Until fall 2009, BP ranked the 18th most sustainable major company on the NASDAQ OMX CRD Global Sustainability 50 Index. And then on April 20th, 2010 the company had to deal with the infamous oil spill. Did BP deserve to be ranked so high on a sustainability index?
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The ranking of companies based on their Change Management and Sustainability strategies and practices needs to come under close scrutiny. An analysis of 25 sustainability rankings indicates that just 15 percent of the top 50 companies have truly sustainable practices. The rest have substantial environmental risk associated with their operations. The issue is should an oil company that has an enormous carbon footprint be even included as an organization with “sustainable” practices. The answer probably lies in what defines a sustainable organization and the metrics that need to be considered when assessing the practices of sustainable organizations.
Arcus surveyed 1273 senior executives for their views on sustainability for the Arcus View from the Top series. Our findings indicate that organizations are focused on three key areas to manage theirsustainability strategies: optimizing energy consumption across the enterprise, changing employee behavior and driving supply chain optimization. Other activities include product enhancements to optimize types and volume of materials used.
Clearly, the strategic focus of companies is on cost savings by optimizing processes and managing procurement strategies to embed Change Management and Sustainability strategies into their organizations. These are key components of change management strategies. CEOs recognize that business imperatives need to be integral to sustainability initiatives. For these organizations, Green Reputation Management is secondary to tangible results in cost optimization. The end customer’s viewpoint has not made it to the top of their priorities with regard to being a prime motivator for their initiatives in this area.
Our research also indicates that senior executives recognize that change is complex, especially when executing against specific business imperatives that are focused on cost containment and optimization with tangible long term outcomes. However, there are three steps most senior executives recommend with regard to deployment of sustainability strategies:
1. Develop a business case
There is a concerted effort to build a business case for incorporating environmental, social and governance considerations into managing operations and growth strategies to deliver a range of business outcomes. These strategies include better anticipated and managed risks by spreading risk out across different partners and reducing operational risks related to supply disruptions, cost increases and reliability of raw materials. Employee engagement is increasingly becoming a priority too, especially in regard to managing workplace conditions to reduce employee turnover. These strategies are believed to lead to improvements in quality and predictabilty of outcomes.
A survey by The United Nations Global Compact (UNGC) titled A New Era of Sustainability Study, found that the “global economic downturn did little to dampen corporate commitment to sustainability”.The report says it seems to have done the opposite with “80 percent of the CEOs say the downturn has raised the importance of sustainability”. The key driver of the accelerated pace of sustainable practices has been the need to address the challenges of the financial crisis.
As a result, sustainability is being recognized as a source of cost efficiencies and revenue growth and not as a cost head. The survey results also indicate that businesses are taking sustainability more seriously. 81 of CEOs said in 2013 that sustainability issues had become part of their company’s strategy and operations compared to just 50 percent in 2007.
Implications for change management: The most challenging task for leaders is to agree on the definition of sustainability. It is a confusing topic with many different opinions regarding environmental stewardship – what it entails and possible outcomes that could be considered such as energy conservation, manufacturing processes and employee behavior. The most critical task within a change management strategy will be to align the strategic priorities of the organization with the expectations of employees. Today, 85 percent of young employees consider sustainability track records to be the most important criteria when assessing the reputation of an employer. Empowering clusters of employees with common goals can help to develop corporate strategies that are linked to employee needs. These groups can help to provide a cohesive set of principles and strategies that stem from real world needs of internal and external drivers of sustainability.
2. Manage change by embedding sustainability
Michael Hopkins, editor-in-chief of MIT Sloan Management Review wrote in an article – “You don’t need to find sustainability. Sustainability will find you. The United Nations Global Compact (UNGC) studyindicates that sustainability has become a priority of nearly 800 CEOs from around the world. The UNGC report indicates that 93 percent of the CEOs believe that the future of their company’s success will depend on how well they integrate sustainability into their operations.
Implications for change management: CEOs who take an active interested in determining how to make changes in their organizations to move their sustainability strategies forward by embedding Change Management and Sustainability strategies into their organizations. Ask yourself and your team “what it will take” to realize tangible sustainability goals.
3. Constantly monitor progress
What doesn’t get measured doesn’t get done. Many business leaders say that there is a high level of uncertainty on outcomes that they are likely to see from sustainability initiatives. This is because most organizations do not have best practice standards or prior experience in deploying sustainability initiatives.
Implications for change management: Taking a flexible approach with a range of scenarios planned into the outcomes can help companies manage the risk associated with sustainability initiatives. “Develop a plan and make small adjustments every quarter” is the advice of one of Arcus’s senior consultants. Create a knowledge repository and small teams that are assigned specific tasks with defined outcomes. Constantly scan and observe environments and be ready to make changes to your plans.
Most CEOs agree that adopting a sustainability plan is a good business practice that can benefit an organization, its employees and growth plans. However, they also agree that it isn’t an easy task. There aren’t too many guideposts available to help with the process and employees are still learning how to manage and deploy sustainability practices.
Arcus has developed a repository of best practices to help our clients manage, deploy and measure the impact of sustainability strategies. As one client put it- “Arcus’s approach to managing sustainability strategies is unique and comprehensive. It manages the risks associated with deployment of these strategies by looking at thousands of “what if” scenarios to guide us through the process.
Business Implications of Climate Change – A survey of 1,200 business leaders on economic, environmental, and social performance. Read more >
Download the Arcus Best Practices report on Sustainabilty Risk Management.