There's never been a more critical - or challenging - time for business to invest in sustainability.
In the two months following the Deepwater Horizon spill, in the Gulf of Mexico, in 2010, BP shares dropped 40% and the company lost more than $100 billion in market value. Being a global oil company in a world hungry for energy, however, it made the money back rather quickly and was off prospecting again in months - in 2011, the company signed 55 exploration licences in nine countries, more than any year in its history. The concrete and lasting damage to the Gulf, its marine ecosystems and the people and industries along its coastline will take much longer to fix of course, as will BP's reputation.
It's a key lesson for the many companies rushing headlong into sustainability strategies, without considering what they are committing to. While BP has tried its best to scrub away the grime of public mistrust, like the oil still swirling in the ocean, the taint muddying BP's image is not likely to fade soon. Most organisations will never experience this kind of disaster, but it is a compelling message to those getting a little giddy with the green brush.
With all the hype around greater social and environmental responsibility, not to mention regulatory obligations, companies everywhere have begun rolling out sustainability strategies. While becoming more aware of environmental impacts is critical for business these days, it is not something to be ventured into lightly. Consumers have shown time and again that they will test corporates' sincerity and legitimacy on this front - usually on a very public platform. So once making a certain commitment, expect to be held to it, and expect to have every customer supporting this decision to be watching for signs of a misstep.
All this puts companies in a precarious position, really. On one hand, if you're a major corporation, you can't afford not to have a sustainability strategy in place. Not only because it will make you look like a laggard among competitors who are charging ahead with their own “green journeys”, but because it's becoming increasingly risky to ignore this area. Last year saw record-breaking economic and insured losses due to natural disasters, with extreme weather events accounting for 90% of these disasters. The cost of insured losses came in at over $55 billion. So shareholders are starting to see it as a serious risk consideration. Add to this the numerous market and consumer-driven trends pushing the green agenda, and companies are feeling increasing pressure to get on board.
But on the other hand, the reality is that entering the sustainability game is tough. It requires a thoroughness and transparency, which can be extremely demanding. It requires honesty and often organisational culture change. And it's becoming expected, so companies can't even count on the customary PR boost and pat on the back. They will probably attract the support of a few new customers; but they will almost definitely attract the scrutiny of all their existing ones.
The moment a business links its strategy to sustainability, it puts itself in a position of far greater accountability. People expect more and will be far less lenient if the company gets it wrong. This may seem obvious, but recent examples make it clear corporates don't always realise the extent of what they're committing to, and how consumers come to view them. The Gulf of Mexico spill would have been devastating whichever company was involved. But the fact that it was BP - which had spent the previous decade crafting a “green” image with its “Beyond Petroleum” tagline and promises of cleaner fuel technologies - made the backlash even worse. It's one thing to be an oil company that causes the biggest corporate environmental catastrophe in recent history; it's another to be an oil company that has built its reputation around being a responsible and environmentally-conscious corporate citizen.
They will probably attract the support of a few new customers; but they will almost definitely attract the scrutiny of all their existing ones.Lezette Engelbrecht
The thing about filth is it sticks. Once the idea that you've been involved in something shady is out there, it is almost impossible to undo. A speaker at last week's Green Business Seminar, in Sandton, revealed that when asking students which companies had poor social/environmental practices, Nike routinely got a mention. As he himself asserts, Nike is now one of the leaders in corporate sustainability and social development. But all most people remember is that back in the 90s, Nike had something to do with child labour. That sweat shop connotation will forever taint the brand, no matter how hard Nike tries to scrub its hands clean. Something about its reputation will always remain shadowy, as will BP's even decades after the Deepwater Horizon spill.
These examples illustrate what is at stake when adopting a sustainability strategy. It would be far easier if the message to business was: do this and customers will love you. Maybe some will, but what it will also mean - and what isn't often communicated - is that consumers will watch you like a hawk, and call you out when you don't deliver. This while companies that have made absolutely no effort to clean up their act carry on merrily, with little or no flak coming their way. It's not fair, but it's a reality. Eventually those companies will be forced to get onboard to comply with legislation, or simply fade away as competition takes over. But in the meantime, the organisations taking a leading role have to deal with the fact that doing the right thing invites public scrutiny.
Take the classic case of Woolworths' free-range egg debacle. As a company that emphasises ethical behaviour, this is something customers have come to expect. So when it emerged that Woolies' claim to only stock free-range eggs didn't extend to other products (like baked goods or meals that contained egg in other forms), it wasn't long before consumers unleashed a wave of criticism. No one mentioned all the things Woolworths was doing right, or that fact that none of the other retailers even bothered to source exclusively free-range eggs - all they cared about was that Woolworths had made a promise - a promise to do better - and then failed to carry that through.
Furthermore, organisations that have taken up the green mantle can expect fewer second chances. If they have messed up once, they're in store for even harsher criticism if it happens again. Memories may not be reliable, but easy access to the Internet means even the smallest gaffe isn't easily forgotten, and can be called up in a second.
This isn't meant to dissuade corporations from adopting wise and responsible business practices. Indeed, environmental and resource-issues are becoming fundamentally important for all companies especially in terms of risk management. But if you're going to adopt sustainability as a core value, do it properly, and if you mess up, don't expect any mercy because you had good intentions.
Consumers, especially with more and varied methods of communication, are becoming all the more empowered about the brands they use, and more equipped to investigate their claims. There are also far more public channels on which they can make their grievances known.
Fortunately, there are also plenty of examples of companies conducting their sustainability goals with success. Multinationals like Walmart and IBM show it can be done right - that big business does not have to be synonymous with evil business, and that it's possible to combine planet, people and profit in a mutually beneficial way. It's possible and it's very necessary as we head into a resource-constrained future - but just don't expect it to be a quick and easy ride.