Talk of embedding sustainability into business strategy is all well and good, but executing on that is an altogether harder proposition. The corporates that lead the way adopt a longer-term approach to doing business, discussing issues such as human rights, the environment, labour and anti-corruption when making decisions. As a result, sustainable thinking is ingrained in the plans, policies and procedures of the organisation.
The United Nations (UN) Global Compact, the world’s largest voluntary sustainability initiative for corporates, has made a difference. Part of the success is because it’s based on concepts that businesses are familiar with, such as due diligence and risk management, but they’re applied in the context of human rights. Despite its achievements, a large number of companies still have a long way to go.
At the last UN Global Compact Leaders Summit, the majority of the executives attending recognised that sustainability was important for the future of their businesses. However, according to Chip Pitts, Criticaleye Thought Leader, Lecturer in Law at Stanford Law School and Professorial Lecturer at Oxford University, they need to take their initiatives to the next level.
He says: “Some companies, mistakenly in my opinion, think they’re doing everything they can, but a lot of the time they haven’t really. What they’re doing is often not completely in accord with the current human rights norms, or environmental sustainability norms. The key to getting sustainability right is really getting the commitment from the top and at all levels of the company, then focusing on the tough work of truly integrating and embedding it at every level.”
A common problem is a failure to align different parts of a business. For instance, the CSR department won’t have contact with procurement, and different incentive structures can encourage conflicting behaviour. For Chip, it’s all about execution and unless the thinking around sustainability is joined-up, the impact a company can make will always be limited.
“There’s a difference between the formal policy, the stated commitment and the ability to implement effectively on the ground where it counts, where it affects people’s lives and the environment,” he says. “Often, there’s a real failure in the implementation, but the companies that are doing it well are starting to align these concepts.”
Peter Lacy, Managing Director of Strategy Practice & Sustainability Services for Asia Pac at Accenture, says: “Sustainability should be managed not as a standalone, isolated corporate responsibility, but as an integral part of business strategy. It is a chance to manage reputation and grow revenue, while understanding risk more effectively.”
It’s a case of companies beginning to integrate sustainability into their products and service mix, in terms of R&D, marketing and branding. “Businesses such as Vodafone and Unilever are also putting pressure on their supply chains to drive significant environmental gains and efficiencies in their operations,” he says.
Lean and green
The idea of a business being able to do more with less has gained real traction in the boardroom. Sandy Stash, Group VP for Safety, Sustainability and External Affairs at Tullow Oil, says: “At the heart of sustainability is efficiency. An efficient business is a sustainable business.”
When it comes to best practice, Sandy says that companies from different industries can benchmark ideas: “We’ve learned a lot from the airline industry. You’d think there’d be no similarities between running oil platforms and onshore oil facilities and airplanes, and yet in the psychology and practice of running a safe and sustainable operation, there’s a lot our industry can take on board.”
The main barriers to sustainable thinking within corporates often come from basic misconceptions and short-termism at board level. Kevin Craven, Chief Executive Officer of UK Central Government at Serco Group, an international outsourcing company, says: “Sustainability is not about tree hugging but rather good business sense where everyone can benefit. Both clients and employees are really looking hard at businesses which genuinely integrate sustainable practices into their working ways – you cannot fake this by greenwashing your polices…
“Your planning horizons cannot be about the one-year or even the three-year cycle – they need to be longer so that the impact of your business on a community or the environment can be considered. Planning, rather than reacting, is always more economical.”
Gareth Llewellyn, Executive Director of Safety and Sustainable Development at Network Rail, says: “Being part of a sustainable business is about making money. From a commercial perspective you have to be profitable, otherwise you’ll go out of business and that can have quite a big economic and social impact on those who work for you.
“You also need to make sure that whatever product you use or manufacture doesn’t have a major or persistent environmental impact, because if it does you’ll be regulated out of existence whether you like or not. The other piece to this is the social impact: if society believes that you’re delivering your business in an unethical manner, Enron perhaps being a good example here, you will be forced out of business.”
Ultimately, for sustainability to be taken seriously, senior executives have to demonstrate how it will help deliver overall business targets. Andrew McCallum, former Director of Corporate Affairs and Business Support for Dana Petroleum, comments: “From a risk perspective, companies need to identify the social, environmental and economic considerations that might impact the successful delivery of the business strategy.
“There’s definitely a role for businesses to be involved in the communities where they operate. Helping to tackle relevant social and environmental issues should benefit the company and the community.”
If a sustainable approach is going to be more than an adjunct of the organisation, it needs to be driven from the top. After all, there is little point in discussing long-term intentions for society and the environment when the culture of a business is very much about hitting short-term targets. “Businesses need to execute on integrated leadership,” says Chip. “That means sustainability is embedded horizontally and vertically throughout the extended enterprise.
“Everyone needs to understand that it’s the ways things are done… The companies that don’t get this are truly the walking dead, they just don’t realise it yet.”
You have been warned…
I hope to see you soon.