March 20, 2012
Corporate Sustainability Efforts -- Feast or Famine?
Is corporate sustainability on the wane or growing more important to top executives? At the beginning of the year, two big-picture reports on the state of green business painted divergent pictures.
In GreenBiz's annual review of 20 indicators of "how business is doing" on green, we learn that 6 of those indicators are on a downward trend. But in the report "Sustainability Nears a Tipping Point," MIT and BCG prove their point with a fast-rising graph of companies that recently put sustainability "on the management agenda."
While they seem at odds, both views are right — companies are no longer ignoring sustainability; most big companies now have someone focused on it, at least in part. That's why execs can honestly tell MIT that it's on their agenda. But with sustainability often siloed into just one person or department in each organization, it's hardly a surprise that, at the same time, we're seeing some loss of momentum. Sustainability has moved from being a hot, new management trend to being just one more thing for execs to keep an eye on: for many it's become a check-box exercise..
This structural gap reveals the fundamental misunderstanding about what sustainability really means for organizations. I've seen it time and again in the companies that I work with or study. For them, sustainability is a thing to tackle, a functional area; it's a what, like marketing or product development.
But sustainability needs to be viewed as much more of a how concept, like quality or innovation. It's a way of operating that creates the most value when it's embedded throughout the organization.
Of course companies have distinct quality or R&D departments and professionals, but the most committed companies drive the thinking into every aspect of the business. This is the mindset that sustainability needs to engender throughout an organization. And as with quality, this isn't just about ethical or aspirational hopes — acting with sustainable values, for example, as covered well by many, including Dov Seidman in his book How.
No, I'm talking here about the more prosaic, everyday, tactical, blocking-and-tackling of business. Sustainability pressures force changes in how we build our supply chains, how we design and manufacture products, how we deliver services, how we create and execute our business models and strategies, how we develop financial metrics to measure success, how we attract and retain 21st-century, holistic thinkers, and on and on. So sustainability pressures, if acted on, drive us to create and build better products, design more efficient services, execute better, and hire the best. Those are goals that reach throughout the entire organizational structure, and they're actually enabled by sustainable thinking.
Given the scale of these goals — and the global challenges we all face — putting just one (or a few) people against the what of sustainability is a woefully inadequate response.Resource constraints and rising input prices; increasing demands from customers, employees, and consumers; the risks of severe business continuity disruptions from water, climate, or labor problems in the supply chain...the list of big pressures grows more complicated every day. And these issues require a full-court press from all aspects of operations.
It's become a mantra in the sustainability world that green needs to be a part of everyone's job. Of course that's true, since detecting risks and innovating around them will often fall to those closest to the ground (hint, that's rarely the c-suite). But most companies are missing a big step.
To conquer a how you need more than just a mantra. You need a significant investment of resources in time, top-leader focus, people, and money. You need people to ride herd and drive the agenda — to do the cross-cutting analyses such as lifecycle assessments, to track and get a handle on the many diverse and complex issues, to present a unified front to employees and external stakeholders, to question business models and find new, heretical ways to operate and serve customers...the list goes on.
There's no "ideal" structure for sustainability efforts, just as no two companies would tackle innovation the same way. Most large companies have now appointed a lead on sustainability, but have provided limited financial support and fewer human resources. There are exceptions: a few well-known sustainability leaders, such as Starbucks, Nike, and Coca-Cola employ central teams with specialists in areas like water, climate, and packaging, as well as reps spread out around the organization.
One of my clients, Kimberly-Clark, a much quieter sustainability leader, has a centralized team of 5 to 10 sustainability-only managers (and that's only part of the 50-plus central staff covering environmental, health &safety (EHS), OSHA, and, yes, quality). More importantly, Kimberly-Clark has another couple dozen professionals in dedicated sustainability roles (again, not EHS) embedded in business lines and geographic regions.
But even the leaders with robust organizations are rarely putting much money specifically into sustainability-driven innovation or disruptive changes that might dramatically reduce the value chain footprint of the company's products. Let's be honest: It's very hard to assess how much is "enough" when you're investing in a strategic priority. But it helps if the organization first defines it as a strategic priority. And given the ever-rising costs of under-reacting to sustainability pressures (such as direct costs from rising input prices, or business discontinuity risks from extreme weather), it's clear that companies should put a lot more people and money against an agenda as large, complicated, pressing — and let's not forget profitable — as sustainability.
Only with significant investment can we move down the path to sustainability integration and real, ongoing, full value creation. A robust network of sustainability professionals within a company — whether or not they sit in one "department" — may need to obsolete themselves over time. But until then, sustainability can't drive anything — it will just remain a nice side show.
(This post first appeared at Harvard Business Online.)