As individuals, most business leaders buy into the concept that climate change is a real thing; and that the problems are man-made, and we need to change our behaviour to avert the worst consequences of it.
Yet, somehow, when it comes to setting this business strategy, this very real imperative can get lost behind the challenge of responding to immediate market needs and creating short-term growth.
And often when businesses do consider sustainability, it gets bundled up as part of “CSR”… something that often seen as a “cost of doing business” with a focus on compliance and reporting.
The Political And Economic Environment
This short-term focus from businesses is inevitable given the event horizon for many investors… as one venture capital investor said to me recently: “I really like this idea, and I think it is important that it is funded, but we won’t back it because we think it will be five years before the market is ready” (for mass adoption).
Yet we somehow need to square this short term business focus with the commitments from the UK government and other countries to becoming “carbon neutral” by 2050… Part of the challenge is that whilst 30 years is short in infrastructure terms (by way of example, from planning in 2012 to projected completion in 2035, the HS2 railway line in the UK will have taken a “mere” 23 years), it is a very long term in the planning cycles for most businesses – where even the most forward looking of companies are thinking 5 to 7 years out.
And, of course, companies need to do this whilst managing the current political and economic turbulence… from Brexit through to a US-China trade war!
So Why Is Sustainability Now A Strategic Issue?
Despite the mismatch in timescales, at SKCI we are finding that more and more companies are making environmental sustainability a strategic issue today, why … for the good “old-fashioned” reasons that they want to grow faster and become more profitable – in both the short and medium terms.
It is becoming generally accepted that business with a clear purpose tend to grow faster than average. One of the organizations we work with is The Planet Mark which certifies businesses for their performance in reducing carbon and feedback from Planet Mark certified companies indicates that they consistently grow faster than their peers.
Why is this? Possibly because the Planet Mark encourages companies to not only Measure their environmental performance but also to Engage and Communicate. Engagement with staff on carbon reduction not only helps to reduce costs (think, switch off the lights when you go out, but on a macro scale) but this shared interest helps to create a more enthusiastic and productive workforce. Communication with customers and the market on environmental performance has been shown to open up new sales opportunities and allow companies to sustain higher growth.
Whilst I believe The Planet Mark is unique in requiring the three steps of Measure, Engage and Communicate as part of its certification, many successful companies have chosen to apply a similar methodology internally.
The Productivity Puzzle
Another interesting trend we have seen is that an increased focus on environmental sustainability can drive improvements in productivity… a topic have I written about previously and on that especially important in the UK, which has long suffered with a “productivity gap” when compared to other industrialized countries.
By way of example, our experience from working with Turnkey Group (a supplier of ESG software based in Singapore) ) is that companies who measure their environmental performance and have senior management support to make changes often see dramatic improvements in productivity as well as significant reductions in energy cost.
Why should there be a link between environmental sustainability and productivity? In addition to the benefits from improved staff engagement described above, it seems that a focus on sustainability forces business leaders and their staff to look at why and how they are doing certain things, not just the what. This often leads onto discussion on how to use technology to improve business processes, cut out unnecessary steps, reduce waste, and generally improve efficiency.
In many ways, these changes are similar to those which the best companies have implemented as they have become more serious about the health and safety in the workplace.
How To Make Sustainability A Cornerstone Of Your Company’s Strategy?
One of the benefits of thinking about a carbon-neutral future is that it forces management to think about dramatic changes to their business… A good place to start is the question “How would my business look if it were truly carbon neutral?”.
This inevitably leads onto other questions such as “Can we change our product delivery to become radically more efficient?”, “What part does technology have to play in the solution?” and “Is this an opportunity for us be disruptive and create more growth?”
As with every strategic challenge, it can only be addressed properly if there’s buy-in from the senior management. The good news is that the recent (and very public) actions from Extinction Rebellion and others have raised urgency of the discussion around climate change and environmental sustainability.
Where Next?
There is more content in the pipeline discussing strategy development for sustainability; as well as looking into the challenges of implementing such a strategy, and how some companies are applying technology to disrupt their industries.