13 February 2012 | Linton Nightingale
Climate Change, Finance/insurance

 

Throughout the great recession of 2007 – 2010, there was a dislocation of trust between companies and the global communities they serve. Emerging from the recession, any company wanting to repair such dislocation has used sustainability as the model to achieve best results.

Whether it is customers companies want to engage, or investors through the reduction of risk, or employees to improve team cohesion, drive innovation and attract best talent from the ascendant eco-boomers, sustainability connects all the interdependent functional areas in a more holistic manner, driving down costs and delivering on-going value through the introduction of a continuous cycle of improvement.

Companies showing a lack of understanding as to the business model and value opportunities of sustainability run the high risk of stunted growth and make the course of any economic up-turn more treacherous.

One thing for sure – global competition is rising for goods and services and the need for competitive advantage has never been greater. Leveraging sustainability has shown its way to create a winning advantage as companies and individuals are curbing consumption out of necessity.

Additionally, as highly qualified eco-boomers come to the work market from university, they are choosing whom to work for with more consideration as to the values of the employer, making sustainability a major factor in decision-making. Business is going to have to adapt to the changing requirements and needs of the workforce and its ability to attract best talent as people revise their goals, priorities and expectations as they look to make efficiencies in how and where to live and work. For example, commuting has become less attractive with the associated impacts of time, cost and emissions being factored.

And whilst sustainability embedded into the DNA of an organization gains the economic benefits of asset and resource optimization to stave off cramped profits, embracing sustainability as a model buttresses trust as well as the balance sheet, enabling a company’s ability to create competitive advantage and nurse income streams with better-controlled costs.

Any company not factoring in the changes happening now and which are set to increase over the next ten years will hobble their chances for improvement in the up turn as more energetic incomers and adapters align themselves to the rising advantages and opportunities. Essentially, laggards towards sustainability will see their value vaporize.

As we watched the recession draw blood, companies found they had issues with over capacity, forcing them to make cuts. The point here is to learn how to operate with less and enhance profitability.

For example, for companies who rent their space there is a clear growth in expectation of building function and efficiency, as green takes hold. Energy-saving sustainability features are beginning to be expected as sustainability models drive optimization through all functions and assets to help improve profitability and productivity away from the previous recession gripping nadirs. These values pervade also with property purchasing, as the leveraging of sustainability opportunities towards future value gains in an ameliorating market place, accommodate accretive buyers, working to sustainable procurement protocols.

The natural evolution of sustainability will separate the winners and losers in an emerging bifurcated market place.

With that in mind, it is disappointing that SMEs still see sustainability as a non-essential and, as a result, show themselves to be four times less likely to engage in sustainable behaviour than large companies – who are typically their customers. This flies in the face of mounting pressure for sustainable supply chains. This trend is evidenced in the 2011 Carbon Disclosure Project Supply Chain report, where the numbers of companies who are willing to de-select suppliers for not having sustainable credentials has doubled over the 2010 report.

SMEs cite resource constraints and cost, yet the biggest cost is to do nothing. As regulation mandates demand greater disclosures of the business world, investors and customers demand more transparency as they measure the risks across value chains, so pressure continues to rise. All the time companies leave it for tomorrow, they miss the value opportunities: increasing their risks by failing to inoculate themselves against market exclusion.

Additionally, relatively short horizons and profit imperatives deter SMEs and lagging corporate leaders from engaging in sustainability strategy and developing green enhancements to their business. This dangerous practice is blinding them to the risk being built up towards business exclusion, allowing their sustainable competitors to go through the door of new business first.

Others believe they can develop a green mirage by ticking a few boxes and communicating efforts in the vaguest terms without proof of delivery, execution and the continuous cycle of improvement. As buyers become more sophisticated in identifying “window dressing,” this practice of half-hearted commitment will be a danger to reputation, eroding trust and competitive advantage.

In conclusion, sustainability enhances the adage “less is more.” As companies in the vanguard of sustainability become ultra-cost conscious, building efficiencies across all interdependent functional areas has become a habit – part of the DNA of operational daily life. This is not just the result of the recession, but part of the major movement of Darwinian law, reflecting a new way to do business, with a clear focus on expense levels. Sustainability is pervasive, making the companies more efficient, adaptable and focused on supplying against customer needs whilst lowering impact on customer footprints – giving the supplier and the customer competitive advantage.

 

Christopher Gleadle is a senior partner at the CMG Consultancy.

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