Business sustainability brings benefits, and roadmaps have been produced showing how to get there. Companies have good reasons to pursue such goals. But there are also challenges. Jon Herbert looks at costs, hurdles and possibilities.
Sustainability is a journey involving the entire supply chain. For most organisations, it is a path-finding exercise of learning, changing and adapting in exchange for the rewards of extra efficiency, smaller environment footprints and social impacts, optimum resource use and greater profitability.
In principle, sustainability makes excellent sense. It has even been described as a lens for inspecting operational efficiency, innovating better products and capitalising on new markets.
Energy is an example. By raising energy efficiency and using more green energy along the supply chain, companies support legally binding government carbon reduction targets. At the same time they can cut their own fuel bills — although much depends on renewable energy being cheap enough.
Waste is another example, particularly when seen as a valuable resource. “Cradle-to-grave” sustainable supply chains are kinder to people and communities around the world. Why ravage the earth for raw materials when recycling and using attractive substitutes can result in better products, less disruption and a healthier bottom line?
The costs of sustainability
However, sustainability also has costs. As the world population continues to grow and consume, the question increasingly asked is whether true sustainability is achievable. Governments set ambitious legal frameworks to reach environment and social goals. These create level competitive playing fields on which everyone has to meet the same acceptable minimum standards. However, by raising the bar at all they increase basic costs.
An obvious example is where governments are currently spending heavily to kick-start renewable power sources on the assumption that green energy will become an established way of life.
When subsidies are finally removed, however, if costs remain high, will companies and countries slink back to their bad old polluting ways? Low oil prices are also making green energy less competitive. It may be very tempting to revert back to fossil fuels, including dirty coal in some parts of the world, if a new generation of wind and nuclear power prove to be too expensive.
Austerity could also alter the attitude of buyers. Customers may be unwilling to pay the added costs of sustainability on consumer goods.
But this is negative thinking. Companies have every good reason to pursue sustainable goals for the competitive edge and short- and long-term cost savings that they can bring.
Practical starting points
Almost all companies are part of a long supply chain that may have its raw material root in distant developing world countries. How can small-to-medium sized companies tackle sustainability, green their own supply chain, and become a competitive part of someone else’s green supply chain?
A major criticism levelled at companies in general is that executives and senior managers do not understand, or provide the leadership needed to set real sustainable goals. As a result, the eagerly anticipated returns on investment (ROI) do not materialise. Despondency sets in and the focus slips … along with progress.
Fundamental changes currently being finalised in the implementation of the international environmental management standard, ISO 14001, seek to address this very problem.
Bearing in mind the potential cost savings that can be achieved, sustainable decision-making deserves an input equal to that given to developing and launching new products or services. This raises the concept of working towards a sustainable rate of return on investment — SROI — as well as ROI.
In cases where procurement strategies either endanger, or are hostage to, supply conditions, sustainably-minded company leaders might want to take a wider strategic look at the alternatives.
Here, an example is the clothing industry, which depends on the cultivation of cotton in regions where increasing water shortages damage crops, plus employee livelihoods and wellbeing. Sustainable thinking might look for answers in better technology, supply sourcing or even alternative products.
When it comes down to brass tacks, what practical areas can companies consider when planning for the century ahead, a time period in which the world population is on track to double (current growth is circa 1.14% annually) and the Earth’s available resources per person could fall by 50% or 75%?
There are a number of important commodity, utility and activity areas. They include adopting more cost-effective and energy-efficient processes, pollution-free water management and low carbon or even zero-carbon transportation of people and goods. Also tackling waste by reducing, recovering, reusing or recycling it combined with responsible disposal.
Raw materials often arrive as over-packaged secondary products from remote suppliers. However, the hidden or embedded energy, carbon, water, waste and labour involved in their production is part of the purchaser’s own sustainable footprint. This applies to everyone in the supply chain.
Another key area is communication, which covers a multitude of sins and virtues. It is important to share good ideas about water, waste, materials and transport management.
Collaboration is the corollary of good communication. It is about not only one-way education but also the two-way flow of useful knowledge and shared experience. Staff working at the sharp end are often in a better position to know where leaks and losses are made than boardrooms.
Health and safety: physical, mental and emotional wellbeing are core to sustainability. Healthy, happy workers who harbour no grievances are apt to be more productive and co-operative.
Throughout a long supply chain, workers taking home decent living wages to communities not blighted by pollution, water deprivation, or the scourge of exploitation, are likely to be positive business assets. What goes around comes around. Shortcuts are the antithesis of sustainability, potentially damaging reputation, goodwill and bottom-line performance. They are what they are – shortcuts.
In more detail
Power, fuel and energy present the largest opportunity for businesses to be environmentally, financially and socially more successful. Buildings still account for some 40% of world energy needs — electricity is used for heating, cooling, lighting and operating equipment. Conservation — using less of the stuff in the first place — is recognised as the main gateway to cost savings. Efficiency is more difficult and ranked second.
Free energy audits from utility suppliers can provide low-cost, best practice solutions, plus rebates.
Daylight lighting, followed by florescent bulbs, and increasingly, LED (light emitting diodes) raise illumination efficiency, while cutting energy use. Movement-detecting sensors help further, particularly in areas used infrequently.
Setting thermostats to 26°C in summer and 20°C in winter and using high star-rated electrical appliances can help to optimise heating and cooling efficiency. Process equipment, computers, monitors and electrical systems should be put to optimum settings; stand-by equipment needs to be unplugged. Reducing the sheer amount of machinery also goes a long way towards cutting energy consumption.
Commercial — office, factories and public buildings — demand for water is often a large component in a modern community’s water use.
Fixing leaks that result in millions of litres being lost in the UK each year and installing saving fixtures can cut water use by 50%. Although the UK has seen substantial rainfall in the last few years, in line with climate change prediction of more warm and wet winters, drought conditions could return again quickly, as they did half a decade ago. More droughts on a scale with the dire water shortages of 1976 have been predicted.
Meanwhile, treatment, transportation and energy costs make water efficiency crucial to sustainability. Water recovery, and taking advantage of washroom and bathroom grey-water, can raise water efficiency.
Buying in materials, using them effectively and being mindful of general waste management is only part of the problem. In the bad old days importing low-cost commodities no matter how they had been produced did not count against a business and its financial needs. Today it does.
Buyers have sustainable responsibilities to look back along procurement chains and be able to report accurately on how sustainably raw materials are being produced. Do fair trade concepts apply? Are health, welfare or environmental impacts caused by primary manufacture or extraction? No one likes “sweatshop” allegations for both moral and business reasons. Are local resources at the point of supply being depleted? Do neighbourhood communities receive any compensation in kind?
The price of oil hit a record high in July 2008. Today, for complex reasons of excessive exploration and reserve development versus actual demand in post-recession economies, petrol and diesel prices have slumped — including shale oil exploitation in the USA.
This does not mean that car-use pooling, walking, public transport, cycling and intelligent route planning are not important. Low oil prices and high carbon and particulate emissions are a poor mix. Minimising even cheap travel is important. Optimum vehicle size and the use of hybrid vehicles are more efficient and cuts pollution.
Locating a business near to public transport routes, especially if car parking is a problem, saves money and carbon. A majority of firms now trust employees to work honourably from home over the internet, saving time and fuel.
Millions of tonnes of waste are generated by offices each year. Recycling it cuts raw material demand and emissions. Electronic documents are almost carbon-free – except for the generation of a tiny amount of electrical power. Some materials can be composted.
Many plastics and cans can be recycled. Better design can reduce material off-cuts. Packaging can be reduced. Regrading material by-products saves resources, money and haulage costs. Waste minimisation cuts retreatment costs.
The advantage of good communications is that it is inclusive and involves everyone. Explaining the aims of sustainability internally and externally, asking for bright ideas, sharing knowledge and thanking everyone for taking part creatively brings dividends. Partners, clients and customers working remotely can have a profound joint input to sustainability, both in promoting innovation and cutting out malpractices.
Good communication is about making everyone feel part of the team. This leads on to collaboration, which in the context of contemporary global enterprise context is far-reaching.
Close collaboration across long distances is an idea whose time has come, largely because of the instant power of the internet. Everyone is now a stakeholder with the power to make or break an organisation’s sustainable footprint.
Locally, having on-site green-teams is helpful, especially if backed by weekly meetings that have a formal agenda and shared responsibility that creates pride and ownership.
Health, safety and wellbeing
Providing healthy workplaces and residential communities results in bonuses in reduced absenteeism, lower insurance premiums, greater staff satisfaction, greater productivity and a reduced turnover of skilled trained employees.
Everyday factors that some companies take into account include advice on healthy living, well-located cycle sheds, more natural lighting and providing enough fresh air.
ISO 14001 changes in 2015
Management standards play a part in ensuring effective sustainability. ISO 14001, the international standard for developing and implementing environmental management systems (EMSs), is being revised and realigned with the wider principles of sustainability.
From mid-2015 onwards, the full life-cycle impacts of a project will become a primary consideration. Supply and value chain performance will be a key factor. Stakeholder interests and social responsibilities will move to centre stage. There will also be a definite push towards adaptation to climate change.
Much of the responsibility for change will fall on senior management. Executives have been identified as the people with the power to make the commitments and decisions needed to deepen and broaden environmental responsibility in a wide global context. Many have often had a limited role in the operation of a company’s EMS. Now their leadership skills will be called into play.
When ISO 14001: 2015 is introduced, senior managers will have a high-profile role that will be audited closely. They will be held directly accountable for success and their ability to demonstrate good environmental credentials. In effect, the revision represents a mind-set change. This means that rather than simply working within the environment and limiting potential damage, companies will be encouraged to see themselves as an intrinsic part of the global environment.
One of the most forceful arguments made for sustainability and green supply chains is that they force businesses that until now have externalised the true costs of emissions, landfill waste and damage to biodiversity to recognise and internalise the full costs of production.
Far from being an imposition, sustainability spurs on innovation and the development of better products and services. The wholesale adoption of new ways of working will unlock new ways of creating value, say proponents.
Two forces must come into play to make this happen. The first is action on the part of business as ultra-efficient suppliers. The other is gradual changes to market framework rules that match and mould the expectations of customers who create demand as buyers.
Last updated on 29/06/2015