People, Planet, Profit.

Environmentally and Socially Sustainable Business Strategies

Kit Oung

• Publisher: Business Expert Press
• Year: 2022
• Print ISBN: 9781637421819
• eBook ISBN: 9781637421826
• Topic: Business
• Subtopic: Business Development
• Index: Business

CHAPTER 1

Embed Resource Productivity Into the Company’s Strategy

I will build a motor car for the great multitude … It will be so low in price that no man making good wages will be unable to own one and to enjoy with his family the blessings of hours of pleasure in God’s great open spaces … When I’m through, everyone will be able to afford one, and everyone will have one.

—Henry Ford, quoted in [61]

To make resource productivity a reality, there is a need to put an implementation program together, organize resources, and implement the opportunities. Logically, gaining top management commitment is an important first step. This is where most people get stuck.

Why? Many people have an impression that businesses are only after one thing—maximum profits. Anything that detracts the focus of top managers and others from generating profits is wasting their time. There simply will be no interests. Perhaps, this impression is exacerbated by the many Hollywood blockbusters such as The Wolf of Wall Street and reality shows such as Dragons Den and The Apprentice portraying successful businesses driven by men and women with aggressive, narcissistic, money spenders, high-risk takers, high sex drive alphas with a single-track mind.

The sad reality is that there are big businesses that are operating badly—chasing from short-term profits to the next, constantly staying just ahead of the next crisis. The news media loves to find and report about these and they do so often. However, this is not representative of the true picture! An Internet search will reveal many small to medium, and some large businesses implement initiatives to use their resources productively but choose to remain “under the radar” of the news media.

While profits are essential, it is not the purpose for companies to exist. Entrepreneurs do not start their business purely to generate profits; they start the business to serve specific customer needs in a marketplace. Rather interestingly, business schools also do not teach or preach about operating the business for short-term profits. There is a long tradition, mentioned in the Introduction, where businesses balance the needs and interests of multiple stakeholders over the long term. Many Asian and Continental European countries still practice this.

In 2019, The Business Roundtable reverted its stance on top management fiduciary duties (mentioned in the Introduction) to the 1981 version [62]—one that includes all stakeholders, placing the needs of customers, employees, suppliers, communities, and the environment before long-term value for shareholders. Short-term profits and shareholder value are no longer the only raison d’etre for companies.

We commit to: (1) Delivering value to our customers. … (2) Investing in our employees. … (3) Dealing fairly and ethically with our suppliers. … (4) We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses. … and (5) Generating long-term value for shareholders. … Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities, and our country.

—The Business Roundtable, 2019 [63]

Since the late-1970s and early 1980s, there is an increasing body of evidence from studies by Charles Handy [64], Marc Orlitzky et al. [65], Robert Kaplan and David Norton [66], Scott Keller and Colin Price [67] which found that companies purely focusing on generating financial returns do not last [75] and companies taking into account wider interests have better financial performance than those focused on profits and capitalist agenda. Data suggest that 74 percent of businesses that focus purely on profits and cost-cutting measures are not able to sustain the strategy for more than three years [68].

More recent data show that a whopping 93 percent of Fortune 500 CEOs believe that their companies should also focus on goals other than profits [69]. Another recent study over 18 years shows high-purpose companies outperforming their competition by 50 percent [70]. Those that don’t will face an inevitable blowback ranging from being shunned by investors, customers, to employee walkout and public outcry on social media [71].

So, there is no imperative for a business to maximize profits at the expense of others. Perhaps, to get top management commitment for resource productivity, it is prudent to put aside the preconceived notion and define or rediscover the strategic intent of your company and its business.

Understanding the Strategic Intent of a Business

At the heart of every company are four very important concepts that bind all of its business activities, customers, employees, machinery it deploys, and the decisions it makes. The four important concepts are its purpose, vision, mission, and value statements. These four concepts form what is known as the “strategic intent” of a company. All the decisions made are on this basis. All of the products or services sold are on this basis. All of the machinery and equipment used are on this basis. And, all of the employees and specialists are brought together on this same basis.

All business owners, entrepreneurs, and managers who have gone to business school would have learned them. Those that did not would derive them even if they did not associate it with the words used in business school. It is what Cynthia Montgomery calls, the “ongoing job of company leaders and the crowning responsibility of CEOs” [72].

At the root of the strategic intent is its purpose—the ultimate aspiration of the company’s existence. It answers the question, “why it produces the product and/or services for its customer.” Thus, it becomes the map the business charts its journey—its “true north” or “guiding star” that fuels passion in what it does. It is important to distinguish between making a profit with the purpose of a business. All healthy companies must make a profit. Without it, the business would not exist for long. Seymour Tilles frames the purpose of a company succinctly.

… For far too many companies, what little thinking goes on about the future is done primarily in money terms. There is nothing wrong with financial planning. Most companies should do more of it. But there is a basic fallacy in confusing a financial plan with thinking about the kind of company you want yours to become. It is like saying, “When I’m 40, I’m going to be rich.” It leaves too many basic questions unanswered. Rich in what way? Rich doing what? …

—Seymour Tilles, 1963 [73]

Another good explanation on purpose was by David Packard:

I want to discuss why a company exists in the first place. In other words, why are we here? I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reasons for our being. … Purpose (which should last at least 100 years) should not be confused with specific goals or business strategies (which should change many times in 100 years). Whereas you might achieve a goal or complete a strategy, you cannot fulfill a purpose; it’s like a guiding star on the horizon—forever pursued but never reached. Yet although purpose itself does not change, it does inspire change. The very fact that purpose can never be fully realized means that an organization can never stop stimulating change and progress.

—David Packard, 1960 [74]

The second concept is the company’s vision—a future that your company wants to create when delivering its purpose. The most frequently cited vision includes improving the health and wellbeing of employees, addressing environmental concerns such as climate change or water pollution, community and other social projects, and so on.

The third concept is the company’s mission—the type of activities the business will do to achieve its purpose and its vision. Equally as important are those that it would not. It describes what the company does, why it is different or better than its competition, and why the customer buys (and continues to buy) from the company. A business that tries to be all things to everyone will achieve very little. Some form of trade-offs will be required to be successful.

Finally, the last concept is the company’s values—the type of attitudes, behaviors, and practices it will adopt, thus enabling the company to fulfill its purpose, vision, and mission [76]. Having the right set of compatible values accelerates the company’s activities and results toward its intended purpose, vision, and mission. Culture—a collection of people working together, exhibiting similar attitudes and behaviors, and carrying out consistent practices—can, according to James Heskett, account for 20 to 30 percent of a company’s success. This is why you will find that most of the people who work in the same company think alike!

All businesses, for-profit or nonprofit operating in a competitive market, will have a purpose, vision, mission, and values. Having a clear, aligned, and “living” strategic intent is key. It works for four reasons:

1. It is a profound understanding of the competitive environment. When developed based on objective appraisal, the deep and insightful appreciation of the marketplace allows the leadership team to establish a very specific, defined, and balanced game plan/strategy/goals and how the business will maneuver into a position of competitive advantage, thus be successful over a long term. Resource productivity can feature on its own as a defined goal or part of another goal. As long as the relationship is clear, it is acceptable.

2. It allows the leadership and management teams to invest for the long term. Companies with a strong purpose, vision, mission, and values think about the short- and long-term success of the business. Where necessary, their “true north” compels them to make long-term investments in its offering, its people, and its machinery. As mentioned earlier, these companies outperform and outlive their competition. If the activities of the business are not performing or not complementing the strategic intent, leaders and managers change the methods, work organization, or even its business models to keep the company in its strategic direction.

3. It is a great source of intrinsic motivation for employees. When employees can see a direct commitment from the leadership and management teams on a balanced set of goals, can see that the goal is realistic, can see that they are actively taking actions, it is a source of motivation money cannot buy—employees come together with a strong belief that they are contributing to something bigger than they are; knowing that their work is valued, and able to see their efforts come to fruition.

4. It rallies and builds an unswerving customer loyalty. Customers buy and continue to buy from a certain company because they believe in the product and/or services and the company’s vision, relate to and value the company’s purpose, message, and brand image. This is one of the reason companies with environmentally friendly, sustainable sourcing, and so on are thriving even though there may be a higher price tag. During times of economic downturns, you may even see the loyal customers, and even the local community, chipping in to smooth out temporary hardships.

Case Study: Dŵr Cymru Welsh Water

Operating from 4,200 sites, Dŵr Cymru Welsh Water provides 24/7 water and sewerage services to more than three million people in Wales, Herefordshire, and Deeside in the United Kingdom. Unlike many water and wastewater companies, Dŵr Cymru Welsh Water is a not-for-profit company that is limited by guarantee, that is, it has no shareholders, which allows its strategic and operational plan to be driven entirely by the needs and preferences of its customers and other stakeholders.

By utilizing a not-for-profit business model, Welsh Water did not have to chase after short-term financial gains and focuses on the long term by driving down debt (from 93 percent debt in 2001), maintaining its networks of water mains and sewers, upgrading and rebuilding its treatment works while keeping its energy costs below inflation for more than nine years in a row [77], providing a reduction in household water bills [78], and performing in the top quartile of the water regulators’ league table [79].

Welsh Water plans to reduce its energy consumption by five percent between 2012 and 2020 and increase its renewably generated energy from 15 percent in 2015 to 25 percent in 2020 (and meeting all of its energy needs by 2050) [80]. A good example for meeting its energy objective comes from its Five Fords Energy Park in Wrexham—a £36 million energy park that integrates several of its effluent treatment processes with anaerobic digestion, combined heat and power (CHP), and solar photovoltaic with further plans to extend its photovoltaic capacity, wind turbine, and battery storage by 2020 [77].

For resource productivity to thrive, that is, getting resource productivity projects into gear and off the ground, maximizing the improvement potential for the business, and benefiting from it, requires a home for resource productivity in the strategic intent. Employees and managers can then align their business cases to that of the leadership teams’ interest. Without the explicit alignment at this strategic level, resource productivity becomes an operational benefit, which will be changed, modified, or deferred in preference for items that attract the leadership teams’ interest.

The problem is while up to 90 percent of businesses have a strategic intent [82], a surprisingly large number of senior management and employees are not aware of it [83], or they are confused by the company’s purpose, vision, mission, and val...

Table of contents

• Cover
• Half-Title Page
• Title Page
• Copyright
• Description
• Contents
• Testimonials
• Foreword
• Acknowledgments
• Introduction
• Chapter 1 Embed Resource Productivity Into the Company’s Strategy
• Chapter 2 Gain and Keep Leadership Commitment
• Chapter 3 Define an Appropriate Scope and Boundaries
• Chapter 4 Measure and Benchmark Resource Productivity
• Chapter 5 Make Resource Consumption Visible and Set Science-Led Improvement Baselines
• Chapter 6 Identify Improvement Opportunities
• Chapter 7 Overcome Corporation’s Inertia and Resistance to Change
• Chapter 8 Manage the Implementation Program
• Chapter 9 Celebrate, Learn, and Repeat
• Chapter 10 Implement a Strategy-to-Execution Premium
• References
• About the Author
• Index
• Backcover