Sustainable Businesses


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Our recent survey of 200 mid-market businesses examines the extent to which sustainability issues are integrated into a company's DNA, embedded in its business model and reported on as such. Our report, 'Sustainable Businesses- Navigating towards a more sustainable future', examines these issues. This report is an insightful background into the sustainability challenges faced by businesses today.

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Sustainable Businesses

  1. 1. Sustainable BusinessesNavigating towards a more sustainable future
  2. 2. ContentsIntroduction – Nathan Goode 2Strategy & Risk Management 4Implementation: Governance & Embedding Sustainability 8Sustainability Reporting 13Sector Specific Approaches 17 Food & Beverage 18 Freight & Logistics 20 Property & Construction 22 Higher Education 24 Local Authorities 26 Healthcare 28Conclusion – Nathan Goode 30Contact us 33
  3. 3. Foreword“ ustainability is one S of the buzz words of the moment. But what does it really mean for business? Global and large quoted corporations increasingly see sustainability issues as important to their business model.” Nathan Goode Head of Energy, Environment and Sustainability Grant Thornton UK LLP Sustainable Businesses  1
  4. 4. IntroductionWhilst global and large quoted corporations’ publicprofile provides an obvious rationale for incorporatingsustainability issues into the way they operate, whatabout the rest of the business world?What about nationally or regionally based where they draw resources? Do they draw an explicitorganisations, or companies that are part of global link between these issues and their own profitabilitysupply chains, operating business-to-business and competitiveness? Can and should the principlesor competing in specialised markets? Do these of sustainability be universally part of an organisation’sorganisations need to plan for sustainability amidst DNA, embedded in its business model, and givencompetition and cost pressures on all sides? equivalent value to the financial bottom line? Sustainability can be tricky to define in a waythat satisfies everyone. Sustainability involves both “What are the threats and opportunities comingplanning for the long-term, seeing the linkages out of global shifts in resource use and patterns,between all of the influencing factors – and greater awareness of the corporate footprintunderstanding that the relationships between an in general and changing government regulationorganisation and its environment (in the broadest around areas such as carbon emissions, wastesense) are both dynamic and interactive. Sustainability management and renewable energy?”is fundamentally linked to an organisation’s use ofresources and the waste outputs that it produces. At Grant Thornton, we sensed that business We can see the leadership from global corporates models are starting to respond to these challenges,and understand the rationale, but at Grant Thornton and not just amongst the global multinationals.we wanted to know whether these approaches were But we wanted to test this presumption, see ifstarting to spread into the wider economy. And if we could identify a trend and, if so, assess howthey were, how those organisations were thinking widespread and how deep it was.about the cost of resources: were they focused on So we commissioned independent analyst firmtoday’s cost model or looking forward to a world Verdantix to undertake an independent, anonymisedwhere basic commodities such as energy, water and review with 200 senior executives across the privateminerals show themselves to be volatile, costly, finite and public sector in the UK, choosing the typesand scarce? And how important for their own future of organisation we work with on a day to day basis:do these organisations think the impact is on the ‘mid-tier’ businesses broadly in the £250 million –communities they serve, where they operate and £1 billion turnover range, who are key to the2  Sustainable Businesses
  5. 5. “ ustainability is fundamentally linked to an S organisation’s use of resources and the waste outputs that it produces.”country’s future economic growth, in sectors whichshould in theory be amongst the first to be affectedby sustainability issues: Food Beverage, Freight Logistics, HigherEducation, Property Construction and the PublicSector, concentrating on Health and Local Authorities. We want to look at the challenges theseorganisations face in developing a long-term,sustainable business model and ask: what is thebusiness case for sustainability? What are the threatsand opportunities coming out of global shifts inresource use and patterns, greater awareness ofthe corporate footprint in general and changinggovernment regulation around areas such as carbonemissions, waste management and renewable energy? This report addresses sustainability in thefollowing key areas:• Strategy and risk management• Governance arrangements• Embedding sustainability• Reporting sustainability The organisations we surveyed had clearly begunthe journey, but to a greater or lesser extent were stillonly part of the way there. There is still plenty moreto do before sustainability becomes business as usual.Nathan GoodeHead of Energy, Environment and SustainabilityGrant Thornton UK LLP Sustainable Businesses  3
  6. 6. FindingsStrategy Risk ManagementOverview majority have already begun integrating sustainableThe primary finding of this survey development into their daily work that sustainability is no longer the 85% of those surveyed said this trend will increasepreserve of the happy few; different in importance in the next year and 94% indicated that this will be of even greater importance overforces are compelling many businesses the next five years. Sustainability therefore hasand other organisations to recalibrate their a strong and growing relationship to overalloperations in a more sustainable fashion. organisational behaviour.In the sectors we reviewed, something of a Strategy‘tipping point’ seems to have been reached – those 12% of respondents were still grappling with whatorganisations still failing to face up to the impact of sustainability meant for their organisation, althoughsustainability on their organisational performance the vast majority (88%) of those interviewed werenow risk being left behind by their peers. The able to articulate this. The residual 12% may be failingsustainability imperative is starting to be seen as to identify the risks and opportunities associated witha determinant of business success. sustainability, which may place them at a competitive This is illustrated by the fact that 92% of survey disadvantage. However, the overwhelming majorityrespondents stated that sustainability performance is of our sample had at the very least reached ‘first base’either ‘very important’ or ‘important’ to the overall in seeing a direct relationship between sustainabilitysuccess of their organisation, and that the vast and overall organisational performance.Which statement best describes your perspective 12%on what sustainability means for your organisation? Sustainability is a new concept for our organisation and we are still grappling with what it means 42% Sustainability describes the long-term viability of our organisation in the context 46% of natural resource scarcity Sustainability describes our organisation’s performance on non-financial metrics such as energy, environment and social4  Sustainable Businesses
  7. 7. “Market demand means that ignoring sustainability is not an option.”Organisation At the same time, sustainability is now seenSurvey respondents were encouraged to give their as a necessary cost of doing business. “The increaseown thoughts as well as answer specific questions. [in our interest in sustainability] is because of the“We are constantly trying to raise the bar every year financial importance of achieving cost savings andon our sustainability targets,” was how a respondent our commitment towards using more sustainablefrom the Food Beverage sector expressed their products. We include this even in tenders and ourcompany’s attitude. As another, in the Freight overall procurement process and this will onlyLogistics sector, put it: “Market demand means increase,” said a respondent from the Propertythat ignoring sustainability is not an option.” Construction sector. Another, in the Food Why do so many organisations think the Beverage said “It will be more and more importantsignificance of sustainability will increase in the to find out how to source our raw materials infuture? There appears to be a combination of factors, a sustainable way and then strive to improvesuch as rising energy costs, government targets, and increase efficiency.”competition within the sector and a commitment There was a high level of confidence amongstto social responsibility. Each organisation will interviewees that sustainability was a part of therank these factors differently according to their organisation’s strategic planning. A substantialown circumstances. However, short-term financial majority said their organisations had fully or partlyconstraints, especially in the public sector, are included sustainability into the following areas:affecting the kinds of sustainability initiatives • Long-term strategy (89%)that are being undertaken. • Core values (81%) Clearly ones with immediate cost benefits are • Mission statement (79%)more attractive. “I see a significant increase in the • Vision statement (79%)importance of sustainability due to the cost of • Financial objectives (70%)utilities, indirect cost associated with sustainability Awareness of the issue, therefore, was the normlike waste and packaging, procurement, cost of amongst our interviewees. The next question is howtransport, increase in fuel charge, fuel duty, aviation this is reflected in everyday business practice.taxes, all of it,” was one comment from a HigherEducation respondent. Sustainable Businesses  5
  8. 8. “ limate change will impact on Healthcare and C so we need to mitigate this. The Department of Health has carbon reduction targets. We’re very much looking to beat them.”Risk Management the highest business risks, but wouldn’t be surprisedWe wanted to know how organisations assessed to see more fundamental economic considerationsthe key risks associated with sustainability and set starting to come to the fore in future surveys.performance targets against them. The survey listed Perhaps one conclusion from these results is thatseven risk areas. These were: people are not necessarily distinguishing the concept• Carbon regulations of risk (which is about volatility and unpredictability• Energy prices in forward planning) from simply articulating current• Environmental regulations business concerns. In some cases, limited datasets• Water scarcity or technical experience to undertake an effective• Commodity prices evaluation may also be playing a part, particularly• Extreme weather where these issues are relatively new to a sector.• Substitution risk from more sustainable products When the analysis is broken down, some sectors The responses showed a real mix of concerns, with gave more of a preponderance to carbon regulationsno single dominant risk area, indicating that carbon than others. Carbon regulations were identified as theregulations were identified as the ‘most important’ most important risk factor by 60% of respondents insustainability risk factor for an organisation’s the Mining Extractive sector (and energy pricesperformance in over a quarter (27%) of cases, and by 40%), by Local Authorities in 44% of cases,energy prices by one fifth (20%) of respondents. and by 39% of respondents in Higher Education “Climate change will impact on healthcare and (and energy prices by 32%).so we need to mitigate this. The Department of 168 Local Authorities in the UK are subjectHealth has carbon reduction targets. We’re very to the CRC Energy Efficiency Scheme which maymuch looking to beat them,” said one Healthcare be driving the responses here, but it is a relativelysector respondent. predictable business cost rather than a risk, and it It is important to stress that this survey is a is also likely that public sector responses reflectedsnapshot, taken at a particular point in time. We can wider concerns and aligned with current publicsee the rationale for identifying regulatory drivers as policy agendas.6  Sustainable Businesses
  9. 9. On average across all sectors, the second Substitution risks from competitive, morebiggest risk after carbon was energy prices (20%). sustainable products were considered the leastEnvironmental regulations (17%), water scarcity important risk by 19% of respondents. This kind of(16%) and commodity prices (10%) followed. At ‘disruptive’ market intervention can have profoundthe other end of the scale, 25% thought that extreme consequences, especially in fast-moving technologyweather events were the least important risk, which fields, but it is likely that in the sectors we chose,is interesting given this year’s widespread flooding this risk was not considered particularly relevantincidents and other extreme events globally. to the business model.To what extent has your organisation’s leadership In the next two years, how significant will the followingincluded sustainability in the following? risks be to your organisation’s performance? % %100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Long-term strategy Core values Mission statement Vision statement Financial objectives Carbon regulations Energy prices regulations Environmental Water scarcity Commodity prices Extreme weather more sustainable products Substitution risk from Fully included Partially included Not included Don’t know 1 2 3 4 5 6 7 1 – Most important Sustainable Businesses  7
  10. 10. FindingsImplementation: Governance Embedding SustainabilityOverview competitive market? And how can you tell theAwareness is one thing, but translating difference between superficial box-ticking andthis into meaningful and effective action genuine action?is a different matter. Leaders wishing Often environmental compliance requirements affecting a company’s ‘licence to operate’ is the entryto implement change face plenty point for sustainability in the operational areas of aof challenges. business. However, to move from this to ‘embedding’ sustainability so that it becomes a core part of theIs there resistance to change and, if so, where does business model is a major step. Often resourcesit lie? What strategies are available to overcome it? and money are the barriers to action, but also lackDoes there have to be a crisis to drive change, or of clarity about what sustainability initiatives cancan there be evolution during periods of stability? and should achieve. If sustainability is treatedHow is change best institutionalised? How does predominantly as an ‘environmental’ issue,an organisation implement sustainability goals rather than also as an economic and social issue,while surviving in a potentially conflicting embedding could be harder.Who is accountable for performance against 2% 2%sustainability goals in your organisation? CEO 4% Sustainability Director 4% Other 4% Vice Chancellor Environment/Energy Director 5% Head of Council 7% 40% COO Managing Director CFO Facilities/Estates Director 10% 20%8  Sustainable Businesses
  11. 11. Governance critical finding – not only do successful organisationsAscertaining who has designated leadership for have the strategy for addressing and incorporatingsustainability, together with which departments sustainability throughout the business mix, butof the organisation are involved was revealing. designated responsibility goes to the top. Questions targeted on accountability and Where a board has committed the time and effortresponsibility generated some very interesting to establish such a position, it is a highly positive signresults. In order to surmount barriers to embedding that sustainability has been acknowledged as keysustainability, it is clear that leadership is crucial. to overall business performance and requires its With a strong and consistent message from own management.the top of an organisation sustainability can be The range of job titles in this response suggestscommunicated as something that simply has to be a diversity of approaches, however. Organisationsdone. “The CEO made it very clear that... addressing need to implement as well as strategise and it issustainability issues are necessary for the growth interesting to see that in only 7% of cases the Chiefof our organisation,” was how one respondent in Financial Officer or the Chief Operational Officer isthe Food Beverage sector put it. accountable for attaining sustainability goals, despite The survey showed the CEO or equivalent the survey showing that sustainability is enshrinedwas accountable for sustainability performance ‘partially’ or ‘fully’ in 70% of organisations’ financialin nearly half of the organisations questioned. targets. Yet the economic case for sustainability is47% of respondents reported that the CEO already very important and becoming more so.or Vice Chancellor (the equivalent of a CEO in “In the short-term, financial benefits and increasedHigher Education) was the individual accountable awareness will increase the importance offor performance against sustainability goals. sustainability,” one respondent from theA further 20% identified the Sustainability Director Local Authorities sector responsible. With other board-level categoriesthere was a clear 80% where sustainability was ledfrom the ‘top table’ of the organisation. This is a Sustainable Businesses  9
  12. 12. “ ustainability goals were described S as ‘fully embedded’ in any department in no more than a third of respondents.”Embedding Sustainability in adopting sustainable business practices, either fullySustainability goals are not always embedded or in part, with under 60% of respondents in theseconsistently throughout all branches of an operation. two specialisms reporting that sustainability was eitherThey must cascade down through every department, fully or partially embedded. Many organisations haveor there is the risk of a disconnect between high-level started the journey towards embedding sustainabilitystrategy and organisational reality. and to measure where each organisation was on this In our review, sustainability performance metrics journey would require more detailed analysis.were least noticeable in financial management and The uncertainty may be because manyproduct development compared to energy and departments still consider sustainability as just anenvironmental management functions. It is clear environmental issue. In Sales for example, wherethat the stage of embedding sustainability is where targets are financially driven, non-financial metrics aremany organisations still have much to do. considered to be less important, unless they are seen as In leading organisations and businesses, by having a direct impact – for example where businessescontrast sustainability is fully embedded throughout need to meet certain environmental requirements inthe core strategy, and is seen as a driver of growth order to win contracts.and innovation. For the SME’s reviewed in thisresearch, sustainability goals were described as ‘fully Less than 60% of respondents reported thatembedded’ in any department in no more than a third sustainability goals had been ‘fully embedded’of respondents. This highest response rate at 33% was or ‘partially embedded’ within HR and Sales.Operations – the lowest, at 14% was Sales, with theothers falling between these extremes. The scores go up when ‘fully embedded’ and‘partially embedded’ are combined, but the resultsshow clearly that HR and Sales are lagging well behind10  Sustainable Businesses
  13. 13. The power of sustainable business practice is To what extent are sustainability goalsrecognised as a potent motivator for behavioural embedded in the following functions?change. When the SME’s in this survey were %asked whether there were plans to incentivise 100the incorporation of sustainability into employee 90behaviour, responses indicated limited considerationof possible interventions. Only 13% said that they 80planned to fully embed employee recognition for 70improving sustainability into their strategy. This was‘employee recognition’ in a non-financial sense – 60we asked separately about bonuses and pay rises. 50The figure rose to 51% to include ‘partial embedding’,but again what this means in practice is a moot point. 40 Employee recognition was the most popular of allsuggested strategies. Giving bonuses to executives was 30the next most popular choice (9% fully embedded) 20with general employee pay rises or bonuses the lowest(3% fully embedded). 10 0 Operations Risk Finance RD IT Supply chain HR Sales Fully embedded Partially embedded Not embedded Don’t know Sustainable Businesses  11
  14. 14. There is a majority recognition that different Leading companies which have alreadyinvestment criteria should apply to sustainability successfully integrated sustainability throughoutprojects. 67% of respondents identified longer payback their organisation all report that they have someperiods as being allowable for sustainability projects form of recognition for behaviour change embeddedand 53% included non-financial social and in their operations. When sustainability metricsenvironmental information in the assessment process. directly affect financial performance and therefore48% had reached the stage of monetising these criteria, the reward that people derive from their work withinwhile only 15% did not include social and environmental the organisation, they can become truly embedded.information in the process. This seems like a strongplatform to build on. No doubt different metrics areinconsistently reported in organisations’ sustainabilityreports and wide disparities exist between the quality,quantity and types of information represented, buta process at least appears to be underway.How does your organisation account for sustainabilityin its capital investment appraisal processes? Longer payback periods are considered for sustainable projects Non-financial environmental and social information is included in the assessment process 67% Environmental and social information is not included in the assessment process 53% 48% All environmental and social costs and benefits must be monetised for 5% consideration in the appraisal process 15% Don’t know12  Sustainable Businesses
  15. 15. FindingsSustainability ReportingSustainability information was reported At the top of the list of reported metrics waseither internally and/or externally in over Waste Management (fully included by 56%), followed by Environmental Management (51%).80% of organisations surveyed. Just 16% Energy Management came third at 50%.did not publicise any information related This probably reflects the length of time thatto their sustainability performance. waste and environmental (pollution) legislation has been in force (up to thirty years in some cases), duringBut exactly what they are reporting varies widely. which time it has become almost a standard concern.Of those who do report, 46% see ‘sustainability’ In particular, the Landfill Directive has begun drivingas their organisation’s performance on non-financial increasing recycling, waste minimisation and resourcemetrics such as energy, environment and social. efficiency, with material effects on the bottom line.Almost as many, 42%, see it as the long-term “We have to nearly double our recycling ratesviability of their organisation in the context of from 28% to 40% by 2014,” said one respondentnatural resource scarcity. from the Local Authority sector. Either way, this suggests that sustainability Water Management has been creeping up thereporting can provide a way of systematically agenda (fully included in 46% of reports) dueand quantitatively measuring management quality. to compulsory water metering and rising costs.However, the fact that Waste and EnvironmentalManagement came top of the reporting list suggeststhere isn’t necessarily a strong correlation betweenthe responses on external sustainability risks (carbon,energy etc.) and what gets reported on. It is likelythat what gets measured tends to be linked to what isrequired for compliance purposes. Yet it is importantthat organisations measure, manage and disclosethe full range of factors that help it to create andpreserve value. Sustainable Businesses  13
  16. 16. “ ector and trade bodies have the opportunity to S demonstrate leadership to assist this process by working closely with regulators and governments to improve the quality and value of reporting.” Boards take a variety of approaches to presenting Communications (20%) or the CEO (37%) or thesustainability data. 28% present it as a standalone Head of Sustainability (42%).report. A further 40% either integrate it or present External validation of sustainability informationit as a separate section in the annual report. 16% was not widespread in this group. Only one thirdjust include it in their internal reports and 16% do of sustainability information was subject to any formnot report on it at all. It is probably fair to say that of assurance.sustainability is not yet seen as having a direct impact Yet, despite there being no regulatoryon financial results – only 7% of those surveyed requirement, many organisations are reporting.consider the CFO/FD responsible for deciding Many other countries, such as South Africa, Francehow to present sustainability information. This and parts of Scandinavia, have statutory obligationswas significantly less than the Head of Corporate for sustainability reporting.To what extent does your organisation include sustainabilityperformance metrics in the following areas? Fully included Partially included Not included Don’t know Waste management 56% 37% 2% 4% Environmental 51% 42% 5% 1% management Energy management 50% 42% 6% 2% Water management 46% 45% 6% 4% Facilities management 34% 45% 17% 4% Procurement 29% 51% 17% 4% Travel and logistics 26% 45% 22% 7% Financial management 21% 50% 22% 7% Product development 13% 39% 32% 16%14  Sustainable Businesses
  17. 17. Businesses that have incorporated sustainabilityin their reporting processes tend to adopt independentbenchmarking according to recognised standards.This helps organisations avoid accusations of‘greenwashing’. Independent assurance is possibleusing AA1000AS (2008), the Carbon Trust’s GHGProtocol Product Standard, GRI (G3) guidelines,and ISO26000, for example. There are new initiativesto improve corporate reporting such as the developmentof an integrated reporting framework by theInternational Integrated Reporting Council and thedisclosure of carbon emissions by the Carbon DisclosureProject. Sector and trade bodies have the opportunity todemonstrate leadership to assist this process by workingclosely with regulators and governments to improve thequality and value of reporting. The proposed introduction of mandatory carbonreporting for UK companies listed on the main exchangeshould also lead to greater transparency and comparabilityin reporting. Whilst there is a concern that this may addto the reporting burden, the move towards mandatorycarbon reporting was wholeheartedly backed by businessduring the recent Government consultation process. The argument is that companies, investors andother stakeholders will benefit from improvedinformation about the risks and opportunities facingthe organisation; this should lead to better decision-making through increased awareness of sustainabilityissues. Many respondents to our survey cited theexpectations of clients and the public as beingimportant motivators for reporting. Sustainable Businesses  15
  18. 18. As one respondent put it: “It is mainly external community and diluting efforts to move away frominfluence, customers’ expectations on our company. a solely short-term focus on investment decision-A lot depends on the external stakeholders and at making. On the other hand, developments in socialtimes they are putting a lot of increasing pressure on and interactive media are magnifying the potentialthe business to address these sustainability issues.” for reputational damage and may act as a catalystReputation is everything and can massively affect for change.brand value, and this is seen as vital by many Effective communication of sustainabilityleading companies. performance can enhance reputation, but ineffective Other barriers to effective communication include communication or a lack of trust can equally worknot quantifying and accounting for sustainability in the opposite direction, particularly through socialissues in financial terms, which can result in the issues media, where damage may be difficult to repair.having less perceived importance to the investmentWhich of the following statements best describesyour approach to sustainability reporting?16% 28%We do not publicise any information relating to Sustainability information is presented in aour organisation’s sustainability performance standalone sustainability report16%Sustainability information is integratedin our internal management reports20% 20%Sustainability information is presented Sustainability information is integratedas an independent section within the into the annual report and accountsannual report and accounts16  Sustainable Businesses
  19. 19. SectorSector Specific ApproachesWithin sectors, as we have identified, approaches to sustainabilitydiffered widely on a sector by sector basis. “ e deal with sustainability W thoroughly; it is part of our business and it will only increase in importance.” Sustainable Businesses  17
  20. 20. SectorFood BeverageCompanies in the food and beverage sector are An independent research and analysis reportexposed to reputation and resource scarcity risks. conducted by our Strategy and Commercial AdvisoryTo mitigate these risks and achieve positive brand Team on behalf of the Food and Drinks Federationimpacts, firms are investing in sustainable supply (FDF) identified growth opportunities and barrierschain strategies which are less resource intensive that companies in the sector are facing based onand focus on building stronger relationships extensive surveys and interviews with seniorwith key suppliers. management (representing c. 29% of the total “We deal with sustainability thoroughly; industry by turnover value).it is part of our business and it will only increase One of the major future risks identified in thisin importance,” said one respondent. 32% of report was access to raw materials exacerbated byrespondents confirmed that sustainability goals had the growing demand from emerging markets and thebeen fully embedded into their supply chain, for extreme volatility in commodity prices. Executivesexample by sourcing locally. This was the highest regarded access to raw materials a competitivevalue recorded for supply chain and is reflective disadvantage for the UK compared to other countriesof its relative importance in this industry when who are more self-sufficient or can access more rawcompared to the others evaluated in this study. materials locally, compared to the UK, which remains In this sector, consumers have been taking a more particularly dependent on importing certain interest in the sustainability of products for One of the conclusions of the report is that insome time and many have been the target of consumer order to ensure food security, the UK food and drinkcampaigns. This explains why communicating industry and Government must work together. Thesustainability performance to customers was industry must develop more resilient supply chainsidentified as ‘very important’ by this sector. (produce more with less resources while reducing the In terms of threats, water scarcity emerged as the impact on the environment) while the Governmentmost important risk factor for this sector (identified should facilitate greater trade liberalisation throughas such by 32% of respondents), reflective of the high international trade negotiations.water usage intensity levels of this industry.18  Sustainable Businesses
  21. 21. Case Study:Marks Spencer plcMarks Spencer (MS) is one of the UK’s leading retailers. They have delivered£185 million in net benefits through Plan A. An essential element has been closecollaboration across the supply chain. Adam Elman, Head of Delivery at Plan A, commented that CO2 emissions fromthe supply chain are up to 10 times that of the company itself. “We do not have allthe answers and it makes sense to work together and learn from each other.” A Supplier Exchange best practices programme was launched 5 years agothat allows best practice to be shared on a whole range of topics both on-line andface-to-face working groups plus at an annual conference where over 1,200 supplierscan engage with each other to discuss challenges and opportunities. This approachengenders collaborative working to develop better working practices but suppliersmust meet sustainability standards from an environmental, social and economicperspective that align to the company’s balanced scorecard, in effect a ‘carrot andstick’ approach is used. Sustainable Businesses  19
  22. 22. SectorFreight LogisticsFor Freight Logistics, the sustainability agenda Looking ahead, this sector sees more efficient(specifically low carbon transport) is having transportation as a theme which has been strong fora transformative impact on this industry, and it the last three years and is likely to continue to be so.was the shareholders who were the target group Although 24% of respondents foresaw no changemost frequently identified as ‘very important’ in the importance of sustainability in the next year,for sustainability performance communications. this is because they have already taken on board the Whilst low carbon is a priority it is also importance of the aspects of sustainability mosta challenge for companies in the sector because relevant to them.alternative fuel systems – such as electric – have yet The need to embed sustainability was noted byto be developed which can run vehicles for long one respondent from the Freight and Logistics sectorperiods of time. who stated: “We are driving [sustainability] through our internal environmental management system which requires input from lots of departments and teams.”20  Sustainable Businesses
  23. 23. Case Study: Case Study:Debach Enterprises Ltd Deben TransportDebach, a warehousing, logistics and Deben Transport provides container haulagedistribution company, has installed a services to multinational shipping companies.large solar PV array at one of its depots. The haulage sector faces increased regulatoryAnother is planned. Bee Kemball, MD pressures to reduce carbon emissions, suchof Debach, said: “[the deal] is financially as Euro 6, which alone can add £10,000 torewarding immediately and long-term, the cost of new vehicles. Deben attributesgiving us and our customers, operational and the sustainability of its business model tomost importantly, environmental benefits.” high levels of performance and reliability,The company has a goal of becoming carbon achieved through commitment to co-neutral and the initiative sits alongside effective operation and partnerships and a highlyenergy monitoring and management systems skilled workforce that is able to adapt toand insulation. Debach plan to tackle changing demands.transportation emissions next. Sustainable Businesses  21
  24. 24. SectorProperty ConstructionThe Property Construction sector appears tohave been more effective at embedding sustainabilitygoals into its Operations and Risk functions than anyof the other sectors (45% and 43% of respondentsrespectively confirmed they were fully embedded).The UK property market is highly competitive, andfirms in this sector are seeing sustainability credentialsas a way to differentiate in the market place. Legislation is also playing a part. One respondentin the Property Construction sector remarked thatsustainability is increasing in importance for theircompany “because of the financial importance ofachieving cost savings and our commitment towardsusing more sustainable products. We include this evenin tenders and our overall procurement process.” Environmental regulations were most frequentlyidentified (26%) as the major risk factor for thissector. This is due to the significant volume ofenvironmental legislation to which the industry issubject. “It is linked to quotas for sustainable homeswhich is a national policy, basically that is by 2016all new homes have to be constructed zero carbon,”said one respondent.22  Sustainable Businesses
  25. 25. Case Study: Case Study:Argent Group QuintainProperty development company Quintain is an estate-leasing and urbanArgent Group strives to manage its sites regeneration business. It tries to avoid undueas sustainably as possible. For example, focus on the financial bottom line throughits 67 acre development in King’s Cross, an integrated development approach.London, which requires £2 billion of One Brighton contains 172 zero carboninfrastructure works, will include a district eco-homes, offices and community areasheating system running off an already that reflect sustainability principles withexisting 2MW Combined Heat and Power a car club, rooftop allotments and recyclingsystem, with two similar plants to be added. facilities. Eco-studios and apartments featureThe project included an Energy Centre highly energy-efficient lights, appliances andon site, and working closely with English fittings. Sky gardens on every level provideHeritage ensured a listed building was communal space. All energy is suppliedrefurbished to their requirements. from renewable sources, achieving a 95% In a totally different kind of project – reduction in CO2 open-cast coal mine and land reclamation Elsewhere, Quintain’s studentscheme near Merthyr Tydfil – Argent is accommodation block in Hoxton, London,remediating the environmental impact of has been fitted with LED lighting, CHPcoal extraction, and providing much-needed for heating and hot water, individual flatemployment, by restoring the land and sub-metering, a central energy managementits former biodiversity. This involves the system, a green roof and a bat box. Theremoval of three toxic tips and preserving social element of sustainability is addresseda community of Great Crested Newts, through the provision of ample, communal,an endangered species. social and study space and facilities, which encourages students from a range of disciplines and countries to mix. Quintain has supported local businesses by facilitating them giving discounts to residents. Sustainable Businesses  23
  26. 26. SectorHigher EducationIn Higher Education, 53% of respondents sawa significant increase in the importance of this topicover the next year. This appears to be in part dueto the relatively recent appearance of sustainabilityon the policy agenda in this sector. There are anumber of drivers, which include: rising energy costs,government targets, competition within the sector andgreater expectations by stakeholders of institutionsto perform on social responsibility. “I see a significant increase in the importanceof sustainability due to the cost of utilities, indirectcost associated with sustainability like waste andpackaging waste, procurement, cost of transport,increase in fuel charge, fuel duty, aviation taxes,all of it,” said one respondent. Carbon regulations were identified as the mostsignificant risk factor for this sector, by 39% ofrespondents. At the same time, energy prices werealso reported as the most significant risk by 32%of respondents. Higher Education bodies aremandated to produce carbon management plansby their funding body, the HEFCE. “Our CarbonManagement Plan, and the university’s long-term planas well as government policies will mean significantincrease in sustainability,” said one respondent. In terms of communicating performance,policymakers were the group identified mostfrequently as a ‘very important’ target for messages.24  Sustainable Businesses
  27. 27. Case Study: Case Study:Downing College, University ofCambridge SouthamptonWith savings in fuel consumption of 14.4% The University’s award winning Combinedgas and 11.4% electricity, cost reductions Heat and Power facility connects to a districtare over £45,000pa and carbon emissions heating network on its Highfield campus,over 300 tonnes CO2e. As a result Downing using heat normally wasted in generatingbecame the first Oxbridge college to achieve plant to meet over half of the heatingCarbon Trust Certification. Success has demand, thus reducing the needbeen achieved with a range of methods for conventional boilers. The £3.5 millionaddressing the specific challenges of initiative was largely funded by thesustainably refurbishing a 200 year old University, supplemented by an £800,000building. Solutions included hiding solar Government grant. Over £1 million of thispanels on roofspaces, insulation in attics, was spent on reducing the heat demand ofand double glazing in listed Georgian sash existing buildings, and with a web-basedwindows. In addition rainwater harvesting, metering system allowing close monitoringan electric vehicle charging point and of running costs, a six-figure operating profita ground source heat pump for its new was achieved with a saving of 4,000 tonnes of£8 million Howard Theatre, has already CO2e. Other benefits of the scheme includedelivered up to 40% savings. Funding increased property value and a contributionis assessed on a ‘spend to save’ basis, to satisfying planning requirements onrecognising that some returns may be subsequent building projects. Southamptonover the long-term. University is passing on its experience to other organisations, with keen interest shown by private businesses, as well as the education sector. Sustainable Businesses  25
  28. 28. SectorLocal AuthoritiesLocal Authorities already see sustainability performance The primary audience for communication of theiras an integral part of their organisational performance, performance for Local Authorities is almost alwaysfor example with respect to the Carbon Reduction the residents of their boroughs. “The council’s roleCommitment; many have signed up to the Nottingham is to serve the general public, sustainability goals leadDeclaration on climate change and its successor, Climate to improving their climate security, energy bills,Local, and, going back further, were involved in the health etc.,” said one Rio Earth Summit Local Agenda 21 project. This is the only sector where any respondentssuggested the importance of sustainable developmentmay reduce; 24% also foresaw no change in the nextyear. This was identified as being down to depressedbudgets, where spending on sustainability becomestougher to justify (though it should be noted that somemore imaginative respondents used the challengingeconomic environment as a driver for continuedinvestment, due to the expected cost savings). As one respondent here put it: “In the short-term,financial benefits and increased awareness willincrease the importance of sustainability. Newprojects are bringing attention to it; successes meanthere has been positive attention on what we’redoing on sustainability. This will create supportfor maintaining sustainability in the long-term.” Here again, carbon regulations were identifiedas the most significant risk factor in 44% of cases.Most authorities are subject to the CRC, but ongoinguncertainty around the final shape of this schemecreates a risk for these organisations.26  Sustainable Businesses
  29. 29. Case Study: Case Study:Wychavon HaringeyDistrict Council Borough Council‘Intelligently Green’ Haringey have committed to a 40% CO2 reduction from its corporate estate by 2015.The Intelligently Green Plan provides the The Sustainable Investment Fund (SIF)blueprint for Wychavon from 2012-2020 is a £1.5 million, ring-fenced fundwith practical actions to cut energy use, supplementing Business Unit budgetstackle fuel poverty and reduce reliance ensuring that installations and works are noton fossil fuels. simply replaced, but completely upgraded It covers energy, construction, transport, mainstreaming whole-life costing byfood, tourism and green space. The plan removing the ‘price premium’ and focusingcontains a range of new commitments on the combined costs of price, operationsincluding developing an Intelligently Green and disposal. Several projects have beenAward scheme, reviewing cycle provision completed on the strength of the swiftat train stations and major bus interchanges, return on investment through energypromoting examples of sustainable savings. The scheme can also be used toconstruction, working with farmers and finance entire projects requiring significantgrowers on water supply issues and making capital investment, with an investment returnit easier for business parks to install green of less than five years through energy costtechnologies. Wychavon will be promoting reduction. The Council benefits from CO2the Green Deal programme and currently reductions immediately.offers free loft and cavity wall insulation to Arguably the most successful project toall owner occupiers or residents privately date has been a new ‘regenerative filtration’renting their home. system based on fired volcanic glass material “Being intelligently green is about things for the swimming pool at Tottenham Leisurethat not only have a positive impact on the Centre, saving 106 tonnes of CO2 emissionsenvironment, but also bring financial or and almost £7,000 in water charges per benefits.” The pool was the first in England to have the new system installed. Sustainable Businesses  27
  30. 30. SectorHealthcareFor the Healthcare sector, it is the general publicas well as policymakers who are the key driver andtarget for communication. “Being a Trust there is aconstant need to ensure that we provide sustainableservices to our local people and community. This hasto be done to ensure a sustainable future for ourhospitals,” said one respondent. However, because of the pressure on the NHSto save money, this makes it harder for some Truststo make the initial investments that may be requiredto make long-term, sustainable savings. When askedabout barriers to action, one respondent commented:“Top of the list is money, then second is the necessarywill of the organisation itself. We need to get to gripswith the fact that a lot of sustainability is becomingmandatory. The NHS needs a culture change.”Another agreed with this: “We only get so muchallocation each year for capital projects – there arelimits. Possibly this will improve but it dependson pressures from above. I’m not sure if it’s beingtaken seriously enough. We struggle to get financialbacking, which indicates that it’s just not being takenseriously by management.” Overall, pressure on finances is key; as anotherrespondent said “We should make sure that we savemoney, as we are the NHS!”28  Sustainable Businesses
  31. 31. “ eing a Trust there is a constant need to ensure B that we provide sustainable services to our local people and community.” Sustainable Businesses  29
  32. 32. ConclusionThis survey reveals that sustainability The supply chain impact is also evident and oneis an integral part of the strategic fabric that larger corporates and small to medium sized companies need to take note of. Up to one in threeof the ‘middle tier’ of organisations in the of respondents confirmed that sustainability goalsUK. Sustainability is no longer a luxury; had been fully embedded into their supply chain,many different forces are compelling for example by sourcing locally. This has greaterbusinesses and other organisations to prominence in retail markets where consumersrevolutionise and recalibrate their traditionally take a more active interest in theoperations in a more sustainable fashion. sustainability of products, many of which haveOrganisations failing to understand the been the target of consumer campaigns.impact of this on their organisational However, embedding sustainability into theperformance risk being left behind by business model, making it ‘business as usual’, remains a work in progress. Responsibilities and incentivestheir peers. As one respondent put it: vary and a common framework for articulating“Market demand means that ignoring sustainability practices has yet to emerge. The primarysustainability is not an option.” risks and drivers for sustainability approaches vary widely, and not just on a sector by sector basis.The survey showed that 9 out of 10 respondents Sustainability looks set to become a core elementsee sustainability performance as either ‘very of the business model as regulations increase andimportant’ or ‘important’ to the overall success of the availability of resources presents new challenges.their organisation and many of them have already Organisations, both public and private, that are ablebegun integrating sustainable development into their to innovate and adopt sustainable practices shoulddaily work practices. This is a trend that will grow stand to gain an advantage in their importance over the next five years. A combinationof factors emerge, such as rising energy costs, increase Nathan Goodein compliance and government targets, competition Head of Energy, Environment and Sustainabilitywithin the sector and a commitment to social Grant Thornton UK LLPresponsibility. As one respondent puts it “we dealwith sustainability thoroughly; it is part of ourbusiness and it will only increase in importance.” “ esponsibilities and incentives vary and a R common framework for articulating sustainability practices has yet to emerge.”30  Sustainable Businesses
  33. 33. Sustainable Businesses  31
  34. 34. Notes32  Sustainable Businesses
  35. 35. Contact usFor further information on this report and its findings please contact:Jane Stevensen Mike ReidDirector, Sustainability Associate Director, SustainabilityT 020 7728 3046 T 0131 659 8503E E GoodePartner, Head of Energy,Environment and SustainabilityT (Edinburgh) 0131 659 8513T (London) 020 7728 2513E Sustainable Businesses 33
  36. 36. © 2012 Grant Thornton UK LLP, All rights reserved.‘Grant Thornton’ means Grant Thornton UK LLP, a limitedliability partnership.Grant Thornton is a member firm of Grant Thornton International Ltd(Grant Thornton International). References to ‘Grant Thornton’ are to thebrand under which the Grant Thornton member firms operate and referto one or more member firms, as the context requires. Grant ThorntonInternational and the member firms are not a worldwide partnership.Services are delivered independently by member firms, which are notresponsible for the services or activities of one another. Grant ThorntonInternational does not provide services to clients.This publication has been prepared only as a guide.No responsibility can be accepted by us for loss occasionedto any person acting or refraining from acting as a result ofany material in this