With the wheels of the Sustainability Revolution now in motion, the next decade will represent a disaggregation of carbon in the value chain. This drive for low carbon growth is reshaping the rules of supply, demand and regulation. While some businesses have been quick to innovate, mistrust, delusion and disengagement still exist. As sustainability becomes increasingly ingrained in the business agenda, leaders must consider who has the innovation and competitive advantage.
Criticaleye, in association with Accenture, produced three films exploring sustainability in terms of regulation, consumers and technology. The purpose of these films was to help business leaders to prepare their organisation for the impact of sustainability regulation, how they can achieve competitive advantage through sustainable practices and how they can unlock the potential of clean technologies.
Led by Accenture’s Peter Lacy, each film offers extensive commentary from a panel of experts. This Update draws specifically on the views of Peter Lacy, Patrick Thomas, Richard Gillies, Gareth Llewellyn, Christine Farnish and Bill Eyres. The films can be found on the Criticaleye TV page.
The following offers a selection of questions and answers from the films:
How should leaders approach sustainability issues in terms of regulation and reporting?
Gareth Llewellyn, Non Executive Director of the Renewable Fuels Agency (formerly Head of Safety and Sustainability and Anglo Amercan plc), says: “I think there’s a real danger of putting too much information in the public domain that will never help you manage your business or improve the way in which you run it. I don’t think more demands for compliance-driven sustainability reporting is the right way to go. Shareholders and wider stakeholders want to know that you are running your business properly, not just giving them information for the sake of it.”
Christine Farnish, Public Policy Director at Barclays, says: “Does making formal demands on companies to report, whereby you get reams and reams of impenetrable data and teams of lawyers pouring over disclaimers, make the world a better place? Surely a better approach is to have continual pressure on businesses to be accountable for and transparent about their practices, looking more carefully at how they operate, especially those difficult, crunch decisions, where they have to make judgements on whom not to do business with. It’s about saying no to certain things that are perfectly within the law, but where the company ethics, culture or desire to protect their reputation says, we don’t won’t to go there, these are the reasons why and we’re going to form a company policy on it. It’s about being more willing to disclose that type of approach. I think that’s the way we’re going and I think that might deliver better outcomes.”
Q&A from the Films
What are the challenges in trying to engender trust on a business’s sustainability practices?
Tabitha Aldrich-Smith, Communications Director at Whitbread Group, says: “There’s a tremendous engagement and communication challenge in getting ‘going green’ to be seen as a value proposition - particularly in a budget sector such as ours. But we managed to get a commitment from the business, despite being at the height of the recession, because Alan Parker, then our CEO, believed in it, and saw it as a real competitive advantage - to take the lead in the industry. The results of our employee survey helped to galvanise our internal strategy, which included getting the buy-in of senior management, customers and shareholders to define seven pillars for sustainable business practice. We’re still only on the start of that journey, but we recognise at least the need to ingrain sustainability in our business strategy.”
Richard Gillies, Director of Plan A at M&S, says: “When you look at what our society is faced with, more than nine billion people by 2050 and, more immediately, peak oil by 2013, something will need to change fundamentally in society. Today’s ‘frustrated consumer’ is offered only the labels of sustainability from the last century. All the current products are sold at a premium, which is unsustainable as soon as you hit a downturn. The challenge is to create sustainable products in the marketplace. The opportunities here are boundless because everything we currently buy will need to change. There’s the opportunity to offer new products to the market and demand products of the market without that premium.”
Bill Eyres, Head of Corporate Responsibility, Environment and Sustainability, O2 UK, says: “Marketing has a critical role to play in effectively communicating sustainability to the consumer. Yes, there is a degree of complexity to translate, but campaigns such as Ariel’s ‘Turn to 30 degrees’ and M&S’s ‘Plan A’ have overcome some of the obstacles. Going forward, I think NGOs such as Forum for the Future could play a powerful role, to take a step back and consider, as a business sector, if there’s a more effective way to address consumer communications; is there a way in which we can bring a unified approach with more simplicity? If consumers understand what we are trying to do, that’s a very powerful message.”
Q&A from the Films
How can businesses capitalise on the new opportunities created by low carbon technologies?
Phil Smith, Vice President & Chief Executive, UK & Ireland, at Cisco Systems, says: “Collaboration technologies are already reducing the need for business travel, saving organisations millions of pounds a year and significantly lowering carbon footprints. However, the investment that these technologies require can often be a barrier to adoption. Our recent survey revealed that only a third of business people thought that their organisation would be likely to invest some of its technology budget in innovative carbon-reducing technologies. And you can’t rely on technology alone. It’s also vital to change employee behaviour. At Cisco, we have established an eco-board devoted exclusively to environmental issues and we work hard to champion sustainable working practices. By encouraging employees to meet over our TelePresence and web-based collaboration technologies, for example, rather than travelling, we managed to halve our travel budget and, globally, we have saved 409, 987 metric tonnes of carbon to date [2010].”
Patrick Thomas, Chairman & CEO, Bayer MaterialScience AG, says: “We still need incentives to change. Indeed, many industries have the means to develop efficiencies, but are simply not encouraged to make use of it. Take the chlorine industry. Bayer’s ‘ODC technology’ would mean 30 per cent less electricity is used in the production of chlorine which, for example, accounts for 4 per cent of total German electricity consumption. We know we can produce chlorine more efficiently, but there are no incentives to do this in the West. By contrast, the Chinese are the fastest growing in this area. Bluestar, a Chinese/US private equity-backed joint venture, is building a pilot unit using the new technology. It fits with their values. They always ask ‘What’s that in terms of coal consumption?’ From Bayer’s perspective, our operation in Caojing, China, is now our largest manufacturing site in the world and the most energy efficient. It is a benchmark for all our facilities globally.”
Peter Lacy, Managing Director, Sustainability Services, Europe, Africa and Latin America at Accenture, says: “If you look at emerging markets in 10 years - particularly in China, Korea and Brazil - I see real innovation being created at scale. They are not locked in to the same heritage infrastructure as in the West, but sustainability is also perceived as a step shift to create competitive advantage. China is positioning itself for global leadership in the transition to a sustainable, low-carbon global economy. The pace and scale of investment are staggering as it becomes the ‘clean tech laboratory’ of the world. In effect, China is taking a big handful of clean technology spaghetti and throwing it against the wall to see what sticks.”
Q&A from the Films
To succeed along the sustainable path, businesses must understand how sustainability forces will impact their markets and view it not as a functional challenge, but as a way of thinking about business operations and strategy. The biggest challenge for CEOs is to translate the strategy to execution across their business.
Please get in touch if you have any comments about the issues raised here.
I hope to see you soon
Matthew
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