Sustainability depth – are you green from top to bottom?

Companies trumpet sustainability initiatives, but what is the significance of these initiatives? Another lens we can use to evaluate their efforts is a measure of sustainability depth. There are three levels of performance to consider:

  • the company’s in-house sustainability performance
  • the impact of the company’s products and services on society and the planet
  • the company’s leadership role in sustainability in its industry or sector.

Lets look at examples of some industries to understand the significance of this approach.

Banking

You probably will have noticed banks that use advertising to announce their use of green cars. Or perhaps they have chosen to occupy green office space. While these initiatives are helpful, they are dwarfed by the impact the banks’ products and services have on the planet and society. The capital that they provide can support sustainable initiatives or more traditional extractive initiatives. The flow of capital has tended to be more determined by risk analysis rather than an analysis of sustainability.

The practices and example of the Grameen Bank exemplify creative thinking and dedication to sustainable aspirations (in this case, the eradication of poverty). The achievements of the Grameen Bank leave most Western Banks looking homogenous and deficient in leadership. One notable exception (you may know of others) is Vancouver’s VanCity Bank. This statement from their Accountability report indicates their willingness to show leadership at all three levels.

 

Another evidence of their commitment to sustainability is their relative longevity – Citizens Bank, a subsidiary, was talking about sustainability before the turn of the century. Closer to home (New Zealand) the Australian banks here were at least more conservative and responsible, sheltering us from the worst of the financial crises.

In the banking industry, the impact of their in-house sustainability initiatives are miniscule, compared to the greater impact of their products and services and the banking industry’s huge influence on economies. The banks to support are, yes, those who run fleets of green cars, but more importantly are engaged in leadership discourse in their industries. The worst examples of banking were the junk-bond traders that were essentially corrupt and dishonest. Who are the banking leaders who will follow the example of Muhammad Yunus and position the industry to both serve and prosper?

Retail

As with banking, you can imagine retailers who focus on in-house sustainability, but are locked into the need to grow their business. They may be tempted to sell whatever they can to make a buck with little focus on the environment or wider society.

It appears that Walmart has become a very positive exemplar of deep sustainability. They have a long way to go – but are taking initiatives from in-house sustainability, through to industry leadership. Here are examples:

In-house sustainability – For Walmart, electricity is their number two operating expense. They are moving on two fronts.LED lights have been installed in freezer panels, providing a 70% reduction in energy consumption. LED lights will eventually be rolled out throughout stores and carparks. Walmart also have installations of solar panels underway. Over 30 stores are already installed with another 20 to 30 in the pipeline.

Another massive opportunity to improve in-house sustainability is with Walmart’s transport fleet. This video refers to a goal to increase transport efficiency by 100% from a 2005 baseline, by 2015. By the end of July 2011, they have achieved 65%.

Impact of products and services – Walmart aspire to improve the quality of food that their customers eat. Here is an extract from a recent article:

With more than 140 million customer visits each week, we have an opportunity to make a real difference in the nutritional quality of the food we sell, so we have a long-term goal to make food healthier and make healthier food more affordable.

First, we are reformulating thousands of our private brand packaged food items and working with branded products to do the same. By 2015, we will:

  • reduce sodium by 25%
  • reduce added sugars by 10%
  • remove all remaining industrially produced trans fats in our packaged food.

And here is a video about organic lettuce production at Walmart.

Leadership role in sustainability – Because of its size, Walmart can be particularly effective as a leader in the retail industry. When they get interested in initiatives such as LED lighting, solar panels and transport efficiency, they indirectly accelerate the mass adoption of better technology by consequence of their size in the market place. Recently Walmart has turned its focus on food-waste, reacting to the news that approximately one-third of food produced globally is wasted and are working with the USDA on projects to reduce waste. They also are working to access produce closer to the point of sale.

The examples here are a sample of the great work that Walmart is doing and provide a great illustration of a company engaging with sustainability across the three dimensions identified here.

Drive and imagination is the key

In the positive examples here, including Professor Muhammad Yunus of the Grameen Bank and Walmart, we see clear evidence of a desire to create a better world. This drive in turn generates the cognitive resources of imagination and breadth of vision that create new possibilities and transform industries from the top to the bottom.

I would love to hear of more examples.

Advertisements

Sustainability – what’s real?

There are a belwildering array of sustainability ratings – but what do we believe? How do we know they are measuring and evaluating the right things?

In their Rate the Raters documents, SustainAbility identified over 50 sustainability rating agencies. SustainAbility will offer insights into how credible each rating system is, but I suspect that many imponderables will remain.  For example, in part two of the study, the Dow Jones Sustainability Index was ranked highest in credibility by the study’s participants. But in his article titled,When Pigs Fly, RP Siegal noted with incredulity that Haliburton is now listed in the Dow Jones Sustainability Index.

Here are two reasons that determining a company’s sustainability will remain problematic:

  • the bureaucratisation and commercialisation of quality processes
  • determining sustainability

 The bureaucratisation and commercialisation of quality processes

In the galaxy of organisation endeavour, sustainability reporting can be regarded as a quality measure. For example, while the ISO 9000 series deals with operational quality matters, the ISO 14000 series deals with environmental management. While ISO 14,000 may not be classified as sustainability reporting, it serves the same purpose, in that it provides third party assurance of a quality measure.

I like Tom Peters perspective on quality. He quotes Richard Buetow, a Motorola executive.

With ISO 9000 you can still have terrible processes and products. You can certify a manufacturer that makes life jackets from concrete, as long as those jackets are made according to the documented procedures and the company provides next of kin with instructions on how to complain about defects. That’s absurd.

Where quality processes are formalised, they can divert resources from the product or service itself. Any product or service will justify a finite amount of resource input, so ideally, any quality process will add value equal to or greater than its cost. Too often, compliance-driven quality processes militate against quality as they divert resources away from product or service delivery. This is a big issue in service delivery sectors such as education and health. When teachers spend more time on quality assurance processes, they spend less time on preparation for delivery. It may be that, unless there is a compelling reason to get third party assurance, that resource is best invested in enacting sustainability aspirations, rather than measuring them.

I’m not arguing against quality processes – but I am stressing that they have to add value. Sustainability reporting processes will add value to the economic bottom line where there are game-changing benefits. For example:

  • a supplier demonstrating conformance with a client’s ESG (environmental, social, governance) standards to ensure continuance of business
  • securing a listing in a sustainability index
  • remediating reputation losses.

But unless there are clear benefits from quality process third party assurance, why bother?

BP’s gulf oil spill illustrates this issue. Along with Shell, BP scored consistently highly in GRI (Global Reporting Initative) reports, and I believe the company’s leaders had, and have, genuine sustainability aspirations. BP invested a lot in rebranding as “beyond petroleum.” But the gulf oil spill incident has undone a lot of the energy BP had invested in sustainability initiatives. What the GRI couldn’t assess, were complex embedded processes, such as the quality of engagement between BP and its suppliers, and the impact of budgets and deadlines on safety and operations. (This video recounts BP’s PR problems)

Commercialisation

No doubt ratings agencies are also well motivated, but budget pressures will typically create pressure to grow the business and perhaps make processes than they need be. SustainAbility’s Rating the Raters cites commercial pressures as an impediment to more transparent report, partly because the raters are paid by those being rated.

Determining sustainability

Part two of this blog will explore what sustainability means in different industries, and from whose perspective.

Sustainability leadership report

How do you know if a company is green-washing, or over-promoting its sustainability performance? Brand Logic’s recently released Sustainability Leadership Report compares the perceptions of sustainability of 100 prominent brands, with their sustainability reality.

Their matrix, sorts the brands into 4 categories:

  • leaders – those who perform well in environmental, social and governance (ESG) dimensions of sustainability and successfully communicate their achievements
  • challengers  – who are performing well, but not getting enough credit
  • promoters – who are credited with ESG performance ahead of their actual performance
  • laggards – who are low in both dimensions
brandlogic’s Sustainability Leadership Report matrix
Notice that IBM hits the sweet spot of high sustainability performance and high sustainability perceptions.

The great news

This report surveyed three groups, purchasing/supply management professionals, investment professionals and graduating students.  They were asked :
When evaluating a company as a potential:
  • investment or investment recommendation
  • supply chain partner
  • employer
how important is it to you that the company act as a good corporate citizen, operating in a socially and environmentally responsible manner?
An impressive 88% felt that this was somewhat important or extremely important –  45% responding that it was extremely important.

The long twilight of hunter-gatherer capitalism

The firestorm that raged through finance and other companies over the last few years exposed the deficiencies of the current brand of capitalism. The naked greed and short-term thinking that characterised much of commercial world was over-looked as consumers enjoyed a bonanza based on the cornucopia of cheap finance.

But as we stand surveying the wreckage, with hindsight, more of us can see the flaws in the system. In the March 2011 Harvard Business Review, Dominic Barton, of McKinsey and Company identifies three areas to create a more sustainable and kinder capitalism:

  1. fight the tyranny of short-termism
  2. serve stakeholders and enrich shareholders
  3. act like owners

Short-termism

The equities markets have developed a hummingbird metabolism. Barton identifies that “roughly 70% of all U.S. equities trading is now done by ‘hyperspeed’ traders – some of whom hold stocks for a few seconds”. This is hardly the basis for a long-term company-investor relationship. When oil prices peaked at $US140 a barrel, for every barrel of oil consumed in the U.S., 100 were being traded. These short-term market signals generate short-term management thinking, pursuing favorable quarterly results rather than longer-term thinking. There are encouraging signs that the lessons are being learned and some companies are refocusing on longer timelines.

Serving stakeholders

Barton’s article confirms for me that the stakeholder focus is now becoming mainstream. Capitalism is in the twilight of its hunter-gatherer phase, as companies learn to focus on more than the singular pursuit of profit.

“In 2008 and again in 2010, McKinsey surveyed nearly 2,000 executives and investors: more than 75% said that environmental, social, and governance (ESG) initiatives create corporate value in the long-term. Companies that bring a real stakeholder perspective into corporate strategy can generate tangible value even sooner”.

The transition from hunter-gatherers to corporate farmers will see companies becoming more embedded in the communities they serve and more relevant to them. There are two reasons that this has to happen – the first is that the predatory relationships in places such as the supply chain are unsustainable. And the second is that the public, over time, will become more insistent for ethical and sustainable corporate behaviour.

More on predatory relationships

Lets consider the chocolate industry. A BBC Panorama documentary exposed the widespread use of child slave labour in West African cocoa plantations. And the small farmers who actually grow the cocoa are paid so little, that marginal profits are forcing them to look elsewhere for income.

So the chocolate you eat, could have been produced by slave child labour. As the world is increasingly interconnected, this is an issue from every one in the supply chain, from the farm labourers, to the end consumer. Fair Trade chocolate overcomes this issue, by establishing labour and environmental standards, insisting on schooling for children and setting fair prices insulated from market fluctuations. Large chocolate manufacturers, such as Cadburys are including Fair Trade chocolate in their offerings. They are limited by supply. So the big challenge is to move as much chocolate production as possible to the Fair Trade model.

This is more than a moral issue for consumers. It is also a security and economic issue. The largest chocolate producer, the Ivory Coast, continues to be embroiled in conflict. Impoverished conditions are the culture for the conflict germ. We are all stakeholders.

Act like owners

Barton’s third point encourages organisational leaders to act like owners to engender a longer-term focus. This includes more commitment from board members and more sensible CEO pay. I recommend his article.

Challenging assumptions

Going deeper, we need to challenge the assumptions that drive hunter-gatherer capitalism. These are revealed in the language of capitalism. For example justifying a dodgy business deal with the phrase “business is business” tells us that business defines its own rules and is not answerable to broader public sentiment. In a stroke of brilliance, John Elkington coined the phrase, “triple bottom line” – a discursive tool that eventually will see the phrase “the bottom line”, with its implicit dominance of the profit motive, fade from prominence in business discourse.

Of course, hunter-gatherer capitalism is ably supported by (up until recently) unbridled consumerism. I would like to explore the relationship of these two bedfellows, but I will leave it for another post.

And I am not saying we need to abandon chocolate. But if we eat a little less, and pay a little more for Free Trade chocolate – we will all be better off!

Stakeholder mapping part 2

Part one of this post featured the stakeholder map. For those who want to cast the net wider when identifying stakeholders two possibilities are online surveys and email data mining. But it may be more useful to just get started and regard the stakeholder map as an iterative process.

Stakeholder mapping is one of the first things to do when formalising your stakeholder engagement. A stakeholder map as outlined in an earlier blog, is central to this process.

I recommend that you keep the process as simple as possible and avoid over-planning or over-complicating the stakeholder mapping process. It can be initiated by a small of group of people, ideally with some external facilitation to ensure that the focus is on external stakeholders. Your initial attempts at a stakeholder map (or matrix) can be shared with others and updated accordingly.

On the other hand, if you want to cast the net more widely a couple of suggestions follow.

1. Surveying staff

You can quickly set up an online survey using a website such as Survey Monkey. Ask staff to identify two or three external stakeholders for a series of perhaps five questions. Here are some ideas:

  • Identify two or three stakeholder groups that have some legal or regulatory influence on the work you do.
  • Identify two or three stakeholder groups that you think are impacted by our operations.
  • Identify two or three stakeholder groups that you believe we could create shared value with.
  • Identify two or three stakeholder groups that might share our aspirations.
  • Identify two or three individuals, external to our company, who you believe are most important to the sustainability of our company.

The collated results will help to populate your stakeholder map. But avoid making the map too big. Use the same ranking system as outlined in the earlier post to identify your most relevant stakeholders. The beauty of using a tool such as survey monkey, is that the information will be collated for you. If possible, supply three text fields for each question, so the responses are easier to sort.

2. Mining email data

Your techies should be able to provide a means to identify the domains most frequently used by your staff when emailing externally (hopefully its not ebay or Facebook :-). For example, which government department do we have most contact with? Or which of our suppliers do we generate most email traffic with? And a ratio of internal to external email will provide a raw indication of how externally orientated the company and its departments are.

Can anyone suggest software that might achieve this?

Remember, these two methods may give you a more complete picture for stakeholder mapping, but if they slow the process down, their value will be minimised. Make your stakeholder mapping an iterative process – its more useful to get out there and encourage other staff to get out there, and engage and revise the map as you go.

Engaging the engagers

Your staff are potentially your best ambassadors. If they are positively engaged, both at work and outside work they will be leading your stakeholder engagement. Improving staff engagement is a win-win that will improve internal processes and strengthen external engagement.

Ideally, your staff are great ambassadors for your business. When they are at work, they interact with a range of stakeholders, and outside work they interact with the wider community. We know from the 2010 Hay Group Report, that the best leadership companies harvest knowledge and best practice from wherever they can, and staff, and contacts of staff are sources of this knowledge.

Fostering better staff engagement has great synergy with external stakeholder engagement. If staff are feeling good about the company, they will project that goodwill into both their workplace and social interactions. Both activities require the same skill sets – so by improving staff engagement capacity, external engagement improves.

But staff engagement is not in good shape. For example the Tower Perrin 2007 Global Workforce Study, based on nearly 90,000 employees worldwide found 21% of staff engaged, 41% enrolled, 30% disenchanted and 8% disengaged – a total of 38% in a negative space.

The Hay Group reported that 59% of employees in the UK started 2010 resolving to find a new job.

Identification, citizenship and engagement

Another dimension of engagement is how staff identify with the organisation. The following diagram illustrates four different types of identification. Some staff as in the second column, will identify strongly with the organisation. Another possibility is ambivalent identification as illustrated in the fourth column; in this situation the staff member identifies strongly with their work team, but not with the organisation itself. An example might be engineers or health clinicians, who identify strongly with their professions, but are disenchanted with the organisation. They might be technically engaged, but not engaged as corporate citizens. Thus, while they are happy in their work, they may not be good ambassadors for the organisation.

Having disenchanted or disengaged staff costs. I think of it as the company never quite managing to shift into top gear. The Hay Group found that “employees who are both highly engaged and enabled are 50 per cent more likely to outperform expectations”. So when times are tight, while the cost cutting game may yield a few percentage gains, raising engagement has greater potential benefits.

The Towers Perrin research identified drivers of engagement:

  • senior management sincerely interested in employee well-being
  • opportunities to improve skills and capabilities
  • the organisation’s reputation for social responsibility
  • employees able to input into decision-making
  • the organisation quickly resolves customer concerns
  • the organisation sets high personal standards
  • excellent career advancement opportunities
  • challenging work assignments to broaden skills
  • good relationships with supervisors
  • innovative thinking encouraged

In the previous blog, leading engagement, I shared the Hay Group findings about best leadership practices for engagement. The companies with leadership worth emulating, are good at reaching across boundaries to learn from people and to connect people. They help people to find meaning in their work and link their tasks to a greater good. The story of the stone-cutters illustrates this: A traveller encountered two stone-cutters and asked them what they were engaged in. The first said “I’m cutting a stone”. The second said “I am building a cathedral”. For effective engagement, we need more cathedral builders and fewer stone-cutters.

[1] adapted from Kreiner, G. & Ashforth, B. (2004) Evidence toward an expanded model of organizational identification. In Journal of Organizational Behavior 25:1, 1-27.