This two-part post is the result of more than a dozen in-depth conversations with leading sustainability practitioners, most of them within Fortune 500 companies. We wanted to understand the sustainability trends these practitioners see to help us convey where, why and how leading companies are engaging sustainability to achieve their business goals.
This piece will explain the trends themselves. Part two will focus on how leaders are accomplishing their work and the first steps others can take to stay competitive.
In the last four months of conversations, we saw consistent sustainability themes emerge as companies move through the cycles of their business: from procurement and resource use to measuring and marketing. Leading companies are:
- Acknowledging their supply chains
- Examining their relationship to nature’s systems instead of single elements
- Improving their data quality
- Telling customers simple, memorable stories with that data
1. It’s All About Supply Chain
Companies experience a predictable evolution in their sustainability journey: They focus initially on understanding their own “four walls” – defined as what they own and operate. Next, they evaluate the inputs they use to power the business elements they own and operate. Only then do companies begin to consider their subcontracted services, such as manufacturing and logistics – also known as their supply chain.
Most consumer brands based in the U.S. and Europe do not own their manufacturing or logistics, yet their supply chain accounts for up to 75% of their greenhouse gas emissions. Leading companies understand they will be held accountable for these subcontracts and services due to their influence over the design and development of their products.
Over the last two years, two particular events highlighted the need for organizations to understand and report on their supply chain impacts: the Walmart sustainability index and the Greenhouse Gas Scope 3 protocol.
In 2009, Walmart created much of the early supply chain momentum with the launch of its sustainability index. Walmart’s tier-one suppliers were required to report 10 metrics from their contract manufacturing. The metrics focused on four areas: energy (and related CO2 emissions), water, waste water and solid waste. Effective July 2011, Walmart suppliers are required to complete the Carbon Disclosure Project (CDP) investor questionnaire. Other global brands, including Proctor & Gamble and Staples, have launched similar programs around supplier sustainability reporting.
The Greenhouse Gas (GHG) Scope 3 protocol, released in September 2011, is the generally accepted global standard for greenhouse gas reporting. Most companies understand the GHG footprint concept, but may be overwhelmed when attempting to calculate their GHG footprint for Scope 3 emissions.
Leading companies are not only reporting Scope 3 emissions (UPS used the new Scope 3 protocol when reporting their emissions in July 2011); they are also assessing their sourcing/procurement strategies and where they are sourcing their products. Creating redundancy and resiliency within the supply chain is vital to a company’s future competitiveness.
2. From “Carbon Counting” to “Climate Adaptability”
Companies are moving past counting and measuring individual sustainability elements, such as carbon and water, in isolation. Companies leading in sustainability look at the larger systems, such as biodiversity, climate adaptability and water resources, and assess potential impacts from their operations on the systems that support them.
Companies are looking at embedded carbon within their products and thinking broadly about climate beyond carbon counting alone. The topic of sustainability has expanded to include larger issues like biodiversity. Many are placing a focus on water. While some view water as “the new carbon,” water is clearly an issue with very local concerns and impacts that are dependent upon the water inventory of that particular region.
3. From Spreadsheets to Smart Systems
Companies are always challenged to gather and make sense of data, but sustainability data is especially difficult. Early sustainability data and reporting is often a very manual process, relying on hunting down data points throughout the organization and sticking them in spreadsheets. This process is not sustainable, forcing companies to consider more automated data gathering systems, whether a stand-alone sustainability data program or a sustainability module within an ERP (Enterprise Resource Planning) system.
Leading companies are looking at how to integrate smart decision-making, find efficiencies and model outcomes within their operations using sustainability as a lens, and then at reporting their performance against sustainability metrics.
Those who have already captured their low-hanging energy savings are purchasing companies with smart energy systems that enable energy intelligence to provide the right information for them to make smart investments with good business ROI. All companies have difficulty with data quality, but leaders are investing in improvement.
4. Communicating Sustainability to Customers
We see three trends in sustainability communication from industry leaders:
- From consumers to customers: Companies are finding benefits from communicating sustainability activity to their customers, even while they are unsure of the value consumers place on sustainability. Companies typically focus on one or two messages that educate and enable consumers to take action themselves, such as prompts to recycle their packaging or encouragement to use lower temperatures for clothes-washers to save energy and money.
- Don’t mention climate change: Most companies are afraid to talk about climate change in the U.S. As one thought leader pointed out, the United States is the only country in the world where climate change is a political issue. One company is launching a global marketing campaign about climate change through evocative images, but is avoiding mentioning climate change explicitly to sidestep the controversy.
- Sustainability around the water cooler: Sustainability conversation has moved from Corporate Social Responsibility broadcasts alone and is now influencing daily business conversations among many business units. Sustainability is now commonly part of the business language within procurement, on request for proposals and in operational discussions with international business units.
Stay tuned for my second post on these corporate sustainability trends for practitioners, when I’ll share how these trends play out in real corporate spaces. How are leaders doing what they are doing within their organizations, what challenges are they facing, and where should other companies start to stay competitive?