Seeing sustainability as a business strategy
Sustainability is not just about cost reduction, says Sonny Masero, vice-president, ecoSoftware EMEA, CA Technologies, but also about helping firms stand out in the marketplace and generate new revenue through product innovations.
Masero says firms are starting to address sustainability for three main reasons: cost reduction, compliance with legislation and communication with stakeholders.
Starting with cost reduction, companies have to start thinking about how they manage their environmental performance time-wise, says Masero.
“In the past, a lot of time has been spent on data, using spreadsheets, often with thousands of spreadsheets of data.
“That is prone to error, so the data quality is an issue. Also, it tends to be done as a once-off or a quarterly exercise at most.”
Instead, he says firms need to put in place a centralised data management system to improve data quality and to avoid errors in compliance reporting and communications.
“Once you’ve got that data you can share that information across the business with managers so they can make informed business decisions.
“That’s important because with companies such as AkzoNobel, 50pc of their executives’ compensation plan is related to their sustainability performance. If you are going to do that to executives and managers, then you need to give them the tools and information to make decisions that are best from an environmental performance, as well as a financial performance, point of view.
“If, for example, a manager is making a capital investment in a new piece of IT equipment or a new building design, they need to know quickly if that has been the right decision so they can continue to invest in that same way or change direction.”
In CA Technologies’ own case, the company recently released the latest version of its energy, carbon and sustainability management solution, ecoSoftware 2.0, with companies such as Tesco using the software for its carbon management, collecting carbon data from over 4,000 Tesco stores globally.
As well as knowing your baseline environmental performance today, with a centralised database, Masero says it’s vital for companies to estimate their future energy costs and outputs.
“The ability to forecast what your future emissions might be, based on internal investment or even mergers and acquisitions, enables you to budget appropriately for buying allowances under the CRC or thinking what type of energy contract you might have over a three or five-year period so you can get the best deal.”
In terms of ecocompetitiveness, Masero says that’s about “companies being more productive with less natural resources and not having your business growth dependent on using more energy, water or generating waste or carbon emissions in a linear fashion.”
He gives the example of Unilever, which has set itself the target of doubling its business by 2020 whilst reducing its absolute environmental impact.
“Any environmental targets that you see from companies are about reducing their impact relative to a growth metric. There are actually few companies that say it is going to be absolute reduction and that’s the key difference – decoupling that growth from resource consumption.”
And with more legislation come to the fore such as the Climate Change Agreements, the EU Emissions Trading Scheme and the Carbon Disclosure Project, companies will also have to be poised to communicate their energy management data more frequently.
In April of this year, the UK Government introduced the CRC Energy Efficiency Scheme, which will aim to improve energy efficiency and cut emissions in large public and private-sector organisations that are responsible for around 10pc of the UK’s emissions.
The CRC Energy Efficiency Scheme will put a price on carbon of £12/tonne and will require about 5,000 to disclose their UK carbon emissions, explains Masero.
“One of the intentions of the CRC was to put issue of carbon management onto the boardroom agenda.”
“In the CRC, a board director needs to be made responsible for signing off on compliance report. Roughly a third of respondents said that should be the CEO and another third said it should be the CFO.”
To assess the impact the CRC Energy Efficiency Scheme will have on companies, CA Technologies commissioned the survey ‘CRC Inspires Carbon Management Leadership’, released in June.
As part of the survey, 202 carbon-management experts from the largest private and public-sector organisations covered by the CRC in the UK were interviewed.
The 202 firms interviewed have set aside budgets for:
- Energy and carbon data collection (80pc)
- Smart meters (73pc)
- Energy efficiency projects (63pc)
- Software for carbon management (54pc).
Communication and brand reputation
Meanwhile, another driver that’s pushing sustainability up higher on company’s agenda is around communication.
“One of the challenges that sustainability teams have in companies at the moment is being able to demonstrate business value back to senior level and to staff because they don’t have adequate measurement systems.
“This is particularly important for companies that are linking their brand reputation to environmental or sustainability performance.
“In the past, they would have managed with an annual sustainability of CSR report, but with the growth in social media such as Twitter, there is an increasing demand for more frequent communication on environmental performance. That’s not always structured.”
He cites the campaign that took place through YouTube against Nestlé in March after it purchased palm oil from Sinar Mas. (Sinar Mas is being accused by Greenpeace of destroying the Indonesian rain forests.)
Says Masero: “If companies are relying on data that is in their annual report, which could be a year or even 15 months old when a campaign comes up or a particular question, they can waste a lot of time getting that information. They will require monthly, up-to-date data. That data will also be important to ensure that the data they’re using to communicate externally is consistent with the data they’re actually using to run the business.”
Greening the supply chain
However, he says sustainability is also important for B2B companies because the responsibility for environmental performance is being shared with the supply chain.
“WalMart is probably the most publicised example with its sustainability checklist for suppliers. Companies like WalMart and McDonald’s are setting targets for their suppliers to improve their performance. So for those suppliers to remain as important suppliers, they need to improve their performance, as well. That can apply as much to SMEs as to larger multinationals.
“You are actually seeing tenders being issued and points being awarded for a supplier’s sustainability performance.”
Finally, on the wider sustainability agenda in companies, Masero says the emergence of a chief sustainability officer role is a challenge.
“It’s a challenge because they have inherited the environmental brief, sometimes the CSR brief, the health and safety brief and then energy and carbon.
“That role is becoming more important to business and I think many businesses consider that sustainability will become something that all businesses do during the course of this decade.”