What Corporate Sustainability Leaders See in the Years Ahead

What Corporate Sustainability Leaders See in the Years Ahead

As we begin 2005, some of the trends and events of the past year are bound to shape the movement toward sustainability in the near future. Russia ratified the Kyoto Treaty, bringing it into force in February 2005. President Bush was re-elected, ensuring the continuity of current U.S. environmental policy for the next four years. Oil prices spiked to more than $50 per barrel and have remained volatile, raising new interest in renewable energy technologies.

So what does all this mean for businesses and their pursuit of sustainability? [email protected] asked several leaders in the corporate sustainability movement to share their insights in response to the following question:

In your view, what will be the key trends and developments over the last half of the decade, with respect to the environment and corporate sustainability, and how will the business community respond?

Bill Malloch
General Manager, Environmental Business Opportunities for Nike Global Footwear, Nike

I believe that we'll see more collaboration between design and engineering to address the challenges that an increasing number of educated consumers are demanding, with new tools emerging as vehicles for companies to develop better products and engage more deeply with their supply chain.

Consumer interest in sustainability will also become clearer. A growing community of consumers is already asking for products with fewer chemicals and less waste that, at the same time, don't compromise on performance, style and value.

I also see product chemistry becoming a driving force in product design and development. There are thousands of chemicals used in commerce today, and surprisingly little is known about them, their interactions, and their effect on human health and the environment. Forward-thinking companies are addressing this issue by developing screening tools to help identify chemicals of concern. These tools reach well beyond regulations and require deep supply chain cooperation. Leading innovators will develop sophisticated assessment tools and mechanisms to collaborate around product chemistry.

The answers will be found within the thousands of excellent people innovating for brands that believe that business can operate in favor of the future.

Steve French
Managing Partner, The Natural Marketing Institute (NMI)

We are optimistic about the future of the environmental marketplace and the influence that consumers have to affect corporate sustainability practices. Based on three years of trends that NMI has been observing within our LOHAS Consumer Trends Database™, we expect to see continued increases in consumer usage of environmentally friendly products, such as organic products, hybrid cars and green building products, among others. Usage of these products is projected to increase not just among core "green" consumers, but among more mainstream consumers as well.

This anticipated growth is, in part, a function of manufacturers understanding how to market eco-friendly products through various communications strategies -- emphasizing both conventional and green product benefits. Organic foods are great-tasting and use no pesticides; hybrid cars get higher gas mileage and create less pollution; green homes save money on water/energy bills and are conserving the planet's natural resources. The markets for these products have all expanded well beyond the early-adopter or niche consumer base, are growing at double-digit rates, and show plenty of room for continued growth.

Consumers wield a tremendous amount of power to influence business practices, and business needs to pay attention to that. Consumers are attracted to environmental and sustainable products because they not only satisfy consumers' basic functional needs, but they also fulfill an emotional need to "feel good" about the products and companies they use. Early movers in sustainability and corporate responsibility are benefiting from the foresight in their image, equity and profit margins. Their successes attract more businesses to the marketplace, thereby giving consumers additional choices and options. All the while, the environment and society benefit. We look for continued growth in this dynamic marketplace.

David Rinard
Director of Environmental Performance, Steelcase Inc.

Increased federal, state and local environmental regulation is a trend that shows no sign of abating. Federal regulation alone has grown from 500 pages in 1965 to over 60,000 pages today. Additionally, initiatives like Greenguard Institute's product certification and the U.S. Green Building Council’s LEED program, to name two, have established environmental standards and reflect the growing power of the consumer to affect change. These developments have made sustainability a "cost of entry" for business -- pushing industry to accelerate and exceed compliance.

A second trend is connecting an organization’s environmental strategy to its business strategy -- expanding beyond a values-based driver to one that also secures business results. This moves the environment from a "feel-good" conversation toward one that is about producing better business value. And with that we engage all the business people, greatly magnifying the impact.

A recent Steelcase Workplace Index Survey demonstrates that while 61 percent of Americans say they will buy an environmentally friendly product even if it costs more than another product, the majority also believe that increased costs are the primary barriers keeping companies from minimizing their environmental impact. Meeting business-to-business and business-to-consumer demands will continue to drive environmentally friendly activities, but that trend will flourish only as the costs for doing so remain static or decrease.

Another trend is cradle-to-cradle thinking. As our environmental intelligence has grown, recyclability and percent of recycled materials used are no longer the only measures of a product’s sustainable performance. This trend will drive businesses to utilize tools like life-cycle assessments to make sustainable decisions throughout product development and to give their customers a transparent method of product evaluation.

Overall, our environmental efforts will continue to evolve as we collectively seek the knowledge and insight we need to make wise decisions about our businesses and the environment, act on what we learn and share it with others.

Katie Fry Hester
Advisor, SustainAbility

Meeting the challenges of the next decade (and beyond) will require system-level changes focused on global governance and markets. While recent corporate responsibility efforts have been impressive, these new demands will force companies to shift up a gear or two.

In this light, the most pressing issue is the worrying vacuum in terms of global governance. For example, environmental issues have moved from local to global, from the periphery to the mainstream. While Kyoto and carbon trading are potentially elements of a solution, we still lack credible, effective global environmental regulatory bodies. Nature abhors vacuums, so something will evolve to fill the gap.

In parallel, the complex triple bottom line agenda has grown in significance with social and economic issues such as HIV/AIDS, access to pharmaceuticals, human rights and civil liberties, and the anti-corruption drive. This has forced corporate responses to become more strategic. In addition to implications for corporate balance sheets, increasingly effects will impact board-level priorities and brand management. Eventually they will be felt at the level of business models.

Once viewed as the enemy, or at least as a handy set of scapegoats, corporations are now seen as key agents of change. A growing range of progressive alliances are forming to address many of the issues listed above. In the process, we expect the focus will shift from environmental, corporate responsibility and investor relations staff to chief financial officers, research and development units, investment bankers, venture capitalists and social entrepreneurs.

Mark Ryan
Manager, Environmental Initiatives, Antron Carpet Fibers, INVISTA Inc.

Environmental trends over the last ten years have evolved from simple recycling and pollution prevention to more complex efforts to measure and lower the total environmental impact and health effects of products and services over their entire life cycle. Standards have been developed for many environmentally preferable products (EPP) in categories such as wood, power, paints, adhesives, carpet, carpet face fiber and even maintenance. In the United States, presidential executive orders encourage federal procurement of EPPs, and other countries and private sector organizations are also adopting "green" procurement policies. Further advancing this trend, the California Division of State Architect is creating EPP screening criteria for a minimum of 20 product categories.

These standards are driving many manufacturers to evaluate more broadly the sustainability of their products and services. Life-cycle inventory and analysis is becoming an integrated part of doing business, and better support tools are becoming available. These developments are important: Some EPP programs have been controversial because of their failure to incorporate broad life-cycle considerations. The International Design Center for the Environment (IDCE), in Chapel Hill, N.C., is developing industry-specific tools to make basic life-cycle analysis (LCA) simple. They are also providing large end-users with access to the data through an easy-to-use online user interface called “eLCie' Building a Sustainable World,” to be launched this summer. Additionally, the U.S. Green Building Council has established a committee to incorporate more LCA-based criteria into the LEED rating system.

Over the next 10 years, manufacturers and their suppliers can use these new tools to better understand and evaluate the environmental issues associated with their products and services. That will enable many companies to significantly reduce impacts. Manufacturers and suppliers who lead their industries may reap substantial rewards from environmentally conscious customers for their efforts.

James A. Fava
Managing Director, Five Winds International

There will be a fundamental shift in sustainability strategy from an operations focus to a proactive product life-cycle focus. This shift will redirect corporate, government and other stakeholder resources to understand, identify and manage risks, opportunities and trade-offs associated with products, technologies and services over their whole life cycle -- a "cradle-to-grave" or “cradle-to-cradle” perspective. Benchmarking of corporate sustainability performance has revealed that significant gaps often exist in the way that companies manage the risks associated with their products over the entire life cycle, from material acquisition, manufacturing and use, to end-of-life management. Businesses continue to take actions to fill these gaps.

Companies will also be taking action to identify opportunities for value creation along the product life cycle. There are major social needs (access to food, fresh water, health, for example) that if not met will severely effect companies’ abilities to maintain sustainable growth. While companies will continue to work to manage environmental and social risks associated with their products, they will also increasingly take action to identify and deliver new products and technologies that contribute to enhancing the quality of life for consumers around the world.

The fundamental shift to life-cycle-based product strategies requires changes in well-established business practices that are not easily modified. Systematic planning and actions are required to maintain competitiveness and identify a competitive edge in today’s global environment.

Scott Seydel
President, EvCo Research

Management continues to measure and trim internally controllable environmental impacts: enhancing water use and energy efficiencies while reducing solid, liquid and gaseous wastes. However, until recently, producer responsibility for downstream or "down-chain" wastes was a studiously avoided issue.

The early shifts by fast-food companies from polystyrene clamshells to more compostable wraps and microflute cartons was less a matter of stewardship than a reaction to public insistence; however, this shift did succeed in drawing focus on the recyclability and compostability of both consumer and commercial transfer packaging. Other milestones include Coca-Cola's decision to incorporate 10 percent-recycled PET plastic in its bottles, Starbucks' introduction of coffee cups with 10 percent-recycled content (developed with Solo and MeadWestvaco), and Albertson's insistence that perishable food suppliers seek recyclable corrugated boxes for retail store shipments.

Enter the Sustainable Packaging Coalition (SPC), a project of GreenBlue, where representatives from the packaging, manufacturing, distribution and retailing industries study the "value chains" through which product and packaging pass. From the forest, the mine, the wellhead, the rivers and sea, to the landfill, SPC members are working on how to best assure that the end products of their commerce are cradle-to-cradle compatible.

SPC and several similar groups are swiftly redefining sustainability and environmental stewardship in MBA terms. They are determining how to make or influence stewardship profitably by studying who within the value chain stands to profit from impact-reducing change, and how this profit can be passed up the chain as incentive to make those changes.

The effect of value chain assessment of new and traditional manufactured products and packaging will undoubtedly accelerate the trend toward nonrenewable resource preservation and environmental stewardship during the next half decade.

Hank Cauley
Partner, Ecos Corporation

The retreat of national governments, particularly in the United States, for policy and regulatory leadership in most sectors will lead to three overall trends. First, the distance between leading and lagging nations in regard to sustainability will continue to widen.

Many European nations and Australia are examples of countries where civil society is demanding and getting improved real performances on sustainability issues by corporations. Conversely, the United States lags in promoting sustainability. While civil society in the United States is beginning to stir on the issues, catalyzed by concerns like energy security, a discontinuous market shift in a demand for more sustainable products in climate-impact-intensive industries like the automotive sector is still years away. Leading global companies within the business community are ignoring these differences across nations and complying with society’s expectations at the highest level.
Many corporations have adopted corporate sustainability reporting and increased transparency as policy, but emerging skepticism and “green spin” will lead to demands for increased accountability for stated claims. This will be particularly true for environmental claims that have direct social impacts in local communities, such as air or water pollution that have health consequences like asthma or increased rates of cancer. Leading corporations will treat environmental and social sustainability issues as linked and be able to point to real results on the ground that have been independently verified.

In reaction to the above, the business community along with non-governmental organizations will drive the third trend, which will be the acceleration of creating groups that act as conveners for discussing contentious issues, setting voluntary benchmarks and measuring progress upon request. These consortium organizations will draw their memberships from diverse stakeholder groups, outside of government, and be a safe ground for businesses and civil society groups to engage constructively. While a few market campaign groups and corporations may not participate, competitive advantage in both non-profit and for-profit worlds will accrue to those groups that have the public’s trust.

This article has been reprinted courtesy of [email protected] magazine. It was first published in the Spring 2005 issue of that publication.