Creating sustainable business strategies

This week I attended an interesting conference on sustainability in Kensington Roof Gardens in London, organized by IHS, who - perhaps bizarrely - also provide key exploration information for the oil and gas industry. The event was kicked off with a presentation by David Metcalfe from green analysts Verdantix, with whom we are familiar from last year's Orange Business Live. I'll be reporting on a couple of other presentations in future blog entries, including a very interesting one from Nigel Topping from the Carbon Disclosure Project.

One of the issues that Metcalf touched upon in his presentation was the increasing dominance of the word 'sustainability' in the green lexicon, with chief sustainability officers (CSO) popping up all over the place in corporations. They seen to have usurped part of the role of corporate social responsibility (CSR), which Metcalfe says 'lacked perspective'.

The CSO's emergence comes despite the negative press around climate change issues in recent months and the failure of the Copenhagen Summit to agree to anything substantive. Sustainability is still on the agenda at corporations, says Metcalf, because it encompasses more than climate change and covers issues such as resource use that directly affect a company's bottom line. External factors such as the BP Horizon disaster have also brought it home to companies that they need to manage that risk and make sure that they are compliant with all environmental regulations

However, while CSOs are seen as a senior role - typically reporting into the CEO - in some companies they may only have a small team to carry out their rather wide brief. Metcalfe says that it isn't unusual for them to just have an intern, for example. At an organizational level, Metcalf highlights Orange and the France Telecom Group as a leader, with some 20 people involved in sustainability strategy and projects including CSR and innovation, linking directly through to the business units for implementation.

So what exactly does a sustainable business strategy look like, and why are companies adopting it? Well, Metcalfe says that an Ernst & Young survey on the topic found that 80% of companies were looking to get competitive advantage from sustainability. It wasn't primarily about compliance because most companies wanted to go beyond that. The three main drivers sustainability were in fact, to reduce costs, increase revenues and minimize risks. So pretty much what the core business targets of most companies are in the first place, making it possible to embed sustainable strategies at the heart of the business.

While the there may be a concern that some companies are just paying lip service to sustainability, Metcalf says that there are many others who have put substantial resources into their sustainability strategies. They include steel maker Arcelor Mittal that is innovating around low carbon content of steel, FedEx that is actively reducing its fuel consumption and is working with electric and hybrid vehicles, and Renault that is working extensively in electric vehicles. In fact, Metcalfe says that after utilities, the automotive industry is most forward in changing how it operates. All of the above initiatives are being backed up by new executive leaders, billion dollar budgets, company-wide programs for employees and strategic operational changes.

Innovation is playing a major role in sustainability strategies, both in the long term like carbon capture or nuclear energy and technology developed now, such as renewable energy. The business case for renewable energy, for example, becomes much easier to be made once the market prices of resources, such as oil or gas meet a certain point, so it's vital for companies to innovate in this area.

Connected to this are solutions to measure consumption accurately so that companies can make changes on the fly. Energy cost savings is the primary driver here, because companies want to know how much they are spending and carry out analysis on exceptions - such as 'why is this building consuming so much energy?' This is also driving technology innovation such as smart metering.

In conclusion, Metcalf says that sustainability is here to stay, but for it to be successful strategy for businesses they will need to embed sustainable thinking in all aspects of the business.