Making sustainability profitable         What business leaders do to drive real value                    from sustainabilit...
MAKING SUSTAINABILITY PROFITABLE    Key findings    Some companies position themselves more proactively than others in ter...
MAKING SUSTAINABILITY PROFITABLETable of ContentsIntroduction                                                             ...
MAKING SUSTAINABILITY PROFITABLE    Introduction    I. Forewords    Nowadays, most companies are aware of the increasing n...
MAKING SUSTAINABILITY PROFITABLEIII. How this study is build                                Business and sustainability   ...
MAKING SUSTAINABILITY PROFITABLE      V. Respondents information      Figure 1 - Sector distribution                    Re...
MAKING SUSTAINABILITY PROFITABLEVI. AcknowledgementsKurt Salmon is very grateful to all companies, respondents, and interv...
MAKING SUSTAINABILITY PROFITABLEBusiness and SustainabilityGlobal warming is unequivocal!                      More and mo...
MAKING SUSTAINABILITY PROFITABLE     I. Companies are preparing to face climate challenges     Figure 4 - What are the mos...
MAKING SUSTAINABILITY PROFITABLEII. There is an increasing pressure to make companies act in a moresustainable wayFigure 5...
MAKING SUSTAINABILITY PROFITABLE     On the other hand, regulatory risk is constantly                Furthermore, on the s...
MAKING SUSTAINABILITY PROFITABLEOur Point of ViewBest performers are always one step ahead of the competition. Indeed, bei...
MAKING SUSTAINABILITY PROFITABLE     III. In response to these pressures, companies identified appropriate          approa...
MAKING SUSTAINABILITY PROFITABLEOur Point of ViewMost mismatches between actions perceived as the most effective and those...
MAKING SUSTAINABILITY PROFITABLESustainability in the businessCompanies finally acknowledge their envi-                 ass...
MAKING SUSTAINABILITY PROFITABLE     Our Point of View     To survive in today’s changing environment, companies are requi...
MAKING SUSTAINABILITY PROFITABLEOur Point of ViewAs seen previously, in our complex and interconnected world, taking the e...
MAKING SUSTAINABILITY PROFITABLE     Among the 25% of respondents who have not            40% believe that the development...
MAKING SUSTAINABILITY PROFITABLEIV. When and for which motives did companies integrate sustainabi-    lity within their st...
MAKING SUSTAINABILITY PROFITABLE     Another question assessed the moment in time        having done it in the last 5 year...
MAKING SUSTAINABILITY PROFITABLEV. Which structure is supporting sustainability initiatives within thecompany?Figure 12 - ...
MAKING SUSTAINABILITY PROFITABLE     To make sustainability part of their day to day     activities, most companies have p...
MAKING SUSTAINABILITY PROFITABLEOur Point of ViewIf the commitment is real, “Green teams”, as we call them, are very impor...
MAKING SUSTAINABILITY PROFITABLEEvaluating, monitoring and reportingsustainabilityAlong with the integration of sustainabi...
MAKING SUSTAINABILITY PROFITABLE     Most of respondents were imperfectly able to measure and monitor their     sustainabi...
MAKING SUSTAINABILITY PROFITABLE  Best performers we met had often changed their            Figure 15 - D. Esty and A.Wins...
MAKING SUSTAINABILITY PROFITABLE     Main difficulties for companies to track environmental performances are     related t...
MAKING SUSTAINABILITY PROFITABLEAlso, a common dream among top managers wouldbe to have all the information they need on a...
MAKING SUSTAINABILITY PROFITABLEEnvironmental Risk mitigationEnvironmental risk is not an issue that                As we ...
MAKING SUSTAINABILITY PROFITABLE     The survey highlights that the primary long           change with respectively 59% an...
MAKING SUSTAINABILITY PROFITABLEII. Who is under the environmental risk scrutiny?Figure 18 - Assessment of the main source...
MAKING SUSTAINABILITY PROFITABLE      Stakeholders’ influence can affect companies significantly, resulting in some cases to...
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
2011 study making-sustainability-profitable_kurt-salmon
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2011 study making-sustainability-profitable_kurt-salmon

  1. 1. Making sustainability profitable What business leaders do to drive real value from sustainability initiatives?
  2. 2. MAKING SUSTAINABILITY PROFITABLE Key findings Some companies position themselves more proactively than others in term of sustainability and seek opportunities to make their activities sustainable, but there is still considerable room for improvement. Many business leaders ask the question: “How to make sustainability initiatives profitable?” This report should help them to identify opportunities to benefit from their environmental initiatives. Key findings of the survey are: • Sustainability is not an option any more! There is a gradual shift in the global mindset and most of the companies start or continue to integrate this new element into their business transformation. With an increasing pressure from different stakeholders, ignoring the imperative for sustainability action could put your company’s business at risk in a very near future. • Develop a strategy and integrate it fully. Sustainability transformation must be coherent. The business strategy built on sustainability offers the framework for articulated and related initiatives. Companies that have fully integrated sustainability into their strategy execution are more likely to drive value from their initiatives. Commit the top executives and fully involve management and employees at each level. Free the necessary resources and avoid the middle management squeeze or the executive vacuum! • Measure your environmental performance. Performance evaluation is essential to align your actions with the execution of the company’s strategy. Metrics will support management for decision-making. To assess investments, take all aspects of the environmental initiatives payback into account. Increase your traditional cost-benefit analysis with impacts on risk mitigation and brand value. • Follow risk and anticipate change. Environmental risks are real and companies have to protect themselves against them. Assessing and following threats seriously help to uncover new opportunities and anticipate future changes. Use sustainability as an income driver and benefit from the change. Move ahead of issues or stakeholders will force you to do it! • Move first and make it visible! Be the first to move to develop the competitive advantage. Communicate about your efforts and actions that make sense. Pairing profitability and growth with sustainability is more than doable. Plenty of opportunities exist to do so and it is by embracing sustainability that it becomes the most profitable.2
  3. 3. MAKING SUSTAINABILITY PROFITABLETable of ContentsIntroduction 4Business and Sustainability 9Sustainability in the business 17Evaluating, monitoring and reporting sustainability 27Environmental Risk mitigation 33What makes sustainability profitable? 39 3
  4. 4. MAKING SUSTAINABILITY PROFITABLE Introduction I. Forewords Nowadays, most companies are aware of the increasing necessity to build a future based on sustainable principles. More and more executives express their convictions that, in a wide range of areas and corporate activities, the approach towards business has to change from the traditional way to more sustainable activities. Still, it is noticeable that, when proactive management decisions related to sustainability are needed, there is generally a gap between talks and actions. However, some companies seem to position themselves faster than others and seek for opportunities to make their activities sustainable. Some have succeeded in making sustainability profitable and drive real value from each one of their initiatives. II. Objective of the survey This report explores how and why companies in Belgium engage for sustainability, how they integrate different sustainable concepts inside their strategy and what is the level of implementation within their activities and their different functions. It also covers how these companies assess their efforts, which difficulties they experienced while striving to engage towards sustainability and how they manage operational risk linked to the environment. Finally, this survey aims to highlight how companies that have succeeded in making their sustainability initiatives profitable, differentiate themselves. Making sustainability profitable implies making the change towards sustainable business an opportunity to create value for the company. In other words, it means managing sustainability issues while offering profitable benefits, in the short and long terms: in the short term by driving revenues or reducing operational costs, in a longer run by reducing environmental and regulatory risks in the supply chain and by creating and benefiting from intangibles such as enhanced brand value and competitive advantages. This report aims to explore strategies and tools used by companies to identify and benefit from environmental opportunities. Even if they are complementary to make business sustainable, environmental and social issues are different kind of challenges. This study focuses especially on the environmental and economical dimensions of sustainable development.4
  5. 5. MAKING SUSTAINABILITY PROFITABLEIII. How this study is build Business and sustainability Environmental challenges Pressures to changes Various responses Sustainability in the business Perception Strategy Pitfalls Measurement Importance of measurement Difficulty to measure Risk Mitigation What is tracked? Who is tracked? How is it tracked? Making sustainability profitableIV. ApproachThis report is based on quantitative data collected through an online survey and on qualitativedata collected through face to face meetings with people in charge of sustainability within theircompany.The survey was conducted by Kurt Salmon in autumn 2010 and received complete responses from85 companies. They were selected from a wide range of areas of activities and from medium tolarge companies. The panel consists of Belgian companies and multinationals operating in Belgium.Respondents are either C-level or Management in charge of sustainability and environmentalresponsibilities.Those quantitative data were complemented by 35 qualitative interviews with companies that havedemonstrated that sustainability constitutes a lever for their development. 5
  6. 6. MAKING SUSTAINABILITY PROFITABLE V. Respondents information Figure 1 - Sector distribution Retail Transport, Energy & Utilities 2% Others 10% 21% Telecom & Media 11% Professional Services 18% 11% Financial services Engineering & Construction 15% 12% Manufacturing, Consumer Good and Wholesales The sample is covering all types of activities across various sectors. Figure 2 - Turnover distribution 15% 0-500 5% 500-1.000 16% 58% 1.000-5.000 5.000-10.000 6% > 10.000 Around 40% of the surveyed companies have a turnover over 500 million€. Figure 3 - Number of FTEs 14% 0-500 5% 500-1.000 15% 55% 1.000-5.000 5.000-10.000 11% > 10.000 About 45% of the surveyed companies employ over 500 full time equivalents.6
  7. 7. MAKING SUSTAINABILITY PROFITABLEVI. AcknowledgementsKurt Salmon is very grateful to all companies, respondents, and interviewees who have beeninvolved in this survey as well as the companies who accepted to meet us and provided us withvaluable information, in particular:• Francis Blake, Director at Derbigum• Fabio Boccalatte, Director CSR and Group Communication at AGC Glass• Magda Buelens, Public Affairs & Environment Director at Tetra Pak Benelux• Pierre Coërs, Corporate Senior Sustainability Advisor - Corporate Management for Health Safety and Environment at Solvay• Eric Coiffard, Senior Property Manager at Cofinimmo• Stephan De Brouwer, Managing Director at McDonald’s Belgium• Isabelle de Cambry, Associate Director Corporate HSE & CSR at UCB• Olivier Dautrebande, Eco Manager at Total Belgium• Bruno Defrasnes, Director Sustainable Development at Electrabel• Philippe Dembour, Head of Corporate Responsibility and Sustainable Development at ING• Veerle Demol, CSR Communications Officer at KBC• Jean-Christophe Donck, Vice President at UCB• Guy Ethier, Senior Vice-President Environment, Health & Safety at Umicore• Concetta Fagard, Vice-President Group Reputation, Vice-President Group CSR, Sponsoring, PR & Events at Belgacom Group• Marc Flammang, Managing Director at Bank Degroof Foundation• Stéphane Geerts, Director General Services at Group RTL Belgium• Aurelie Gerth, Public Affairs and Media Relations Manager at Unilever Benelux• Mia Goetvinck, Director Business Excellence/CSR at Ricoh Belgium• Dr. Hildegard Deweerdt, Environmental expert at KBC Bank• Laurent Kahn, General Manager at EXKi• Catherine Kinet, Head of Corporate Social Responsibility at BNP Paribas Fortis• Rikkert Leeman, Chief Technical Officer at Befimmo• Pascal Léglise, Quality and Sustainable Development (CSR) Director at Carrefour Belgium• Olivier Marquet, Managing Director at Triodos Belgium• Xavier Milcent, Global Marketing Manager at ExxonMobil• Florence Rossi, Corporate Social Responsibility & Quality Manager at Sodexo• Hannelore Schotsaert, Marketing & Communication Manager at BMA Ergonomics• Géraldine Tondreau, Sustainable Development Advisor at Electrabel• Vincent Vanwijnsberghe, Government Affairs & Public Policy Manager at Baxter• Mieke Vercaeren, Advisor public affairs at Colruyt• Gaëlle Vervack, Responsible Renewable Energy and RUE at Elia 7
  8. 8. MAKING SUSTAINABILITY PROFITABLEBusiness and SustainabilityGlobal warming is unequivocal! More and more companies acknowledge those facts and endorse their part of responsibilityDespite many quarrels between eco-partisans regarding the environment. Accordingly theyand eco-sceptics, there is now one certainty: started to integrate sustainability principlesthere is no doubt about the truthfulness of within their activities. This trend has beenglobal warming and its consequences such as encouraged through initiatives of diversean biodiversity. institutions at international, national and even community level.For years now, many scientific and publicfigures show us key messages: In this context, this part of the report tends to identify how and why companies in Belgium• Global warming is unequivocal: the world’s engage for sustainability. It will first assess average temperature is rising, what are the challenges perceived as the most difficult for the future. Then, it looks• Most of this warming comes from human into the different pressures pushing company activities, in particular GHG such as CO2 due to take measures and to start initiatives. to the burning of fossil fuels, Finally, it examines which actions are taken by companies to respond to those challenges and• It is translated into more negative than pressures. positive consequences, and the severity is likely to increase.Furthermore, other major environmentalchallenges have reached common acceptancesuch as energy shortage, water stress, wastemanagement, ocean fish depletion anddeforestation, to name only a few.In the end, no matter if scientific, eco-partisansor eco-skeptics are right, the general public isnow convinced about the necessity to limit ourimpact on the planet. Clients, consumers, aswell as employees and business partners arenow expecting companies to respond to thesechallenges in an appropriated way. 9
  9. 9. MAKING SUSTAINABILITY PROFITABLE I. Companies are preparing to face climate challenges Figure 4 - What are the most difficult challenges related to sustainability that you are expecting to face in the near future? Rise in energy cost 69% Climate change and upcoming relevant regulations 59% Rise in transportation costs 34% Rise in commodity prices 31% 28% Public opinion regarding environmental decisions 28% Air pollution and upcoming relevant regulations 28% Waste Management 28% Water scarcity and upcoming relevant regulations 20% Lack of resources needed to produce 20% Bio-diversity and land use related issues 11% Chemicals, Toxics, and heavy Metals and upcoming relevant regulations 0% 10% 20% 30% 40% 50% 60% 70% 80% While global society is aware of the different key natural resources. Those resources, like challenges, the results highlight 4 major oil, commodities and industrial metals, are challenges that companies expect to face in gradually reaching their limits. On numerous the near future. areas, companies cannot continue to go forward with business as usual regardless For most of the surveyed companies, “rise of the environment. Since energy has taken in energy cost” and “climate change and a central position in our society, it makes upcoming relevant regulations” represent this challenge highly visible and shows the the 2 most difficult challenges for the near constraints imposed by our planet. However, future. These are closely followed by the “rise like any challenge, it can be seen as an in transportation costs” as well as the “rise in opportunity. It is an early warning in order to commodity prices”. reorient how markets and society function and hence how companies operate in their day to For a majority of companies, rise day activities. in energy cost and climate changes regulations will be the 2 most chal- Challenges expressed also reflect concerns on lenging issues to manage in the near air pollution and in particular on climate change future. as regulators worldwide are determined to put pressure to lower this at a sustainable level. Worries expressed by companies reflect the awareness that the business as usual is currently putting too much pressure on10
  10. 10. MAKING SUSTAINABILITY PROFITABLEII. There is an increasing pressure to make companies act in a moresustainable wayFigure 5 - What are the main sources of pressure that drive companies to pay attention to sustainabilityissues?According to respondents, 4 main drivers Didier Bellens, CEO Belgacompressure their company to pay attention to “CSR helps us to anticipate on societalsustainability issues: the necessity to strengthen trends and stakeholder expectations. Ittheir competitive position, to meet consumers’ drives innovation and opens doors toexpectations, to manage the risk of regulation as promising new business areas”well as to attract, motivate, and retain talentedemployees.Competition is the most important factor that drives companies to addresssustainability issues.The main source of pressure to address Francis Blake, Derbigumsustainability issues comes from competition. If “Through our program of innovation whichthey want to keep one step ahead, companies started less than 10 years ago, we grewhave to move to strengthen their competitive from a company active in roofing systemsposition. Environment being more and more to one that is ‘Making building smart’. Aimportant in customers’ minds, companies must sustainable approach and a strong R&Dadapt to meet consumers’ expectations. Some program have led us to the developmentcompanies however gain from a competitive of more eco-friendly solutions whichposition by beating environmental expectations! permitted to gain a significant competitive advantage” 11
  11. 11. MAKING SUSTAINABILITY PROFITABLE On the other hand, regulatory risk is constantly Furthermore, on the strength of employee’s pressuring companies. Some institutions, such expectation, companies tend to act more as the European Union, play an important role, responsibly. Indeed, in the fierce competition pushing companies with more regulations to for talent, potential employees also growingly fight against climate change. The cap-and- take into consideration the sustainability trade system for the carbon market and the argument and actual employees want to be extended producer responsibility, requiring proud of their work and of their employer. companies to take the ownership of the product they launch on the market, are good examples of the numerous initiatives taken by the authorities. Stakeholders’ pressures box Financial partners: Banks and Hedge funds are now including environmental factors Competition: Through providing more inside their investment decisions sustainable products & changing • Equator principles: new standards for decision making about project finance loans behaviours. • Carbon Principles: agreement to look hard at carbon risk • See Derbigum text box of electric power projects financing (2008, JPMorgan, Morgan Stanley, and City group) Consumers: Consumer awareness and Investors and Stock Market: ranking system expectations increase. They demand that refers to sustainability performances. • SRI indexes: DJSI, FTSE4Good, ASPI, Ethibel Excellence information such as what is in the product, Europe,etc... where it comes from and how it is made. • Ranking Agencies: Vigeo, SAM, Eiris, etc. Authorities: Be it from international Financial market: Market uncertainty institutions (United Nations, European • Energy costs variation Union, etc.), national or local government, the number of environmental regulation Local Communities: Local communities are boomed in the last two decades. more self-powered and companies need to • At European level, directives and regulations are directly involve them for opening or expending ope- impacting companies’ activities: RoHS (restriction of hazardous substances), WEEE (waste electrical and rations in a region. electronic equipment), REACH (registration, evaluation • The local community of southern India succeeded to and authorization of chemicals) remove Coca-cola’s license to operate in Kerala for its • Due to the presence of a contaminating product bottling plant due to an over-exploitation of ground wa- (cadmium) within their Playstation cables, Sony wasn’t ter sources and the emission of toxic sludge. As a Result allowed to supply their product just before Christmas many people in India have cut down or given up on Cola consumption 2001 in the Netherlands NGOs & Opinion leaders: Retaining Employees: Today employees are looking considerable public influence for a meaning in their day to day work. • Chiquita was pressured in the 1990’s to change its way to work with local farmers They need to be proud of the company • Al Gore’s recent campaign on climate change has tre- they work for! mendously attracted the attention of general public New employees and competition for talent. • New generations are more sensitive to green concepts Medias: Traditional media (TV, radio, newspaper) but also new media (internet) Business partners: B2B customers are increase the awareness of consumers increasingly asking their suppliers to reveal • After a campaign of media harassment through Facebook, Greenpeace urged the agribusiness giant what their products contain and how they Nestle to abandon oil palm and engage in a policy of make them. «zero deforestation» • Walmart is pressuring for sustainability principles • The movie «home» from Al Gore has risen the awareness compliance concerning products, requesting its 70 000 of several million viewers suppliers to lower fossil fuel use and waste.12
  12. 12. MAKING SUSTAINABILITY PROFITABLEOur Point of ViewBest performers are always one step ahead of the competition. Indeed, being one move aheadallows you to be better prepared to deal with upcoming problems. We believe that all the signs arepresent, it is time to jump!In the last few years, watchdogs and opinion leaders have been more urgently raising awareness onsustainability. Media play an important role as well. Major business publications and newspapers,have increased their focus on sustainable development topics and are definitely on the watch for acorporate blunder. Consequently, sustainability issues climb the general public agenda and climatechange becomes an increasing concern.As the results show it, consumers, employees, communities as well as businesses and financialpartners now expect companies to take their responsibilities and to respond to the challengesin an appropriated way. Those changes of behaviour pressure and affect significantly company’sactivities (See Stakeholders’ pressures box above).In addition, numerous examples show that in the race to sustainability, companies that move firstgain the most significant competitive advantage. 13
  13. 13. MAKING SUSTAINABILITY PROFITABLE III. In response to these pressures, companies identified appropriate approaches targeting the highest impact Figure 6 - Ranking of the most effective actions to reduce a company’s environmental impact 1 Purchase of Clean energy 63% 2 Production of Clean energy 41% Rank of the action by order 3 Carbon footprint analysis 46% of perceived effectiveness to reduce a company’s 4 Waste management 78% environmental impact. 5 Cost identification & reduction 72% Percentage of respondents 6 Green Procurement 54% already using the action within their company 7 Products/services optimization 58% 8 Fleet management optimisation 68% 9 Usage of clean technologies/green IT 59% 10 Smart buildings 46% 11 Environmental Risk Management 53% 12 Search for Subsidies 30% The survey assessed several levers that can For the respondents, the actions and be used as a response to environmental opportunities perceived as the most effective issues. On one hand, one question covered are, by order of effectiveness: the production the perception on effectiveness of those and use of clean energy, the use of a carbon actions regarding the reduction of companies’ footprint analysis to assess and mitigate GHG, impact on the environment. On the other hand, and waste management. another question assessed which levers where effectively used by companies to respond to Concerning the actions already used, the environmental issues. most used ones are the improvement of waste management, the monitoring and reduction of costs and the improvement of the fleet selection. There is a mismatch between the actions perceived as the most effective and the ones effectively used. The results show a mismatch between the these actions, the purchase of green energy actions perceived as the most effective and the is the fifth initiative the most used and the levers currently used by companies to respond production of green energy locally is the 11th to the environmental issues. For example, initiative. Nevertheless, waste management the use of clean energy is considered as the and costs identification & reduction are, in most effective action, yet regarding the use of both cases, in the top 4 actions.14
  14. 14. MAKING SUSTAINABILITY PROFITABLEOur Point of ViewMost mismatches between actions perceived as the most effective and those currently used by therespondents can be explained by the perceived returns on these actions. The best way to reducethe impact is rarely the cheapest, let alone the easiest! In this regards, governments and institutionscan have a significant impact.In the same way, the most significant mismatch of the results is the fleet management which inBelgium can be explained by the federal auto premium as well as the regional incentives. Forobvious reasons, policy makers are very active in limiting road transport nuisances which arereflected in the the various European eco-taxes on road transport and fuel consumption.Similarly, even if clean energy is perceived as the most impacting action that a company can taketo reduce its impact on the environment, it is generally costly. Indeed, producing your own “green”energy is a considerable investment for which the payback period is relatively long. Additionally,many companies do not own the building they work in, which in case of solar panels and windmillsmakes it more complex. On the other hand, purchasing clean energy is much easier but it is aninvestment for which the returns are intangible and difficult to measure financially. Hopefully,more and more companies are seeing the benefits through the costs and clean energy is definitelybecoming trendy. Again, governments can and are playing a significant role through “Feed inTariff ”, green certificates, and other regulations and incentives towards clean energy production.Likewise, the results show that a carbon footprint analysis can be very useful to help reducing thecompany’s impact. In regards to GHG, it can be used as a starting point from where you can identifywhere to act in order to have the strongest impact on your emissions. However, it is a complexprocess for which companies usually do not have the internal competencies and knowledge. Inaddition, the analysis needs to be done continually or on a regular basis to be the most effective.Though, waste management is a goodmatch because reducing waste to a Cradle to cradle at BMA Ergonomic’s, Hannelore Schotsaertminimum and by doing so increasingproductivity, is part of doing efficient "Most of the chairs used in an office environment are out of use after 7business which is a priority for most years on average. Undoubtedly, most of those chairs are designed tocompanies. Nevertheless, the mindset last longer!on waste management is evolving.The change in perspective from an BMA Ergonomics’ AXIA chair is, through its Design for Disassembly anunbounded world with unlimited alternative to the classic cradle to grave products. BMA Ergonomicsresources to a constrained world operate a withdrawal guarantee. After years of intensive use, BMAhighlights the need for another Ergonomics come and pick up your old Axia chair. In exchange, you willapproach to waste management. even receive a money coupon to use for a new chair (around 50 EUROSThe best initiatives start ahead in in 2010/2011). The old chair returns to the factory. In the recycling shop,the supply chain and aim at closing especially equipped for this purpose, and is completely taken apart.the loop through a cradle to cradleproduct life-cycle. Some of the components are directly reused in the manufacturing of new chairs. Others are sent back to their suppliers, who recycle the parts and use them in the production of new materials. Today, BMA Ergonomics guarantee that their products consist of at least 67% recycled materials." This is an example of a Cradle to Cradle Design in which technical materials are viewed as nutrients for new products. This kind of design seeks to create systems that protect our planet by developing almost waste free processes. 15
  15. 15. MAKING SUSTAINABILITY PROFITABLESustainability in the businessCompanies finally acknowledge their envi- assesses the proportion of respondents whoronmental responsibility. Therefore, they start fully or partially implemented sustainabilityincreasingly to integrate sustainability prin- within their strategy. In the first place it looksciples within their business activities. As shown into the reasons why some did not developbelow, this fact is reflected by an increased sustainability within their strategy. Secondly, itenvironmental focus in their core strategy. explores why the others did develop it. Finally, the report studies how companies structureIn this context, this part of the report highlights their organisation to support environmentalthe trend to engage in sustainability through a initiatives.strategy oriented towards planet concerns. ItI. Environment is no longer an option, it is now taking an important role within corporate strategy, and this trend will strengthen in the near futureFigure 7 - To what degree does companies’ strategy focus on the different elements of the «Triple P»:People, Planet, Profit? Planet 24% Planet Planet 34% 36% People 29% People People Profit Profit 29% 30% 49% Profit 34% 37% 5 years ago Today 5 years from now5 years ago, profit was by far the highest to be more balanced between the 3 elementsconcern of the triple P mix (People, Planet, and what is more, there is an increasing trendProfit). Nowadays, businesses strategies seem for planet concerns.Results confirm that companies are increasing their focus on environmentalconcerns.It is manifest that companies tend to integrate behaviours internally. Externally, companiessustainability concerns within their core claim not only to be willing to reduce theirstrategy. This shift is visible and companies are impact but more and more that they commitresponding to constantly growing pressures themselves to protect the environment.and try to stimulate environmentally sound 17
  16. 16. MAKING SUSTAINABILITY PROFITABLE Our Point of View To survive in today’s changing environment, companies are required to adapt their business model. As regards to the environment, they must find ways to stand out from other players and to benefit from competitive advantages. The starting point for this is to develop a strategy oriented toward sustainability. We firmly believe that in a near future, companies that do not have an adapted environmental business strategy will find difficulties to stay in the market. During our interviews and meetings we saw environmental leaders using appropriated sustainability oriented strategies that helped them to: • Cut operational costs and expenses related to environmental issues, • Manage and reduce environmental and regulatory risks, • Drive tangible revenues from differentiation of products and services offered, • Drive intangible revenues from an improved brand image and through improving relationship with their customers, employees, and other influencing stakeholders. II. Most companies formalised their engagements through the integration of sustainability aspects within their strategy Figure 8 - Does your company have developed a comprehensive Sustainability Strategy? Yes, a formal comprehensive and documented strategy 25% 34% Yes, general guidelines about environment and social responsibility 41% No, we do not have a documented Sustainability Strategy Our survey reveals that more than 70% environment and social responsibility. of the surveyed companies developed a sustainability strategy, consisting, for 34%, On the other hand, 25% of respondents still of a formal comprehensive and documented don’t have any documented sustainability strategy or, for 41%, of general guidelines about strategy. The majority of companies have formalised their engagements on the environmental challenge, ranging from general guidelines to more formal documented strategy18
  17. 17. MAKING SUSTAINABILITY PROFITABLEOur Point of ViewAs seen previously, in our complex and interconnected world, taking the environment intoaccount is no more an option. On the contrary, it can be seen as an opportunity. While the worldbecomes global, it is more and more difficult for companies to differentiate themselves. To thisend, an environmental perspective can help to reduce risks, cut costs as well as to drive revenuesand enhance hard to measure but significant intangible value. Hence, the development of anenvironmental strategy has become a critical point for competitive differentiation.Indeed, developing a strategic approach to environmental issues helps to identify the opportunitiesrelated to the environment a more natural part of doing business. We are confident that buildingan appropriated environmental strategy will provide companies with an essential framework foractions. A structured and formalised approach will translate the c-level commitment towardsenvironmental issues and is an essential tool to develop coherent actions aligned with the coreactivities of the company.During our visits we observed several examples of a successful sustainability strategy creating realvalue for the company. Nevertheless, it is worth mentioning that for some, temptations to fool theaudience are real. Several pitfalls should be avoided and could be revealed as problematic in thefuture:• Some companies are exclusively committed on “trendy” topics such as GHG reduction. Of course, climate change is an issue of utmost importance for the future. However, to ensure the viability of their business on the longer run, companies must embrace sustainability globally and accommodate their business model accordingly. You cannot see the forest for the trees.• When reporting results, a year’s comparison can make a tremendous difference in the perceived results of the efforts announced. Making bold statements should not only look good but be good and translate real commitment! • In various cases, especially in the retail industry and fast moving consumer goods, companies are announcing efforts and formalising engagements without consulting the operational level on the feasibility of their commitments. This can easily lead to unreached targets.III. Why have some companies not yet included sustainability within their strategy?Figure 9 - Primary reasons why companies do not yet have a sustainability strategy?Does yourcompanyhave a Lack of human resources to drive the changes 63%developedsustainability Not relevant for our sector of activity 42%strategy or Why?guidelines? 26% No clear vision of what could be done No 25% 16% We are waiting for the right time Yes 11% We don’t see the benefit 75% 11% There is no time to implement such a change 01 0% 02 10% 03 20% 04 30% 05 40% 06 50% 60%0 19
  18. 18. MAKING SUSTAINABILITY PROFITABLE Among the 25% of respondents who have not 40% believe that the development of such yet developed a sustainability strategy, more a strategy is not relevant for their sector of than 60% claim that they do not have enough activity and 26% claim that they have no clear human resources available to do so. About vision on what could be done. The most important reason for not integrating sustainability within their strategy is the lack of human ressources. When looking at the size of the companies Moreover, 57% of the companies which believe who did not implement a sustainability that the development of a sustainability strategy, the human resource issue makes strategy is not relevant for their sector of sense: 78% of these companies have less than activity are active in the professional services 500 employees. sector (not including bank, finance and insurance activities). Our Point of View We are convinced that in the today’s world no company big or small, in manufacturing or services can afford to neglect environmental issues. It makes senses that the small companies and service companies feel less concerned about sustainability than others because their impact is already small, the pressures on their activities is limited and they are usually more flexible to adapt quickly without supporting unbearable costs. Nonetheless, stakeholders’ expectations are rising. Even if the pressures are lower, they rise as well for smaller companies and for the professional service industry. Different reasons make us believe that even those companies should take sustainability into account within their strategy. Firstly, more and more large customers are putting pressure on suppliers, big or small, and encourage them to comply with environmental standards. Indeed, as it is the case for 54% of the respondents, many companies are developing “Green Procurement” practices to assess the sustainability of their suppliers. As a result, even for small companies and the service industry, a sustainable strategy can be used as a serious asset to differentiate oneself from its competitors. Secondly, legislation applies also to smaller companies. To meet ambitious commitments made at International level, and in particular at EU level, authorities will increase their requirements towards companies in the coming years. Notably, a recent study on SMEs and the environment in the European Union, conducted jointly by Planet SA and DTI, highlights that small and middle sized companies account for 64% of the industrial pollution in Europe. Hence, some legislation will accordingly be directed towards them. As the REACH directive demonstrated, regulation can have a serious impact on small businesses. Thirdly, we live the information age which has two major impacts on companies, taking all categories together. On the one hand, there are now plenty of tools allowing a higher level of information to track environmental impact. New sensors and information systems make tracking affordable for smaller companies. On the other hand, information travels faster and almost at no cost, which makes small companies more vulnerable to watchdogs and other stakeholders’ scrutiny than they ever were.20
  19. 19. MAKING SUSTAINABILITY PROFITABLEIV. When and for which motives did companies integrate sustainabi- lity within their strategy?Figure 10 - For which motives did companies integrate sustainability within their strategy?Does your Improve corporate and brand reputation 78%companyhave adeveloped Differentiate the company’s products 62%sustainabilitystrategy or Motivate and retain employees 60%guidelines? Comply with legal and stakeholders requirements 59% Why? No Cost reduction 52% 25% Identify new growth opportunities 48% Yes 75% Increase efficiency 47% Customer retention 47% Improve risk management 43% 01 01 0% 02 20% 0330% 10%02 03 04 0405 40% 05 06 50% 60%07 70% 0 80% 06 08 0The four main reasons put forward by respondents to explain why they chose to integratesustainability within their strategy are:• The improvement of their corporate/brand reputation: 78%,• The differentiation of their products: 62%,• The fact that it helps to motivate and retain employees: 60%,• And the fact that it helps to ensure the compliance with legal regulations and other stakeholders pressures: 59%.Figure 11 - How long ago did companies integrate sustainability within their strategy? 35 35% 34% 30% 30 25% 25 20% 20 22% 19% 15% 15 14% 10% 10 8% 5%5 4% 0%0 Less 6 - 12 1-2 2-5 5 - 10 10+ than 6 months years years years years months 21
  20. 20. MAKING SUSTAINABILITY PROFITABLE Another question assessed the moment in time having done it in the last 5 years, and more than when sustainability started to be implemented 20% during the last year. within their strategies. More than 75% reported Most companies implemented sustainability in their strategy to improve their brand reputation and differentiate their products. There is a recent shift in the way corporate matter of fact, since new generations are more drive changes towards sustainability. While sensitive to green concepts, sustainability is companies were used to perceive sustainability now significant in the competition for talent. constraints as negative, many see them now as businesses address sustainability in a way that It is interesting to assess when companies is directed to preserve or improve their brand started implementing a sustainability strategy. reputation. In addition, many companies know Most companies did it during the last half- that they could capitalise on sustainability to decade. However, our meetings revealed differentiate their products and strengthen that in the past, even if sustainability was not their competitive advantage. expressed directly into the strategy, several actions were done already. This changes and Employees’ motivation and retention is also there is now a clear necessity for companies to identified as an important priority for which express it more formally. The trend can also be sustainability plays a growing role. As explained confirmed by the recent increasing number of before, employees increasingly search for a new sustainability reports which has boomed meaning in their day to day work and need to in Europe in the last ten years. be proud of the company they work for. As a Our Point of View There are many motives for companies to develop an environmental perspective in their strategy. We identify three basic reasons that encompass all motives. First of all, a sustainability strategy helps companies to yield tangible profits and reduce costs. Companies reported to us that when they started addressing sustainability within their strategy, they uncovered upside potentials on both the short and long run. Among other benefits, sustainability pushes them to increase efficiency, to reduce their waste as well as to be more innovative and to uncover new opportunities to increase sales. Secondly, by acting towards sustainability, companies provide consumers and employees with a proof of genuine concern to the growing global unease about the future and about doing the right thing for the next generations. Hence, implementing sustainability into the strategy has a tremendous impact on brand reputation and definitely helps to attract and retain customers as well as employees. There is now a growing need for companies to be more visible regarding their environmental behaviors. Last but not least, sustainability helps them to manage the downside risks. Risk management and compliance with legal constraints as well as with stakeholders’ expectations become crucial for some companies to keep selling their products. To sum up, integrating sustainability within your strategy becomes a “must do” because it lowers business risks while protecting value creation! This fact is strengthening over time: as the results shows, during the last half-decade most companies started to officially commit towards sustainability. Before that, it was risky to communicate on environmental matters because it often meant exposing yourself to watchdog’s scrutiny. Nowadays however, increasing upsides exceed risks. What is more, not to talk about it may well reveal being even riskier!22
  21. 21. MAKING SUSTAINABILITY PROFITABLEV. Which structure is supporting sustainability initiatives within thecompany?Figure 12 - Who is responsible for ensuring that the environment is taken into consideration in your company? Board of Directors 31% CEO 62% CFO 12% Management Team 51% CSR/En- Purchase & Prod. & Mktg & Adm. & Account.& Financialvironment HR IT dpt. Logistic Engin. Sales Fiscal dpt. Control dpt Unit 45% 26% 23% 18% 14% 8% 5% 3% 3%For most of companies surveyed, the CEO, the the environment is taken into considerationManagement Team and a specific Environment within the company.or CSR unit are responsible for ensuring thatFigure 13 - Which structure is supporting sustainability initiatives within the company? At each level of the company, almost everybody is involved to some extent 19% Several teams, each dedicated toNumber 16% a departmentof personsinvolved inthe company 7% A team/departement with more than 5 people A team of 2 to 5 people 29% 1 single person 29% 05 10 15 20 25 30 0% 5% 10% 15% 20% 25% 30%Regarding the number of employees working reported that their company has dedicated 1to support the ecological dimension of single person or a team of 2 to 5 people tosustainability in the company, most respondents support sustainability initiatives.Top management functions are generally responsible for a sustainabilityand most respondents have a unit dedicated to sustainability comprising 1to 5 people. 23
  22. 22. MAKING SUSTAINABILITY PROFITABLE To make sustainability part of their day to day activities, most companies have put in place Umicore: A clear example of commitment a dedicated team for CSR activities (1 single Due to its historical activity, mining and person or a team of 2 to 5 persons). During smelting, Umicore, formerly know as «Union our meetings we observed that the team is in general composed of people who previously Minière» faced pollution issues. worked for the same company but in other Thanks to the commitment of its CEO, it functions (related or not to environment and has gradually evolved into a responsible sustainability), notably people from the Quality company specialized in materials or Safety departments. However, in some technology. Its engagement is clearly cases, companies hired new comers, generally visible in its statement «materials for a experts in CSR. better life». During the transition period, The persons accountable to ensure that the communicatioon from the CEO has sustainability is taken into account in the been strong and clear. Their sustainability company are for most of respondents their approach has also been clearly detailed CEO and Management. The CEO can have a key in their booklet «The Umicore Way» which role to make sustainability initiatives effective is distributed to all Umicore employees and a clear message from the top ensures leadership for sustainability and optimises worldwide. the chances for a successful implementation throughout the organisation.24
  23. 23. MAKING SUSTAINABILITY PROFITABLEOur Point of ViewIf the commitment is real, “Green teams”, as we call them, are very important to catalyse initiativesand make environmental actions more coherent with the company’s strategy. Nevertheless, havinga team assigned to deal with environmental matter is not sufficient. The latter cannot do much if theCEO, the corporate culture and the resources investment are not there to back it up! Furthermore,relying solely and blindly on such a team can undoubtedly create problems as well. Notably, bybeing isolated from the rest of the company the team can sometimes deter other employees’involvement. To avoid such issues, it should be actively involved in the company’s process andconvey and stimulate employees’ commitments.There are several pitfalls that managers should bear in mind concerning the structure used tosupport environmental initiatives:First, the support of top management is essential. Most of successful initiatives we learned werebacked up by c-level engagements. A clear message and vision must come from the CEO to pushthe entire company to act responsibly. This is even more the case for companies historically notinvolved in environmental matters. Such support shows to the entire company that environmentis an important aspect of the strategy and that the company looks towards the future through asustainability that goes beyond short-term targets.Second, if top management is where commitment starts, middle-management is generally wheresustainability initiatives are brought to a halt. Since middle-managers are frequently holding whatseems to be the weight of their agencies on their shoulders and are often “squeezed” from allaround, they are stuck between the call for more sustainability, from top management or the “greenteam”, and all the other day to day objectives such as boosting profit margins, increasing sales orcost cutting targets. To respond to those pressures, middle-managers have to prioritise. Obviously,if the environmental areas are not high enough in their priorities, they will go by the wayside.Hence, involvement of operational management is critical.To avoid middle-management squeezed from all directions to overlook environmental objectives,they must get a clear signal that sustainability and environment is a part of their job. Signals can begiven through the integration of sustainability goals within their job descriptions, bonuses, and thedefinition of environmental metrics as key performance indicators of their activities. TNT Expressfor example has given CSR targets to all its managers and includes CSR and environment withinthe bonus schemes. Ensuring that incentives stimulate to prioritise green initiatives is necessary toalign employees’ goals with environmental targets. The number of trainings given on sustainabilitycan also send clear messages to executives and employees in general.Finally, aside from the lack of involvement from the top and operational management, anotherrecurrent problem for green initiatives is the lack of resource investment. To be meaningful,sustainability strategies like any other strategies require the availability of various resources. Thesecan be material or immaterial, be human or financial and it can even be information, knowledge,involvement or commitments. All these resources are decisive to guarantee the success of initiatives.Of course, companies could, and often should, perform pilot project to assess the potential of anopportunity. Even so, while the same initiatives prove to be very successful for other companies, wehave seen pilot project being so poorly invested in that it had no chance to yield positive results. Tosum up in one sentence: “the wise one does not seek to jump halfway across a ditch!” 25
  24. 24. MAKING SUSTAINABILITY PROFITABLEEvaluating, monitoring and reportingsustainabilityAlong with the integration of sustainability shows improvements and helps to identifyprinciples within the business activities areas that need attention and initiatives thatcomes the need to assess, monitor and should ultimately be discontinued. Secondly, itreport on sustainability performances. is essential to communicate on achievementsLeading companies are now integrating both internally and externally. Last but notkey environmental concerns into their least, managing and measuring the company’smanagement, measurement and reporting environmental performances provides aprocesses. Yet, a majority of companies are protection for the long-term share-value.only starting to evaluate, measure and reporttheir environmental performances and face This section highlights the importance ofdifficulties to do so. monitoring and reporting on environmental performances and underlines the fact thatAn appropriate measurement and monitoring most companies face difficulties to evaluatebrings substantial benefits to the company. environmental initiatives and to measure theirFirstly, potential initiative and performance environmental performances adequately.evaluation are essential to implement, follow up It presents the major roadblock to adaptand align actions with the company’s strategy. assessment and measurement in order toThe metrics will support management during integrate the company’s environmentaldecision-making processes and post decision considerations.analysis. Hence, measuring performancesI. Measuring sustainability performances is important but measuring it precisely is a real challengeFigure 14 - Are you able to measure and monitor your sustainability performances? 50 50% 46% 40 40% 33% 30% 30 20% 20 10% 9% 10% 10 1% 0% 0 Not at all No Imperfectly Yes AbsolutelyAbout 42% of the respondents reported their remaining 58% face difficulties and amongcompany as able to wholly measure and them, 11% are ultimately unable to do so.monitor their sustainability performances. The 27
  25. 25. MAKING SUSTAINABILITY PROFITABLE Most of respondents were imperfectly able to measure and monitor their sustainability performances While companies strive to reduce their constitutes a major issue for decision makers. environmental impacts and take many sustainable initiatives, most face difficulties The results show that companies investing in measuring results and tracking their sustainable initiatives are more often than not environmental performances. Since for an imperfectly able to monitor environmental initiative to be really meaningful for the performances. Consequently, they cannot company, progress needs to be measured, this properly estimate returns on their initiatives. Our Point of View Performance evaluation is essential to implement, follow up and align actions with the company’s sustainability strategy. Decisions should not be taken blindly. An old management adage says “You can’t manage what you do not measure”. We can at least say that you cannot manage what you do not know about. Metrics support management during decision-making process and post decision analysis. Clearly, measuring performances does not only show improvements, but also help to identify areas that need attention and initiatives that should ultimately be discontinued. Without a doubt, information is a basis for managing business and to ensure an alignment between results and objectives. Finally, it is also essential to communicate on achievements. Accordingly, many companies face difficulties to make their actions visible and miss a substantial part of the return they could get from environmental initiatives. Although respondents indicated that sustainability dimension of their strategy mostly consist of improving brand reputation and differentiate their products, they communicate mainly through low-impacting media such as Sustainable Development websites and CSR reports. As a result, many actions are not conspicuous enough and fail to be noticed by general public. An appropriate measurement and reporting is crucial to capitalise on past achievements and to gain visibility by providing essential information to the outside world. However, monitoring sustainability results is far from being an easy task. Environmental issues tend to be complex and in many cases potential solutions will uncover new issues that can be even worse than the initial one. This complexity makes measuring performance a real challenge. The traditional cost-benefit analyse is not appropriate to measure potential initiatives and to compute returns on current projects related to the environment. Indeed, payoffs from environmental initiatives can take various forms and are often diffuse, delayed and not easy to see. Hence, to measure fully the results of environmental actions, companies need to broaden their measurement methodology. They should take into account the various aspects that returns can take. Those are traditionally not taken in consideration into investments calculation and performance measurement. For example, protecting your brand reputation and shielding the company against upcoming regulations. To help in this process, we recommend categorising payoffs as in Daniel C. ESTY and Andrew S. WINSTON (Authors of Green To Gold, John Wiley & Sons, Inc. – 2006) framework presented in Figure 15. In this framework, the traditional cost-benefit point of view is aggregated with less certain payoffs that are generally hard-to-see intangibles or risk related benefits.28
  26. 26. MAKING SUSTAINABILITY PROFITABLE Best performers we met had often changed their Figure 15 - D. Esty and A.Winston strategic environmental related investments decisional framework process and their performance measurement to take those less certain returns into consideration. Obviously, those returns cannot be measured precisely. However they exist and constitute a Capitalize Capitalize Build real benefit for the company. Hence, they should on the Revenues Reputation not be disregarded! To sum up once more in one upsides sentence: “In the country of the blind, the one- eyed man is king.” Manage Reduce Mitigate the Cost Risks downsides High Certainty Low Short Run Long Run II. Companies face difficulties when measuring and monitoring sustainability performances Figure 16 - What are the main difficulties that you experienced in measuring and monitoring your sustainability performances? Lack of indicators and data 44% Lack of knowledge and expertise 39% Internal level of priority 39% Suppy chain complexity 37% 17% Consumer awareness 14% Lack of international regulations and standards 01 02 03 04 05 0 0% 10% 20% 30% 40% 50%The survey questioned companies on the main difficulties they experienced when measuring andmonitoring their sustainability performances. The results show that main difficulties are related to1. The lack of indicators and data for 44% of the respondents2. The lack of knowledge and expertise on tracking environmental performances for 39% of the respondents3. The internal level of priority for 39% of the respondents4. The supply chain complexity for 37% of the respondents 29
  27. 27. MAKING SUSTAINABILITY PROFITABLE Main difficulties for companies to track environmental performances are related to the lack of indicators and data as well as the lack of knowledge and expertise. The lack of indicators and data is not If environment is not perceived as a priority surprisingly the highest difficulty of measuring then the urge to measure it is weak. This can be and monitoring performances. First of all, partially explained by the lack of involvement sustainability is usually a new dimension of top management and middle-management for which data collection was not originally overlooking environmental aspects, as we have planned in the company’s reporting structure. seen above in the chapter “Which structure is Secondly, as we have seen the aforementioned supporting sustainability initiatives within the performances can take many forms that are company?” in page 18. sometimes difficult to evaluate. Finally, supply chain complexity is a major In addition, as sustainability is a recent difficulty, especially for companies that face concern, companies often lack of knowledge difficulties to identify the causes of their and expertise in tracking environmental environmental impacts and when the highest performances. The company has to either impact occurs outside the company’s walls. train current employees in order to learn the However, companies can no more consider that necessary knowledge, hire new employees with what occurs outside their internal activities is specific skills or ultimately get the expertise not part of their business. Even if the supply from the outside. chain is very complex, not assessing suppliers correctly can lead to serious troubles. We can also see that difficulties are also coming from the internal level of priority and the undervaluation of environmental aspects. Our Point of View While for some companies, the collection and use of accessible data to generate appropriate environmental indicators is already business as usual, most companies need to develop new metrics more appropriate than previous ones with regard to sustainability. Hence, the lack of indicators and data is perceived as a major difficulty. Even so, gathering underlying environmental data and indicators alongside with economic and social ones is critical for management and decision making. Hence, the question is why this lack of data and indicators. We know that sustainability is usually a new dimension for which data collection was not originally planned in the company’s reporting structure. Therefore, companies need to adapt. Various methods, numerous techniques as well as countless solutions exist to identify what to track and to ensure a reasonably correct level of information on environmental performances. The problem is that companies face difficulties to implement such a change. Those difficulties are often due to the lack of knowledge and expertise. The first step to overcome this issue is probably to get help from the outside. Several environmental leaders we visited were partnering with knowledgeable actors and specialists to shape an appropriate reporting system regarding their environmental performances. Experts, and sometimes academics or even NGOs, can offer a real added value to companies seeking to make their sustainable initiatives profitable. Another recurrent issue is the low internal level of priority of environmental challenges although the CEO and top management commitment are a key success factor. A clear message must come from the executive committee, and the CEO himself must commit the whole company to improve its sustainability. From there and let alone the building of a coherently aligned sustainability strategy, companies can start implementing systems to track relevant information and evaluate performance towards sustainability.30
  28. 28. MAKING SUSTAINABILITY PROFITABLEAlso, a common dream among top managers wouldbe to have all the information they need on a company Pierre Coërs, Corporate Management forwithin one single indicator. Similarly, we met companies Health Safety and Environment at Solvaywho were trying to synthesise all information about “Concerning indexes and tools, at Solvaysustainability and their environmental impact into one to we regularly perform evaluations ofthree metrics. Unfortunately, it is not an easy task and it indicators necessary to manage the risk.more often than not lead to focusing attention to a bunch This allows us to identify what we need inof trees regardless of the whole forest. To manage the house and to answer questions from theenvironmental aspects of a company correctly, using a different stakeholders. We have about 55wide range of metrics is definitely wiser. In this regard, parameters; some measured for a veryPierre Coërs, member of the Corporate Sustainability long time, others have been modified toCommiittee of Solvay, came up with a comparison that better respond to changes. Their respectiveillustrates this remarkably: the dashboard of a manager is importance also changed with time,not that different from the one of an airplane‘s pilot. The especially lately given the recent increasechallenge of limiting the impact of our activities on the of focus on climate change and the renewalenvironment is inevitably multidimensional and the focus of our strategy.of managers, as well as for pilots, has to shift accordingto the situation. The idea is to have a large number of parameters, but to focus on some, givenAnother difficulty lies in the choice of what and how to the circumstances. The metaphor of anmonitor. Among the most relevant metrics we observed, airplane cockpit explains it quite well: Awere those disigned to inform about Energy consumption pilot has countless instruments. However(reduction and use of renewable sources), Air quality he does not pay attention to all the(greenhouse gas emission and emission of particulates), instruments at the same time. Some areWater (reduction and pollution) and Waste management for the take off, other for the landing, other(reduction and quantity recycled). Assessing the carbon for flying or assessing weather outside.footprint becomes increasingly popular amongst large It must be the same for managers. Forcompanies. With regards to GHG, it helps considerably to me, business is still an organization thatrealize the sources of highest impacts and to understand responds to external pressures, but it maywhich levers would be the most effective to mitigate as well anticipate future pressures in orderthem. to gain market shares.”Finally, companies find it difficult to track their businesscorrectly due to its complexity. However, even if thesupply chain is very complex, assessing it rigorously islikely to pay off. Some of the companies we visited decided to mic contribution to the country’s GDP. Hence, to follow specific metrics appropriated to their bu- improve the indicator value they must reduce their siness activities. emissions beyond the reduction rate achieved by - Tetra Pak is closely tracking the progress made the entire world/country. They call it the “AGC En- in recycling of its products. One of the goals of vironment Indicator” and use it to analyze their en- Tetra Pak is that the cartons they manufacture are vironmental impact in an objective manner by put- recycled after use and likewise in every country. ting it in relation with their economic contribution: The challenge is that they do not control recycling; they can only facilitate it by working with other partners in every country. Nevertheless, about 20% of the cartons they manufacture were recy- cled in 2010 worldwide. - Cofinimmo and Befimmo are closely monitoring indicators of progress that assess the environmen- The indicator is calculated by comparing their sales tal performance related to major renovations. to the global/country GDP and the amount of subs- - AGC Group found an interesting way of calculating tances of concern (SOC) emitted from their activi- the impact of their activities. They estimate their ties on total global/domestic SOC. environmental impact in relation to their econo- 31
  29. 29. MAKING SUSTAINABILITY PROFITABLEEnvironmental Risk mitigationEnvironmental risk is not an issue that As we will see, various methods and tools havecompanies can afford to neglect in Belgium. been developed and used to measure the riskImpacts on reputation, finances, consumer on their operations, but companies are stilltrust, boycotts and other risks linked to the facing some difficulties in identifying all theenvironment can no longer be ignored. Still, sources of potential environmental risks andit seems that many companies only start to threats.integrate environmental risk management intotheir daily management and that others do not In this context, this part of the report tendsassess environmental risk recurrently. to identify which risks are assessed by companies. Then, it looks into the differentNevertheless, companies are becoming stakeholders that companies regularly assessmore inclined to evolve towards greater and particularly the influence those can haverisk integration in the management of their on their activities. Finally, it examines theactivities. Obviously, the goals put forward different tools used by companies to identify,by companies do not always reflect a genuine assess and measure potential threats and theirconcern for environmental protection. Above likely outcomes on companies’ results.all, companies are afraid of the potentialconsequences that an environmental incidentcan have on their activities.I.What is under the environmental risk scrutiny?Figure 17 - What potential long term risk does your company currently assess? #1 Rise in energy cost 66% #5 Waste Management 59% Ranking of the #2 Climate change related risks 50% # most difficult challenges #3 Rise of transportation cost 49% perceived for the near future #5 Public opinion regarding environmental decision 46% #5 Air pollution related risks 30% #5 Water scarcity related risks 26% #9 26% Lack of resources needed to produce #4 24% Rise of commodity prices #11 21% Chemicals, Toxics, and heavy Metals related risks 20% Inability of future technologies to respond to environmental challenges #9 16% Bio-diversity and land use related issues 01 0% 10%02 03 20% 30% 04 40%05 50%06 07 60% 0 70% 33
  30. 30. MAKING SUSTAINABILITY PROFITABLE The survey highlights that the primary long change with respectively 59% and 50%, term risk that companies are currently complete the top 3 topics of environmental assessing is the rise in energy cost, assessed risk assessment. These are closely followed by by more than 66% of the surveyed companies. the rise of transportation cost and the public Subsequently, waste management and climate opinion regarding environmental decisions. The first risks to be assessed are generally related to financial risks The first risks to be assessed are generally not However, the results presented in Figure the ones perceived as the most challenging 17 show some contradiction with this last for the near future but those that have a direct assumption. Clearly, there are discordances, and visible impact on the company’s financial especially regarding “Waste management” and results. Previously in this report, we had “Rise of commodity price”. As regards waste identified which environmental challenges, management, it can be explained by stronger that companies expected to face in a near legal requirements which push companies to future, were perceived as the most difficult (see pay more attention to risks relating thereto. Figure 4 in page 6). According to the results, the most difficult challenges are, by order of On the other hand, concerns regarding “Rise in importance: “Rise in energy cost”, “Climate energy cost” and “Rise of transportation costs” change and upcoming regulation”, “Rise in are positioned similarly. Those topics impact transportation cost” and “Rise of commodity noticeably directly on companies financial price”. It seemed reasonable then that these performances and are accordingly managed should as well be the ones that are primarily first. assessed through risk management. Our Point of View The concept of risk can often prove to be difficult to measure. Often, when the risk contains a subjective component such as the view of the company in the eyes of other stakeholders, companies seem to disagree between the perception of the risks and the need to manage those risks closely. Yet, even if they are difficult to assess, those risks can seriously impact the company in the long run. However, when the risk in question is more objective, for example the likelihood of a direct impact on financial performances, it becomes easier to grasp and to track because it can be translated into tangible impacts to the results of the company. As we will see below, pointing out the different risks and assessing the expectations and influences of the different stakeholders is of great importance.34
  31. 31. MAKING SUSTAINABILITY PROFITABLEII. Who is under the environmental risk scrutiny?Figure 18 - Assessment of the main sources of pressure that drive companies to pay attention on sustainabilityissuesResponses show that the stakeholders that are followed by Employees and Business as well asthe most regularly assessed are Rule makers, Financial partners.Customers and Competition. These are closelyRule makers are the most rigorously scrutinised stakeholdersThe results show that the main sources of Despite a reversed order, the Top 3 sources ofpressures identified previously (see Figure pressure identified corresponds to the Top 35 in page 7) are effectively the ones that are stakeholders regularly assessed.the most closely watched by our respondents.Our Point of ViewFrom Rule maker’s for regulation to NGO’s for their influence on public opinion, stakeholders arepressuring companies to face their responsibilities towards the environment and inevitably tomanage whatever environmental risk they deem as related with their activities. 35
  32. 32. MAKING SUSTAINABILITY PROFITABLE Stakeholders’ influence can affect companies significantly, resulting in some cases to brand damage and strong financial consequences. Assessing them is thus essential to ensure that the company keep its licence to operate. In other words, stakeholders possess the power to revoke a company’s right to operate. If a company crosses the line, stakeholders’ pressure can ultimately destroy its business. Hence, a licence to operate illustrates stakeholders’ power and can be fragmented into regulatory, economic and social licences which are monitored and enforced by a variety of actors, which commonly seek leverage by exploiting a variety of licence terms. Taking seriously into account stakeholders’ point of view as well as their influence on your business does matter. Knowing and mapping your stakeholders play an essential part in managing today’s environmental issues. Questions to be addressed by companies are: • Who are the key players that the company has to face? • How can they interact or interfere with the company’s activity? • What are their interests and concerns? • Which level of influence do they have on the public opinion? On company’s activities? • What is the possible impact of each of them, today? In the future? • Are we putting (enough) effort to understand their key concerns? • Are we prepared to answer their requests? • Which type should then be prioritised? • Finally, which ones should be selected to initiate relation? The last question is capital and should be based Guy Ethier, Senior Vice-President on the answers from the previous questions. Environment, Health & Safety at Umicore Partnering with appropriated stakeholders may We learned from history the added value well be the best way to deal with external problems to work hand in hand with stakeholders: and pressures. Recently, we have seen more and whether with client and suppliers, through more leaders which, like Delhaize with WWF, collaboration around our « sustainable engage partnerships with NGOs, authorities and procurement charter », or with authorities communities. Many companies entrusted us that to repair soil pollution and the impact of they used to ignore and to avoid confrontation our previous activities, as Union Minière. We even work with outsiders, as Michael with complainers. Now they tend to be growingly Broungart (author of Cradle to Cradle). debating with big protesting groups. III. From talk to action, what are the methods and tools used to measure potential environmental risk? Figure 19 - Methods and tools used to measure potential environmental threats and their possible impact on future results Develop and monitor KPIs 50% Does your Perform Internal survey 50% company include the How? Perform Scenario analysis 50% sustainability No dimension in its 38% Study future trends 40% recurring risk management Yes Follow financial indicators 33% process? 62% Perform external survey 28% 15% Perform pre/post analysis 10% Use a software suite to manage environmental risk 0% 10% 20% 30% 40% 50%36

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