The Business Guide to Sustainability

Practical Strategies and Tools for Organizations

Darcy Hitchcock, Marsha Willard

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317663300
• Edition: 3
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

The Business Guide to Sustainability is a practical introduction to implementing a comprehensive sustainability strategy in any organization. Written by top business consultants, this useful book can be applied in both large and small enterprises.

This edition shifts away from a discussion of CSR to focus more squarely on sustainability. It explores strategies for implementing sustainability in each of the functional areas of the corporation (accounting, HR, operations, etc.), while providing examples from a range of sectors, including manufacturing, services, and government. The book also includes the authors' S-CORE assessment tool to help organizations determine whether they are on the right track, identify new opportunities, and assign accountability and responsibility.

Brimming with interesting stories and examples, and covering new developments such as the emergence of BRICs and the effects of the Great Recession, this book will interest managers, business owners, and students for whom sustainability is a priority.

Part I
Foundation Concepts

1
Sustainability as a Strategic Issue^*

When we published the second edition of The Business Guide to Sustainability, the term ‘sustainability’ was still unfamiliar in boardrooms and the media. But several years ago, when we saw the term in the Wall Street Journal and they didn’t feel the need to define it, we knew the concept had finally gone mainstream. Now if you are a business or a community and you aren’t learning about and pursuing sustainability, you are getting left behind. Because familiarity with sustainability has increased significantly, we will focus in this chapter on critical issues that can take that understanding to the next level. Like any new term, sustainability tends to get diluted and co-opted. We would like to clear up some of the confusion. In this chapter we will discuss what sustainability is and why it is now a critical strategic issue for businesses and communities everywhere.

What Is Sustainability in General?

What Goes Around Comes Around

From a practical, day-to-day perspective, sustainability means managing for multiple benefits, making decisions that make the economy, society and environment better at the same time, not trading them off. Businesses have long referred to this as the ‘triple bottom line’, a term coined by John Elkington in Cannibals with Forks. We can’t argue anymore about jobs or the environment, economic growth or environmental health, development or habitat. The answer should always be yes-and, not either/or. A company whose profits come at the cost of harm to the environment or exploitation of workers is not sustainable, since these impacts put its licence to operate at risk in the long run.

We have to satisfy the needs of all three – economy, society, environment – because, taking a systems view, these three realms are interconnected. If you put toxic chemicals into the environment, it sickens and weakens people, which then has an economic impact. Just ask China. The Ministry of Environmental Protection estimated that environmental degradation was costing the country about $230 billion in 2010, roughly 3.5 per cent of their gross domestic product.¹

Environmental damage (pollution) → Social damage (sickness) → Economic damage (GDP)

Because this is a whole system, you can start the argument anywhere. When the economy crashed in 2008, many people lost their jobs and then their homes. Communities like Detroit (a city built on technologies of the twentieth century) hollowed out. Banks hired firms to clear out anything left in foreclosed homes, filling dumpsters full of waste.

Economic damage (crash) → Social damage (loss of housing/jobs) → Environmental damage (waste)

As Thomas Friedman found, the ongoing conflict in Syria didn’t come out of the ether. Climate change led to water shortages, and the lack of an appropriate response by government led to revolution. Now bombs are flying, threatening to destabilize the Middle East, and oil prices are inching up, slowing the world economy.² Here we go full cycle, creating a death spiral.

Environmental damage (climate change) → Economic damage (hurt farmers) → Social damage (revolution) → Environmental damage (destruction from war) → Economic damage (oil prices)

No Man/Organization/Community Is an Island

Simply realizing there are these three realms (social, economic, environmental) and pursuing actions in each of them does not make you or your organization sustainable. Now, many companies claim they or their products are sustainable. But sustainability is a characteristic of the entire system – Planet Earth. One organization is not sustainable. One community is not sustainable. They may be pursuing sustainability, but please don’t claim to be sustainable. A little later in this chapter, we’ll discuss what full sustainability is, based on science. But before we get a bit wonkish, we should discuss why it’s smart for organizations to pursue sustainability as a strategy.

What’s Pushing the Trend Towards Sustainability?

Sustainability is no longer a fringe issue. After all, what is more important to a firm than its ability to survive in the long run and to operate within a healthy ecosystem? Bob Willard, author of The Sustainability Advantage, encourages organizations to think of sustainability as a primary enabling strategy, not one more goal in a long list. Sustainability can unify and organize a wide spectrum of efforts, including seemingly disparate programmes for lean manufacturing, international labour issues and zero waste.

Sustainability thinking calls for organizations to understand all material social and environmental impacts of the business, establish metrics to measure their success in managing those impacts while succeeding economically and scan the external environment constantly for threats and opportunities. That’s just good strategic management in a world with finite resources, ecosystems under severe pressure, a changing global climate and a growing population. Firms that fail to take these measures won’t have a long-term future; it’s as simple as that.

Organizations and communities are pursuing sustainability in response to a number of strategic trends for different reasons.

Big Business

Large publicly traded businesses are pursuing sustainability in part because of the following:

• Society’s expectations of business have changed. Today, society wants it all. According to the Millennium Poll on Corporate Social Responsibility conducted in 1999, surveying 25,000 people in twenty-three countries on six continents, the majority of people expect companies to go far beyond just making a profit, obeying laws, paying taxes and providing jobs. Instead, they expect corporations to ‘exceed all laws, setting a higher ethical standard, and helping build a better society for all’.³
• Social media has changed where people get trusted information about companies and products. According to the 2013 study on corporate responsibility,
  • 34 per cent of consumers use social media to share positive information about companies and issues;
  • 29 per cent are using social media to learn more about specific organizations and issues;
  • 26 per cent are using social media to share negative information.⁴
• Investors have discovered that organizations paying attention to environment/social/governance issues are better managed. Based on a number of studies, their stock prices and finances perform at least as well as those that don’t and often better. (For a nice overview of this research, see the first chapter in Investing in a Sustainable World by Matthew Kiernan.) There is no financial penalty for making the world better. Therefore, why would you choose to build a business around making the world worse?
• The CDP (formerly the Carbon Disclosure Project) has driven many companies to voluntarily report on greenhouse gases and soon also water. It has shown that companies that do report and manage their carbon risk have significantly better stock price performance.⁵
• Boardrooms are starting to pay attention. According to the Sustainable Investments Institute, 55.4 per cent of Standard & Poors 500 companies had board oversight over sustainability issues.⁶
• Sustainability reporting is the norm. By 2011, 95 per cent of the Global 250 (the largest companies in the world) issued reports on sustainability.⁷ (Sadly, two-thirds of the non-reporters are in the US.) Efforts by the Global Reporting Initiative, Integrated Reporting and the Sustainability Accounting Standards Board are working to bring consistency to how these metrics are tracked and reported.
• Insurance companies are worried that climate change and its associated effects will undermine the validity of their actuarial models, so they are putting pressure on major emitters to report on and manage their climate risk.
• The major brands feel a strong need to protect their image and have been the target of various shareholder and NGO campaigns. Proactively seeking out the sustainability skeletons in their supply chain closet is smart brand management.
• In some cases, their exchanges require it. Australia is one nation where companies are expected to report on these issues or explain why they are not.

Main-Street Business

Small to medium-sized businesses are pursuing sustainability in part because:

• In many cases their customers demand it. Any suppliers to Wal-Mart, for example, have to report on a variety of factors related to their sustainability index. So the interest of the big businesses is driving smaller businesses to comply. Also, little main-street businesses are tapping into the increasing interest in local, organic, sustainable, ‘natural’ products and services.
• Their younger employees expect it. The people moving into the workforce want to make a difference in the world. They know they will inherit a mess from the twentieth century – they heard all about that in school – and now they want to do something about it.
• It brings meaning to work: Even old-timers get motivated by sustainability-related efforts, of course. As Ken Hopper, general manager for one of the Scandic Hotels in northern Europe, said,
  I’ve been involved in Scandic for ten years. We’ve had all kinds of different campaigns or processes. Nothing has ever been close to creating as much excitement as this environmental campaign. It was just huge. You did not have anyone who didn’t feel something. It was incredible that people got so involved in this that they are willing to make some sacrifices and put in some energy and effort to get involved. It brought people together in a way we’ve never ever been able to bring our staff together before, and we haven’t since. Nothing we’ve done has mobilized a force that’s created such unison.⁸
• They get it. Some business leaders have or develop a passion for sustainability. And unlike their Wall Street cousins, they can take bold risks to make this happen without worrying about next quarter’s profit. Ray Anderson, former head of one of the largest carpet companies in the world, Interface Carpet, decided his firm should show the world the path forward. Because, as he liked to say in his presentations, ‘If it’s been done, it must be possible’.

Communities/Municipalities

Communities and municipalities get on board with sustainability in part because:

• They may have had some type of disaster: the major employer shut down their plant, climate change brought them a 100-year flood a couple of years running, or a natural resource they thought was perpetual ran out. They start to think about the importance of resilience, and they have an opportunity to rebuild their city to serve people, not cars.
• They have an enlightened citizenry who care about sustainability. Portland, Oregon, has become a mecca in the US for people interested in creating a more sustainable society. A number of cities in Europe flaunt their eco-city label. Many cities now have Transition Town⁹ groups planning how to thrive in a resource-constrained world.
• Th...