizations may appear like pesky gnats to you, these entities have a very strong role to play in society and do not exist solely to piss you off. You want to move this group from engagement to enlistment. Last time I checked, Greenpeace's phone lines received incoming calls too.
The first thing to do is get your VPs, top salespeople and corporate communications folks in the same room, and list all of your stakeholders. The next thing is to place them on the grid above. Then assign a leader for each box and plan your approach. That is a two-hour workshop worth investing in for the sake of the sustainability of your company. It is an engagement strategy, not a sustainability strategy, but it will make your sustainability strategy stronger.
Businesses should not be accountable to everyone to the same degree. They are entities that have fiduciary and legal duties to shareholders, employees and customers. But their sphere is much greater than that, and businesses often mistake engagement for accountability.
Just because you acknowledge a group, and listen, does not mean you are eternally beholden to them. Acknowledging costs you nothing but saves you much more than that. A 21st century organization is one that initiates, enlists and enables, and at all times acknowledges. It knows when to do what, how much time to invest, and it never ignores. Right now your company is most likely stuck between centuries. Give it a nudge forward.
Stephen Linaweaver is an associate principal at GreenOrder, an LRN Company. GreenOrder is a strategy and management consulting firm that, since 2000, has helped leading companies turn sustainability into business value.Â
Image by LeoSynapse.
