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Sustainability


HOW TO BUILD YOUR SUSTAINABLE BUSINESS STRATEGY


By Sphera’s Editorial Team | January 17, 2020

Sustainability tactics to consider, whether you work for a large company or a
small to medium-sized business. An interview with Hannes Partl, principal
consultant.

 

In your view, what is the definition of a sustainability strategy?

Sustainability is an all-encompassing term. It can mean different things to
different people and different organizations. In a nutshell, I would say that
sustainability strategy means that an organization has at least a general idea
or a rough plan of how to align non-financial aspects with their commercial
practices in a way so that they derive a business benefit. They have a
sustainability strategy if they are convinced that improved sustainability
performance, environmental or social performance, will be a business advantage
in the medium to long-term.

 

So strategy puts sustainability into the field of business. Is it correct to say
that a strategy can be called a strategy when the economic element dovetails
with the two other pillars of sustainability: environmental and social?

Yes, that’s what I mean with a real sustainability strategy. The focus areas
are, of course, environmental and social. When a company has found a compelling
way to combine all three to their advantage, then the sustainability goals are
aligned with the business. Some companies create a sustainability strategy,
because they want to show that they are “a little bit green,” or “a little bit
sustainable.” Those companies are not convinced that it helps them commercially.
But a real strategy must combine all three aspects.

Hannes Partl

 

Can you point out some mainstream approaches companies take with their
sustainability strategies?

By far the most common approach is greenhouse gas or carbon reporting and
sometimes the management of these emissions, but for many it is often just
reporting, and many times just Scope 1 and 2 reporting, without Scope 3. It’s
just reporting without any serious ambition to improve and reduce—to manage—the
emissions and get them aligned with commercial goals. We often see that
sustainability in general is reduced to carbon reporting and emissions reporting
and that’s it. While some companies are really taking this seriously, others
just do it for a few numbers, because they think it’s what a company should do
nowadays.

 

Could we call it “the strategy that is not a strategy”?

Yes, in a way. Some companies start with greenhouse gas reporting and
management, and they really want to do something. They want to improve and use
those improvements to their commercial advantage. Then it’s great—it’s a
starting point to build from. But when you do it only because you think you have
to do it, well, we could call that the cheap and dirty version.

The other mainstream approach is when a company takes the issue more seriously,
when it starts with a kind of materiality assessment to find out what is
relevant to them and to stakeholders outside of the company. This is a proof of
serious intention for sustainable development. It shows a willingness to make
sustainability an integral part of the business strategy.

 


WatchBusiness Value & Challenges in Sustainability
To derive real value from sustainability, businesses need to assess and
understand how their operations and products impact the environment.

 

Would you recommend this last approach then?

You can always start from different points, but in my view—especially if a
company starts from scratch—a materiality assessment is a very good way of
building up a sustainability strategy.

 

With regard to sustainability reporting, many small and medium-sized companies
think that a sustainability strategy is just something for the “big boys.” Do
you agree? If you don’t, how should small and medium-sized businesses with
limited resources approach this topic?

Strategy can mean many different things to many different people. Like if you
ask, “How long is this piece of string?” You’re going to get different answers
depending on who you ask. Strategy can be very succinct and simple and still
very successful. Of course, for a large company, strategy requires a substantial
amount of analysis and thinking, involvement from a wide range of people and
business units, suppliers and clients. But for a small to medium-sized company,
a sustainability strategy doesn’t have to be complex to still be very effective.
It can start from a simple intention, like the improvement of your brand through
promoting the sustainability performance of products.

--------------------------------------------------------------------------------


‘A MATERIALITY ASSESSMENT IS A VERY GOOD WAY OF BUILDING UP A SUSTAINABILITY
STRATEGY.’

--------------------------------------------------------------------------------

 

Is there a way for SMEs to bypass working incrementally in their sustainability
activities? How can they align their sustainability activities more efficiently,
to build a strategical sequence with a long-term vision? Do you have any tips
for how to start?

I think the main word is vision. With large companies and big sustainability
strategies, sometimes it’s a major undertaking to develop the vision—to
determine where a company wants to be and what role sustainability should play
in their game. For a small company, the vision could also be a manager saying,
“I want my company to be more successful by being more sustainable,” and he or
she might know exactly how to get there, with a realistic vision for the work
required to determine which steps need to be taken. In the case of a smaller
company, it’s much easier to identify the pathways to implementing a strategy.
Whereas with a large company, there is much more involved, and it’s a complex
process that can take six months or even a year. Tools and consultancy services
can be useful also for SMEs, but a simplified materiality assessment can also
work well—three or four bright minds together that give their input and help
decide what is relevant and how much positive impact the company can make in
different areas.

If there is no vision, then sustainability will always only be a byproduct.
Without a vision, things run in parallel. We can only speak about vision and
strategy when they are together and aligned based on a real understanding of the
potential for improved sustainability performance.

 

Where do companies usually fail? What are the typical pitfalls?

I think the biggest challenge is to develop a strategy in which a sustainable
way is found within the company to develop a more competitive edge. The company
needs to be convinced that sustainability is a more successful way of doing
business. Many companies fail to find or fully understand the connection.
Management plays a key role here. If the top management isn’t behind it, the
company will never leverage sustainability to its full potential.

Another factor for failure is misguided communication or a lack of
communication. If the vision and the strategy are not communicated at all levels
within an organization over time, then the transition takes longer or can even
fail, because the people who work there are not behind it or don’t understand
why sustainability is being pushed. If there’s no understanding, the quality and
outcome of actions will always be poorer.

 

How would you then summarize the key to a successful sustainability strategy?

We can draw the conclusion that the key to success is to first have a clear
vision. Second, convince top management. Third, communicate efficiently at all
levels within an organization and, lastly, make a fundamental connection between
the sustainability strategy and the overall business strategy.

--------------------------------------------------------------------------------


‘THE COMPANY NEEDS TO BE CONVINCED THAT SUSTAINABILITY IS A MORE SUCCESSFUL WAY
OF DOING BUSINESS. MANY COMPANIES FAIL TO FIND OR FULLY UNDERSTAND THE
CONNECTION.’

--------------------------------------------------------------------------------

 

Do you think there is an ideal starting point for the development of a
sustainability strategy? If a company is starting from scratch, what’s the ideal
starting point?

Ideally it would always be the engagement of top management. In my experience,
many times people at the middle management level are on board, but it’s very
hard, and it takes a lot of effort to convince C-level to get behind the case
and make resources available. Otherwise, I think there’s no recipe that is valid
for everybody—it depends on the type of company and its strengths and
weaknesses. There’s no rule that says you should always start with the product
or with corporate sustainability. But it must be connected to business success.
A general rule could be, first develop the vision, then understand, analyze and
measure and after that you can have a goal for where you want to end up, along
with different targets along the way to getting there.



HOW TO BUILD YOUR SUSTAINABLE BUSINESS STRATEGY

Is there a universal topic that every organization should focus on? For example,
recently I read an article that said, “We need all our energy, resources and
focus on climate change. Talk about nothing else, to your board, investors,
political connections and customers. Measure your success in $ and tons CO2. If
we beat climate change, we will automatically make many of the other problems
better.” Do you agree?

I don’t think this is the only universal topic. For larger corporations some of
the social aspects of sustainability are essential and need to be addressed as
well. In environmental terms, I think greenhouse gas reporting and management is
a good start. At the product and corporate level as well, it’s a pretty good
indicator, and it is relatively easy to understand. And this is important. It
can get the company to think about their place in the value chain and how to
engage with their suppliers, how to improve themselves and the supply chain and
how to better manage risks.

 

Is there a framework or initiative that could support any company in the
development of a sustainability strategy? Guidelines that everybody can benefit
from.

If a company is looking to orient itself and trying to determine the potential
aspects that it may not be familiar with, then, in my view, GRI [Global
Reporting Initiative] is a great guideline for large companies and SMEs as well.
It has different levels of reporting and sustainability management, so companies
don’t need to start at a very ambitious level. It gives companies good insight
into what may be relevant and what is seen as relevant by other companies and
how those companies approach such topics. The other framework I would recommend
for larger companies is the CDP [Carbon Disclosure Project], which originally
focused on carbon management and reporting and over time has grown to address
other areas as well, such as water and forest programs. Their rating systems, in
terms of quality of reporting and management, give a good indication to
corporations of answers to questions like, “Where do I stand? What can I do?
What are the potentials?”

 

You said that ideally sustainability strategy should be developed top-down. But
what if a CEO has a vision, but doesn’t have the expertise? Yet he or she takes
the lead of a company that without a sustainability strategy?

I would try to find an external senior sustainability expert to start a dialog
with. This dialog is essential. The CEO understands how the company operates.
The experienced sustainability professional knows what is possible, what can be
done from a sustainability point of view, and can tell whether there is any
possibility of doing it. That’s why I enjoy working at Sphera, and I love what I
do—to bring quantification and substance into sustainability, thereby enabling
companies to succeed sustainably. It’s important to make decisions and develop a
strategy on the basis of accurate evaluation. The “make us green” motto doesn’t
work. Without substance, “sustainability” is just a lie and at that point it’s
better for the company to do and say nothing related to sustainability. The only
thing that such greenwashing brings is it increases awareness about
sustainability as a general topic, but if a company has no substance behind its
claims, eventually the truth will come out in the open, and then they’ll have a
branding crisis on their hands.

Without substance, “sustainability” is just a lie and at that point it’s better
for the company to do and say nothing related to sustainability.


Let’s look at this from a different angle. How can sustainability professionals
drive the sustainability strategy bottom-up? How can they get unreceptive and
uninterested management involved?

They must build a business case around a certain sustainability topic. That’s
the only way to do it, and that’s why I was so adamant in saying at the
beginning that sustainability is not just an add-on. It needs to be—or become—an
essential part of the business.

Unfortunately, improved environmental performance is just not convincing enough.
Getting the buy-in from sales and marketing people can be decisive. If they
understand the business potential of sustainability, they can successfully
support sustainability, often much better than R&D professionals who are more
driven only by the wish to do better.

 

Could you share with us a success story that is a good example of a
sustainability strategy path for a company that you supported?

Of course. There are many case studies, but I would like to mention the example
of Giesecke and Devrient, a corporation we have been working with for more than
10 years. They started wanting to do something in the field of sustainability,
and they asked us how to go about it. We began with a few meetings, involving
people from different business units. They shared their ideas and their
challenges convincing top management about the business benefits of taking
action. So, we developed carbon reporting with them, first Scope 1 and 2 and
later Scope 3 as well, and a strategy around it.

The next step was that they committed to reporting to the CDP. We created a
benchmarking framework for their industry sector to understand what the
competition was doing. Using these elements as a basis, we developed a more
involved sustainability strategy and set related targets. Having a clearer
understanding of how these sustainability actions and targets could be utilized
from a commercial perspective, we jointly took the learnings to their board.

One of the keys to winning them over was to show statistics. For example, we
showed how the improved financial performance of CDP reporters compared to their
non-reporting peers. The company moved forward along its sustainability path. It
developed environmental footprints for a key product group, which then helped
them to win bids. So by gradually scaling up, their sustainability efforts
developed into a wider sustainability strategy and implementation plan that has
become an integral part of their business.

 

Anything else you’d like to add?

I’d just add that it’s great to see a fairly steep increase in the numbers of
companies that are getting serious about sustainability. And it’s great to be
able to work with a few of those and contribute to two things at the same time:
their long-term success and a more sustainable planet.

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