Interserve bridges the gap between sustainability and finance
Interserve bridges the gap between sustainability and finance
Ask sustainability executives, on condition of anonymity, what the biggest obstacle to green progress is in their business and you almost invariably get the same answer: the finance director. It is a trend that risks putting Interserve Group's Tim Haywood in a somewhat difficult position, given he is both group finance director and head of sustainability at the construction and property services firm.
However, for Haywood, who last week officially launched an ambitious new strategy that promises to halve greenhouse gas emissions across the 50,000-strong global company, the perceived conflict between the two disciplines is entirely avoidable -- in fact, it has left him more than a little frustrated.
"I must admit I am a bit fed up with the way the finance director is seen as the person who knows the cost of everything and the value of nothing, just as I am fed up with the perception the sustainability executive is the reverse, knowing the value of everything and the cost of nothing," he says, reflecting on 18 months serving as both finance and sustainability director. "That is nonsense -- sustainability has a very strong business case."
The challenge, as Haywood acknowledges, is making that business case explicit, and it is this necessity that has informed the innovative management framework that underpins the company's new sustainability strategy. "The first thing I wanted to do was bring some financial director measurement to the sustainability sphere, so we have developed this concept of looking at four 'capitals,'" he explains. "Financial capital, natural capital, social capital and knowledge capital."
Measuring the performance of the first "capital" is easy since tracking the financial metrics of a project or department is something every business does, but the three new "capitals" present more of a challenge. Interserve is working with the Robertsbridge Group's Tony Juniper, who also authored the recent book, "What Has Nature Ever Done for Us," to develop a means of accounting for the environmental impacts the company has. It is an approach that Haywood admits is likely to draw on the pioneering work undertaken by sportswear company Puma, which last year published the world's first Environmental Profit and Loss sheet that committed to putting a financial value on the company's impact on the natural world. However, the plan to develop two new metrics for the company's social capital and knowledge capital will require an entirely new approach for measuring the largely intangible value of the company's interaction with the communities it is part of and the training and talent development it offers staff and stakeholders.
Haywood admits placing a meaningful value on the company's community engagement and skills programs represents a considerable challenge. "There is a degree of 'how the bloody hell do you measure that?'" he says. "And we don't have the answer yet. But we will get there and we will define what success looks like. How we measure the pull and push of financial, natural, social and knowledge capital will require a lot of debate within the business. But the overarching goal is to get to a position where we ensure that sustainable business is seen as good business."
The medium-term goal is to have metrics in place to measure the financial, natural, social and knowledge capital of half of the projects Interserve works on by 2016-17 and then use the new approach to incentivize managers and teams to embrace more sustainable behaviors and technologies. "We are building a measurement and rewards structure around each of these targets -- incentives will be applied against these targets," Haywood confirms. "One of the advantages we have is that we already have top-level executive buy-in. The traditional opponent of this way of thinking, the FD, is the proponent of this approach."
The work to develop this new sustainability reporting and rewards framework will be carried out alongside a more conventional sustainability push designed to meet some exacting green targets, including a series escalating goals to use only sustainable forest products from next year; cut water use 20 percent, reduce construction waste by a quarter and office waste by half, and reduce emissions from business travel 30 percent by 2016; increase recycled content in materials by 50 percent and achieve 75 percent of traceability for building materials by 2018, and halve absolute carbon emission by 2020.
All of the targets, and in particular the overarching pledge to halve emissions within seven years, sound daunting, but Haywood is insistent that ambitious goals are critical to any successful sustainability program.
"The first thing we have to do as a board of directors is understand that in this world, unlike in the financial world, we need stretching targets that we don't always know how to reach," he says. "In finance, you'll have your targets for the year and you should have a clear strategy for meeting them, but with sustainability we don't have all the answers."
Although, that is not to say Interserve has no idea how to meet the various targets. Haywood is committed to building on a series of recent green achievements, citing the opening of the U.K.'s first Passivhaus-certified commercial building at the company's office in Leicester, a new staff green driving program that helped cut emissions 30 percent, and the upgrading of a facility in Qatar that slashed energy use by 30 percent at relatively low cost. Further investments are now in the pipeline, alongside a plan to develop a sustainable procurement strategy with major suppliers.
"All of these projects and investments have a payback and a net positive impact," he argues. "I am not going to give up financial disciplines just because something has a sustainability tag."
The Passivhaus project, for example, will deliver a return on investment within six years, which Haywood describes as "reasonable for a capital project," while some of the other upgrades delivered significantly shorter return on investment periods.
However, he also acknowledges that some green investments still require the kind of longer payback periods that prompt many of his finance director peers to block sustainability initiatives. It is a challenge that brings us back to the tension between sustainability and finance teams and the "capitals" approach being pioneered by Interserve.
"You have to look at [new projects and investments] across the four capitals, as the financial part is just one capital," he explains. "You realize there is real value in the other capitals. They get you a ticket for the game, they get you support in the community."
Haywood insists Interserve recently won a major $227.34 million PFI contract to deliver two new police headquarters in West Yorkshire on the back of its sustainability credentials, the value of which would not be properly recognized without the proposed capitals approach.
"That value is something that if you are a believer in sustainability you see and accept, and if you are not you pour scorn on it," he says. "The fact is that having a strong approach to sustainability is a work winner, a cost reducer and a reputation enhancer. It also makes Interserve a good place to work and makes it easier to attract and retain talent."
And with the company's new sustainability strategy up and running it is now on track to recognize the real value of these numerous benefits.
This article originally appeared at BusinessGreen and is reprinted with permission.
Photo of rope bridge at Carrick-a-Rede in Northern Ireland provided by Georgi Djadjarov via Shutterstock.