Embrace Sustainability or Put Your Business at Risk
Embrace Sustainability or Put Your Business at Risk
The concept behind sustainability is as simple as it is compelling: resources may only be used at a rate at which they can be replenished.
When most people see the word "resources," they think immediately of natural resources. But in order to thrive businesses actually need three types of resources: environmental (e.g., natural resources), social (including employees, customers and general societal goodwill) and economic (money).
In fact, these three factors comprise a common definition of business sustainability: increasing short- and long-term profitability by holistically managing economic, social and environmental risks and opportunities.
This definition is relevant both in times of recession and economic growth because the main drivers of sustainability don't change. The three factors have been the drivers of business success since mankind has been engaged in business endeavors. While sustainability may seem to run counter to the profit-maximizing doctrine of running a company, this concept of creating sustainable business processes is increasingly seen as a key to long-term success.
Organizations can work toward sustainability in many ways, but to be truly effective sustainability initiatives cannot stand alone. They must transform the organization as a whole. This takes individual and coordinated efforts from many segments of a company.
Look at Sustainability Strategically
Nike, Coca-Cola, and Nestle are examples of companies that go about this strategically. They have figured out that if you do not change the way you operate -- and the way your supply chain operates -- you're potentially putting your entire business model at risk. They know that risk encompasses more than financial risk. If a company loses its societal mandate to do business then it faces as much risk as if it were struggling financially.
Nestle understands that to continue making very high-quality food products requires a planet that can produce a reliable supply of natural products. Its "Creating Shared Value" approach focuses on specific areas of the company's core business activities -- water, nutrition, and rural development.
Coca-Cola has been very aggressive around water development and protection, both for agriculture as well as in communities. Although the company does not own farms, it realizes that it has "significant opportunities within [its] global supply chain to develop and encourage more sustainable practices to benefit suppliers, customers and consumers."
Nike, which relies heavily on globally outsourced manufacturing operations, is working to increase its focus on sustainable business and innovation. It is integrating the concept across its business strategies to create a more sustainable approach aimed at providing greater returns to the company's business, communities, contract factory workers, consumers and the planet.
Four Steps to Sustainability Success in Your Business
When incorporating sustainability as an integral part of corporate strategy, it's imperative to have a clear view into the business at a level that is much higher than just simply complying with regulations.
Whether you are embarking on a new sustainability plan or tweaking plans that are already in place, the following four steps can help you get the most impact from your efforts:
1. Assess your organization and plan how you can incorporate sustainability in a strategic, holistic way. Before you begin to create a strategy it's imperative to get feedback and understand the needs of all your stakeholders. Dig deep to fully understand the business case for sustainability for your company. Remember that such a case should combine social, environmental and economic considerations. With that understanding, you can see where opportunities exist to improve. Any plan must include a concrete view of how to move from strategy to execution.
In an interview with GreenBiz.com, Peter White, director of global sustainability for consumer products giant Proctor & Gamble, noted that P&G is developing "sustainable innovation products" that have a "significantly reduced environmental footprint versus previous alternative products." By 2012, the company plans to "develop and market at least $20 billion worth in cumulative sales." This is a perfect example of incorporating sustainability into a business in a strategic way and looking forward to a significant boost to the bottom line at the same time. Winning in the marketplace through more sustainability products is a key value driver to sustainability.
2. Measure your business activities. Set a baseline for current activities so you know when and where you are improving. Include your network of partners and suppliers in the measurement process to increase the footprint of your efforts. Some businesses even include their customers and their usage and disposal of products.
For example, at SAP, one of our goals was to set and achieve a significant decrease in our greenhouse gas (GHG) emissions. Yet, at the time we had no real idea of what our carbon footprint was.
In order to determine a baseline of our emissions, in 2008 we carried out a comprehensive program to inventory and measure our year-2007 emissions. We looked across our business and measured emissions in all three direct and indirect scopes. We took that information and extrapolated a year-2000 baseline figure, based on emissions per employee head count as identified in the 2007 study multiplied by the year-2000 head count.
3. Take action. Execute on your plan and measure it every step of the way. This includes the involvement of employees in engagement programs that make them part of the effort.
Continuing the example noted above, after we determined our emissions baseline at SAP we came up with an ambitious plan to reduce the company's total GHG emissions back to the levels of 2000 by 2020, cutting our emissions by nearly half from the year-2007 levels. We use our own software solutions, including SAP Carbon Impact, to measure, report and guide the reduction of our emissions.
The result? By working with processes and involving employees across our company in 2009 we were able to decrease our emissions by 15 percent, reduce energy use by 7 percent, and achieve an energy mix that includes 33 percent renewable energy. And there was a direct financial payoff, too: nearly 90 million Euros ($124 million USD) in direct savings!
4. Constantly monitor and adjust your plan. Learn from your experience and look for additional means of achieving sustainability throughout your organization and ecosystem.
Sustainability means moving beyond merely fulfilling corporate responsibilities and governmental regulations to incorporating the topic as a strategic business development pillar. Sustainability simply has a great business case -- it makes good business sense, allowing you to reduce the cost of compliance, increase your resource productivity, win new markets, enhance your brand and attract and retain the high-quality talent your business needs.
By embedding sustainability in each action as a driver of profitability and reduced risk, best-run businesses can holistically manage sustainability across their business processes and their business network.
The end result is a sustainable business model that will ensure the longevity of your business. As Catherine Roche, partner and managing director of the Boston Consulting Group, noted in "The Business of Sustainability," "Green can save you a lot of money -- not two or three years from now, but now."
Peter Graf, Ph.D., is the chief sustainability officer and executive vice president of sustainability solutions at SAP AG. He is responsible for developing sustainable solutions that best serve the needs of SAP’s global customers, while also driving sustainable operations within SAP.
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