1. becoming a Leader Business
“Whether it is the world’s rapidly growing population or the
worsening problem of global warming, we see the need for sustainable
business practices as increasingly urgent. And perhaps more than
anything else, we see sustainability as mainstream.”
Lee Scott, Chief Executive of Wal-Mart, 2007
Sustainability has finally made it. A quiet night in front of the TV sees climate change on the news, reality shows
‘going green’, government carbon footprint campaigns and everyone from banks to supermarkets advertising their
Meeting our needs without compromising the ability of future generations to meet their own needs – in short, sustainable
development – is the major challenge facing our age. And for Leader Businesses, companies that are pushing the
boundaries on sustainability in one or more areas of their business activity, rising to that challenge is already boosting
profits. This summary provides a comprehensive model of their business strategies and key approaches, and shows
how your business can benefit too.
today’s rules won’t apply tomorrow
Leader Businesses recognise that many ways of making money today won’t be profitable tomorrow. Basic services
and resources that the natural world now provides cheaply will become more and more expensive. Rising expectations
of business’s role will translate into new regulation, changed consumer behaviour, new norms in the supply chain and
investor pressure. New entrant entrepreneurs will grab market share from established competitors caught napping.
Leader Businesses realise that sustainability issues are forming the operating context from which they need to make
money. And as the leading sustainable development charity, we have already seen a profound strategic shift on
sustainability. When we started over a decade ago, our partners asked “What should our sustainability strategy be, in
the light of our business?” Now the likes of BT, First Choice, Marks & Spencer and Unilever are asking “What should
our business strategy be, in the light of sustainability?” From ‘nice to have’ add-on, sustainability has become a driver
of business strategy.
practical model of Leader Business Strategies
In our last publication Are you a Leader Business? Hallmarks of sustainable performance we highlighted best
practice in key areas and business activities, including senior commitment, governance, procurement, stakeholder
engagement and investor relations. This latest report provides a practical model of Leader Business strategies for
your next competitive edge:
• the TECHNOLOGIES that underpin a business’s offer, such as 3M’s Pollution Prevention Pays, GE’s
Ecomagination, Caterpillar’s engine re-manufacturing or Phillips’ radical new lighting equipment;
• the MARKETS where businesses make their offer, such as Nike subjecting its supply chain to scrutiny, M&S
asking customers to ‘Look Behind the Label’, Unilever opening up new markets at the Bottom of the Pyramid,
or GSH’s energy management service;
• the CONTEXTS that set the rules of competition, such as Unilever's sustainable agriculture programme, the
Climate Change Leaders Forum pushing for better regulation, or the Forest Stewardship Council, set up by
collaborating competitors and civil society.
key approaches to integrate sustainability into strategy
Leader Businesses use three key approaches to develop and integrate the right combination of strategies for sustainability:
• PLAN strategy to include sustainability trends and incorporate them into today’s decisions on future business direction;
• MANAGE how opportunities are defined and selected, so that the potential for emerging sustainability solutions is
identified and maximised;
• EXPERIMENT with a variety of approaches to learn which yield the best results.
2. what is sustainability,
and why now?
“Many CEOs recognise the underlying tension between business
models wedded to increasing patterns of consumption and the
reality of limited natural resources.”
McKinsey & Co, Shaping the New Rules of Competition, 2007
Sustainability is an end goal: the ability of global society unsustainable eco-system services which we still rely
to continue into the far future. Sustainable development on for business success.
is the journey towards that end goal: how can we meet And we’re depleting our natural capital at the very time
our needs without compromising the ability of future when our need is growing. The planet will be home to
generations to meet their own needs? nine billion people by 2050, with just under one billion
At Forum for the Future we use the notion of capital to extra people in the next 10 years alone. And just as we
help people understand what sustainability means in want to continue to drive our cars and buy new shoes,
practice. We have developed the Five Capitals Framework so people in developing countries want that too.
to underpin our approach. No company can sustain itself Business faces the twin challenges of delivering greater
by living off its capital alone. The same is true for society. equity between rich and poor nations and having fewer
But increasing evidence that we are living off our global resources to do it with.
capital means we can no longer take for granted our
current pattern of development. The consequences of a the opportunity: to profit from
new pattern of development are already changing the creating a sustainable future
strategic context for business and affecting the types
The surge in population and consumption over the next 20
of strategies that will succeed into the future.
years looks impossible for damaged ecosystems to sustain.
But smart businesses will profit from these challenges by
the challenge: reducing supply finding ways to give us what we need and want whilst
and rising demand maintaining the eco-system services on which we rely.
Business depends on a host of often unnoticed People increasingly expect business to play a key role in
‘eco-system services’, from a stable climate to finding solutions to these global problems. There is an
assimilation of waste, from providing food to controlling opportunity now for business to explore how to combine
disease and pests. It's not just rainforests and tigers profit with creating a sustainable future. Business
under threat. Climatic systems, water resources, strategies that address this challenge at a profit will
agriculture and fisheries are all degraded or define the successful business of the next 10 years.
3. practical model of Leader
“More capital is now focused on sustainable business models and
the market is rewarding leaders and the new entrants in a way
that could scarcely have been predicted even 15 years ago.”
Goldman Sachs, Introducing GS SUSTAIN, 2007
Our experience shows that taking a business into the create value in a global society searching for a
future is a balance between enhancing the current sustainable future?”, “How can we create the best
competitive edge and exploring the next one. As our future for our business?” and “Are we clear about the
model shows, most Leader Business strategies focus on consequences of these strategies?” Each strategy
the next competitive edge. Simply improving current contributes to creating a sustainable future in its own
business strategies will no longer be enough to thrive. way. In the full Leader Business Strategies paper we
show how each strategy contributes to sustainable
New strategies build on existing capabilities and
development using the Five Capitals Framework.
resources, answering questions such as “How can we
4. key approaches to integrate
sustainability into strategy
Leader Businesses develop the right combination of strategies
by bringing sustainability into their strategy process in
PLAN strategy to include future • Setting a structural context where opportunities
trends that are on-strategy are favoured. These can be
formal, like performance targets, or informal, like
When setting the future direction of their business,
promoting people who have pushed commercial
companies can incorporate sustainability into their
strategic planning cycle in three ways:
One Forum for the Future telecoms partner is
• Introduce material sustainability trends to the
creating a ‘sustainability-related opportunity register’.
external assessment of the structure and dynamics
The register provides a new way for commercial
of the business context
departments to define and identify market place
• Use Leader Businesses strategies as a starting point opportunities by highlighting the ones relating to
for generating options about ways forward sustainability. This has helped towards the gradual
• Pay attention to any unintended biases when integration of sustainability into core product and
selecting options to take forward. service offers.
First Choice, now TUI Travel PLC, incorporated
sustainability into their ‘Managing for Value’ planning EXPERIMENT to learn and
cycle. We helped them frame the issues in the external to create options
assessment, generate options and prioritise action The world changes fast, and so do the commercial
through calculating the financial value at risk. As a opportunities of sustainability. To keep your options
result, a host of initiatives has emerged to shift the open and identify the best approach, it makes sense to
business onto a more sustainable pathway. initiate a range of deliberate and contained experiments.
The experiments could be a new product message,
a new product, or a whole new business.
MANAGE how opportunities
are defined and selected Such experiments give you the chance to test different
In most organisations there is the plan, and then there approaches without committing the entire business.
is what happens. Putting any strategic plan into action Learning is the success factor - even if you lose money,
means changing how opportunities are defined at you will know how to do it differently next time.
the 'coalface' and selected by managers, and then One Forum for the Future global electronics
re-allocating resources appropriately. partner used a staff competition on new sustainable
Leader Businesses can manage sustainability into business models in emerging and developing markets.
strategy by: Staff submitted project proposals that met criteria of
being profitable, and creating environmental benefits
• Setting the strategic direction by giving clear and social value. The aim is to establish a range of
signals of intent, including announcements innovative commercial possibilities, a few of which
and symbolic actions. People at the ‘coalface’ will become the successes of the future.
can now identify and define sustainability-related
the TECHNOLOGIES that
underpin a business’s offer
these strategies explore how to improve or replace technologies in
the supply chain, and in the products and services themselves.
improve technologies in current production methods
Instigate more sustainable production methods to improve resource efficiency, lower costs and mitigate
BP created an internal market for carbon, saving $650m and reducing carbon emissions
from its production.
3M’s Pollution Prevention Pays programme proved exactly that. Encouraged to innovate, staff developed
6,000 environmental projects, saving over £1 billion and one billion kilos of pollutants in their first year.
use closed-loop systems in production and beyond
Transform waste output into an input for further value generating activity, either inside or outside the
company. Benefits include: addressing the increasing prices of raw materials and waste disposal;
pre-empting legislation that extends producer responsibility all the way to the end of the product’s life;
getting closer to the consumer and gaining greater control over the supply chain.
Caterpillar takes its used truck diesel engines and ‘remanufactures’ them into engines that are sold at
the same price with the same guarantee. The company offers incentives to its parts distribution network
to maximise used parts return and keep input costs down.
ICI, Carillion and Forum for the Future have been funded by the UK Government to create a zero
emissions paint enterprise: a profitable business with no waste or emissions anywhere in its supply chain.
improve product design as customer needs evolve
Improve product design to offer more value from using less, responding to business
and consumer demands for improved resource productivity.
The Toyota Prius is still a car, but the improved design has been tremendously successful:
Car of the Year in North America (2004) and Europe (2005), and selling 750,000 by June 2007.
GE’s Ecomagination is billed internally as “a business strategy to help meet customers’ demand for
more energy-efficient, less emissive products and to drive growth for GE- growth that will greatly reward
investors”, mainly by improving current products. In 2006 GE launched some 45 Ecomagination products
with revenue of $12 billion.
create radical new technology
Create new technologies with radical breakthroughs in resource productivity or in
serving social needs.
Phillips, the Dutch electronics firm, developed ‘Edore’, an energy saving
domestic halogen bulb providing clear, crisp lighting for half the energy of an
ordinary household bulb.
the MARKETS where
businesses make their offer
these strategies create the right sort of demand in both
new and existing markets.
improve transparency to protect brand value
Protect brands in the market place, through improving transparency and engaging with stakeholders on
material issues. Otherwise, brand equity can erode quickly when a gap between expectations and
performance is revealed.
Nike has responded to bad publicity on working practices in its supply chain with a ‘product stewardship’
strategy that improved working conditions and reported transparently on its actions. The threat to the brand
create and grow new markets at the bottom of the pyramid
Target new markets where non-consumption is the main ‘competitor’. At the bottom of the economic
pyramid, four billion people earn less that US$3,000 in purchasing power parity terms. Serving that market
can create the scale with which to attack ‘top of the pyramid’ mature markets from below.
Unilever subsidiary Hindustan Lever (HLL) targeted India’s rural poor with affordable soaps and
shampoos. The new products utilised Unilever’s core capabilities – top-class science and technology – in
partnership with a local NGO. More than half of HLL’s revenues now come from customers at the bottom
of the pyramid, and BOP practices are being transferred to other parts of Unilever.
grow the size and sophistication of demand in mature markets
Increase the sophistication of consumer demand to shift customers from saying they’d
like to buy ethically to actually doing so. Companies that proactively shape demand can respond to
changing purchasing habits faster than their competitors.
In 2005 Marks & Spencer launched a ground-breaking marketing campaign called ‘Look behind the label’
which informed customers of M&S’s long commitment on social and environmental issues such as fish
sourcing, animal welfare, Fairtrade and reducing salt and fat levels in food. A Citigroup report in the middle of
2006 said that the campaign contributed to the ongoing sales recovery and would underpin M&S brand
performance going forward.
Cafédirect has achieved double-digit growth by putting quality and fair treatment of producers
(accredited by the FAIRTRADE Mark) at the heart of its offer.
sell services, not products
Seek competitive advantage by meeting customers’ needs with services rather than products. This strategy
brings sustainability benefits by shifting the mix of inputs away from energy or materials towards labour, and
matches likely changes in the relative costs of materials and labour.
Facilities management company GSH have an energy services business called Energyplus which helps
clients cut their energy use by a guaranteed five per cent. GSH retains any cost savings beyond the five
per cent, making for a profitable service business based on its core competence of engineering expertise.
Novo Nordisk is repositioning itself from a pharmaceutical company to ‘a leader in diabetes care’.
It is exploring ways of selling prevention as a service, not just insulin as a product.
the CONTEXTS that set the
rules of competition
these strategies tackle issues beyond the company’s boundaries to
create a more successful competitive context for the business.
improve inputs, supply chain and infrastructure
Respond to threats with strategies that improve access to, and the quality of, inputs, supply chains
Unilever sources over two thirds of its raw materials from agriculture. Over the last 10 years a sustainable
agriculture programme engaging experts, producers and suppliers has helped secure the future of supply
by implementing new supply chain standards. Unilever was well placed ahead of the competition when
Tesco and Wal-Mart made their sourcing polices more stringent.
seek regulation that rewards responsibility
Form industry clusters, sometimes with unlikely partners, to seek regulation that rewards responsibility and
creates a level playing-field. Taking the lead provides an enhanced platform for progressive businesses to
innovate and differentiate.
The Corporate Leaders Group on Climate Change, convened by the University of Cambridge’s
Programme for Industry, is a group of major UK and international business leaders pushing for government
action on climate change. They are working in partnership with the UK Government towards strengthening
domestic and international progress on reducing greenhouse gas emissions.
form strategic alliances to address business-critical issues
Join forces with a range of organisations, companies, suppliers and sector bodies to tackle strategic and
operational challenges that are too big for one business to deal with alone.
The Forest Stewardship Council (FSC) arose from collaboration between NGOs like WWF and a
group of timber users and traders, including B&Q. Despite coming from different perspectives, everyone
involved appreciated the benefits of an honest and credible system for identifying products from
well-managed forests. The FSC now certifies some 12 per cent of the world’s commercially-managed
forests, helping safeguard the future of the timber industry.
do you want to be a
Forum for the Future, the sustainable development charity, works in partnership with leading organisations in
business and the public sector. Our vision is of business and communities thriving in a future that is environmentally
sustainable and socially just. We believe that a sustainable future can be achieved, that it is the only way business
and communities will prosper, but that we need bold action now to make it happen.
We play our part by inspiring and challenging organisations with positive visions of a sustainable future; finding
innovative, practical ways to help realise those visions; training leaders to bring about change; and sharing success
through our communications.
This document is a summary of Leader Business Strategies. The in-depth version has greater detail on the different
strategies, including an analysis of their contribution to a sustainable future based on the Five Capitals Framework
and many more examples. Our research builds on our related publication, Are you a Leader Business? Hallmarks of
sustainable performance. A further approach to applying environmental principles to business can be found in
Sustainable Wealth Creation within Environmental Limits.
All are available from our website www.forumforthefuture.org.uk.
Authors: David Bent and Stephanie Draper.
For more information about Leader Business strategies and how to make them happen,
email us at firstname.lastname@example.org.
With thanks to our Foundation Corporate Partners who contributed to this report through the Business Futures Fund.
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