7 May 2013 | Adam Leach
Can your business afford not to give the issue of sustainability its due attention? Adam Leach reports.
The Sustainable Purchasing & Supply Summit, held in London last month, highlighted the growing appetite of investors, particularly pension funds, to invest in firms that not only promise strong financial returns, but also deliver on the ethical front.
The potential for sound sustainable practices to improve a company’s standing and limit any damage was also brought to the fore.
These issues, as well as resource scarcity, political and customer pressure and the financial health of a company’s supply chain, all fit under the broad banner of sustainability. But, as Professor Andrew Douglas, lecturer in strategy and operations management at Bristol Business School at the University of the West of England, points out, they also apply to another, arguably more high-profile and attention-grabbing area of business. “Virtually all of this could be put under risk,” he said.
In his eyes, using risk as the premise for a sustainability initiative is likely to get more traction. “Sustainability sometimes meets a lukewarm reception. But risk management and linking them together as your initial premise for doing something different, resonates extremely quickly in most organisations.”
Sustainability as a business issue has a growing profile, with many large organisations now producing an annual corporate sustainability report. But, it is failings, or perceived failings, that tend to generate the most interest, especially when connected to a well-known consumer brand. Notable examples include: human rights breaches at the Foxconn factory in China, a supplier to Apple and a number of other technology firms; the fire at a Bangladesh factory that Walmart discovered was an indirect supplier of some of its goods; and the recent horse meat scandal that many UK supermarkets were caught up in.
The issues behind each of these crises – labour and health and safety practices for the first two and contaminated supply for the third – result in damaged sustainability credentials. More significantly, they put overall reputation, and therefore finances, at risk. So being proactive is not merely good from a sustainability perspective, it’s just good business.
Former prime minister Gordon Brown last year proposed in a report, Financial stability and systemic risk, that addressing sustainability sits at the heart of the business agenda. He said “the ‘creeping risks’ associated with income inequality, global warming, resource depletion and ecosystems destruction, sit at the heart of our collective challenges during the course of this century”.
And it is not just politicians who are putting the topic up at the top of the agenda. Under CEO Paul Polman, Unilever has put sustainability and resource efficiency at the core of its business plan. Under its ‘Sustainable Living Plan’, the global FMCG company has set the target of halving its environmental footprint while doubling sales by 2020.
This is an extremely ambitious target that some commentators say it has not a chance of achieving, but is nevertheless laudable and necessary to drive significant changes.
Launching the plan in 2010, Polman said: “Tackling sustainability challenges provides new opportunities for sustainable growth. It creates preference for our brands, builds business with our retail customers, drives our innovation, grows our markets and, in many cases, generates savings.”
Unilever, due to its size and the scale of its commitment, rightly garners a lot of attention in the realm of sustainability. But it’s not alone in investing in this area for business as well as environmental benefits.
Ian Ballentine was attracted to his current role as procurement director at Heathrow Airport in part because of the high value the executive team placed on sustainability. He says: “They’d made that link that sustainability can be a part of our agenda rather than being a compromise or a distraction.”
Airports are not generally considered particularly environmentally friendly places and it’s also important Heathrow considers those living around its site – who hold significant power when it comes to planning applications. Both these issues come under the heading of ‘sustainability’ and ‘risk’.
Addressing the first point, the new Terminal 2 building is currently the biggest construction project in the UK in the private sector and Ballentine, backed by his bosses, has put sustainable procurement front and centre of it.
Scheduled for completion in 2014, it will produce 40 per cent fewer CO2 emissions than the building it replaces. It will also be the first airport to be BREEAM-certified, an internationally recognised assessment of environmental credentials.
Measures to reduce its environmental impact include installing north-facing skylights, which will reduce the need for artificial lighting, and greater use of LEDs, which, while more costly in the short-term, will deliver long-term savings and lower carbon emissions. It is also building a combined cooling heating and power plant (CCHP) that will power the terminal using woodchip sourced within 100 miles. The CCHP will reduce its CO2 output by 13,000 tonnes a year.
Those living close to Heathrow are also directly affected by noise pollution so it is important to consult with them and provide benefits to the local community. Consequently, half of the workforce employed to build the terminal will come from the local population, stimulated largely as a result of a training academy funded by Heathrow.
While Ballentine is currently in the enviable position of having senior buy-in, he is aware that’s not always the case. “People often feel sustainability either ends up being a distraction or a compromise in business and I don’t think it ever has to be. If you can get the buy-in at the top, you can get the understanding.”
He advocates buyers translate their objectives into what gets the bosses thinking. “Find out what’s on their agenda and link to what you’re doing to help to get their attention. If you’re trying to do something that isn’t on their agenda you’ve got a far more difficult journey.”
Martin Barrow, head of footprinting at the Carbon Trust, agrees communication and the language used to promote sustainable procurement initiatives are key. “You have to understand what the corporate culture is in each company. It varies from those that are extremely driven in the area of sustainability to those who are only going to do anything once they’ve seen the pay packet.”
He advocates bespoke presentations to stakeholders. “Put things in financial terms or terms people come up against in their day-to-day job. In a large organisation, I’ll talk to the sustainability director in technical or environmental language, but when it comes to talking to every other department, speak their language. The desired outcomes are the same.”
The value of sustainable procurement for companies is undeniably strong, but to get support, it depends how it is presented. Getting more out of rapidly declining resources, reducing the threat of planning objections and limiting the risk of human rights abuses packs a hard punch.
5 CSR tips
Points to help turn attention to sustainable procurement:
1. Highlight the risks of not prioritising sustainability.
2. Identify what keeps the CEO awake at night and how sustainability could make a positive contribution.
3. Tailor how you present your initiatives to suit each senior stakeholder and department.
4. Lead with financial benefits. Follow up with the environmental wins.
5. Capitalise on senior buy-in when you get it.