July 1, 2013 — Ten years ago, few of the world’s largest companies made investments in sustainability, mentioned their greenhouse gas emissions to shareholders or had employees with the word sustainability in their job titles. Today, half are publishing sustainability reports and making progress on reducing greenhouse gas emissions, and chief sustainability officer has become an important and well-regarded profession.
More and more, companies are realizing sustainability issues are business and economic issues, and business leaders are accountable for outcomes, whether meeting greenhouse gas reduction targets, managing wastewater or curtailing human rights violations in the supply chain. “Companies are designed to come up with solutions and to sell the services and products,” says Andrea Moffat, vice president of the corporate program at Ceres, a Boston-based nonprofit that works with business leaders on sustainability. “Sustainability challenges like climate, human rights [and] water scarcity are becoming very mainstream, so they are looking to be part of how to drive business success through coming up with solutions. This is the exciting part of shifting to a 21st century sustainable global economy.”
In business, executive management sets company strategy by addressing risks and driving competitive advantage. Sustainability issues are part of both. Climate change and water scarcity, for example, add significant risks to the world’s leading companies, whether through extreme weather events or supply chain management. The top tier at companies is also where investment decisions are made that impact operating costs. Issues such as pursuing energy efficiency and renewable energy to save money and achieve other benefits are influencing these decisions now more than ever. Sustainable investments for business growth are even being made, such as Google’s venture fund to invest in clean technology development, Moffat says.
Of Procter & Gamble’s 140 manufacturing sites, 45 are zero waste, meaning nothing leaves the plants to go to landfills. Of the material that enters the factories, 96 percent of it leaves in products.
Sustainability issues can still be a hard sell at the board level, but they are slowly becoming a core component of doing business. And companies leading the way on sustainability issues all seem to have one thing in common: They integrate the financial, social and environmental risks and opportunities around sustainability as they would any other aspect of their business — that is, without special treatment.
When Procter & Gamble’s former CEO Bob McDonald took the reins of the consumer products giant in 2009, he was under pressure from rising commodity prices and slow growth in some developed markets. Still, sustainability ranked high for building profitability because the company had begun to put a price on waste and on greenhouse gas emissions attributable to products, from production to use by consumers. The company developed an environmental vision: power its manufacturing plants with 100 percent renewable energy, use 100 percent renewable materials in its products, send no waste to landfills and design products that are better for the environment. All of those have added value to the company, McDonald says, and added to the bottom line. Incorporating these goals into the company’s annual $2 billion research-and-development budget as it would any other priority, McDonald says, has driven innovation toward sustainability.
Of P&G’s 140 manufacturing sites, 45 are zero waste, meaning nothing leaves the plants to go to landfills. Of the material that enters the factories, 96 percent of it leaves in products. Another 3 percent is recycled, and 1 percent is reused. For instance, scraps from diaper manufacturing are used to make parking barriers, and roof tiles are made from paper refuse that is a by-product from other manufacturing. Eliminating waste has resulted in $1 billion per year in savings.
What’s P&G’s secret? All company leaders are involved in sustainability decisions, says Len Sauers, vice president for global sustainability, and there is a directive that sustainability be a part of everybody’s job.
Sauers doesn’t get a free pass on initiatives he brings to the table, however. When he sought to replace a foam-based product packaging with a renewable material, he sat down with the finance folks to explain why it made sense to switch to something that was 20 cents more per pound. “You have to go in there with a business case as to why you want to make that change,” he says. “As a sustainability person, I want the company to move from a petroleum product to renewables because renewables use less greenhouse gas emissions in their production.” That reasoning doesn’t necessarily fly on its own, though. Sauers also has to put numbers on business risk and brand value, something finance people understand. “Renewable materials can give you more flexibility in materials supply,” he says. “It can be renewable materials that a consumer is responsive to and [that] drive a purchase decision. It can … build brand equity. There is a whole host of reasons.”