The path to developing a case for the ROI of sustainability can be developed on a departmental or on an organizational basis. For this to happen effectively however, it is critically important to get buy and leadership from operational managers. Leadership is the first and most critically important step in the process. Once leadership develops the vision and commitment to create a sustainability plan than the process of weighing the return, developing a business case and creating project budget can begin. Over the next 3 posts I will look at the ROI of some very specific technologies  and show how properly implemented, they can help business leaders reduce costs, minimize risks and deliver direct bottom line benefits. I will look at alternative energy solutions including wind and solar, carbon footprint analysis and recycling and in each case show a strong business case for each.

-FR

There’s no alternative to sustainable development.

How’s that for an opening line. But that’s exactly how this September 2009 article published in The Harvard Business Review, Why Sustainability Is Now the Key Driver of Innovation, opens. The article’s authors Ram Nidumolu, C.K. Prahald and M.R. Rangaswami, make a compelling case that the companies that are early adopters of sustainable business practices are developing competencies that distance them from their competitors. They studied 30 major U.S. corporations including P&G, Cisco, Walmart and Hewlet-Packard. Among their conclusions:

• Sustainability isn’t the burden on bottom lines that many executives believe it to be. In fact, becoming environment-friendly can lower your costs and increase your revenues. That’s why sustainability should be a touchstone for all innovation.
• In the future, only companies that make sustainability a goal will achieve competitive advantage, That means rethinking business models as well as products, technologies and processes.
• Becoming sustainable is a five-stage process and each stage has it’s own challenges.

Here are the five stages they refer to:

Stage 1: Viewing Compliance As Opportunity

Stage 2: Making Value Chains Sustainable

Stage 3: Designing Sustainable Products and Services

Stage 4: Developing New Business Models

Stage 5: Creating Next-Practice Platforms

The study outlines each stage and discusses the challenges and how innovative corporations have overcome those challenges to be become segment leaders.

Their conclusion- the number of new consumers is projected to double over the next twenty years.  This will place an unprecedented demand on limited resources. Traditional approaches to business will collapse and companies will be forced to develop innovative solutions.

To the authors, “Sustainability=Innovation.”

You can get a copy of the article at: www.hbr.org

Broken into four sections, the survey appears simple at first glance and some of the questions are fairly opened ended, but the sum of the survey, is that it requires an examination of sustainability practices and will allow for comparisons that were not previously possible. In this blog post  I will list the questions by section. In subsequent posts I will examine the survey on a section by section basis.

Energy and Climate: Reducing Energy Costs and Greenhouse Gas Emissions
1. Have you measured your corporate greenhouse gas emissions?
2. Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project (CDP)?
3. What is your total annual greenhouse gas emissions reported in the most recent year measured?
4. Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets?

Material Efficiency: Reducing Waste and Enhancing Quality
1. If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured.
2. Have you set publicly available solid waste reduction targets? If yes, what are those targets?
3. If measured, please report total water use from facilities that produce your product(s) for Walmart for the most recent year measured.
4. Have you set publicly available water use reduction targets? If yes, what are those targets?

Natural Resources: Producing High Quality, Responsibly Sourced Raw Materials

1. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety?

2. Have you obtained 3rd party certifications for any of the products that you sell to Walmart?
People and Community: Ensuring Responsible and Ethical Production
1. Do you know the location of 100 percent of the facilities that produce your product(s)?
2. Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production?
3. Do you have a process for managing social compliance at the manufacturing level?
4. Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements?
5. Do you invest in community development activities in the markets you source from and/or operate within?

15 questions, simple enough, but when we dive into them by section in subsequent posts, you will see the answers may not be that simple.

-FR

Wal-Mart’s unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change. By rolling out an environmental labeling program disclosing to consumers the environmental costs of making products sold at Wal-Mart, the $401 billion retail behemoth has transformed green standards from nice-to-have to must-have.

It marks a change in how products will be labeled, how supply chains communicate their activities and in the information that will inform consumers make purchasing decisions. This is how Green To Gold author Andrew Winston describes it in a post How The Wal-mart Eco-Ratings will Save Money, also on the Harvard Business Review.

And this is the larger trend that’s coming. The combination of technology and rising consumer demands is creating a powerful movement toward greater transparency  about how a product is made, where it comes from, how much energy is used, and so on. Consumers are already starting to get a taste of this data — you can already download a number of iPhone apps and/or check websites like GoodGuide.com  to find product sustainability scores. Consumers will certainly want more, and they’ll want more coordination between all the groups starting to collect it. The world’s biggest retailer kicking off this initiative is a good start at harmonizing all these sources.

Sounds like a game changer to me.

-FR

According to Mike Duke, Walmart’s President and CEO:

Customers want products that are more efficient, that last longer and perform better. And increasingly they want information about the entire lifecycle of a product so they can feel good about buying it. They want to know that the materials in the product are safe, that it was made well and that it was produced in a responsible way.

We do not see this as a trend that will fade. Higher customer expectations are a permanent part of the future.

At Walmart, we’re working to make sustainability sustainable, so that it’s a priority in good times and in the tough times. An important part of that is developing the tools to help enable sustainable consumption.

The Walmart plan calls for a 3 phase approach to the development and implementation of the index. The first step is creation of a survey (sounds a little like the Verdant 360) that will ask questions around 4 areas.

1. Energy and Climate
2. Material Efficiency
3. Natural Resources
4. People and Community

Walmart will be asking it’s over 100,000 suppliers to respond to the survey. It is asking it’s U.S. base suppliers to respond by October of this year.

The second phase will be to create a consortium of universities to collaborate with suppliers, retailers, NGO’s and governments to create a global database of information of the cradle to grave impact of the products that are sold in Walmart stores. They intend to engage a software company create an open platform to power the index.

The Third and final phase will be to translate the data captured in phase two into a standard that informs consumers about the sustainability of products.

This is how the statement was reported in bloomberg.com today,

Wal-Mart’s unilateral decision to put its purchasing and communication power behind going green also shows that a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change. By rolling out an environmental labeling program disclosing to consumers the environmental costs of making products sold at Wal-Mart, the $401 billion retail behemoth has transformed green standards from nice-to-have to must-have.

We will be discussing this for some time to come.

-Fred

What we’re trying to do here at the Center for Collective Intelligence with our Climate Collaboratorium is what we call radically open computer modeling to bring the spirit of systems like Wikipedia and Linux to the problem of global climate change. We want thousands of people all over the world to be able to interact with and modify the system, create real quantitative representations of plans for what we could do.

We also want them to be able to discuss the advantages and disadvantages of different plans in an organized way, and we want them to be able to collectively select the most promising plans from all the possibilities that have been proposed.

In his interview on the MIT Sloan Business School Website, All Together Now (or, Can Collective Intelligence Save the Planet?) Professor Malone outlines his belief that the potential for collective intelligence can be a very powerful tool to address the challenges raised by Global Climate Change.

To solve the climate problem, we need a huge range of expertise. We’ve got to know things about the physics of the upper atmosphere and the chemistry of the oceans and the economics of carbon taxes and the psychology of consumers who are making decisions about when to drive versus take public transportation. Collective intelligence mechanisms are ideal for bringing together those diverse kinds of knowledge.

To download a copy of the first working paper created by the Climate Collabotorium click on this-Can We Exploit Collective Intelligence for Collaborative Deliberation? The Case of the Climate Change Collaboratorium.

-FR

Crowdsourcing has the potential to correct a long-standing human conundrum. The amount of knowledge and talent dispersed among the numerous members of our species has always vastly outstripped our capacity to harness those invaluable quantaties. Instead, it withers on the vine for want of an outlet. Crowdsourcing is the mechanism by which such talent and knowledge is matched to those in need of it. It poses a tantalizing question: What if the solutions to our greatest problems weren’t waiting to be conceived, but already existed somewhere, just waiting to be found, in the warp and weave of this vibrant human network?”

Now here’s the interesting part in reference to this blog. When I met Clay Shirky I began to consider the possibility that there might be some way to utilize intelligence of the “crowd” to solve some of the problems presented by Climate Change and/or Global Warming. So in that spirit I picked up “Crowdsourcing.” I am reading it (finished it two days, it was that engrossing), and there on page 166, I see that the MIT Center For Collective Intelligence is attempting to “crowdsource” the viability of solutions to health care and yes…climate change. Fair enough, but what I found upon visiting the Center for Collective Intelligence is fascinating. There is an interview with Professor Thomas Malone, who launched the Center for Collective Intelligence. In the interview All Together Now (or, Can Collective Intelligence Save the Planet?), Malone outlines what the Center is doing as well as, his thoughts on sustainability in general. It will challenge how many of us view sustainability and will force us to look differently at how we approach solutions. In part 2 of this post,  I will discuss the Malone interview and describe the Center’s activities around climate change as well as sustainability in general. -FR

-FR

But here’s a lesson many executives have yet to learn: A commitment to improving social and environmental conditions in the developing countries where a company operates is the key to maximizing the profits and growth of those operations.

That’s the conclusion we drew after studying more than 200 companies. As a group, the companies most engaged in social and environmental sustainability are also the most profitable

Particularly compelling , according to the report are the six major competitive advantages that sustainable management yields. They are:

• A Sterling Reputation
• Better Employees
• More Efficient Production
• A Smoother Relationship With Authorities
• Better Cooridnation-Internally And With Suppliers
• Suppliers That Are More Reliable and Flexible

I recommend that you take a look at the report. Incrementally it seems, there is more and more evidence supporting idea that there are significant positive business aspects to implementing an executable sustainability strategy.

-FR

A lively discussion took place when the question of ROI was brought up during the question and answer period, and it is clear that ROI is on every-one’s mind. As company’s weigh the costs and associated benefits from the implementation of an effective sustainability strategy, I sense there is still feeling among many that sustainability is high cost low reward scenario. That may be changing, and it should be changing. The challenge is in demonstrating that there are direct ROI benefits from an effectively implemented sustainability strategy.

Interestingly, yesterday morning I received via my RSS feed the following report from the Aberdeen Group, The ROI of Sustainability: Making the Business Case. I highly recommend that you read it. Their research based on interviews with of 200 enterprises came up will the following conclusions.

Using six key performance indicators to distinguish Best-In-Class companies they found that those BIC companies achieved a 6% to 10% reduction in costs while making strides in in retaining customers.

Best-in Class-Performance

• 9% reduction in carbon footprint
• 6% reduction in energy costs
• 7% reduction in facilities costs
• 7% reduction in transportation/logistics costs
• 16% increase in customer retention

The survey showed that the companies identified as Best-In-Class shared the following characteristics:

Competitive Maturity Assessment

• The Best in Class are 52% more likely to incorporate sustainability metrics into value chain performance management
• 74& of the Best-In-Class have an organization wide sustainability policy compared to 58% of all others

The report also highlighted the need d to track, measure and communicate sustainability progress, successes, challenges and areas of opportunity.

-FR