Business & Sustainability – How They Fit Togather
Bridging the Gap between Sustainability & Business
There are 5 good reasons why many business owners and managers are driving more strategic sustainability approaches in their businesses:
- Because their current competitors are thinking about it
- Because their clients and customers want them to do it
- Because their next significant marketplace competitor is already doing it
- Because it makes business sense and is the right move to make
- Because they realise their cash flow, profit and future growth will suffer if they don’t!
For many Organizations today, sustainability is their business. The Business’s founder or thier leadership team deliberately positioning themselves as an eco-friendly or responsible organisation. Often with a clear strategy of product differentiation or to situate themselves in a competitors blind spot. Differentiation through Sustainability is a powerful strategy whcih can appeal directly to ethical and socially responsible consumers. Good market examples are Unilever’s domestic cleaning products) and Green Tariff renewable energy suppliers. An alternative strategy is to attract customers who wish to associate with a particular value, cause or environmental issue. Patagonia’s recycled sea plastic clothing range is a great example of this strategy.
Why develop a Sustainability based Business Plan?
In all cases, these businesses possess a strategic sustainability in business model that:
- Reflect a societal concern within the consciousness of consumers
- Delivers a competitive edge over existing incumbent rivals within their market sectors
- Stimulates a ‘relationship’ between the business and customers
- Drives innovation within existing products and stimulates the development of new longer-term replacements
- Enhances Enterprise Risk Management protocols
- Increase the motivation and ‘feel good’ engagement with their employer amongst staff; and as importantly
- disrupts the market share of established suppliers .
The Risk of Remaining Unsustainable in Business
What has propoelled the rise of Sustainability in Business so far up the Boardroom agenda? Equally, why in so many Boardrooms are they valueing the addition of sustainability awareness into risk, governance and strategy debates? The answer is simple, these organisational leaders percieve a clear financial and commercial advantage in doing so. This is driving a demand for business leaders and managers who have a business understanding of sustainability issues and risks. Leaders who comprehend responsible management behaviours and who are able to take accountability for sustainability initiatives within their business agenda.
The Basis of all Business is the Environment
These are the business leaders who understand the linkages between business and rthe environment. They understand that all commerce ultimately derives from the exploitation of natural environments and thier resources. They may be in Investment, an IT enterprise, a Financial Services business or a Property Asset Management Group. It makes little difference as inevitably there will be a reliance on or need for primary environmental resources such as:
- food (including seafood and game), crops, wild foods, and spices
- raw materials (including lumber, skins, fuel wood, organic matter, fodder, and fertilizer)
- energy (hydropower, biomass fuels)
- water purity
- biogenic minerals
- medicinal resources
Climate Change & Economic Exploitation
A new and growing business risk is Climate change. Climate change will have a significant impact on some businesses with a heavy reliance on environmental services and resources. Existing hydropower schemes may become stranded assets due to lack water. Agricultural lands may reduce in crop yield or dry up as they exceed irrigation supplies. The precence and geoplitical availability of rare earth minerals necessary for digital equiptment may hit manufacturers. Utility companies with vulnerable assets may become increasingly at risk of adverse weather events. Climate change will place limitations on future economic growth rates within some sectors. Smart companies are re-assessing thier risks and whether the exploitation of sustainable resources can offset or mitigate risk. The exploitation of renewables over fossil fuels, and circular economy production approaches to rare earth minerals are two good examples.
The strategic sustainability challenge that many early adopters of sustainability business models are addressinging is:
- how to limit thier reliance on valuable, rare, difficult to imitate or non-substitutable resource ,
- How to replace or secure continued access to the materials they require, and
- how to maintain control over such resources through recovery and re-use programmes
Three examples of why innovative and forward-thinking leadership business are adding Sustainability scenarios into Enterprise Risk Management.
Bridging the Leadership gap
Only a relatively small number of progressive businesses have fully intgerated sustainability into thier organganisation to date. In these enterprises, success can often be attributed to a small committed group of executives and managerss. Leadership initiatives in other organisations have successfully delivered a wide variety of sustainability and CSR initiatives.
The size of an organisation does not automatically dictate a willingness to embrace sustainability management principles. Size does however bring with it greater exposure to sustainability risks, shareholder perception and wider brand exposure. However it seems clear that Brands that are good for people, good for society are good for business at present. In many such cases the adoption of a forward thinking leadership team, scanning ahead, have openned u new economic markets and new growth sectors.
What is clear is all examples of organisational sustainability is that these leaders have been the critical change agents. who most clearly understand the existing business and the challenges they face. They are better placed than most to undertake the analysis of issues and scenarios that is required. Sustainability change programmes, especially those requiring a combination of technology, process and employee behaviour are better led by internal leaders. It offers employees to see leadership values, ethics or behaviours being demonstrated. Consultancies, such as Leading Green, have the capacity to advise and support executives on this journey. 25 years experience as a corporate executive in industry and government has demonstrated the value of internal insights and experience. Consultants often lack understanding of internal power plays, relationship history and behaviours to overcome internal blocks.
Key Sustainability Leadership Functions Leading Green Training Courses
Business & Sustainability – The management of intangible risk
Sustainability issues are not that different from many of the day to day issues that business leaders face. They impact just as readily on long-term cashflow, profitability, growth, procurement, management, competitiveness and regulation. What sets sustainability practices apart is the greater focus on governance, long-term strategy and a watching brief over intangible risk. Factor that are often put aside due to short-term management demands. Issues that can rapidly escalate and engulf a business with its management team.
The management of intangible risks has as its central focus issues of leadership and behavioural risk. Often derided as ‘soft’ risks, these issues can have brutal consequences for a business. Short-sighted strategies, lack of risk awareness and social values can curtail the market life of brands. In the face of competitive change businesses must understand the life cycle (cradle to grave) of thier products. Many parameters need to watched as there is a long catelogue of:
- Managerial indifference to customer preferences
- Executive ‘group think’
- Ivory tower mind-sets – the risk to monololies of disruptove technology.
- Cultural arrogance to client needs
- Ethical misjudgement,
- An inability to integrate management systems,
- Mismanagement of reputation risks,
- Mismanagement of value
- Conflict,
- Poor public relations,
- Ineffective corporate governance,
- Environmental Pollution, and so on
Case Study
H&M Conscious Collection was derided in the press for greenwashing and for unsustainable practices. The company was percieved to have not provided consumers with precise information about why these clothes were labelled as sustainable. The furore attracted unwanted and damaging regulatory interest. The lesson in this scenario is that consumers are more environmentally and sustainably conscious than ever before. Companies should think twice before making unsubstantiated green marketing claims.
Sustainability and Business Risk
Only the foolish would ignore a sustainability issue that has become material to business success or survival. What is deemed material will depend on the market sector and the risk awareness mindset of the leadership team. The lesson to be learnt is that sustainability issues and its management must link to, and align directly with how the business operates. It must be a component consideration within management systems dealing with:
- Cash flow
- Material and resource depoendencies
- Boardroom Social and enterprise governance, ie CSR programmes
- Annual and strategic planning cycles, and
- importantly how the leadership team and the organisation views its mission, behaviours and relationship with stakeholders
To continue viewing sustainability as an ‘add-on’ or cost to the business is a strategic mistake. Keeping it separate from core business decision making and long-term business planning results in poorer information flows into executuve decission-making. Limiting the scope of sustainability in your business to resource management, marketing and ISO14001 management of direct environmental impacts could be a costly mistake.
Sustainability and Responsible Management
In the last decade, Sustainability theory has developed close links with business management models. Several leading Business Schools now promote the consideration of sustainability as a key factor of Responsible Management, Transformational and Ethical Leadership practices. It is a growing parameter in Boardroom approaches to governance and Enterprise risk management, and a growing requirement within the CV of executives.
It is has finally shaken off the old misconception of its ‘doing good, but not core to the business’ tag. Environmental Management Systems (EMS), such as ISO14001, have provided organisational leaders with a simple shield from sustainability engagement. It is common for such systems to be operated by middle or lower tier managers with litle executive oversight. The ISO14001 standard now recognises that many company EMS struggle through lack of leader engagement. The standard has thus been updated to proviode a more strategic tool for business. The ISO14001 (2015) revission now places a greater emphasis on visible (auditable) commitment and engagement by the organisation’s leadership team.
The Future
In today’s global inteconnected marketplaces, Organisations now have to decide for themselves what thier brand stands for. Research indicates that strongly environmental or socially concious Business’s command greater customer brand loyalty and higher stock valuation. A tribute to the individual executives and managers who brought about these organisational changes.
A recent trend has been in Boardrooms applying sustainability risk approaches to test the strength of Corporate Business Strategies & Plans. This is in addition to procedures to to integrate Sustainability with Responsible Management/CSR practices in existing Governance programmes. Some are experimenting with Enterprise Risk Management and Economic Sustainability activities. – as all share a common focus on business longevity. The objective being to provide a clearer boardroom picture of tangible and intangible factors influencing cash flow, profit and strategic growth. It makes sense to map sustainability risk with emerging Megatrends in organisational culture, consumer and stakeholder relationships.
The willingness to embrace sustainability as a Boardroom parameter, reflects a greater understanding that an organisation’s profitability is now a key driver in its valuation. Previously the greater percentage of a company’s ‘value’ was linked directly to its tangible assets (property, assets, etc). Today some of the larger corporations have less than 20% of share price value attributable to financial performance and assets. The remaining 80% of value reflecting intangible assets such as brand, customer base, future market risk, intellectual capital and whether a business has a ‘future fit’ business model. It therefore makes sense for businesses to aligned to responsible management with sustainable business practices.
The full range of Leading Green training courses can be accessed at https://www.leading-green.com/
Good luck in your Sustainability Leadership journey.
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