Embedding sustainability: Pitfalls and opportunities

When it comes to putting sustainable practices at the heart of the business, even the most well-meaning organisations tend to fall down in one of five main ways, says Two Tomorrows executive chairman Mark Line

I recently took part in Ethical Corporation’s Responsible Business Summit. At events like this, much time is spent lauding examples of good practice. And rightly so – it’s a great chance for leading practitioners to learn from one another. But that has to be tempered with realism about what’s going on beyond those companies at the top table of corporate sustainability.

The business world as a whole is a long way from having really embedded sustainability. By that I mean that everything a company does is joined up properly – so its investment in managing its material sustainability impacts can create real value. That way, it is not just making money while being sustainable, but making money by being sustainable.

The deep and lasting commitment to sustainability this requires is rare. That’s not for want of good intentions – it’s just that embedding sustainability deep in the fabric of a business is a very difficult thing to do.

We all know there are plenty of companies out there that say they have sustainability programmes but, despite what they claim in corporate marketing, these are often a bolt-on to core business and can get shown up as a phoney veneer. Big brands that have enjoyed good reputations for their CR programmes – have been caught up in scandals over price-fixing or misleading pricing in recent months and I think that’s an unacceptable contradiction.

At Two Tomorrows, over the past 12 years we’ve seen from up close the extent to which companies walk the talk, particularly through our work on the Tomorrow’s Value Rating. What we’ve found is that, when it comes to putting sustainable practices at the heart of the business, even the most well-meaning organisations tend to fall down in one of five main ways. Though for every pitfall, there are standout examples of companies who’ve negotiated those challenges in ways that set them apart as genuine leaders.

Pitfall 1: Failure to convert top management

Sustainability programmes don’t have much traction if they’re led by middle management. Your top execs must be committed and visible. That means more than just signing off the CR report or agreeing to publication of some long-term goals. It means having a genuine belief in the importance of the company’s contribution to sustainable development and – the other side of the same coin – the importance of sustainability to the company’s long-term success.

We can all think of CEOs who’ve suddenly ‘got religion’. But in today’s world where the average life of a CEO is three years – and where companies are constantly managing the short-term expectations of the City – it’s rare to find a business leader who’ll stick to their guns in the long run.

But there are those exceptions out there.

Global carpet and flooring company Interface is well known for its commitment to sustainability. Its founder and chairman Ray Anderson famously grasped the mettle back in the 1990s.

Interface is now reaping the benefits of its bold attempt to eliminate all its environmental impacts by 2020. Last year, its greenhouse gas emissions were down 44 per cent in absolute terms since 1996, or 94 per cent when factoring in offsets. During the same period, it grew sales by 27 per cent.

Pitfall 2: Disengaged employees

Of course, it’s all well and good having lofty corporate ambitions and even a bought-in exec. But a sustainability programme gets executed only through the understanding, commitment and action of frontline employees.

Many companies fail to give employee engagement sufficient attention – probably because it’s plain hard work.

It’s common to hear staff complain about yet another corporate initiative, and they’re likely to be cynical about becoming involved where they can’t see what’s in it for them.

Just making a few internal announcements is nowhere near enough. There must be meaningful opportunities for frontline employees to participate; after all, the best ideas often come from the base of the pyramid – from those who understand the company’s impacts, and are part of local communities.

One of our key clients has started turning its corporate goals into frontline engagement. It recently ran a CR Week when everyone was encouraged to get involved in one significant corporate responsibility initiative in their local business unit. In the lead-up, they were given a toolkit with guidance and case studies, including policies on volunteering and fund-raising. But there was a lot of freedom in how this guidance could be interpreted.

Top management was staggered by the scale and diversity of initiatives that bubbled up.

Meanwhile, for another of our key clients, we design and deliver CR training. We get delegates to understand the company’s CR issues at the global level and then figure out how they can make a local contribution in their part of the business. This helps them take ownership of CR rather than seeing it as some distant head-office activity. In a recent employee survey, scores for the company’s social responsibility rose 11 per cent against the year before.

Pitfall 3: Lack of alignment

Whether we’re talking about the CEO or someone on the production line, we all need reasons to commit to what the organisation is trying to achieve.

But few companies – even those leading the way – manage to get sustainability-related targets built into people’s performance objectives. For sustainability to be embedded, the nuts and bolts of how objectives are set has to reflect the sustainability mission. That would mean, for example, that:

• buyers have clear objectives relating to ethical practice as well as price;
• innovation teams are rewarded for embedding sustainability in product design; and
• brand managers’ salaries are influenced by whether they include sustainability in their brand story.

Companies in the utilities sector have long been accustomed to holding board directors accountable for aspects of CR performance – safety, energy use, customer service. These are measures that link very clearly to the success of their core business, and in many cases there are regulatory targets to be met.

One of our clients in this sector have been able to extend that alignment in their business. They have a ‘Line of Sight’ framework that cascades company-level CR objectives down through functions and teams and into every employee’s annual objectives.

Pitfall 4: Not considering sustainability in product and service development/innovation

If sustainability is truly embedded, it’ll be apparent in the company’s products and services. But very few companies have yet to get sustainability included as a key factor in their product and service innovation.

It’s very common for a sustainability initiative to focus on operational environmental performance in manufacturing and for there to be a disconnect between those improvements and the sustainability credentials of the final product the company is selling.

Yet some companies do see the link.

One of our clients in the IT sector set themselves the challenge of becoming sustainable, primarily by enabling other industry sectors to improve their performance. For instance, they are one of the leaders in SMART electricity meters and infrastructure. SMART metering enables accurate energy profiles, dynamic demand management and micro-generation. Our work as their assurer suggests that their net impact on carbon emissions is positive – in other words, they reduce more emissions than they use to run their business.

Pitfall 5: Failure to embed sustainability in the supply chain

While many companies have started taking responsibility for their direct impacts, few have yet to properly address what goes on in the supply chain.

Companies tend to fall down here because sustainability is not truly central to their procurement processes. The quest for the lowest price tends to prevail.

I was talking to a senior ethical trading manager in a big retailer recently. Her company is recognised for its leading-edge work to drive responsible business practice in the supply chain. She told me that it’s only now, five years into their programme, that buyers are being set objectives that integrate ethical risks into their day job.

So who are the leading lights?

In its recent Ethical Operating Plan, The Co-operative – one of our longest-standing clients – has made a commitment that, if a commodity can be fair-trade, it will be by 2013. This shows genuine commitment to achieving change.

They’ve also disclosed a lot of detail from the results of their supplier audit programme. They are being transparent about the significance of problems they are detecting – and their ability to drive change.

Something similar is going on with adidas. It’s not news that adidas has a major responsible sourcing programme. What is interesting is how transparent they have become about where they are still struggling. Like The Co-op, they give a real sense of what’s working and where they are getting stuck.

But elsewhere, the lack of transparency remains a problem. Too many companies are content simply to say: “We have a policy, an auditing programme, and everything is moving in the right direction.”

Summing up

These five common pitfalls show why embedding sustainability is just so challenging. Yet leading companies, many of whom we’ve worked with, are showing that it can be done given enough commitment and imagination. And the prize on offer – a real return on sustainability investment – makes all that effort worthwhile.