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 . 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.
On the fourth principle, “seek quick payback,” I agree that easy wins are important for a number of reasons. First, they’re everywhere – even the leanest companies continue to find new, innovative, sometimes head-slappingly obvious ways to save money by cutting energy and waste. (See a recent announcement, for example, about GE helping GM’s factories reduce energy by timing all the power-using devices -- lights, heat, pumps, and so on -- to coordinate with the actual movement of the conveyor. As the Reuters reporter said, “it’s a wonder nobody thought of it before.”)
Second, these quick wins help win over internal skeptics -- easy money is hard to argue with. And third, the freed-up capital can be invested in bigger changes. And here’s where I’d add something to the focus on easy wins. Incremental change can get you pretty far if you keep doing it, but sustainability leaders are also going to find disruptive, heretical solutions to their customers’ problems-- big leapfrog changes in how a business or industry works. So a truly robust sustainability strategy needs to balance the two -- incremental and heretical -- to greatest effect.
I’d also add two more core items to Calkins’ four principles. First, top-level support for sustainability efforts is critical, but I suspect it went unsaid at this event because Xerox has clearly had CEO support for green initiatives for years. Second, employee engagement is an essential element in executing sustainability strategy. Luckily, most companies find that as soon as they mention wanting to do more on green, employees pour out of the woodwork wanting to help. Sustainability is one of the greatest engagement tools out there.
Moving past the core principles, I wanted to also share Calkins’ “Top 10 Reasons to Act Sustainably” because they capture the core logic of green business, and they fit very well into my framework of four buckets of value creation -- cost reduction, lowered risk, higher revenues, enhanced brand -- from the book I co-authored, Green to Gold. Here are her 10 reasons, with my buckets in parentheses:
- Eliminate visits from your friendly regulator (risk)
- Reduce lawyers on staff (risk/cost)
- Capture bottom line cost reductions (cost)
- Improve business process efficiency (cost)
- Avoid shareholder resolutions (risk)
- Enhance brand value (brand)
- Retain/attract top/key talent (brand)
- Grow revenue (revenue)
- Drive innovation (all)
- “We have not inherited the world from our forefathers…we have borrowed it from our children”
The last point is a proverb credited to indigenous peoples. Calkins makes the point that in the end, sustainability is the right thing to do for our children, and our future selves. The moral argument usually sits outside of the business world, but why? Businesses are part of society and the people working in them want to do the right thing, so it’s a good reminder.
In the end, what’s good for society -- creating a sustainable economy and civilization -- is good for business too. The same fundamental principles apply to both.
Both Waste Management and Xerox have been clients of Winston Eco-Strategies, LLC. This article originally appeared on Xerox's website and is reprinted with permission.
Image CC licensed by Flickr user Jeremy Burgin.