23
August

Sustainability in the Supply Chain

The latest study from Green Research identifies the trends, tools and best practices at the next frontier in corporate sustainability: the supply chain. The study found that a lack of data standards and concerns about data reliability have hindered supply chain sustainability progress. Sixty-two percent of executives surveyed for the study said their efforts to track supply chain sustainability performance are impaired by a lack of measurement standards. The study advises firms to support industry and cross-industry groups that are working to develop supply chain sustainability standards. An important recent development in this area is the release by the Sustainable Apparel Coalition of its “Higg Index,” a standard measure of environmental performance at the product and facility level for the apparel and footwear industries.  The Higg Index should dramatically improve communication about performance and sustainability goals throughout apparel supply chains, leading to sustainability improvements over time. The report notes efforts with similar goals in other industries.

Just a few years ago many companies avoided taking responsibility for the environmental performance of their supply chains, often on the grounds that they had little influence over this aspect of supplier performance. But attitudes are shifting: Sixty-four percent of senior sustainability executives feel their companies can have significant influence on their top suppliers’ sustainability performance, and eighty-four percent consider it likely that their companies can obtain much better environmental performance from suppliers without compromising their companies’ business goals.

Sustainability improvements sometimes depend on advances in technology — such as renewable energy systems or mechanical or electrical systems with advanced, resource-efficient designs. But often they depend on advances in management practice. The research identified ten supply chain sustainability best practices followed by one or more of the dozens of companies discussed in the report. These include educating and motivating suppliers, setting goals, using scorecards, and enlisting buyers and sourcing managers as front-line representatives of a company’s sustainability strategy.

The research revealed that effective management of sustainability data is critically important for companies aiming to drive supply chain sustainability improvements. A vibrant collection of vendors is offering software tools and web-based systems to help companies track, analyze and manage this data. The report provides capsule profiles of a dozen vendor offerings along with a vendor selection framework prospective buyers of the tools can use to help select one appropriate to their needs. For more information about the research, please visit greenresearch.com.

Other Studies Featured This Month

Towards Zero-Impact Growth

Consultancy Deloitte teamed up with sustainability visionary John Elkington to help make Elkington’s vision of a zero-impact growth economy more accessible to major corporations. The team developed a scoring system to plot companies along Elkington’s “pathway to zero,” the five stages from recognizing the opportunity of a zero-impact growth strategy to fully embracing one. Of 65 companies studied, none had yet reached the final stage but according to the analysis, six companies — Puma, Natura, Nestlé, Nike, and Ricoh and Unilever — have arrived at the fourth stage. Among a range of findings, the study identified several best practices, including taking a holistic approach to sustainability, exemplified by Unilever and its Sustainable Living Plan; acting collaboratively, exemplified by a group of competing apparel manufacturers that have jointly committed to eliminating the discharge of hazardous chemicals (and, I would add, the work of the Sustainable Apparel Coalition); and internalizing externalities, exemplified by Puma, which released the first environmental profit and loss statement.

You can find the full paper here.

Six in Ten Consumers Globally Think Green Products Cost Too Much

Market researcher GfK has released its third annual global study of consumer environmental attitudes and behaviors. The study is based on a survey of 35,000 consumers in 25 countries across North and South America, Europe, Asia and Africa. According to the new research, the proportion of consumers whose purchase decisions include a consideration of environmental protection grew 6 percentage points in China and 5 points in Brazil, compared to 2011. Mexico and South Africa also recorded significant increases in the past year, the study found. Sixty percent of consumers globally feel environmentally friendly products are too expensive — twice the percentage of those who see a green lifestyle as a “status indicator.” More information here.

Article written by David Shatsky, President, Green Research for Sustainable Life Media – August 22, 2012

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16
May

5 Lessons on Consumers’ Preference for Purpose

For consumers worldwide, values are the new currency and purpose is the new paradigm. You might think this sentence was taken from the Occupied Wall Street Journal, but actually this is a quote from the latest goodpurpose study, Edelman’s annual global research study that explores consumer attitudes around social purpose. This research is an impressive effort (8,000 participants) to figure out how important purpose and values really are to consumers. The study found that purpose has a growing importance among consumers – “the power of Purpose is driving consumer preference and loyalty in a world where trust in corporations is low and differentiation between brands is negligible.”

For example, 53 percent of the responders said that when quality and price are the same, social purpose is the most important factor for them, up from 41 percent in 2010. Also, 47 percent reported that they make purchases of cause-supporting brands ‘at least monthly’ compared to only 32 percent in 2010. The study has some valuable lessons both for consumers and companies. Here are five of them:

1. Don’t take people’s word when it comes to paying premium on green products

According to the report 43 percent of the consumers are willing to pay a premium for purpose. The numbers are higher in developing countries like China (80%), India (71%) and Brazil (55%) and lower in more developed countries like Japan (29%) or UK (29%). My advice to companies would be to read these figures with a grain of salt. Usually the assumption is that about 10 percent of the consumers will pay premium for green products (see BBMG’s New Consumers research for example). Given the global economic environment and especially when 85 percent of the respondents report being affected by the global recession, there’s a better chance the average number now is lower than 10 percent, certainly not higher.

2. The bull and the bear

The report presents an interesting differentiation between Rapid Growth Economies (RGEs), including China, India, Indonesia, Malaysia, UAE and Brazil, which are bullish on purpose, and “Bear” Markets, like the US and Western Europe. RGE consumers have much higher expectations of and engagement with brands and corporations on societal issues, whereas levels commitment to purpose and values seem to be lower in developed countries. This is not the first study showing this trend, although it seems to be more reflective of respondent attitudes than in actual behavior. We’ll have to wait for further research before we can really establish who is a bull and who is a bear when it comes to intention.

3. Companies need to do more, but also need to communicate more effectively

According to the report, while 87 percent of global consumers believe that business needs to place at least equal weight on society’s interests as on business’ interests, less than a third believe business is performing well at addressing societal issues. “This performance gap is likely to drive disillusionment, disengagement and outright distrust from consumers,” the report explains.

This finding presents three challenges to companies: First, companies need to act more sustainably or as Paul Polman puts it, “to recognize that the needs of citizens and communities carry the same weight as the demands of shareholders.” Second, when a company already acts, it needs to make sure that consumers know about it – how many buyers of Dove soaps know about Unilever’s Sustainable Living Plan? How many customers of M&S know about its Plan A? Third and this might be the trickiest one, companies should learn to communicate effectively – the problem is that while consumers have higher expectations from companies, they don’t trust them too much. So companies that act and want to spread the word about their good work should find how to communicate smartly to make sure consumers not only get exposed to the news, but also find it reliable.

4. What should companies be doing anyway?

For companies that wonder what consumers are expecting them to be doing, exactly, the report provides answers. Approximately half of respondents believe organizations should donate a portion of profits (51%) and products or services (50%), while 49% believe companies should be creating a product or service that helps address a societal issue. They also think companies should be providing educational information (47%), partnering with NGOs (43%), and somewhat surprising – working with the government (45%).

5. The power of the sticks

According to the report, consumers are willing to praise those brands and corporations that support a good cause, and they will also punish those that do not. I have a feeling that companies are paying more attention to the sticks so they might want to pay attention to the favorite ways customers use to punish those companies that don’t actively support a good cause: refuse to buy products (44%), criticize it to others (44%), share negative opinions and experiences (44%), not want to work for it (48%) and not invest in it (53%).

As we can learn from the case Apple, where its sales set a new record last quarter alongside a waterfall of accusations about the working conditions at Foxconn, boycotts doesn’t seem to be too popular, no matter what people say. Still, the example of Apple shows that the power of online protests is no less and might be even greater than the power of boycotting.

Article as published in Triple Pundit, May 4, 2012 by Raz Godelnik, an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.

 

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5
April

10 Lessons from 11 Business Sustainability Journeys

There are many valuable lessons to be learned by reviewing the ways companies relate to sustainability. An increasing number of companies around the world are engaging major sustainability initiatives ahead of government regulation and in the absence of strong public demand.

Corporate sustainability is now part of strategic business decisions that are determining everything from manufacturing processes to marketing communications. As explained in a Sustainable Brands article, “Companies increasingly recognize that a proactive stance on sustainability is becoming a competitive necessity in attracting investors, employment talent and supply chain partners, as well as customers.”

Each company has had to deal with a unique set of circumstances and each company’s experience reveals a different insight. Here is a selection of ten companies and some of lessons that we can take from their sustainability journeys.

1. Eastman Kodak Corporation: Adapt or Die

Companies that proactively engage sustainability are rewarded while companies that ignore sustainability are punished. This holds true for Eastman Kodak, which is forced to reinvent itself by the changing marketplace. The company must radically change its product offerings and its culture of complacency or it will die.

As reviewed in a Triple Pundit article, Kodak is already teetering on the brink. To raise capital, they are close to selling off some of their lucrative patents, and they have one year to submit a reorganization plan to bankruptcy court.

To survive, the 120-year-old film company is morphing itself into a digital imaging company. Through its partnership with Natcore Technologies, Kodak is also investing in inexpensive patented thin-film solar technology, specifically flexible solar cells, through a New Jersey-based startup. The solar cells cost as little as half as much as traditional thin-film solar cells to manufacture. This is a bold move for Kodak, but it will need to make similar bold moves if it is to regain its foothold.

2. Toshiba International Corporation: Bold Strategic Move

Adapt or die is a motto that applies equally to thriving businesses as well. Toshiba, once a leader in incandescent lighting, is now betting on LED technology as the future of lighting. As revealed in a recent press release, Toshiba completely abandoned production of incandescent lights in March 2010 and is now diving fully invested in LED lighting. Toshiba is the first major lighting manufacturer to proactively discontinue the production of incandescent lamps.

Toshiba is one of the largest lighting companies and LED light manufacturers in the world, they produced their first light bulb in 1890. On July 13, 2011, Toshiba announced that twenty of its energy-efficient LED lights have received the US Environmental Protection Agency (EPA) Energy Star® label. An Energy Star qualified LED lamp uses up to 75% less energy, lasts at least 15 times longer than incandescent lighting and has a light quality, which remains consistent over time.

Being awarded the Energy Star certification is an important payoff for Toshiba’s bold strategy.

3. LG Electronics, Inc.: Lead through Public Private Collaboration

LG Electronics USA is based in Englewood Cliffs, N.J., and it is the North American subsidiary of LG Electronics, Inc., a $49 billion global force and technology leader. LG Electronics Inc. is reducing emissions by collaborating with government.

As reviewed in an April 3, 2012 PR Newswire release, LG Electronics USA plans to cut its carbon footprint in half by 2020. To help achieve this ambitious objective, the company is working in cooperation with the EPA’s Green Power Partnership, which is a voluntary clean energy program.

As part of the Partnership, LG USA will power its Englewood headquarters by purchasing more than 1.5 million kilowatt-hours (kWh) of green power over the next 18 months. This translates to carbon emissions reductions equivalent to more than 200 passenger vehicles per year, or more than 100 average American homes annually.

Blaine Collison, director of the EPA Green Power Partnership, said LGs effort “provides an excellent example for other organizations.”

In addition to their partnership with the U.S. EPA, LG is also part of South Korea’s Green Technology Center (GTC), a research institute that will focus on developing environmentally friendly technologies.

4. Samsung: Get There First and Keep Innovating to Stay on Top

As reviewed in an Ecoleader article, Samsung has a green vision that will only get greener in the future. Like LG, Samsung is also part of South Korea’s Green Technology Center (GTC) research center and the company is already a leader in energy-efficient products.

In 2007, Samsung was first with internet connected appliances to increase energy savings and reduce costs, and in 2008, Samsung launched an eco-phone made with corn-based bioplastics. In 2011, the company launched more Green IT products and services and in the summer of 2011, Samsung joined the Climate Savers Computing Initiative (CSCI).

Samsung will continue to innovate by increasing energy efficiency, reducing CO2 emissions and being less harmful to the environment when its products are recycled or disposed.

5. PPR Home: Innovative Metrics Shed Light on Supply Chains

As reported in GreenBiz, the parent company of some of the world’s biggest luxury and sporting brands, including Gucci, Yves Saint Laurent, and PUMA, are embarking on one of the world’s most ambitious green accounting programs. PPR Home has announced that it will adopt a group environmental profit and loss statement (EP&L) by 2015.

This new approach to accounting will help to monitor and manage greenhouse gas emissions, water use, pollution, and land use change. According to PUMA executive chairman, Jochen Zeitz, EP&Ls are superior to conventional sustainability reports.

”As the manager of a business, all you need to look at now is one page and you know what you need to do because it tells you exactly where you need to attack in order to get rid of your footprint,” Zeitz said. “But once you visualise and measure, you can actually manage the impact. Whereas before the visualisation was so hypothetical that it didn’t lead to concrete day-to-day decisions.”

The EP&L provide a more transparent view of the supply chain. PUMA’s E P&L revealed that 94 percent of its environmental impact was created in the supply chain, which has encouraged the company to find alternative materials to reduce that impact. Zeitz said that the company was looking into requiring firms to measure and report their environmental impact when PUMA is selecting suppliers in future.

6. HP and Dell: Manufacturing or Recycling

According to an article by Carol Baroudi, HP and Dell are each taking different approaches to sustainability. HP is emphasizing removing toxic compounds from manufacturing while Dell is focused on recycling through take back programs.

HP has been far better than Dell at removing toxic compounds from their designs. They have reduced PVC and BFRs, and they have completely phased out beryllium and other compounds.

Dell is better than HP at recycling their products at the end of their life cycle. Dell is working with the EPA on the National Strategy for Electronics Stewardship. Dell and the EPA are promoting recycling for electronic waste. The goal of the Strategy is to “encourage electronics manufacturers to expand their product take-back programs, and use certified recyclers as a minimum standard in those programs.”

7. Unilever: Go Big or Go Home

Greenbiz has lauded Unilever’s efforts if for no other reason than the sheer scale of its sustainability ambitions. By 2020, the company, with annual revenues exceeding $63 billion, plans to cut its massive environmental footprint in half through its Sustainable Living Plan.

Big efforts get noticed as is evidenced by the fact that Unilever won top honors at the 2011 International Green Awards in London. Unilever was named the Grand Prix award winner because it has “the greatest capacity to change the way society and business is perceived, supported by factual evidence of systemic change.”

Unilever’s Sustainable Living Plan articulates the view that business must prepare itself for a future in which resources are rare and more expensive.

“We are preparing ourselves for that future. We’re also trying to develop products and services which will allow our consumers to adapt to a very different world,” Gavin Neath, Unilever’s senior vice president of sustainability, said in an interview. “People talk a lot about things like climate change adaptation. In a real sense, part of what we’re doing in the Sustainable Living Plan is about climate change adaptation.”

8. ARAMARK: Training a Workforce

You do not need to be a multi-billion dollar company to develop innovative approaches to address sustainability challenges. One such concern involves securing qualified employees. ARAMARK has launched an Environmental Internship Program designed to meet the growing need for employees who have a practical understanding of environmental initiatives plus fundamental business knowledge.

The program provides young professionals with corporate experience and creates an awareness of the role environmental stewardship can play in all jobs. ARAMARK is a world leader in professional services, providing award-winning food services, facilities management, and uniform and career apparel to health care institutions, universities and school districts, stadiums and arenas, and businesses around the world.

“Environmental practices can be incorporated into virtually any job, and through the ARAMARK Environmental Internship Program, we can help develop employees who make the connection between the work that they do, and its impact on the environment and on our business,” said Rick Martella, ARAMARK Vice President, Business Affairs. “Embedding these internships in key roles across the company will provide environmental knowledge and skills that are not confined to a single position or type of job, and can be easily shared.”

9. Berg Engineering Consultants Ltd.: Be Proactive

Green is also growing in the building sector. As reported in the Daily Herald Business Ledger, the green market was 2 percent of non-residential construction starts in 2005; 12 percent in 2008; and grew to 28-35 percent in 2010. By 2015, an estimated 40-48 percent of new non-residential construction will be green. Experts say green building will support 7.9 million U.S. jobs and pump $554 million into the U.S. economy over the next four years.

By 2015, the green share of the largest non-residential retrofit and renovation activity will more than triple, growing to 25-33 percent of the activity by value — a $14-18 billion opportunity in major construction projects alone, industry experts say.

When Brian Berg Sr. established Berg Engineering Consultants Ltd. (BEC), there was no green market and there was no LEED certification. However, when he set up shop in the midst of the 70s energy crisis, he paid heed to prevailing conditions and positioned himself to be ahead of the curve in energy-efficient designs.

Now his firm has won numerous energy awards using energy efficient design in a huge and growing market.

“Dad had to invent energy efficient design,” explains Brian Berg Jr. “Today it’s not so much a process, but education — staying on top of innovations, showing clients how spending a little more for a more energy efficient building envelope is a smart investment.”

10. Bluehorse Associates: Doing It for the Money

Bottom line benefits are driving the adoption of sustainability. As Sara Pax, President of Bluehorse Associates, noted, it is ‘not about tree-hugging’: Sustainability is simply good for business. According to Pax, companies should be concerned about their environmental sustainability – but it has more to do with ensuring profitability than it does with saving the planet.

Bluehorse Associates is the maker of a tool for measuring environmental sustainability for the food industry called Carbonostics, which Pax claims can give food and beverage companies tangible information about which measures make most sense for business, as well as for the environment.

Consumer engagement should not be a top priority for companies, Pax said, as only a very small percentage of consumers change their purchasing decisions based on any environmental work that a company has undertaken.

Conclusion

Businesses are drawn to sustainability by the returns they see in the real world experience of other businesses. Research bears out the hypothesis that businesses that adopt a sustainable culture “significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.” This was the finding in a November 2011 study conducted by researchers at Harvard Business School and London Business School.

Business is doing more for the environment than governments or grass roots populism. We can learn a great deal from the sustainability journeys of the brave pioneers who have dared to lead.

Article written for Global Warmingis Real,  as published in Sustainable Life Media by Richard Matthews,  a consultant, eco-entrepreneur, green investor and author of numerous articles on sustainable positioning, eco-economics and enviro-politics.

Source: Global Warming is Real (http://s.tt/18OZN)

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9
February

50 Fastest Growing Brands Serve a ‘Higher Purpose’

New research on the world’s 50 fastest growing brands found a cause-and-effect relationship between a brand’s ability to serve a higher purpose and its financial performance.

Brand consultants Millward Brown and former Proctor & Gamble marketing officer Jim Stengel developed the list of 50 brands, which they say built the deepest relationships with customers while achieving the greatest financial growth from 2001-2011. Furthermore, investment in these companies – the Stengel 50 – over the past decade would have been 400% more profitable than an investment in the S&P 500.

The list includes numerous brands with strong reputations for sustainability, such as Method, Seventh Generation, Stonyfield Farm and Chipotle.

The study forms the backbone of Stengel’s book GROW: How Ideals Power Growth and Profit at the World’s Greatest Companies (Crown Business; December 27, 2011).

“We wanted to uncover which brands grew the most over the past decade, both in terms of customer bonding and shareholder value,” said Millward Brown Optimor VP Benoit Garbe, who led the study. “Once we identified these brands, our burning question was what, if any, were the common principles that sparked and sustained their growth.”

To arrive at the Stengel 50, Millward Brown Optimor valued thousands of brands across 30+ countries. The list included both B2B and B2C businesses in 28 categories ranging in size from $100 million in revenues to well over $100 billion:

Ideals – The Ultimate Growth Driver

A research team – comprising Millward Brown Optimor brand strategists, Jim Stengel, Professor Sanjay Sood and MBA students at UCLA Anderson Graduate School of Management – uncovered that the most successful brands were built on an ideal of improving lives in some way, irrespective of size and category.

“We define ideal as the higher-order benefit a brand or a business gives to the world,” said Stengel. “Some companies are very explicit about their ideals, like Zappos – their ideal of delivering happiness is on their boxes, all over their offices, even on t-shirts employees wear. Other brands, like Louis Vuitton, are more implicit about it. But all their actions – throughout their products, stores and communications – amplify their ideal to luxuriously accentuate the journey of life.”

Added Garbe, “We found that this ideal is both a source of inspiration externally among customers, as well as a compass for internal decision making. So whether it’s Red Bull which seeks to Uplift Mind and Body or Pampers which is all about Caring for Happy Healthy Development of Babies, an ideal influences all facets of the business from HR and Marketing to R&D and Finance.”

Through case studies, GROW demonstrates how brand ideals aren’t simply about altruism or corporate social responsibility but a fundamental human value that is authentic to the brand and ultimately a driver for extraordinary growth. In fact, Millward Brown Optimor’s analysis discovered that those who centered their businesses on ideals had a growth rate triple that of competitors in their categories.

How Ideals Impact the Consumer Mind

Millward Brown’s team also determined that the 50 brands touch on five fundamental human values:

  • Eliciting Joy: Activating experiences of happiness, wonder, and limitless possibility
  • Enabling Connection: Enhancing the ability of people to connect with each other and the world in meaningful ways
  • Inspiring Exploration: Helping people explore new horizons and new experiences
  • Evoking Pride: Giving people increased confidence, strength, security, and vitality
  • Impacting Society: Affecting society broadly, from challenging the status quo to redefining categories

The list of companies is as follows:

Accenture, management and enterprise consulting services

Airtel, mobile communications

Amazon.com, e-commerce

Apple, personal computing technology and mobile devices

Aquarel, bottled water

BlackBerry, mobile communications

Calvin Klein, luxury apparel and accessories

Chipotle, fast food

Coca-Cola, soft drinks

Diesel, youth- targeted fashion apparel and accessories

Discovery Communications, media

Dove, personal care

Emirates, air travel

FedEx, delivery services

Google, Internet information

Heineken, beer

Hennessy, spirits

Hermès, luxury apparel and leather goods

HP, information technology products and services

Hugo Boss, luxury apparel and accessories

IBM, information technology products and services

Innocent, food and beverages

Jack Daniel’s, spirits

Johnnie Walker, spirits

L’Occitane, personal care

Lindt, chocolate

Louis Vuitton, luxury apparel and leather goods

MasterCard, electronic payments

Mercedes-Benz, automobiles

Method, household cleaners and personal care

Moët & Chandon, champagne

Natura, personal care

Pampers, baby care

Petrobras, energy

Rakuten Ichiba, e-commerce

Red Bull, energy drinks

Royal Canin, pet food

Samsung, electronics

Sedmoy Kontinent (“Seventh Continent”), retail grocery

Sensodyne, oral care

Seventh Generation, household cleaners and personal care

Snow, beer

Starbucks, coffee and fast food retailer

Stonyfield Farm, organic dairy products

Tsingtao, beer

Vente-Privee.com, e-commerce

Visa, electronic payments

Wegmans, retail grocery

Zappos, e-commerce

Zara, affordable apparel

Bart King is regulat contributor to Sustainable Life Media and a PR consultant at Cleantech Communications

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4
January

Five Mega-Trends Creating 2012′s Trillion Dollar Global Sustainable Economy

2012 will be the milestone year that the US economy demonstrates sustained economic growth through adoption of 21st century’s sustainable solutions. Earth 2017‘s economic model estimates that sustainable product solutions have now achieved the breakthrough trillion dollars per year in global annual revenues level and is on the path toward achieving $10 trillion of annual global revenues by 2017.

Here are the five mega-trend drivers behind 2012’s sustainable economic growth:

1. Energy efficiency is #1 in ROI. The Return On Investment (ROI) on US 10 year bonds is 2 percent and the 2011 Standard and Poor 500 stock index closed the year with zero appreciation. Energy efficiency investments now offer 10-50 percent ROIs making them the superior investment available today in the United States.

Two fuel price trends are driving these superior returns for energy efficiency investments. The first is that 2011 marked the first time in US history that the average price of gasoline did not fall below $3 per gallon and diesel prices did not fall below $4 per gallon.

The second major fuel trend is the continuing rise in electricity prices. Electricity rates continue their long-term upward path driven by higher coal prices and the increased cost of pollution controls on coal fired power plants. In addition, the aging of the electrical grid and pressure to adopt smart technologies mean utilities are cash strapped and must request for higher rates to fund investments.

In response to electricity price inflation 52 percent of US companies report targeting a 25 percent reduction of their electricity consumption by 2014. The pain at the pump is now energizing the US automobile industry to act with new new models like the Chevrolet Cruze, Hyundai Elantra and Ford Focus. These vehicles with MPG over 35 mpg are succeeding in the market with sales up over 40 percent. The most telling trend-indicator of all maybe the successful IPO of Zipcar, a car sharing program.

2. Green supply chain is driving global economic growth. Corporations, not governments, are now driving the push toward sustainability as they harvest increasingly significant profit growth through design and process innovations that cut production, delivery, packaging and disposal costs while also reducing a company’s/product’s environmental footprint. This is a global trend led by international companies like Walmart, GE and Coca Cola. Its commercial impact is now evident in the increasing scale of Request For Proposal bid questions on sustainability metrics and performance results documentation. This global mega-trend is creating new revenue growth opportunities for smaller businesses that can offer price competitive lower environmental footprint products and solutions. It is also decentralizing decision-making as large corporations gain success using Green Teams to find and implement ideas that reduce costs and a company’s environmental footprint. Where CFOs once questioned the ROI of producing a corporate CSR report, the importance of these documents is now clear. CSR reports have an increasingly important role as a source document used by third parties that communicate to consumers and equity investors on the sustainability of a company and its products, which has an implicit impact on the bottom line. The combined impacts of the greening of the supply chain have now made this process the economic engine of the global sustainable economy.

3. Local farm to fork. Boomers are still the dominant economic force in America, accounting for 52 percent of the approximately $700 billion spent on groceries. Boomers are increasingly shifting their food procurement toward healthier choices in their lifelong quest for an “endless summer.” While still heavily influenced by price, convenience and mass marketing, the Boomer Generation is increasingly buying at farmers markets and adopting food gardening. Their mega buying power will accelerate the re-engineering of agriculture away from chemicals. It is also promoting Buy Local. Aligned with the Millennial Generation’s focus upon a healthy lifestyle these two mega-consumers will make 2012 a milestone year for moving the American food supply closer to a Local Farm To Fork supply chain.

4. “Smart” consumers bypassing the greenwashing explosion. 2012 will see a further explosion in greenwashing as 20th century unsustainable products attempt to align with the marketing power of smart, healthy and green labels. The boomerang of this increased greenwashing will be the acceleration in the consumer’s shift to their social networks for answers they view as authentic and transparent. 84 percent of moms now rely upon Facebook and 64 percent rely upon reading blogs to make their purchase decisions. The QR code accessed by a smart phone that links to third party assessments and analysis is emerging as the consumer’s information portal in evaluating price competitiveness, product claims and product safety. 2012 will see further acceleration of the “smart” consumer overpowering traditional brand marketing greenwashing.

5. Hispanic green leadership. The Hispanic community’s 50 million citizens now represent over 16 percent of the US population. Hispanic consumers have over $1 trillion of annual buying power. The US Hispanic community’s buying power is comparable in size to the GDP of South Korea, two-thirds the size of India and over twice the size of Turkey. The Hispanic community leads America in the new business start-ups and in new business start-ups by women.

Emerging market research now points to the Hispanic community also leading America in the green revolution. Led by their US Hispanic Chamber of Commerce the Hispanic business community is increasingly going green to lower costs, align with their Hispanic customers and win business with non-Hispanic businesses. The 2012 election year will see the Hispanic community gain increased influence at the ballot box and at the cash register as they align their vote and wallets with their strong sense of going green in behalf of their families and out of respect for their family values.

Excerpt written by Bill Roth for Triple Pundit, January 3, 2012

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2
November

Companies Are Using Sustainability to Pursue Broader Goals

November 1, 2011—More companies are using sustainability to improve processes, pursue growth, and add value to their companies than focusing solely on reputation according to a study recently released by McKinsey & Company. Based on a July 2011 online survey of over 3200 executives from a wide range of regions, industries, company sizes and functional specialties, the study found that, compared to a similar study last year, larger shares of executives say sustainability programs make a positive contribution to their companies’ short- and long-term value. And more executives say their company’s top reasons for addressing sustainability include improving operational efficiency and lowering costs. The share that said this jumped 14 percentage points since last year, to 33 percent, edging out corporate reputation, selected by 32 percent of respondents.

Sustainability Can Play a Role in Any Value Creation Strategy:

The study identifies three different levers that companies can use to create value–growth, return on capital, and risk management—and finds that sustainability has a role to play in all three. According to McKinsey’s framework, a growth strategy may involve innovation and new products or reaching new customers and markets; a strategy of improving returns on capital might feature increasing the environmental performance of operations; a risk management strategy could entail regulatory or reputational management. The study found that some value strategies are more common than others.

Sustainable Growth Strategies Relatively Rare among Rank and File Companies

Companies are utilizing sustainability tactics in all three value creation strategies, according to the survey, but growth strategies powered by sustainability are relatively rare. About twice as many executives say their companies are reducing energy usage than say they are reaching new customers or markets as a consequence of their sustainability activities, for instance.  Just 18 percent of companies said they were able to achieve higher prices or greater market share from sustainable products.

Leaders More Likely to Employ Growth Strategies

Leaders are more likely to employ sustainability growth strategies than the rank and file, according to the study. Individuals were classified as leaders if they said that sustainability was a high priority and was managed well at their company, along with some other criteria. According to this segmentation, sustainability leaders were more than twice as likely as non-leaders to be pursuing a sustainable growth strategy. Indeed, they were more likely to be engaged in any of the three value creation strategies than non-leaders. One implication seems to be that as companies elevate the priority of sustainability in their organizations and improve their ability to manage sustainability initiatives, a broader range of options for creating value opens up to them.

Written by David Schatsky, President of Green Research, for Sustainable Life Media.

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28
October

The New Metrics of Sustainable Business: In With The Old, In With The New . . .

October 20, 2011—Many companies that closely follow market trends make the mistake of deciding they need a “sustainability strategy.” Yes, sustainability is a transformative market trend and, yes, a strategy is always advisable. However, businesses would be much better served if they instead create a “business strategy that is sustainable.” This is a subtle yet incredibly important distinction.

Not surprisingly, under this viewpoint the “new” metrics of sustainable business look a lot like the “old” metrics of business. Financial and social indicators – such as revenue, profitability, margin, customer satisfaction, employee engagement – all continue to matter. In addition, environmental indicators have become much more prominent in both corporate disclosures as well as corporate decision-making. So, what is so different about the “new” metrics and why should you care? In this article I highlight three trends that are becoming best practice around the “new” metrics and identify three areas where “next” practices are still emerging.

Best Practices for a Business Strategy that is Sustainable

1)      Materiality

The first issue that companies need to address is that sustainability can mean many things, or even everything, to different stakeholders (see the 6-paragraph, 24-citation definition on Wikipedia if you haven’t experienced it yourself). A business strategy that is sustainable needs to clearly define what is material to each of a company’s stakeholders and provide a mechanism for remaining relevant over time. As a practical matter, this means that material issues may differ greatly for different companies, but should begin to converge at the industry/sector level.

SAP has addressed this issue by creating an interactive materiality matrix as part of our online sustainability report (Figure 1). This matrix allows stakeholders to easily provide comments using any web 2.0 log-in (Facebook, Twitter, Linked-In, etc.) and allows us to track and document evolutions in stakeholder views over time. Incorporating stakeholder engagements such as this, SAP has chosen to transparently report and track goals on eleven material sustainability indicators, a relevant, yet manageable number for our business.

Figure 1

2)      Radical Transparency and Real-time Engagement

Technology has completely changed the way businesses must interact with their stakeholders. Brand risk has risen significantly as the world gets more unwired and connected. There are now more wireless devices in the U.S. (>320 million) than there are people, more than 800 million active Facebook users, and over 1.1 trillion text messages sent in the U.S. alone. This allows nearly instantaneous feedback from stakeholders, both good and bad, to a large global audience.

SAP has addressed this issue by providing radical transparency and real-time engagement around our sustainability report. We have chosen to publicly provide a green arrow/red arrow dashboard around our material indicators (Figure 2) and devote 1/3 of each page to real-time stakeholder comment.

Figure 2

As one speaker at the WRI value chain launch in NYC noted, customers have a much greater trust in businesses that are transparent in their disclosures. There is a strong sense in this age of connectivity that even if one customer doesn’t independently confirm the information provided, someone has likely reviewed it.

This is not only becoming a best-practice in the corporate world, but in government as well. The American Recovery and Reinvestment Act of 2009 required creation of a website “to foster greater accountability and transparency in the use of funds made available in this Act.” This site includes not only a massive repository of data to prevent fraud, waste, and abuse – it also allows users to analyze the data on spending and jobs across 15 different categories at the state, congressional, county, or even city level through Recovery Explorer, including providing this transparency on a platform where users are increasingly likely to consume it – as free apps for the iPhone and iPad.

3)      Turning Data into Business-Relevant, Actionable Information

Analytics applications, such as Recovery Explorer, allow users an unprecedented view into correlations between different data sets and the ability to identify trends that were previously unapparent. Last year SAP worked with the U.S. EPA to provide similar capabilities for the public around emissions data for the electricity sector through the Clean Energy Experience site [Figure 3]. These tools allow easy visualization and analysis of the data and allow identification of trends such as how technology improvements, corporate policy, and state policy affect emissions across different regions.

Figure 3

 

The key to creating value from sustainability data is the transition from data to business-relevant actionable information. For example, at SAP we load our carbon and energy data into analytics tools and are easily able to globally benchmark data centers, identify those that are underperforming, and introduce and track corrective actions. An increased focus on energy use and identification of these types of opportunities has provided us savings of approximately a quarter billion dollars from business-as-usual trends over the past four years.

Many global companies are not only using this data to improve their corporate bottom lines, but to identify new business opportunities for their customers. As a business process software company, our largest opportunity is through helping our customer base become more efficient within their operations. This is beginning to lead to a significant global impact. Other companies, such as GE (>$85B in ecomagination revenues over past five years), and Proctor & Gamble ($26.5B in sustainable innovation product revenues) have found material improvements to revenue from new customer opportunities as well.

“Next” Practices for a Business Strategy that is Sustainable: What Areas Remain to Explore?

1)      Correlation/Causation of Environmental, Social and Financial Performance

Additional data is becoming available every year that sustainable companies outperform the market. Recently the Carbon Disclosure Project and Bloomberg released data in the Global 500 Report that show companies on the CDP Leadership Indices significantly outperformed the index. (Figure 4)

Figure 4

This adds to data released by EPA a few years ago showing correlation around energy performance leaders in various sectors and stock price. There is also an interesting Wharton study around how employee satisfaction relates to improved market performance. The recent distinction of SAP as a “Bay Area Top Workplace provides some additional correlation for our own operations.

Reasonable questions remain around whether environmental and social performance is just strongly correlated to returns (i.e. well-managed companies manage energy use well, along with other material risks and opportunities) or whether it is a root cause of this performance (i.e. implementation of best and next practices leads to new business opportunities that would not have otherwise been identified). My personal view is the latter; however, more studies in this area are certainly needed.

2)      Holistic Look at Supply/Value Chain

Another area that leading companies are beginning to address is a much more holistic view of risk and opportunity across the supply chain. Many of the same factors relevant to corporate efforts apply in the broader value chain: managing business and reputational risk, increasing efficiencies to lower costs, and innovation around safer and more sustainable products that can lead to new revenue streams.

A number of companies have created supplier “codes of conduct” to manage expectations, either voluntarily or under pressure from investors. Regulatory efforts such as the European Commission’s REACH program around chemicals of concern has been a major business driver and managing recall concerns has more companies looking at full product and batch traceability in their supply chains. For “next” practices, SAP recently piloted the WRI/WBCSD value chain protocol and now has a more holistic view of carbon/energy use across our entire value chain.

There remain many challenges around a holistic view of value chains, from standardization of data/reporting to willingness to share potentially confidential business information with customers, and the potentially vast amounts of datapoints required from continuously evolving supplier and customer relationships. There are many organizations working to create consensus around multi-stakeholder engagements, such as The Sustainability Consortium, WRI/WBCSD, Sustainable Apparel Coalition , and Carbon Disclosure Project , however, there is still a great need for harmonization of this work around different industry sectors, inclusion of multiple impact factors (from human rights, to chemicals, to calculated impacts around embedded energy/climate effects, etc.), and minimizing impact on small business.

3)      Accounting for Non-Financial Indicators: Integrating Financial and Non-Financial Reporting

A final issue of vital importance to the “mainstreaming” of sustainability is the relationship between traditional financial and non-financial indicators, or “what belongs on the balance sheet?” Investor interest in the issue has increased immensely over the past decade with investors representing over $71 trillion requesting data through the Carbon Disclosure Project  and investors representing over $20 trillion calling for policy action to stimulate private-sector investment in climate change solutions.

SAP provides an online sustainability report that goes into significant depth around our sustainability performance based on the GRI Reporting Framework at the A+ level (including third-party financial auditor assurance of the data). We have also chosen to include sustainability data in our Annual Report as “non-financial key performance indicators” and to discuss these topics on financial analyst calls since our quarter-billion dollar savings is significant to our business. However, much work remains around accounting for non-financial indicators let alone exploration of moving towards a more integrated report.

There is a lot of interest in additional research and developing frameworks for this topic. The International Integrated Reporting Committee is moving forward with piloting an overall framework for integrated reporting. The Dow Chemical Company and the Nature Conservancy have announced a partnershipon developing valuation for “Eco-System Services”, and groups such as HIP Investor are moving forward with pilots on “Human Resource Valuation.”

Next Steps

Great work has been done in many of these areas and much hard work remains to be done as we continue our journey towards a more sustainable business and more sustainable economy. In-depth discussions around many of these next practices will take place at Wharton next Monday during “Redefining Value: The New Metrics of Sustainable Business” and I look forward to continuing our progress there.


Jim Sullivan brings over 19 years of experience to his role as Vice President, Sustainability Management & Strategy at SAP.

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3
August

Building the Green Economy with SME’s

GLOBE-Net, July 25, 2011 – According to Statistics Canada, businesses with fewer than 500 employees account for more than 50 per cent of Canada’s GDP.

Canada has a higher percentage of these small and medium-sized enterprises (SMEs) than most OECD countries. Combine that with the fact that SMEs are a strong source of innovation in Canada, and it is clear to see that SMEs will lead the move to position Canada at the heart of global clean-tech opportunities.

Clean technology is emerging as a key dimension of the global economy given its potential to create new revenue streams, and provide efficiencies that save money, leading to higher profitability and competitiveness.

This improved productivity, with new or better ways of producing goods, has the potential to revitalize industries, boost profitability and simultaneously improve businesses’ environmental performance.

The world’s emerging economies are demanding these superior technologies to sustain their rapid growth, producing a clean-tech market pegged at $4-trillion per year.

For a country like Canada with a relatively small domestic market, a high proportion of SMEs, and a dependence on exports for a large part of our economic growth, this presents a huge and unprecedented opportunity for Canadian business.

The reality in Canada is that we can only grow our clean-tech economy through a significant focus on SMEs.The good news is that the global clean-tech economy will be built on the foundation of SMEs developing clean technology solutions that can be bought and deployed by big corporations.

So the high proportion of SMEs in this country-which has sometimes been viewed as a hindrance to Canadian business integration into the global economy-might well turn out to be an advantage in the global clean-tech race.

The government of Canada recognizes this, understands the challenges and opportunities clean-tech SMEs face, and has stepped up to the plate through SDTC.

Fully 90 per cent of SDTC’s portfolio companies are SMEs. We support technology development and demonstration by connecting innovators with customers and investors, creating a path to commercialization for Canadian clean technologies.

SDTC provides funding to SMEs to help them prove out their technologies in real-world settings based on end-user needs. In addition, SDTC helps accelerate their commercialization by attracting capital and customers to these clean technology developers.

Across Canada, in both rural and urban settings, SDTC helps bridge the gap that separates the majority of IP creators-the innovative small and medium-sized enterprises responsible for most of the R&D and for generating the majority of clean technology concepts-from the multinational enterprises that can help scale smaller companies and take their technologies to market.

Canadians reap the economic, environmental and health benefits ensuing from the successful market entry of these technologies.

Examples of SDTC-funded SME success stories include companies like Saskatchewan-based Milligan Bio-Tech, which has developed a solution that uses non-food canola as a feedstock for biofuel and other valuable products.

Now a revenue generator, the non-food canola has also emerged as a superior alternative for biodiesel users.When Saskatoon Transit used Milligan’s biofuel, it saw its maintenance costs drop by 70 per cent.

Westport Innovations, another SDTC-funded SME, was first to market a solution that links the clean-burning characteristics of liquefied natural gas with the efficiency and performance of the diesel engine for long-haul trucking. In 2010, Westport generated more that $131-million in revenues and employed more than 300 people in R&D, engineering and manufacturing.

And Canada’s largest food retailer, Loblaws, in an effort to lower their multi-million dollar annual costs of refrigerated transport of perishable goods, is building a market for Canadian clean-tech as a member of an SDTC project consortium testing out Sunwell Technologies’ Deepchill Thermo Battery system.

These are just a few of the examples of SDTC successes in supporting over 200 clean-tech SMEs across Canada.

As Canada strives to green its economy and take advantage of the immense global clean-tech opportunities in front of us, we need to view SMEs as one of our greatest strengths. That has been our focus at SDTC for a decade now. And it is paying off.

Dr. Vicky J. Sharpe is president and CEO of Sustainable Development Technology Canada (SDTC).

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20
July

Canadian private companies fall behind on CSR.

Excerpt from an article written for Canadian Business by Paul Klien, May 2, 2011

It appears that Canadian private companies haven’t got the memo. Corporate Social Responsibility (CSR) is an imperative for business and, as it turns out, private companies in this country are missing out on opportunities to differentiate themselves from their competitors and attract a growing number of social and eco-conscious employees and consumers.

According to the PwC Pulse Survey on CSR only 21% of Canadian private companies currently have a CSR plan aligned to their business goals and almost half (48%) don’t have a CSR plan in place at all. This critical gap is also putting private companies at risk. “Many of these issues that are currently being dealt with on a voluntary basis could very well be regulated in the future,” says Mel Wilson, associate partner, Sustainable Solutions Group, PwC. “Companies would be wise to start operating as if there were regulations already in place, so they’ll be in a better position when those regulations actually come along.”

According to PwC, private companies may be more inclined to adopt CSR plans if they understood the opportunities they may be missing out on. Many private companies, for instance, operate in the middle of the supply chain, selling services and goods to large multi-nationals. Increasingly, multinationals are becoming more vigilant in eliminating vendors in their supply chain that are not aligned with their risk tolerance or approach to CSR. “This means private companies have to meet the CSR needs of the end-buyers in order to compete,” says Wilson. “In this new business environment where social and environmental issues are front and centre, private companies should get ahead of the curve or risk being left behind from a competitive standpoint.”

According to PwC, private companies should take the following four steps to create a socially responsible and sustainable business: create a longer-term vision about what CSR means to the company, identify the impacts of the company’s operations are on the environment and on people, measure CSR performance in a quantitative way as much as possible, and communicate performance to key stakeholders.

It’s time for Canadian companies to get with the program.

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