Tyler Elm2013-05-18T19:39:09-04:00Tyler Elmhttp://www.huffingtonpost.ca/author/index.php?author=tyler-elmCopyright 2008, HuffingtonPost.com, Inc.HuffingtonPost Blogger Feed for Tyler ElmGood old fashioned elbow grease.Making Sustainability an Office Prioritytag:www.huffingtonpost.com,2013:/theblog//3.27678112013-03-07T17:13:10-05:002013-05-07T05:12:01-04:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/
I've considered how this experience and my time as a professional biologist provided me with insights during my business education and management consulting work with PricewaterhouseCoopers and IBM Consulting, and more than a decade working at the other end of the value chain as an executive with national and international retailers to develop and implement their business sustainability strategies. And during this time, one insight has emerged as a keystone in the foundation of my efforts to integrate sustainability issues and performance into business:
Adding environmental context and a systems approach to a business's value chain helps managers identify the opportunities and means to create economic value from improved environmental outcomes.
In retrospect, one might consider this insight to be rather obvious; after all, adding environmental context to one's business activities is a rather evident place to start. However, based on the fact that I've been able to make my living for 20 years on the application of this insight to business, it is apparent that it is anything but obvious or easy to do.
Back to the Future
I've revisited my roots recently while helping some retailers and manufacturers incorporate the environmental context of their products and processes that rely on wood fibre. Whether they are widgets or marketing papers, I find myself back at the intersection of applied ecology and the forest and paper supply chain. And while many things have indeed evolved over the last two decades, such as the diversity of values considered in forest management planning and the amount of environmental information that now travels through the value chain from raw material to finished product, what alarms me most is how difficult it continues to be for so many professional managers and executives at the other end of the value chain to address these issues in a manner that is both good for their business and the environment.
In my work as a business management consultant, I find that addressing "environmental issues" is most often not a person's "day job." At best, it is secondary to their core role and business function. And while this might not appear to be the ideal place from which to start, it is a common situation and not all that far off from the end goal of incorporating sustainability into day-to-day business decisions -- making sustainability just part of how one thinks about managing transportation, building infrastructure, product development and sourcing.
When starting out, many managers don't know where to turn for advice or are confounded by the information that is sometimes contradictory. Certainly, there is a lot of information out there, and some of it is misinformation -- from suppliers, to consultants, to so-called "environmental" organizations.
Creating Business Value from Environmental Context
What follows is a list of insights that I will explore over the next few months in subsequent blogs to help managers incorporate sustainability into their business. For illustrative purposes, I'm going to address the challenge of creating a responsible, "green" procurement policy. And while these insights are applicable to the procurement of many things, I'm going to use examples relevant to the forest and paper products value chain because it enables me to draw upon my collective experience, and because it is ripe for illustrating the potential opportunities and pit-falls with trying to do the right thing for your business and the environment.
Business is the engine for environmental change -- In short, it's "the economy, stupid" -- environmental issues are business issues and that is why we have witnessed tremendous change in how businesses and their stakeholders -- investors, auditors, boards, conservation science organizations, academics, activists and market campaigners -- engage on this subject and one another.
Innovation is a social Process -- Do not develop solutions in a vacuum. Rarely, is innovation the product of someone working in isolation, generating a "eureka" moment. Best practices are those that assist in breaking down the barriers among internal functions of a company while also incorporating the broader context, perspectives and values from organizations other than your own.
Develop a robust understanding of your economic and social stakeholders -- A stakeholder is any entity that can either add or erode business value. An economic stakeholder is one with whom your business has a direct economic relationship, such as a supplier, employee, or customer. A social stakeholder is one that is not directly involved in you value chain, but can nonetheless either add or erode business value. Even environmental organizations have a business and revenue model, and every environmental issue exists within political and economic context. For example, activist and campaign organizations are not conservation science organizations; they may not play by the rules, operate within a legal or ethical framework or even a desire to reach a solution if it is not in their best interest, regardless of the environmental outcome.
Develop an understanding of your supplier's business -- You are not just buying a product or raw material; you're also buying the environmental and social context of every business activity of every link in the supply chain and the brand and reputational risk or benefits associated with it. Having supply chain transparency with your suppliers -- knowing from where key raw materials are sourced and ensuring that they are sourced legally and sustainably -- reduces risk and opens numerous gateways to value creation.
Develop a procurement policy -- The objective of procurement policies is to influence and guide decisions, actions, and other matters among stakeholders that are considered wise, sensible and practicable. More than anything else, a policy needs to be a statement of principles that provides guidance to the business and its stakeholders. It must be actionable and promote measurable business objectives and environmental benefits.
Develop quantified measures of business and environmental performance -- A "green" procurement policy must have business and environmental objectives to be sustainable and you need to be able to measure the performance of the desired business and environmental outcomes to actually manage them. Ideally, what you measure is a function of your business sustainability strategy and its objectives. Your metrics should help management establish a position for the business within the industry where they can best defend the brand from competitive forces, or influence them in its favour by creating economic benefits from improved environmental outcomes.
Communicate your procurement policy and the results from implementing it -- Measuring and communicating one's progress to key stakeholders is essential to achieving one's business goals. A business policy, environmental or otherwise, is a waste of words unless it is implemented with objectives, timelines and a plan for putting it into action. Anything less and it could argued that one is merely proffering words without business rationale or accountability.
I look forward to exploring these subjects with you in the coming weeks and months, and I welcome your comments and feedback.]]>How Much Can Business Influence the Environment?tag:www.huffingtonpost.com,2012:/theblog//3.21941542012-11-26T17:25:41-05:002013-01-26T05:12:01-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/This is the eleventh blog and final blog for 2012 in a weekly series on how sustainability can save business. It appeared on Tuesdays, and will commence again in 2013.
Our first blog, How Sustainability Can Save Business, reframes the common purpose of traditional Corporate Social Responsibility (CSR) practitioners -- that of "saving the environment." Our premise: Given the social and economic frameworks and institutions of our society, more can be accomplished (and faster) by viewing sustainability as an economic opportunity relevant to business, compared to viewing it as an environmental initiative in isolation of business. Therefore the goal of "saving the environment" may be more appropriately framed as "saving business."
Our perspective is pragmatic; that the worthy purpose of "saving the environment" is destined to be ineffectual, and at best immaterial, if environmental initiatives are pursued in isolation of the economic engines and structures of our society -- that is, capitalism, business, government and the active participation of other organizations and individuals within this framework. It is within this framework that companies are applying a central guiding principle to their business sustainability strategies -- "derive economic benefits from improved environmental and social outcomes." Why? Because it delivers results.
We do not argue the desired outcome of healthy people and a healthy planet, and an economic framework that includes a broader social purpose. Indeed, we align on these values. After all, Jim was leader of the Green Party of Canada and Tyler used to earn his living as a conservation biologist in the forests of British Columbia, Alaska and the Northwest Territories.
It's just that we don't really think we have time to wait for traditional approaches to environmentalism to be successful. Similarly, we do not argue the value of traditional environmentalism and the vital role it continues to play within our society; rather, we simply note that traditional approaches to environmental objectives have failed to deliver results at the scale that's required and in the time frame that's required. In short, traditional environmental methods have not been successful enough, fast enough.
During the interim, some businesses have demonstrated that they can implement and scale the environmental benefits far better traditional approaches to "saving the environment" while also delivering shareholder value. For example, Canadian Tire estimates that they have accumulated an annual benefit stream of approximately $25 million in cost avoidance since launching its Business Sustainability Strategy in 2008 and reduced its transportation and real estate greenhouse gas footprint by 9 per cent while actually growing -- increasing their tonne-km of product shipped by 22.5 per cent and the amount of real estate area by 9 per cent!
This applied eco-capitalism favours free market principles to achieve environmental objectives. Which is convenient, since business will find itself in an economic context in which sustainability issues will increasingly influence financial performance and global trade.
As such, our observation is this -- for profit seeking companies, sustainability is most successfully employed as a strategic framework for innovation, value creation, employee engagement and organizational improvement -- while generating environmental benefits. What's excites us most about this approach, is that it would appear that Canadian business also shares this view.
Companies are informed and engaged; some even track, manage and mitigate their GHG emissions with internal rates of return (IRRs) at multiples of the cost of capital. And some incorporate internal carbon pricing into management discussions and decision-making. Many have discovered that business sustainability issues are production issues, supply chain issues, marketing, sales and customer issues, and post-consumer use issues. In short, they are economic issues in addition to being environmental issues, and we say, engage them as such.
Most recently, Perrin Beatty, the president of the Canadian Chamber of Commerce, has echoed this opportunity in a policy paper on strategic partnerships among Canada and Mexico, noting that carbon pricing is an area that may be ripe for bilateral Canada-Mexico collaboration. It is interesting to note that Beatty served as a Member of Parliament for the Progressive Conservative Party of Canada for 20 years (1972-1993) and served as a Cabinet Minister.
Change is afoot. The environmental community knows it; the business community knows it. All we need is for Canada's government to know it -- to recognize the opportunity and collaborate with business and the rest of society to build the policy framework that will enable us to participate in the greatest entrepreneurial imperative of our time, the creation of economic benefits from social and environmental leadership.
Which brings us to the original question: Will business influence Canada's approach to environmental issues? We think they already are. And perhaps the question should be: How successful will business be in influencing Canada's approach to environmental issues?
We are going to take some time over the holidays. So all the best for the holidays and Happy New Year to all our readers. Thank you so much for your support, feedback, and getting the word out about this blog! So this will be our last blog for 2012. When we return in 2013, we'll continue to highlight how Canadian business is innovating from the inside out to begin to address many social and environmental issues.]]>Why CFOs Need to Care About Sustainability -- Nowtag:www.huffingtonpost.com,2012:/theblog//3.21590882012-11-20T11:23:10-05:002013-01-20T05:12:01-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/ This is the tenth blog in a weekly series on how sustainability can save business. It appears every Tuesday.
Chief Financial Officers (CFOs) and Chief Operating Officers (COOs) are increasingly accountable for sustainability. A study by Deloitte -- Sustainability: CFOs are coming to the table -- found their accountability for sustainability had jumped sharply during the last year. In 2012, 26 per cent of CFOs were responsible to the board for their firm's sustainability strategy, up from 17 per cent in 2011. Similarly, for COOs it was 10 per cent in 2012, up from 3 per cent in 2011. Further, 53 per cent of CFOs said their involvement had increased in the last year, with 61 per cent noting they expected it to increase over the next two years.
The increasing relevance of business sustainability to financial performance and shareholder value was also highlighted in a recent study by the Chartered Accountants of Canada (CAC) -- Sustainability: Environmental and Social Issues Briefing, which noted that "key environmental issues, stakeholder trust and relationships and an evolving environmental and social legal and regulatory landscape are interconnected and impact strategy for competitiveness, risk and resilience."
The report draws attention to the many environmental and social issues of relevance to directors in discharging their oversight responsibilities, including strategy, risk and risk oversight, financial performance, external reporting, and the reliability of reported information.
When Canadian Tire began reporting its environmental footprint and the results of its business sustainability strategy in its core financial documents in Q3 2010, Marco Marrone was the Corporation's CFO. (He is now COO of Canadian Tire Retail.) Rather than issue a separate corporate social responsibility report communicating its environmental footprint, annual productivity gains and reductions in GHG emissions and waste, Marrone oversaw the transfer of business sustainability measurement and accounting from the Business Sustainability function to the Finance and Accounting function, along with adding the associated due diligence of the Corporation's CEO-CFO Certification Process. This enabled the Corporation to build upon the measurement of business sustainability performance in its operating plans, and integrate sustainability into its public quarterly financial reporting. There are a number of reasons:
"When you report measures, you don't want people to question the measures," says Marrone. "So we embedded sustainability measures into our external reporting for two reasons: it is great to provide the external world with updates on our sustainability programs; but putting the numbers through the rigor of our certifications process for external reporting is extremely important. Those numbers have to go before our audit committee."
Embedding sustainability in a company's financial DNA enables executives to communicate business sustainability issues, strategy and results with confidence to the board, while also signaling to every manager that sustainability is measured on the profit and loss statements of the organization. And as the saying goes, what is measured is managed.
An Ernst & Young study -- Bottom-line benefits of sustainable business practices -- looked at some of the drivers for the CFO's involvement in sustainability. First was managing risks (56.9 per cent); second was cost reduction (52.3 per cent); then stakeholder expectations (47.4 per cent), revenue generation (38.3 per cent) and finally government regulation (33.5 per cent).
Managing Risk As Marrone notes: "We've looked at what would happen in a carbon-constrained economy. At a cost of $30 per tonne, in many cases, the impact to the cost of goods sold could be in the low single-digit percentages. However in some product categories, the cost of goods sold could be 30 per cent or 40 per cent higher. The modeling has allowed us to quantify carbon price-risk in these categories and identify how we can take energy and carbon out of the equation. That's how we are working to manage risk."
Meeting Stakeholder Expectations
The CAC report noted above also emphasizes that understanding how business sustainability issues affect stakeholders and their expectations can be an important source of insight for management, helping to identify opportunity and risk, with positive relationships contributing to trust, which is essential for competitiveness and resilience.
For example, a staggering 92 per cent of graduating MBAs want to work for a socially responsible company, according to a 2007 MonsterTRAK.com survey. This is becoming increasingly important to Canadian retailers as more and more foreign retailers enter Canada and compete for talent and market share.
Friedman's edict -- that "the business of business is business," and the creation of shareholder profit, its fundamental mandate -- is just as true now as it ever was. Yet what has changed is the context within which business operates, and thus how one interprets and applies this edict.
In 2022, Canadian Tire will celebrate its 100th year in business. The competitive forces acting upon it continue to change; they are fundamentally different today compared to 1922, and they will be different yet again in 2022. And so, executives and directors should not be surprised by shifts in business criteria, scope of considerations and sources of value, or changes in the business activities required to deliver a winning value proposition. After all, in the broadest sense, is not the management of such considerations at the root of a business's sustainability?
]]>Will Canada Take Action on Energy?tag:www.huffingtonpost.com,2012:/theblog//3.21204192012-11-13T12:34:39-05:002013-01-13T05:12:01-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/This is the ninth blog in a weekly series on how sustainability can save business. It appears every Tuesday.
The paper highlights how Canada can build a more competitive economy and a more sustainable society while ensuring adequate public finances to fund Canadian's way of life. It calls for the federal government, in partnership with the provinces and territories, to develop a national energy framework, specifically to "develop clean energy solutions and position Canada for leadership internationally."
And, contrary to current inaction, the CEOs urge Canada to take the lead in establishing a bilateral energy and climate accord with the United States to incorporate Canadian interests, and secure greater cross-border collaboration on energy, climate change policy, technology and trade.
The CCCE stresses that a bilateral approach does not mean that nothing can be done until there is clarity on US action; rather, it argues that we must begin to prioritize areas for coordination and ensure that our policy is adaptable to the eventual US system. One thing is certain; during the interim, we cannot expect the Americans to adequately represent Canadian interests in our absence.
Proffering five strategic recommendations, the CCCEs argue that a national approach to climate policy and carbon pricing should be implemented, beginning with a relatively low price and rising over time. Revenue from this should be available as incentives for companies and individuals to adopt cleaner technologies, products and services and shift consumption from high energy intensive goods to lower intensity.
A staggering 88 per cent of CEOs say that innovation is important to grow their top line and increase profitability according to a study by Leger Marketing in conjunction with The Globe and Mail. But only 33 per cent of CEOs are happy with the current results that they are achieving. Among other things, a price on carbon would stimulate innovation because it would give business a greater payback for increasing the efficiency of their operations.
Back to the CCCE paper: the best answer to rising energy costs and environmental impacts associated with energy use is energy efficiency. The most energy efficient countries will have a great competitive advantage in a world of expensive energy.
The paper points out that Canadian electricity production makes use of less than 50 per cent of the energy source used in generation! Coal, nuclear and gas-fired electricity generation plants use only one third of the energy -- the rest goes up the smoke stack as "waste" heat. But it doesn't have to be that way.
Denmark, the global leader in co-generation [also known as Combined Heat and Power (CHP) or district energy], uses that "waste" heat to heat buildings, hospitals and entire towns. CHP or co-gen increased the efficiency of Denmark's electricity production from Canada's 33 per cent to 90 per cent! Imagine tripling the efficiency of the Canadian electricity grid with one simple strategy!
Figure 13 in the CCCE paper articulates the benefits of a climate strategy that engages the end user of energy. On average 100 units of energy of natural gas generating electricity converts into only two units of lighting energy! Meaning that only 2 per cent of the energy generates productive end use -- and 98 per cent is lost due to inefficiency. Is this sustainable from a business perspective? No; and it highlights the value of energy and climate policy being broadly applied across the economy, including consumer end-use.
Jim loves to tell the story about the first oil crisis of 1973 -- when the price of oil quadrupled in just 18 months. Japan recognized how vulnerable its economy was to rises in oil prices -- as the country imports 100 per cent of its oil. So the Ministry of Industry and Trade (MITI) began the most aggressive energy efficiency program in the country and the world's history.
Japan's heavy industries -- pulp and paper, cement, petrochemical and steel -- were able to improve energy efficiency by up to 35 per cent in the following years.
Steel making is hugely energy intensive. By 1987 US Japanese Steel makers were using 41 per cent less energy than US steel makers. And the impact? Over the next 13 years 300,000 American steelmakers lost their jobs, with energy inefficiency being a significant factor. So was energy inefficiency an advantage or a ticking time bomb for America's economy?
In terms of energy efficiency, Canada has the second worst economy of the G8 countries: Germany, for instance, produces almost twice as much GDP for each unit of energy input. Only Russia is worse, but seriously, who wants to benchmark the Canadian economy against Russia's? The world average is 6.1 so Canada not only lags among the G8 but also worldwide:
G8 GDP Produced per Unit of Energy (PPP $ per kg of oil equivalent in 2009)
In summary, we need not wait for others to develop smart policy to promote energy development and environmental stewardship as mutually reinforcing objectives with Canadian interests in mind -- it won't happen and we have more at stake.
Nor should we wait for the Americans to dictate to Canadians our national approach on energy and climate, what qualifies as "renewable" energy or the treatment of embedded carbon in our exports to the US. Canadian business wants to do more; but, we need a policy roadmap that is clear, predictable, fair and efficient, and we need leadership and representation on the international stage so that Canadian firms selling into the US and other markets are not unjustly subject to carbon tariffs or other border adjustments.
]]>Why Culture Eats Strategy for Breakfast (Part II)tag:www.huffingtonpost.com,2012:/theblog//3.20757872012-11-06T08:56:28-05:002013-01-06T05:12:01-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/This is the eighth blog in a weekly series on how sustainability can save business. It appears every Tuesday.
Last week we emphasized that culture trumps strategy every time, and that the key to unlocking the value of any strategy is to understand and harness the corporate culture within which the strategy is being implemented.
Implementing a sustainability strategy within any business is equal parts strategy and change management. And, to be successful, one should use the momentum of the forces that oppose change -- the cultural values, practices and inertia of the organization -- as the channel into the business and its operations, a sort of "cultural Judo" to embed sustainability values into the business and its culture.
Every Corporation has a Culture
Implementing a sustainability strategy into the business of a large U.S. retailer proved challenging because the "corporate culture possessed strong anti-bodies," noted Tyler to colleague -- who had only ever worked for the one company, for decades.
"What corporate culture?" replied his colleague looking slightly confused. "We don't have a culture."
Tyler's instant reply was: "Yeah right, and a fish doesn't know it's living in water."
Every corporation has a culture. Some are more "in your face" than others -- such as those that kick-off meetings with a corporate cheer -- and, if you've never really worked anywhere else, you might not even realize it's there.
Friendly and pragmatic... How very Canadian
Canadian Tire's corporate culture is strong yet subtle. Those who've worked within the company described it as "almost too nice," "relationship-based" and "risk-averse" if not a somewhat dry, analytical and pragmatic.
If you're a change agent within the company, you'll no-doubt encounter a common phrase: "I'm not comfortable with that." After working with U.S. corporations for years, Tyler describes it as "very Canadian."
At Canadian Tire, the business case is king, and sustainability's path into the corporate culture and business operations has been all about the business case, risk-management, innovation and, more recently, the creation of good will and brand equity. The sustainability team use the mantra "In the business, By the business, For the business" to ensure that the sustainability objectives are not only in line with business objectives, but that operations ("the business") are the drivers of the economic and environmental outcomes. After all, it is operations that make "sustainability" real and tangible, not the strategy function.
In the spring of 2008, Tyler was being interviewed as a potential leader for Canadian Tire's sustainability initiative. During one interview, a veteran retail executive asked him: "Why should I care?"
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Bypassing the expected "because it's the right thing to do" response, Tyler picked a product off of the executive's shelf and explained the economic and environmental value of package right-sizing. Leading with the business case of efficiency -- proved to be a very practical, analytical and familiar approach within the Canadian Tire culture.
Leading with a belief- or values-based argument would have set off alarm bells. Instead, the objective has been to incorporate the underlying values of business sustainability into the culture over time on a foundation of eco-efficiency and tens-of-millions in annual cost avoidance. Tyler jokes: "It may be the right thing to do, but if that's your only rationale for your sustainability strategy, you're either a non-profit, or soon to become one."
During the first two years of implementing the sustainability strategy, the business focused on eco-efficiency and later tackled more complex and values-based ideas such as sustainable design. The real estate team was already focused on efficiency, and in 2008 began implementing energy efficiency lighting retrofits at hundreds of stores. The initiative delivered excellent returns, recovering the more than $30-million capital investment during the third year of the project and delivering an internal rate of return (IRR) of 23 per cent -- all the while reducing the energy and carbon footprint of operations.
This was soon followed by the installation of central energy management systems to reduce energy use and the carbon footprint of the stores. This project recovered the initial capital investment during the second year of the project and delivered an IRR of 38 per cent!
Although this path of focusing on eco-efficiency and the business case before tackling more complex and abstract concepts such as sustainable design may be seen by some as overly pragmatic and perhaps comparatively dry to an evangelical call to action, the business case for sustainability formed the essential foundation for engaging business operations, executives and the Board.
After a couple of years of focusing on eco-efficiency, the scope of implementation expanded to include sustainable design of packaging and later products, with one buyer and a long-time strategic supplier producing an award-winning line of household storage and container products made from the recycled plastic collected from Ontario's curb-side Blue Box program. However, business sustainability may not have ever gained traction if the strategy had not first proven its worth via eco-efficiency.
The culture and its focus on the numbers and the business case is also why Canadian Tire placed so much emphasis on measurement and reporting of the economic and environmental benefits of the strategy. In Canadian Tire's culture, information, examples and data points enable the Business Sustainability team to have influential conversations with colleagues and give credit to those within the business for the economic and environmental benefits from their work. And accordingly, this has enabled and guided the implementation of the strategy as it expands its scope to additional operational functions and business units.
Today, Canadian Tire is a leader for its integration of sustainability with the business. We measure and communicate progress quarterly, with metrics and performance linked to operational plans, compensation and core financial documents. And while this may have made the company a leader in this field, it is really just a product of what was required for sustainability to be successful within the corporate culture.
And yes, while an emotive call to action on business sustainability among its employees is largely absent at Canadian Tire, it does not mean that that this cannot evolve over time; it simply means that it was not the best way to initially engage the business.]]>Why Culture Eats Strategy for Breakfasttag:www.huffingtonpost.com,2012:/theblog//3.20377022012-10-30T00:00:19-04:002012-12-29T05:12:02-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/This is the seventh blog in a weekly series on how sustainability can save business. It appears every Tuesday.
"Culture eats strategy for breakfast, every day." This was Tyler's response to a question during a panel session at a recent conference. The panel was discussing the challenges faced by professional managers in their efforts to implement sustainability into business.
The other challenge under discussion was about finding the appropriate balance between sharing insights and strategy with others, versus holding some things back for the competitive reasons.
Tyler's comment was relevant to both. His point: having a strategy is one thing, but being able to implement it is entirely another. After all, the value of a strategy is not what is written on the whiteboard or the back of napkin, it is the value unleashed by engaging the minds and hearts of motivated employees and suppliers.
The key to unlocking this value is to understand and harness the corporate culture, work within its bounds and value system, while making room for new ideas. Enterprise Risk Management colleagues refer to the ability to implement a strategy (or not) as "execution risk."
Tyler has been fortunate to have had the experience of developing and implementing business sustainability strategies over the past decade in three different, very large corporations: a $14 billion company, a $400 billion company and Canadian Tire, a $12 billion company. In every instance he had to tailor his approach to the culture's unique value system and the process by which ideas are accepted into the community.
Making Room for New Ideas
New ideas may not easily find room to coexist with pre-existing ones: There is a natural institutional and cultural inertia that opposes new concepts that compete for acceptance within an established corporate culture. It's like a new group of people joining a cocktail party that is already well underway. They are either accepted, adding to and changing the pre-existing dynamic -- tolerated as a fringe element, talking amongst themselves in the corner of the room -- or totally rejected and asked to leave.
In short, one must tailor how the building blocks of the strategy are applied so that they are accepted. This is a very difficult to achieve, particularly for new employees, or "outsiders" tasked with this agenda. And believe us, we've both made a few mistakes; but, we've also learned that it is important to push the boundaries as well. The trick is knowing when and how to do it.
During the launch of the sustainability strategy for Tyler's previous employer (a global retailer headquartered in a "dry county" of a US state in the buckle of the Bible belt) business sustainability "milestone meetings" were held every four months for employees and key suppliers to listen and learn from external sustainability leaders, and to share employee progress and success stories.
At one meeting, Ray Anderson, the Founder of Interface carpet, was the guest speaker. [As an aside: Interface's 15 year sustainability effort has driven $450 million to the bottom line in savings -- equal to 28 per cent of the cumulative operating profit over that period.] When Ray was part way through his talk people began to walk out -- right in front of the CEO, Board members, senior executives and several hundred employees and guests. Tyler was astonished and had no idea why, or how people could be so rude or have such disregard for a guest speaker.
Later, as he found out via a few blunt e-mails from some of those who had left, he learned that Ray's use of the geological time scale and comparing it to a 24-hour clock to demonstrate how relatively little time humans had been on the planet -- a few seconds on Ray's clock -- and yet had how much we had changed it, was offensive to their fundamental religious beliefs
Being Canadian and new to the US south, being an atheist and someone who had studied geology, Tyler had no idea that such ideas could be a source of friction -- that there were still people who believed that the world was only several thousand years old. Who knew?
Debriefing with the CEO after the meeting, Tyler apologized for the cultural oversight. The CEO waved off Tyler's apology and expressed his disappointment at those who had left the meeting because, as he saw it, part of the value of the business sustainability strategy was opening up one's perspective to those of others, to listen and learn about what matters to other people and their value systems. To this very day, one of the core competencies Tyler stress's and includes in job requirements is the ability and wiliness to:
• Raise potentially controversial issues in a manner that encourages dialogue;
• Listen to others while maintaining a wide perspective on issues; and
• Incorporate diverse views and constructive criticism, leading to improved outcomes and understanding.
You Gotta have Faith
Reflecting upon his first few months in his new context, Tyler began to see a pattern of behaviour and expression of acceptance of sustainability into the culture by employees as almost evangelical in nature. People expressed acceptance of business sustainability as they would a faith-based belief system.
It hit Tyler smack in the face when, during one of the regular Saturday morning meetings, a senior vice president stood up and declared that he was now "a believer" in sustainability and its value to business because, if it was not for the business sustainability initiative, he would not have been able to sign the deal with "The Eagles" for the retailer to be the sole distributor of their retrospective CD box set. As it turned out, it was the underlying value system of sustainability that helped the west-coast musicians relate to the executive from rural middle-America. That deal alone probably paid for the entire sustainability team's payroll and consulting budget for the next decade.
A beer-drinking Canadian atheist in the Republican dominated dry-county in the US Bible belt, Tyler had his work cut out for him for the next business sustainability Milestone Meeting. The featured guest speaker was non-other than the former Vice President Al Gore, who was going to give his now famous An Inconvenient Truth talk and promote his movie. If some people didn't believe the world was more than a few thousand years old, how the hell would they ever "believe in climate change" -- from a democrat politician?
Remember, culture trumps strategy every time: As it turned out, the answer was to open up with a preacher as the Vice President's warm-up act. Jim Ball, the Executive Director of the Evangelical Environmental Network, kicked off the meeting's discussion on climate change playing to the home-town audience -- talking about how climate change has repercussions for "the health of our children" and "global and domestic poverty" because it is the world's poor that will be most affected by it.
Jim's message was that climate change was not a political issue; rather, it is an issue of moral duty. "How we care for God's creation is one of the greatest moral challenges of our time. And as Christians, we also know it is a challenge that cuts to the heart of how we promote and cherish life."
After this meeting, "belief" in climate change was never an issue, and Al Gore received a standing ovation.
In closing we offer you this observation: Implementing a business sustainability strategy into any business is equal parts strategy and change management. They are intertwined and dependent. To be successful, one should use the momentum of the force that oppose change -- the cultural values, practices and inertia of the business -- as the conduit into the business and its operations. It's like using a sort of cultural Judo to embed sustainability values into the business operations and its culture.]]>The Benefits of Carbon Shadow Pricingtag:www.huffingtonpost.com,2012:/theblog//3.20010042012-10-22T10:41:52-04:002012-12-22T05:12:01-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/This is the sixth blog in a weekly series on how sustainability can save business. It appears every Tuesday.
Placing a shadow price on carbon can help a company cut costs, while dramatically reducing its risk and exposure to rising energy prices and a price being put on carbon.
One of the roles of corporate strategy function is to assist the CEO and board in managing strategic uncertainty and risk. Knowing that it's impossible to accurately forecast future events, one of the jobs of corporate strategy is to develop scenarios of potential future realities, strategies for these scenarios, and a portfolio of options that may be exercised in the event that a scenario comes into being.
Royal Dutch Shell is perhaps the best known example of a company using scenario planning to prepare for future events, beginning in the 1970s. Shell's scenario planning prepared it for the first oil crisis in 1973 -- when the price of oil quadrupled in just 18 months. Most recently Shell has been using scenario planning for developing strategies mitigating the effects of climate change.
The greater the value of resources and time invested in a strategic commitment -- such as developing a new oil field or pipeline -- the greater the value of scenario planning is to an organization. But a firm doesn't have to be a multinational oil company to get value from managing the risk that is implicit in any business strategy.
Planning for a Carbon-constrained Economy
Placing a price on carbon of anywhere from $10 to $80 a tonne can have a profound effect on business planning. It immediately highlights the areas of business operations that will be negatively affected when a price is finally put on carbon. Using a shadow price can assist management in quantifying and identifying material risk and making strategic decisions on how to take action to mitigate that risk -- such as by reducing the energy and carbon associated with material composition of products, manufacturing process, product sourcing and transportation decisions and other business activities.
Doing so identifies "hot-spots" in the value chain and often opportunities for reducing risk where it is currently profitable to do so, financing the mitigation of future commodity and carbon price-risk via energy savings and cost avoidance today.
Canadian Tire has been doing this for four years. Managers coined the term "carbon price-risk" and defined it as the potential economic cost to the value chain of carbon being priced. Managers can tell their executives and the board how a price on carbon will affect the average cost of goods sold, which product categories will be hardest hit, whether or not the energy mix in one country versus another should affect sourcing decisions, and how it could affect transportation practices. And, most importantly, what strategies the company can put in place today to mitigate and prepare for a carbon-constrained world.
The right mind-set makes all the difference
Upon framing the issue in terms of business performance and risk -- as opposed to the traditional language of corporate social responsibility (CSR) -- the concept of carbon price-risk becomes real and relevant to strategy, the C-suite and the board. Two things become immediately apparent:
First, one does not have to "believe" in climate change to see the value in developing strategies and options for addressing risk. Whether one believes in climate change is irrelevant when the risk is 1) rising energy prices (which are inevitable over the long-term) and 2) legislative and likely to be a significant issue in international trade.
Second, it establishes the value chain as the appropriate scope for strategic thinking, scenario planning, and mitigation -- far beyond the traditional corporate mindset and boundaries of "responsibility." After all, it does not matter if your corporation is "responsible" for the carbon emissions or if it is in a distant third-party in your value chain; in the end, the cost will be passed on to the consumer, like all costs -- which is a good thing, because it promotes better decision-making.
Placing a shadow price on carbon is a powerful tool for corporations to use. It exposes the carbon risk inherent in operations, and it allows management to communicate that risk to the Board and executives -- who are tasked with mitigating risk and ensuring the long-term competitiveness of the company. Which brings us to an important question...
What's your company's carbon price-risk and what are you doing about it?]]>A Little Less Cardboard Can Save You Millionstag:www.huffingtonpost.com,2012:/theblog//3.19669042012-10-16T07:25:26-04:002012-12-16T05:12:02-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/This is the fifth blog in a weekly series on how sustainability can save business. It appears every Tuesday.
Using sustainability as strategy can drive change within a company's supply chain by engaging suppliers and service providers with the resulting savings running into the millions of dollars a year.
A case in point: one of Canadian Tire's most popular products is a six-foot folding utility table, selling many tens-of-thousands a year. The company collaborated with its supplier on product redesign and packaging to use less raw materials to make and package the product. Now, the tables use 11 per cent less plastic in their construction and occupy 15 per cent less volume for shipping. The annual savings for Canadian Tire: more than $375,000 a year as a result of reduced material, packaging and shipping costs.
Employee Engagement
Sustainability as strategy can also engage employees. In 2010, Canadian Tire's Senior Vice President of Merchandizing invited all the company's buyers to the conference centre for an afternoon departmental meeting. Employees thought it was to discuss organizational restructuring. Before the start of the meeting, the conference centre was very quiet.
The goal, it turned out, was to engage buyers in a creative way -- to shake things up -- to facilitate some disruptive innovation on something that should have been a core element of their business activities, but at the time wasn't.
Corporate thinking is often to execute on a perfect plan -- in this case, we wanted to take buyers out of their usual, comfortable environment and see what insights could be developed by briefing them on a subject and then turning them loose in a store to see how they could apply it. We wanted our buyers to see things with new eyes.
At the conference centre the buyers learned the real purpose of the event: to gain new insight into how packaging sustainability can affect profitability and the environment. After a couple of presentations, the group boarded buses to a local Canadian Tire store where the goal was to discover examples of "stupid packaging" -- examples of too much packaging, improper packaging, or even too little packaging resulting in damaged product, waste, squandered energy use, and excessive greenhouse gas emissions from shipping damaged product that can't be sold.
The buyers identified over 3,000 examples and calculated the potential savings to the company of improving the packaging into the millions annually in cost avoidance. One of the best finds: the company sold a tool for opening plastic clamshell packaging. And guess what? The tool came in a thick plastic clamshell.
Prior to the session buyers really hadn't seen the relevance or value of packaging to profitability. The session kicked off a disciplined, systematic focus on package right-sizing that each year results in hundreds of packaging changes and is generating more than $3 million annually in avoided costs.
In 2011 and 2010, Canadian Tire completed 320 packaging changes that saved the company $6.3 million in costs, while reducing greenhouse gas emissions by more than 4,300 tonnes each and every year the products are stocked.
Of course to sustain such an initiative requires more than just a bus trip, it also requires the systems and structures to support and foster the ongoing effort, such as good measurement, reporting -- and aligned incentives -- now going into a third year.
Mitigating Risk
There's another reason for companies to focus on cutting unnecessary packaging. Extended Producer Responsibility (EPR) costs are rising dramatically. Since 2004 stewardship fees charged to companies and the associated cost of managing dozens of different EPR programs across Canada have grown at a cumulative average rate of 38 per cent.
This dramatic rise has been driven by four factors: 1) implementation of EPR legislation in provincial jurisdictions across Canada; 2) increasing rates being charged for products and packaging under EPR programs; 3) a shift of those costs from government to business, and 4) the data management, point of sale and other systems and resources required to manage them.
The cost of the Blue Box program used to be shared equally between companies and the government. But today, corporations are paying all the blue box fees. For Canadian Tire in 2008, fees alone were $8.9 million and these basically have doubled to $18.5 million in 2011. In 2008 only 4,000 products had environmental fees and this has grown almost six-fold to 23,541 at the end of 2011 with many products being attached to multiple programs in different provinces.
Fees are based on the type of material used and the weight and volume of packaging. Having a disciplined focus on packaging materials and right-sizing can decrease the fee rates applied and the volume and weight of packaging, dramatically mitigating costs and the risk of increasing EPR fees.
Of course there is a balance that needs to be achieved: packaging can't be reduced so much that it results in higher damage rates to the goods being sold.
Rightsizing packaging also resonates with customers, as the number one complaint re sustainability from customer is excessive packaging
So using sustainability as strategy is a way of engaging employees, suppliers and service providers in a concerted effort to drive innovation within retail, to drive out waste and inefficiency, and to lower the corporate footprint and reduce the liability to extended producer fees. We believe all retailers should be aggressively pursuing sustainability as strategy.]]>There's More Oil in Detroit than Saudi Arabiatag:www.huffingtonpost.com,2012:/theblog//3.19500302012-10-09T00:54:28-04:002012-12-08T05:12:01-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/This is the fourth blog in a weekly series on how sustainability can save business. It appears every Tuesday.
Transportation accounts for 29 per cent of US and 26 per cent of Canada's Greenhouse Gas (GHG) emissions. It also accounts for 70 per cent of oil consumed in North America is used for transportation.
In the US, passenger cars, SUVs, pickup trucks and minivans account for 59 per cent of transportation GHG emissions while freight trucks represent 19 per cent and commercial aircraft (both domestic and international) account for 12 per cent.
Canadians drive more than 300 billion kilometres (186 billion miles), each driving on average 16,000 km per year.
All in all, it is billions of barrels per year. And what's the potential for savings? Huge!
First off, if every car in North America got the same fuel efficiency as Jim's Toyota Prius, there'd be no need for oil imports into North America. And there'd be no need to drill in the Gulf of Mexico or to drill in the Arctic.
In other words, the billions of dollars that the US sends to Middle Eastern countries to import is a choice. By choosing not to regulate for higher fuel efficiency standards, the US voluntarily sends billions of dollars to foreign countries every year and unnecessarily exposes itself to environmental, economic and political risk. Roughly half the US oil consumption is from imports.
This has led Amory Lovins to state that there's more oil in Detroit than in Saudi Arabia. There's actually no oil in Detroit, but the reluctance of auto executives to pursue higher fuel efficiency standards, imposes billions of dollars of cost on North American companies and car owners.
Canadians put an average of 16,000 kms a year on a car. Logically, high-use cars -- taxis, and those used by sales reps, repair people, and long-distance commuters -- should be the most efficient vehicles possible. If cars are company owned, simply ensure that they're an efficient model. Or ensure that only efficient cars are available for high-use functions.
Similarly, if the company re-imburses employees for the use of their cars, the CRA standard is 53¢ a kilometre, a policy paying a premium for using high-efficiency vehicle -- such as a Toyota Prius, Smart Car, Nissan LEAF, Mitsubishi i-MiEVm, Honda Civic Hybrid, Honda Insight -- might seem counter intuitive, but it would help shift employees into more efficient vehicles. When oil rises to the $225 a barrel -- as former CIBC Chief Economist Jeff Rubin predicts it will -- companies that have incented employees to shift to high efficiency vehicles will reap significant financial benefits for their leadership.
Long-Haul Trucking --the average long-haul truck in North America is only loaded to 50 per cent capacity! Empty backhauls or deadhead miles are the largest contributor to fuel waste. Some experts suggest that load optimization software and freight matching web-based systems could cut deadheading by 90 per cent. In Canada, Sustainable Development Technology Canada (SDTC) notes that empty backhauling results in one in every three trucks on Canadian highways being empty and more than half are not fully loaded.
Auxiliary Power Units (APUs) -- allow the cab to be heated or cooled while the driver sleeps without having to keep the truck idling. This can save up to eight per cent of fuel use for long-haul trucks.
Low Resistance Tires & Proper Inflation -- can cut fuel use by up to 4-8 per cent.
Hybrid Chilling -- can save 10 per cent of fuel use.
Aerodynamic Design -- of the tractor and trailers, side-skirts on the trailer and rear fairing can reduce fuel consumption by up to five per cent according to the EPA, but according to the Rocky Mountain Institute, futuristic design could save up to 10 per cent.
Altogether these strategies can reduce the fuel consumption by more than 50 per cent in the North American trucking fleet. And each 1 per cent increase in efficiency reduces diesel use by 245 million gallons (927 million litres) a year!
So the available savings are significant. Which contributes to our thesis for this blog -- that sustainability can save business.]]>In Business, Don't Waste a Crisistag:www.huffingtonpost.com,2012:/theblog//3.19290882012-10-02T00:00:36-04:002012-12-01T05:12:01-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/ This is the third blog in a weekly series on how sustainability can save business. It appears every Tuesday.
Many Canadians are trying to do more with less during this economy of thrift. But we all face essential expenses -- those costs associated with "keeping the lights on" -- often, literally.
Whether you're managing a household or a large corporation, energy -- that stuff that enables your car to move from one place to another, keeps your beer cold and your shower hot -- is generally regarded as an essential expense. Sure, you could drink warm beer and take cold showers; but really? There's got to be a better way.
During a poor economy, it can be a challenge for a business to increase profitability as competition for the "cautious consumer" intensifies and there is increasing pressure on margins. But a recession offers the perfect opportunity to question the way things have always been done -- and drive out waste and inefficiency. One of Jim's favourite slogans is: "a crisis is a terrible thing to waste."
While most are cautiously optimistic about the North American economy today, it was a different story in the latter half of 2008 when Canadian Tire launched its Business Sustainability Strategy with an aspiration to profitably grow the business without increasing energy use or contributing to an increase in the carbon footprint of the economy.
And the company has been somewhat successful: energy and fuel used to move product from vendors to stores is nine per cent lower, despite a 22 per cent increase in tonne-km of product shipped. And energy use for buildings and operations has been cut nine per cent despite more than a nine per cent increase in the amount of real estate square footage.
So sustainability cut costs and mitigated risk against rising energy prices. So how did Canadian Tire achieve this?
The first step was insight and political will. Business leaders need to view sustainability as a way of driving out waste and inefficiency -- and a strategic tool in engaging employees and suppliers in transforming operations.
Second was measuring the energy and carbon footprint of the business and its supply chain -- after all, what gets measured gets managed. This quickly identified two core operational functions responsible for most of the energy use: heating, lighting and cooling over 34-million square feet of retail space, and moving billions of dollars worth of product from over 50 countries from all over the world to a store near you.
The third step was to recognize that innovation is a social process. Employees formed "sustainable innovation networks" around buildings and operations, product transportation, and products and packaging, bringing together people from Corporate Strategy, Marketing, Merchandizing, Packaging, Real Estate, Supply Chain, Strategic Sourcing and Transportation.
These teams broke through their traditional silos to examine and optimize the systems that are Canadian Tire's extended value chain, identifying inefficiency and waste. They brainstormed what more streamlined, energy efficient operations would look like in three, five and 10 years. And then the teams brainstormed the projects and initiatives that would get them there.
With the path revealed, they began their journey and started reporting progress quarterly and measuring economic and environmental benefits.
Three years and more than 1,350 business sustainability projects later, the energy use of Canadian Tire's operations have become significantly more efficient. The amount of energy used to transport a tonne of product one kilometre has decreased by more than 26 per cent, and the amount of energy used to heat, light and cool a single square foot of real estate has decreased by 18 per cent.
That's like having more cold beer at a lower cost while doing your part for the environment -- it's a win-win-win -- or, for Canadian Tire, it's the equivalent of realizing the net profit of three and a half additional stores without actually having to build and operate them.
So sustainability is a strategy that business should be pursuing, especially in a recessionary market.]]>You Are Better Off Investing in Sustainability Than Stockstag:www.huffingtonpost.com,2012:/theblog//3.19096102012-09-25T10:58:57-04:002012-11-25T05:12:01-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/
In just the energy efficiency (EE) field McKinsey & Company estimates that $2 trillion can be invested in EE by 2020 with an internal rate of return (IRR) of 17 per cent. To put that into perspective: that rate of return is better than investing in the stock market or in real estate over the long-term -- the two investments we're always told give the best long-term returns.
The net effect would be equivalent to cutting the need for 64 million barrels of oil a day -- about one and a half times today's entire U.S. consumption.
In a separate McKinsey study, "Reducing US greenhouse gas emissions: How much at what cost?"shows that 40 per cent of the CO2 emissions reduction strategies are highly profitable. Jon Creyts, the US McKinsey partner in charge of the study, notes that if these profits were re-invested in the next least-cost solutions, the U.S. would achieve all of its Kyoto reductions at no cost to society!
It's important to note that these two studies come from one of the pre-eminent management consulting firms worldwide -- so business leaders should pay attention.
Amory Lovins, the founder of the Rocky Mountain Institute, and one of the world's leading energy efficiency experts, has documented how North American firms could cut their energy use by 70-90 per cent using existing, proven, practical technology -- all in a way that profitable.
Multitude of Simple Solutions
One of the insights from these studies is that there is no single silver bullet -- what we need is silver buckshot. There are a multitude of strategies that can profitably cut energy and fuel costs. And solutions in many cases are simple:
If every car in North America got the same fuel efficiency as Jim's Toyota Prius, there would be no need for any oil imports to this continent. Similarly, there'd be no need to drill for oil in the Arctic or the Gulf of Mexico. When oil was $147 a barrel in 2008, the U.S. was paying $700 billion a year to Middle Eastern countries. This wealth transfer was entirely unnecessary. Aggressive fuel efficiency standards would have eliminated that transfer of wealth.
Here's another surprising one: if every roof worldwide was white, it would eliminate $2 trillion of carbon emissions. Black roofs are the industry standard. Because black surfaces retain the sun's heat, on a hot 32°C day a black roof will be 88°C while a white roof will be 43°C -- a staggering 45°C cooler. And where do engineers put the air handling equipment? Yes, on the roof! So fresh air is being drawn in at 88°C and having to be cooled to a comfortable temperature. On installation there's no difference in capital cost between a black and a white roof, and on resurfacing there is no cost difference. So imagine being able to save $2 trillion for free!
We could triple the efficiency of Ontario's electric grid by using combined heat and power (CHP). Conventional power plants, whether coal, gas or nuclear vent two-thirds of the energy as waste heat. By contrast CHP -- also known as co-generation or district heat -- uses this "waste" heat to heat buildings. This increases the efficiency up to 90 per cent. Denmark generates a staggering 54 per cent of it's power from co-gen.
And so this leaves us with the question of why aren't we executing some of these simple, economically viable -- in fact hugely profitable solutions?
Well, some are. Canadian Tire, for example, has increased its energy productivity significantly since 2008 when it first began implementing its business sustainability strategy. During that time the company has taken the "silver buckshot" analogy to heart, implementing more than a thousand individual projects that collectively add up to some big numbers.
Energy use in its supply chain has been reduced by approximately 350,000 Gigajoules a year -- that's enough energy to power more than 4,000 Canadian homes -- and all the while earning a financial return for the company in excess of its' cost of capital.
Indeed, while the sustainability opportunity is big, it's about time that we got on with it. We'd rather it be considered old news than surprising.]]>How Sustainability Can Save Businesstag:www.huffingtonpost.com,2012:/theblog//3.18897812012-09-18T08:48:08-04:002012-11-18T05:12:02-05:00Tyler Elmhttp://www.huffingtonpost.com/tyler-elm/
This is the first of a series of weekly columns to be published on Tuesday by Tyler Elm and Jim Harris on how sustainability as strategy cuts cost, raises revenue and mitigates risk for business.
Ever since Rachel Carson's groundbreaking Silent Spring was published in 1962, environmentalists have been trying to save the planet. While there has been progress, overall the efforts have clearly failed, because the planet is in worse shape today than 50 years ago. We need not document the litany of damage here.
Decades of experience have shown that environmental initiatives pursued in isolation of the economic benefit are largely immaterial.
But when environmental objectives are framed as business strategy and tied to business operations and measured in terms of cutting cost and increasing profitability -- significant environmental benefits are generated. Sustainability then garners executive focus and corporate resources. Companies like General Electric, Interface Carpet and Canadian Tire have realized the profound bottom-line benefit that pursuing sustainability as strategy yields.
In the early 2000's a number of environmentalists were feeling the futility of the environmental movement's historic approach to business. In 2004, this led Adam Werbach, then president of the Sierra Club -- the largest US environmental group, to proclaim that traditional environmentalism was ineffective, outdated and dead. In a grist.org interview, following his speech called the "Death of Environmentalism" Werbach noted:
"Perhaps during the many battles between environmentalists and business people we have been asking the wrong question all these years. As generally proposed, the question is: 'How do we save the environment?' As ridiculous as it may sound to both sides, the question may be 'how do we save business?' When you look at the environmental movement, at the great ecological challenges that the planet is faced with, that humanity is faced with, environmentalism has proven utterly incapable of addressing them. The reason we called for environmentalism's death is so that we could call for a new movement... (one) that can address these challenges."
And it wasn't just Werbach that was feeling this -- but he captured the zeitgeist of the time. As a result, environmentalists in greater number began working with businesses to prove that going green has incredible bottom-line benefits. This is a fortunate trend for environmentalism and business.
Sustainability as strategy is a rallying cry for driving out waste and inefficiency. It is a powerful tool for engaging employees and suppliers in an innovation strategy drive to both incremental and radical improvements in operations while managing risk. In the two year period of 2010 and 2011, sustainability initiatives saved Canadian Tire approximately $10.7 million in annual avoided costs; 215,000 gigajoules (GJ) of energy (enough to power more than 2,000 homes for a year); 14,000 tonnes of greenhouse gas emissions and more than 6,600 pounds of waste.(LINK)
Just how much potential savings could sustainability generate for corporations and society? Amory Lovins, the founder of the Rocky Mountain Institute, has documented how using best available existing technology we could reduce current energy use in North American by 70 per cent to 90 per cent without changing our current lifestyle!
The Challenge
Like many large, established companies, growing from a single Toronto location in 1922 to the national retailer and brand management company, Canadian Tire, required specialization of business by functions -- such as strategic sourcing, merchandizing, marketing, transportation, and the operation of distribution centres and stores.
While enabling the business to scale, the unintended consequence of this organizational structure is that individual functions optimize around an increasingly narrow core purpose, leading to the erosion of a system-wide perspective of the enterprise level. As silos evolve, business decisions in one area may be undertaken without the insight into the unintentional effects on other areas.
Sustainability as strategy forces siloed departments to work cooperatively to both define opportunities and devise solutions. Businesses that are using sustainability as strategy are realizing that it is the most powerful tool for driving cooperation and innovation in the organization.
The result: rethinking business activities, redefining peoples' roles, responsibilities, measurement and incentives. The experience at Canadian Tire of pursuing sustainability as a strategy has been organizational innovation, while generating millions of dollars cost avoidance, new sources of revenue, and thousands of tonnes of avoided waste and greenhouse gas emissions.
Why CSR is Not the Answer
Today, many companies are focused on Corporate Social Responsibility (CSR). As we often see it practiced, CSR is about reporting the company's activities. As a reporting function, CSR has little, if any, power to transform the organization. If we were cynical, we might say that many CSR activities are nothing more than a public relations initiative.
What excites us is sustainability as strategy. By dramatically reducing energy use -- electricity, natural gas and fuel -- companies not only cut costs, but mitigate risk against rising energy prices, and raise revenue from new products and services
Management literature has shown that the majority of change initiatives fail. But sustainability engages the hearts, minds and motivation of employees and suppliers and can become a truly transformative driver. It can drive innovation and create new business value. And tip the balance to ensure success of the change initiative.
When looking at sustainability as strategy you ask fundamentally different questions than looking at sustainability in the framework of CSR. The former focuses business performance, organizational transformation -- looking at roles, incentives, re-engineering operational processes, and creating change through the whole supply chain -- while the latter focuses on reporting.
And so we believe that environmentalism can save business, as the more powerful engagement tool that business has at its disposal to drive innovation.]]>
