Recently, I came across a draft post from early 2011. That draft discusses The Board’s Sustainability Handbook, published by A. D. Little, a venerable international consulting firm. The purpose of the Handbook is to acquaint corporate directors with Sustainability and its relevance at the Board of Directors level of management. This post draws on and updates the draft from 2011. – C.H.
To begin, what exactly is Sustainability?
“Sustainability” refers to an organizational condition to be attained. “Sustainable Development” refers to systematic actions taken over time intended in pursuit of Sustainability. The two terms are often used interchangeably. “Sustainable Development” (hence Sustainability) was originally defined as:
“Development that meets the needs of the present without compromising the ability of future generations to meet theirs” (from the UN’s Bruntland Commission, 1987).
Sounds easy enough, until one considers the scope of concerns that “… without compromising the ability of future generations…” entails:
“It doesn’t matter what size your business is. Sustainability requires you to be aware of the whole picture in which the business sits: from one end of the supply chain to the other; the short term and the long term; the complete lifecycle of your products; and the full gamut of risks and opportunities that face your business – not just financial and reputational risks, but competitive, legal and regulatory as well as societal, community and environmental ones.” (A D Little, The Board’s Sustainability Handbook).
So why would any manufacturer want to get involved in all that?
Why? Because the rapidly changing 21st century business realities of globalization, internet communications, litigation, regulation and activism require diligent systems thinking to manage today’s business risks, and to be positioned to seize the remarkable array of business opportunities that the current pace of change presents. Sustainability is the framework for doing that. Sustainability is good business, at the Board level and every level.
Good business requires a sound business case. The business case for Sustainable Development, of course, varies from business unit to business unit. In general, most revolve around some or all of these factors:
- Cost advantage due to reduced energy costs per unit production
- Cost advantage from reduced material consumption per unit production
- Competitive advantage from differentiable Green products
- Improved competitive posture in the marketplace
- Responsiveness to customer requirements for sustainable practices
- Anticipating regulatory measures
- Reduced risk of litigation
- Reduced risk of activist pressures
“(W)e are convinced that in a more globalized, interconnected and competitive world the way that environmental, social and corporate governance issues are managed is part of companies’ overall management quality needed to compete successfully. Companies that perform better with regard to these issues can increase shareholder value by, for example, properly managing risks, anticipating regulatory action or accessing new markets, at the same time contributing to the sustainable development of the societies in which they operate. Moreover, these issues can have a strong impact on reputations and brands, an important part of company value.” (A D Little: The Board’s Sustainability Handbook, again).
Some real world examples:
>> Dow Chemical announced that it reduced the energy intensity of its operations by 38% between 1990 and 2009, and intends to reduce energy intensity by an additional 25% by 2015. “Energy intensity” refers to energy consumption per unit of production. Dow’s energy intensity reductions during the 1994 – 2009 period saved enough energy to power all of the houses in California for a year and a half. Those savings amounted to $9.4 billion. That $9.4 billion is at the rates Dow Chemical paid for power at the time – not what you or I would have paid, and not what Dow pays today. Additionally, Dow’s 1,800 trillion BTU energy intensity reductions prevented 95 million tons of greenhouse gas (CO2) emissions to the atmosphere.
>> In 2005, General Electric introduced its Ecomagination green products initiative. “Green products” means products that offer significant benefits for customers that are due to ecological characteristics of the products. In 2009, there were over 90 products in GE’s Ecomagination portfolio. These innovative products generated $18 billion in revenues for GE in 2009 alone, and revenues from Ecomagination products continue to grow at twice the rate as GE’s total corporate revenues. Innovative products command strong margins, so Ecomagination’s contribution to net revenues is even stronger. (Update: Through 2013, GE’s Ecomagination portfolio is credited with $160 billion in revenues, against R&D investment of $12 billion).
>> The United Nations Global Compact has now been signed by 8,700 corporate participants and other stakeholders in 130 countries. The Global Compact commits businesses to align their strategy and operations with ten universally acceptable principles in the areas of human rights, labor practices, environment and anti-corruption. (Update: As of August 2014, over 12,000 corporate participants in 145 countries)
In the end, the Handbook puts it rather succinctly:
“In 20 years time, no one is likely to be talking about ‘sustainable’ or ‘unsustainable’ businesses, because the unsustainable ones will have gone to the wall.”
That was in 2011. The clock is running.
Thoughtful comments and experience reports are always appreciated.
… Chuck Harrington (Chuck@JeraSustainableDevelopment.com)
P.S: Contact me when your organization is serious about thriving in the 21st century … CH
This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published on Wednesday evenings.
The Board’s Sustainability Handbook is available for download as a .pdf at: http://www.lulu.com/shop/arthur-d-little/the-boards-sustainability-handbook/ebook/product-17363302.html. It is a $1.05 well spent (no kidding — one dollar + one nickel).