Zhike Lei, assistant professor at the European School of Management and Technology in Berlin, explains why corporate tree-hugging is no longer enough in the battle to tackle the sustainability challenge.
Ocean Spray 100 per cent Cranberry Juice has more sugar than a can of Coke. Beef scores a carbon footprint three times the size of chicken. A dark blue t-shirt labelled ‘100 per cent organic cotton’ is actually not so green, due to toxic industrial chemicals used to bleach, dye, and finish cotton yarn. That's what Professor Dara O'Rourke, the founder of GoodGuide.com, a public-private partnership that aims to bring transparency to consumers by rating products and companies based on health, environmental and social performance criteria, wants us to know.
Imagine shopping at a chemist and selecting say, a bottle of sun cream. You swipe the barcode on the bottle with your iPhone, and seconds later, you learn that the sun cream contains compounds linked to the decimation of coral reefs and the plastic container is difficult to recycle. And because your phone has pinpointed your location via GPS, you also learn that another shop close by stocks a greener sunscreen that has neither of these problems.
What is described above is not a pipedream. Today’s technology and sustainability initiatives have made many markets more transparent, especially to sustainability-conscious customers. ‘Tree-hugging’ is not enough any more: the pursuit of sustainability is shifting from a choice that companies make to sheer necessity for survival.
Do more than just 'go green'
Many business leaders understand that sustainability profoundly affects their company’s competitiveness and long-term survival, and that new dynamics will fundamentally alter their business. Yet to many more, sustainability is mistaken for plain environmentalism, equating simply to solar panels, wind turbines, and LEED-certified buildings. This can leave potentially great ideas stuck in the recycling bin. Sustainability is about more than just green credentials: it’s a fundamental strategy that aims to create lasting value, as opposed to piling up short-term transactional wins.
While an overwhelming amount of current sustainability efforts emphasise the green angle, organisations seem in danger of overlooking the human connections vital to their success. Walmart has made impressive strides towards sustainability by using locally-grown produce, energy-efficient products, implementing innovative internal recycling policies and announcing that the company would spearhead an audacious effort to create a ‘sustainability index’ that would measure the environmental and social impact of every product sold in its stores.However, it isn’t exactly known for being employee-friendly. Green initiatives are commendable, but core values that connect businesses to people and their wellbeing should not be forgotten.
Respond to consumer demand
Sadly, it seems that the majority of organisations are just dipping their toes in the metaphorical sustainability pool by adding green features to existing products, procedures, and boosting their philanthropic efforts. While these actions may enable organisations to evolve incrementally, they do little to prepare them for the rapidly changing priorities of consumers.
Take the banking industry, for example. Consumers are now demanding that banks behave morally when handling their money, especially following the banking meltdown and the recession. While banks have access to reams of customer data, customers are all too often left in the dark as to how their money is being used, which creates distrust in the customer's mind.
American Wainwright Bank is one of the few banks in the US with a department solely dedicated to socially responsible community development lending. Currently, over 50 per cent of the bank's commercial loan portfolio is committed to these types of loans and of the $700 million in loans provided, there has never been a single default. Similarly, European banks like Triodos and Co-operative also push the transparency barrier. These self-titled ethical banks have formed the Global Alliance for Banking on Values and have experienced greater customer loyalty as a result.
Invest in your best assets
It is well accepted that a company’s most talented employees can have a considerable effect across the business and contribute to sustainable growth. A recent Gallup study showed that engaged employees outperform others by wide margins, demonstrating 2.6 times higher earnings-to-share growth rates. However, according to a recent study by the Corporate Leadership Council, about 30 per cent of today’s high-potential employees admit to not putting all their effort into their job and a staggering quarter intend to jump ship within a year. When burgeoning talent is unrewarded and disengaged, overall performance and employee commitment and retention is damaged across the firm.
Truly sustainable companies engage all their employees—from product development to manufacturing to service—at all levels in their decision processes. For example, Interface has saved more than $400 million over 10 years by empowering its 4,000 staff to contribute ideas, initiate projects and share in the rewards. In contrast, several big oil companies applied sustainable frameworks to large capital projects, or energy efficiency improvements of existing facilities, but still lack overall employee engagement. A certain recent oil spill certainly provokes us to wonder: are they really sustainable?
Standard Chartered Bank (SCB), whose heritage dates back to the 1850s in India, Hong Kong and Singapore, has set an example for leading the sustainable race for Asian talent. SCB’s raw recruits get intensive training in the English language, communication and listening skills, and business etiquette, and have a variety of ongoing educational opportunities. SCB also provide career guidance and access to networking sessions, enabling raw recruits to explore different paths at the bank. In addition, SCB offers the Great Manager Program, which has won best-practice awards for its creativity and effectiveness in management development. Regional learning centres throughout China and e-learning platforms make further learning accessible to all. Leaders who engage today’s talents and invest in tomorrow are building for the future, creating sustainability and ensuring a legacy.
Who does sustainability well?
Events of recent years have damaged society’s trust in corporate systems, which must be restored if large companies want to survive. While some are falling short, others are making a wider effort: companies like Levi Strauss and Unilever are embracing a lower-impact future by encouraging consumers to wash their clothes at colder temperatures in order to lower the indirect environmental impact of their products.
Others have begun to support the community: for example, Marks & Spencer is partnering with Oxfam to create consumer incentives to support Oxfam’s charitable goals. Where companies invest in solutions that visibly provide services for the wider community, customers are generally willing to believe their sustainability pledges, despite the events of the last two years.
The pursuit of sustainability is becoming the de facto ‘licence’ of a business to operate—a licence that stakeholders and especially customers won’t hesitate to revoke. The good news is, despite the recent economic slump, executives are more committed to sustainability than ever. A new study from Accenture and the United Nations Global Compact has shown that 81 per cent of CEOs have made sustainability part of their company's core strategy—up from 50 per cent in 2007.
The real task, however, is not about decorating corporate strategy with ‘tree hugging’. For a truly sustainable future, companies must apply sustainability to all aspects and at all levels of the organisation and put sustainability on every organisational member's agenda. Mere green emoting won’t do the job.
Zhike Lei joined ESMT as an assistant professor in January 2009 and was promoted to an associate professor in 2012. Zhike has conducted executive programmes and consulting projects for a variety of companies and organisations including Allianz, Cathay Pacific Airways, Deutsche Bank, Deutsche Post, E.ON, Lufthansa, Siemens, Standard Chartered Bank and ThyssenKrupp. http://www.esmt.org