Executive Summary At no time in history have business leaders felt the pressure to perform on such a vast array of fronts. As always, stakeholders expect companies to deliver outstanding financial performance, market dominance, operational excellence and a spotless reputation. Increasingly, they also expect a higher level of corporate responsibility – one that goes beyond legal compliance and traditional philanthropy. A new mandate to deliver value and values means companies must do more than simply follow the law and stay under the radar. They must examine their impact on society as a whole and tell stakeholders what they’re doing about it. Chief among these issues is environmental sustainability. While most companies see sustainability as a critical business strategy, many lack an overarching vision or plan, and instead end up engaging in random acts of environmental kindness. They don’t know how to engage activists as well as analysts, how to assess environmental risks as well as market risks, or how to form non-traditional partnerships in unfamiliar territory. Equally daunting is communicating about their sustainability efforts in the midst of non-stop environmental chatter, green claims and cynicism about greenwashing. Despite the hurdles, some companies are learning to maximize the rewards of environmental stewardship. GE, for example, has combined purpose and profit by building an entire business enterprise around social and environmental responsibility. Interface Inc., an Atlanta-based carpet tile company, has found that transforming its petroleum-intense business into one of the most sustainable manufacturing operations in the world generates both goodwill and increased profits. Equally critical, as BP is learning since the disastrous oil spill, companies must know how to manage environmental risks. By 1) determining where they are and where they want to be on the ECO continuum, 2) developing programs aligned with their business strategies, and 3) communicating through real-time engagement, companies can successfully navigate the environmental landscape and leverage it to achieve their business goals. A Historical Perspective Environmental sustainability is the latest in a string of megatrends that have re-shaped the business world in recent decades. In the 1970s, quality emerged as the new strategic imperative and a defining attribute for brands. In the 1980s, technology took center stage as the key driver of efficiency and innovation and also hastened globalization, a major theme in the 1990s. During the first decade of the new millennium, sustainability gradually made its way into the business and consumer lexicon. Consumers began demanding more sustainable products, new government regulations were introduced, and the emphasis on clean technologies and energy efficiency increased. Sustainability is changing the way we do business forever and leaders who want to remain competitive cannot afford to take a haphazard approach. As history shows, companies must respond and adapt to megatrends or be left behind.2
The Four Forces Driving Sustainability Many factors can spur development of a megatrend. In the case of environmental sustainability, these include growing concerns about climate change, the connection between energy independence and national security; intensified competition for natural resources; and increased awareness of issues such as food safety. Today, four forces are accelerating the rise of environmental stewardship to the top of business priority lists: consumers, government, supply chains and green technologies and products. 1. Consumers In recent years, news headlines have been full of corporate scandals, financial misconduct and questionable ethics on the part of companies and public figures. While consumers’ expectations of value and values from the brands and companies they choose are growing, so is their skepticism. It will take thoughtful, well-planned, authentic communications and clear evidence companies are doing the right things to regain consumer confidence. Consumers are also influencing how sustainability is defined. In the early days of environmental awareness, people worried about pollutants spewing from smokestacks and saving rainforests. Now, consumers are more worried about their own homes, communities and families than the Earth, prompting them to expand the definition of sustainability to include health and wellness. 2. Government Local, state and federal government agencies are creating unprecedented scrutiny and regulation. From the smallest municipalities to the Supreme Court, the actions of government cover a broad range – from limiting greenhouse gas emissions and the size of televisions to requiring companies to disclose climate risks to investors and taxing plastic bags. Both carrots and sticks are being used to motivate companies to act: tax incentives, contracts and grants are being offered to those who drive ECO innovation; penalties and increased scrutiny will be levied against those who don’t. 3. Supply Chains Nowadays, it’s not enough for companies to be accountable for own behavior; they must also take responsibility for how their suppliers conduct business. Wal-Mart, the world’s largest retailer, is creating a sustainability index factoring in assessments of its 100,000 global suppliers. While most companies won’t go to this extreme – regulators, consumers and investors expect them to know that their suppliers are doing the right thing. 4. Green Technologies and Products For the first time in history, “green” is not a casualty of the economic downturn, but a hero. More than $200 billion in private investment and $400 billion in stimulus funding has been poured into clean technologies around the world in the last year, transforming old businesses and creating new ones.
How to Move Forward on the Sustainability Front The mandate for companies to create meaningful and effective environmental stewardship programs is clear. Those who approach the task with a laser focus on purpose, as well as profit, will deliver benefits to their stakeholders, society and the bottom line. The following steps outline the process organizations can follow to re-invent, re-think, re-define and re-imagine themselves in an eco-centric world. Step One: Discover where you fall on the sustainability continuum. An assessment of policies, practices, beliefs and strategies will reveal where a company lands on the continuum between risk avoidance and profit and purpose, and between little stakeholder engagement and shared values. The stages are: • If you are eco-compliant, you follow laws and regulations. You recognize that failing to meet minimum standards will result in penalties and other risks. • Eco-vested means you go beyond compliance and have begun to see that some ECO strategies, such as energy efficiency improvements, help the bottom line. Sustainability, however, exists in its own silo and is not integrated into other parts of the business. • As an eco-innovator: you actively integrate sustainability into your business strategy and it enjoys broad organizational acceptance. It is a core business value and your employees are engaged in the concept. • If you are eco-transformational, you have truly transformed your business or value proposition and are gaining market share with new products and technologies. Your organization embraces the concepts of value and values, and purpose and profits. The Stages of Sustainability Little Stakeholder Shared Values Engagement ECO ECO ECO ECO Compliant Vested Innovator Transformational Defense Offense Risk Avoidance Profit and Purpose Step Two: Understand your stakeholders’ expectations and values. The degrees of priority and scrutiny of sustainability efforts vary by industry. A company in offshore drilling, for instance, faces much more intense pressure than a health care provider. It is crucial to know how well you comply with trade standards or guidelines, how stakeholders view your activities and commitments, and what your competitors are doing.
Step Three: Identify your organization’s values and opportunities. An audit or opportunity assessment can help pinpoint what’s important to your organization, and to your stakeholders. The biggest opportunities and impact are being felt in business-to-business and business-to-government sectors, but business-to-consumer opportunities are quickly gaining ground. Step Four: Build trust with credible programs. Sustainability is not a public relations campaign. Instead, it consists of tangible, measurable improvements to products or business processes, such as reducing your carbon footprint, being more energy efficient, ensuring supply chain partners act responsibly, and reducing the environmental impact of your products’ entire lifecycle. Step Five: Engage stakeholders. While sustainability activities are commendable and worthwhile, stakeholders must be aware of them for your organization to realize their full benefit. By developing an authentic narrative and demonstrating leadership, you can credibly engage in the conversation and deliver purpose and profit.Using Real-Time Engagement to Tell the Story Real time engagement is using experience, insights and analytics to engage stakeholders in “right now” conversations to manage reputation and create powerful movements between people and brands. To master it, companies must understand its components and use them to build a strategy that meets organizational objectives. The four components are: 1. Real time conversations: Get people talking through influencer and consumer outreach, thought leadership and grassroots activation to create authentic, credible conversations. Whether it’s Tweeting, blogging, face-to- face meetings or hands-on training, get people talking. 2. Real time communities: At the heart of the environmental movement are passionate influencers, activists and organizers. They are dedicated to value and values – their families, communities, ECO issues, causes and products. It’s important to build, feed and guide them. 3. Real time content: Fears of “greenwashing” and scepticism about professionally-generated content is at an all-time high. As a result, companies need to create opportunities for multiple voices and consumer- generated content to be shared across multiple channels. 4. Real time commitment: Through powerful, holistic programs, strong tools and analytics, conversation and content can drive communities to act for profit and purpose. This can include changing beliefs, behavior, awareness or intent.
An aspect of sustainability that makes it more challenging than some megatrends of the past is the complexity of interested stakeholder audiences. Younger consumers, for example, care deeply about the environment and as their buying power increases, so will their demands for value and values. Environmental stewardship is also becoming a factor in employee recruitment and retention. People want to work for responsible companies whose values align with their own and who give them opportunities to support environmental causes through their work. Investors care too, since ecological impact can dramatically affect a company’s profitability and growth. Monitoring and managing conversations with these varied audiences over time allows companies to identify risks and opportunities related to their positions on the environment. By using real- time engagement to get the message out, change attitudes and opinions, and ultimately change behavior, companies can measure the impact of their sustainability performance and return on investmentTime to Step Up Sustainability is motivating business leaders to think differently about how to achieve their organizational goals and, at the same time, contribute to the greater good. A thoughtful assessment of the current situation followed by meaningful programs and ongoing real-time engagement with stakeholders will provide the much-needed road map to sustainable change. For more information please contact: Sheila Gruber McLean Senior Vice President, Director North America ECO Network MSLWashington, DC Two Lafayette Centre 1133 21st St. NW Suite 300 Washington, DC 20036 firstname.lastname@example.org (202) 261-2881