Taking back tomorrow
As the Rio+20 summit approaches, big business re-assesses its role in a resource-constrained future.
With one month to go until the Rio+20 Summit on Sustainable Development, there's a growing focus on how corporate sustainability has progressed in the 20 years since the first conference.
One of the summit's major events will be a Corporate Sustainability Forum, where business leaders will discuss the private sector's role in creating the 'Future We Want', as the world heads for unprecedented resource challenges. Organised by the UN Global Compact (which has seen over 6 000 companies commit to sustainable business practices), the forum's objective is to provide a showcase for innovation and collaboration, and improve the quality and scale of initiatives.
At the first summit in 1992, 178 countries adopted the Agenda 21 plan of action, to restructure their approach to economic growth, social equity and environmental protection. Given the dramatic changes in technology, the global economy, society and politics in the past two decades, the world is a very different place to 1992 (a time at which the first phone-to-phone SMS had yet to be sent). But for all our progress, many of the original challenges, if anything, have become even more daunting.
Andy Le May, MD of sustainability consultancy icologie, says there are signs of progress, but even those leading the way aren't fully embracing the change.
“I think there is a new breed of CEO coming in who are asking the right questions. We have seen organisations starting to engage to find out what sustainability means and what it will cost them, but still they delay on pressing the button. Most are doing what they have to so they don't get fined.”
Most are doing what they have to so they don't get fined.Andy Le May, icologie
It's a delay businesses can ill afford, given the enormous challenges we'll face in coming years. The World Wildlife Fund's Living Planet Report 2012 warns that 20 years post the first Rio summit, the planet's environment is getting worse, not better. Surging populations and growing demand for energy, food and water means humanity is fast outstripping what the earth can supply. The report notes that demand for natural resources has doubled since 1996, with humankind using the equivalent of 1.5 planets to support its activities. By 2030, it's estimated we'll need two earths to meet our annual demands.
“Despite some progress, business has continued 'as usual' and the human impact on the planet has continued to grow, destroying nature and the natural resources upon which we ultimately depend for our survival,” says the report.
Opportunity in crisis
Yet, major opportunities exist to use these challenges to drive a new way of living and working, with the so-called green economy becoming a growing priority for both governments and business leaders.
Le May says the shift is both necessary and compelling. “Sustainability is the next evolution in our society and will change everything. This should not be seen as daunting but rather a great opportunity to reach out to new and existing customers by strengthening one's brand and offering new products.”
A recent study, conducted by MIT Sloan Management Review and Boston Consulting Group, shows that 30% of surveyed companies have developed a business case or value proposition for addressing sustainability.
The survey of more than 2 800 corporate leaders in major industries and regions found that two-thirds of companies see sustainability as necessary to being competitive in today's marketplace.
In addition, nearly a third of companies say sustainability is contributing to their profits, while more than two-thirds have placed sustainability on their management agenda.
“Although many companies are still struggling to define sustainability in a way that is relevant to their business, the attention and investment we see indicate the here-to-stay nature of sustainability for organisations everywhere,” said David Kiron, executive editor at MIT Sloan Management Review and a co-author of the report.
Hugh Tyrrell, director of consultancy GreenEdge, says companies are beginning to shift their approach from compliance to innovation. “Sustainability used to be a 'good' thing to do. Now it's becoming the pathway to a green economic revolution.”
He adds that there's been a deepening in sustainability thinking, with more organisations incorporating it into the corporate culture. “Sustainability is becoming 'the way we do things around here'. This cuts costs, increases innovation, and builds trust among staff, suppliers and customers. And trust has huge added value.”
The MIT/BCG study confirms this point, noting that 'harvesters' - the 31% of companies that say sustainability is contributing to their profits - are not merely implementing individual initiatives such as lowering carbon emissions or investing in clean technologies; they are changing their operating frameworks and strategies.
"There's a learning curve to incorporating sustainability into strategy," states Knut Haanaes, a BCG partner and report co-author.
“Our research suggests a pattern: First, a company focuses on reducing costs, boosting efficiency, and enhancing its corporate reputation. Then, after a while, it takes a broader view, becoming innovative with products and processes, and gaining access to new markets."
Ericsson, for example, recently highlighted this approach in its annual sustainability and corporate responsibility report, which stresses the potential of ICT to spur socio-economic development and a low-carbon economy.
The company views the expansion of cities as a key opportunity for new products and services, as increasing urbanisation drives demand for connectivity. It adds that ICT will play a key role in the transition to a low-carbon economy, as it facilitates education, financial services, health, safety and security, and livelihoods.
“As cities evolve, they'll need digital infrastructure and services like smart grids, e-education, e-health, e-governance, and intelligent transportation systems.”
Mwambu Wanendeya, Ericsson VP of sustainability communications, says there's a growing recognition by businesses and consumers alike that the planet's resources are limited and have to be used carefully.
“In today's environment, you need an agenda and must be able to show what you're doing. Increasingly, customers we supply are asking questions about the sustainability of the company's whole ecosystem.”
Tyrrell adds that business has to run with the sustainability banner, as the delay in getting global consensus on policy and regulatory change is undermining the urgency of action. “We don't have a lot of time left. Meanwhile, the pace of investment in clean and renewable technologies is on a very steep and fast upward curve.”
From the inside out
Technology companies, which have particularly promising opportunities for leveraging their solutions, seem to be making great progress in some areas, and failing dismally in others.
Research firm Eiris, for example, released a report last month ranking the sustainability performance of the world's 50 largest companies, expressed on an A to E scale. While pharmaceutical giants including Roche and GlaxoSmithKline come out tops, tech heavyweights Apple and Google ranked only one grade above the E score of energy companies like Exxon. Intel, Siemens, Telefonica, and Vodafone all managed a B.
The report added that while it was clear companies are acknowledging the importance of sustainability, a significant number are demonstrating limited progress. Apple and Google's poor results were mainly due to their failure to address human rights and supply chain labour issues.
Part of the problem, says Le May, is that sustainability teams often have great difficulty in getting information from the organisation. “This is because they have not related what sustainability means to the staff's lives. They just see it as more work rather than securing the future for their families.”
He explains that making employees part of the process results in much greater support, and encourages them to initiate action.
“When you see the staff driving the change that is when you see the real benefits of sustainability - creativity for change leading to cost savings, marketing, staff morale, better retention rates and so on. Nobody knows the business better than the staff - they just need the reasons why.”
While some companies may be lagging in performance stakes, others are pushing ahead with ambitious goals. Microsoft nailed its colours to the mast earlier this month by announcing its commitment to become carbon neutral, beginning 1 July 2012, across all its direct operations.
Sustainability used to be a 'good' thing to do. Now it's becoming the pathway to a green economic revolution.Hugh Tyrrell
These include its data centres, software development labs, offices, and employee air travel. The IT giant says this accountability model will make every business unit responsible for the carbon it generates - creating incentives for greater efficiency and an overall reduction of its environmental impact.
In a paper outlining its strategy, Microsoft says looking to technology to help reduce its carbon emissions and track progress reflects its broader policy on climate change: “that technology can play an important role in the transition to a sustainable, low-carbon economy”.
This transition to a cleaner economy is proving particularly promising for local companies, notes Tyrrell: “In SA, government is throwing money at the green economy because it offers jobs and less dependence on coal, and can help meet its own stringent carbon reduction targets.”
Stricter regulations around sustainability reporting, such as King III and the Global Reporting Institute's latest guidelines (G4), are also contributing. An Eiris report on corporate responses to climate change in SA found local companies are showing progress through improved strategies, governance, and disclosure. The study focused on the 'Top 40' largest listed companies, reporting that 95% demonstrate at least some form of response to climate change.
However, only 30% of the companies analysed have demonstrated reductions in their operational greenhouse gas emissions over the past two years, and while 60% have set short-term emissions targets, only 23% have set long-term goals.
Whether the summit itself will have any measurable impact on the way sustainability is approached in business is debateable. But what it may do is foster a global conversation that is gaining far more voices from the corporate world, and one Tyrrell believes needs to remain positive.
“There's been a swing to the understanding that the world cannot change by thinking doom and gloom. Instead, we must all start to envision a greener, sustainable future which offers reasonable prosperity for all and a healthy ecosystem to support us.”