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BPIR Management Brief - Volume 4, Issue 10

Sustainable Development

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The BPIR Improvement Cycle • Identify/Select an Area for Improvement • Measure Performance • Benchmark
The BPIR Improvement Cycle • Identify/Select an Area for Improvement • Measure Performance • Benchmark

The BPIR Improvement Cycle

Identify/Select an Area for Improvement

• Measure Performance

• Benchmark Performance

• Identify a Relevant Improvement Approach or Strategy

• Learn How to Implement

• Identify Best Practice Organisations

• Research Further Information

• Implement a Best Practice Approach

Practice Organisations • Research Further Information • Implement a Best Practice Approach • Review and Calibrate

• Review and Calibrate

Welcome to Volume 4, Issue 10, of the BPIR.com Management Brief series

BPIR.com Management Briefs provide best practices, innovative ideas and research data on topics and tools that will help you to stay up-to-date on the latest international business trends and practices. Most of the topics for the Management Briefs are chosen by our members, who submit their suggestions through the members’ Research Request Service. Read and absorb, and then pass on to your staff and/or colleagues so they can do the same.

Sustainable Development: The Definition

At a global level, sustainability may be defined as meeting the needs of the present generation without compromising the ability of future generations to meet their needs. [1] Sustainability at the level of individual businesses may be defined as seeking to find a balance between financial profitability, sustainable economic development, and social responsibility.

The Stage

Sustainable development has both national and local business implications. On a macro scale, sustainable development encompasses global concerns and national economies while on a micro scale, it is associated with the practices of individual businesses and people. Sustainable development practices can vary greatly between organisations because of the specific context in which they operate. This creates a unique opportunity for peer organisations to learn from each other’s experiences. Sustainable development can save money, create a more equitable world, and lead to a healthier, more productive work force.

Authors: Neil Crawford, BPIR.com Limited Researcher Assistance: Kevin McKenna, Centre for Organisational Excellence Research

Expert Opinion

Over the last 20 years, there has been a growing realisation that the current models of economic and social development are unsustainable. The loss of biodiversity, created by felling rainforests, over-fishing, and negative consumption patterns, is having a negative impact on our environment and our climate. In reality, our way of life is placing an increasing burden on the planet. The Sustainable Development Unit (SDU) of the UK Department for Environment, Food and Rural Affairs (DEFRA) believes that a decisive move toward more sustainable development is urgently needed. Not only is it the right thing to do – it is also in our long-term collective best interest. In the UK, the following key areas relating to sustainability have been prioritised for immediate action:

• Sustainable consumption and production;

• Climate change and energy;

• Natural resource protection and environmental enhancement;

• Sustainable communities. [2]

Integrated Sustainable Development

Sustainable development initiatives are much more effective when taking in a wide spectrum of issues and treating them as an integrated whole. Placet and colleagues, from the Energy Policy and Planning Group at the Pacific Northwest National Laboratory in the United States, note [3] that effective sustainable development involves an integrated approach to:

1. Environmental stewardship;

2. Social responsibility; and

3. Economic prosperity.

Each of these elements is closely related to the well-being of organisations, and of society as a whole. The formation of an effective sustainability-focused business strategy requires each element to interrelate and support the others. Alarmingly, researchers have estimated that if the per-capita resource consumption rates currently found in the developed world were extrapolated to the developing world, an equivalent of three Earths would be required to support the projected rate of resource consumption. [4] This, of course, is not possible, and has led those advocating sustainability to estimate [5] that resource consumption in all industries must decrease by at least a factor of

four in order to secure a sustainable future. To achieve this, “radical innovation” practices would be needed, for example:

• Developing new processes that have less impact upon the environment;

• Creating new products that are better for—or improve—the environment;

• Formulating improved business processes that incorporate social and environmental considerations;

• Inventing totally new industries that are devoted to improving environmental and social conditions.

Since sustainability practices need to be adapted to fit situationsaffectingvariousindustries,locations,andcultures that are subject to unique and evolving environmental and social pressures, there is a need for great flexibility in their implementation. A high degree of customisation, time, and careful planning is required to develop sustainability strategies. Figure 1, see below, adapted from Placet and colleagues, depicts three interrelated and mutually supporting key elements of sustainable development:

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Figure 1: Three Elements of Sustainable Development

Unified Energy Strategy Brings Savings

Andrew Bray, the European head of Johnson Controls (a specialist energy management organisation), observes [6] that many organisations are often not aware of the full impact of price increases upon their operations, as they do not have a unified energy strategy. And because they lack

accurate trend data, there is often confusion about where energy savings can actually be made. This is compounded by the fact that the responsibility for energy management is commonly split between the purchasing, finance, and health and safety departments. However, the following organisations, all based in the UK, have made significant efforts towards sustainability:

• HSBC, the second largest bank in the world, decided to become carbon neutral in 2004, and has subsequently invested £650,000 towards climate-change research;

• Dow Chemicals has reduced energy consumption per unit of production by 21 per cent since 1994, producing cumulative savings of £1.6 billion;

• Chemical group BASF, through the adoption of energy-efficiency measures, reduced annual costs at one of its sites by £340 million.

Stable Economic Growth is a Precursor for Sustainable Development

Stable levels of economic growth have been recognised as an important precursor for sustainable development. Joachim Spangenberg, vice-president of the Sustainable Europe Research Institute in Vienna, Austria, writes [7] that the UK government characterised sustainable development as being directed towards the achievement of four main objectives:

1. Social progress that recognises the needs of everyone;

2. Effective environmental protection;

3. Prudent use of natural resources; and,

4. Maintenance of high and stable levels of economic growth and employment.

To achieve sustainability at a given rate of economic growth, government policies are required that:

• Seek to improve resource productivity through efficiency standards;

• Provide economic incentives; and

• Encourage innovation.

Spangenberg believes that it is important to carefully limit the increases in production per capita in order to achieve economic sustainability. (See Spangenberg’s formula for economic growth, which has been recorded in the Measures section of this Management Brief, page 11.)

Management of World Energy Sources

José Goldemberg [8] , an author and statesman who was honoured by Time magazine as being one of the “Heroes of the Environment,” cites the chief economist of the International Energy Agency (IEA) Fatih Birol as saying that, “on its current course, the future global energy situation will remain dirty, vulnerable, and expensive.” [9]

Figure 2, see below, adapted from Goldemberg, depicts current world energy sources. It shows that exhaustible fossil fuels represent 80.1 per cent of the current world energy supply, nuclear energy 6.3 per cent, and renewables 13.6 per cent. It should be noted that a large part (8.5 per cent) of the renewable component comprises traditional biomass, which is used inefficiently and in highly polluting ways, often leading to deforestation.

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Figure 2: Overview of Global Energy Sources

At the current rates of use, the known reserves of oil are expected to last around 41 years, natural gas 64 years and coal 155 years. In order to meet our perceived future needs, sustainable energy systems must comprise four important components, i.e.:

• Physical energy supplies – through securing adequate supplies with an extended life to meet future energy needs;

• Environmental management – related to the use of our present energy supplies at local, regional, and global levels, including addressing global warming and catastrophic climate change;

• Geopolitical risk management – related to security risks and possible conflicts associated with escalating competition for unevenly distributed energy resources;

• Equity of access to energy (a global humanitarian issue). The sufficient growth of energy supplies for meeting human needs is a key element of sustainability goals.

With regard to the better management of the world’s energy resources, the “Stern Review of the Economics of

Climate Change” [10] points out that effective disincentives to the burning of fossil fuels are needed. It estimates that that pricing carbon at US$100 per ton would go a long way toward reducing the deforestation of tropical forests, which contributes approximately 15 per cent of all carbon emissions. By assigning a price to the carbon stored in forests, i.e. approximately 100 tons of carbon per hectare,

a further impetus is created to reduce carbon emissions into the atmosphere.

With the rising price of oil, and the probability that the most easily accessible fossil fuel reserves are dwindling,

there is a great incentive to look for alternative solutions, the most likely of which are renewable sources such as hydroelectric, biomass, wind, solar, geothermal, and marine tidal. Other options, such as, (a) synthetic fuels from coal, (b) biomass refineries for the production of a wide variety of fuels, and (c) carbon capture and storage, will also benefit from higher oil prices. However, each of these options poses additional environmental problems. The main danger is that if developing countries simply follow the energy trajectory of those countries that are already developed, the course correction needed to ensure

a sustainable future for the world’s energy supplies will not be possible.

Biofuels and Food Supplies

The impact on net food producers and consumers in low- income countries associated with the anticipated large- scale global expansion of biofuels production presents serious challenges for food policy planners. It also raises questions as to whether sustainable development targets can be reached.

Rosamond Naylor director of Stanford University’s programme on food security and the environment, states that “growth in biofuels production capacity offers many promises, and many threats, concerning the future course of sustainable development. The design and implementation of sustainability audits is critical as the biofuels industry develops, with clear metrics for evaluating the environmental and social consequences of biofuels and feedstock production, and for ensuring that management

and governance practices are compatible with pre- determined sustainability goals. In defence of the world’s poorest populations, it is urgent that the ripple effects of crop-based biofuels on food security and the environmental be understood soon and considered carefully in the design of development policies and investments.” [11]

Measures and Management of Sustainability: Triple Bottom Line

A feature article in the June 2006 Business Credit Journal

described a sustainable business as an organisation that:

• Simultaneously enhances natural, social, and economic capital;

• Assumes product stewardship by enabling customers to return products at the end of their life for re-manufacturing into new generation products;

• Provides tangible social benefits to employees, customers, suppliers, vendors, and the local community;

• Improves its ability to use resources efficiently, closes material cycles, uses renewable energy, and practises green procurement (i.e. procurement policies that seek to provide high quality, while continuously reducing destructive environmental and social impacts);

• Incorporates value over the long term, rather than seeking unsustainable short-term results;

• Measures, reports, and operates using environmental, social, and financial performance criteria i.e. using “triple bottom line” methodologies. [12]

Triple Bottom Line and Business Sustainability

Greater stakeholder activism, along with increased global production and trading, has led to an increasingly

complex management environment. Organisations are developing an increasing interest in sustainability, which

is leading them to focus upon their “triple bottom line”

(i.e. the balance of economic, social, and environmental performance factors).

Dr. Barry Colbert and Dr. Elizabeth Kurucz, senior partners with Stakeholder Research Associates from Ontario, Canada, write that changing expectations of society have brought new challenges to business leaders. [13] Reportedly, 68 per cent of the top 250 global companies on the Fortune 500 list have embraced triple bottom line (TBL) public reporting. They have also sought international honours such as those associated with the Dow Jones Sustainability Index, an award given to the world’s most sustainable organisations. TBL reporting may offer a useful framework

for rethinking business operations. The authors conducted extensive case studies using three Canadian companies, and discovered that each had conceptualised TBL according to the business environment in which they operated. The following three separate views of sustainability were reported:

1. A balanced operational view, in which the

primary objective was to make a reasonable profit, while managing the constraints imposed by stakeholders and thereby sustaining the business;

2. An integrated operational view, which built

upon sustainable competitive advantage, by integrating synergistically with the interests of the key organisational stakeholders (i.e., employees, customers, investors, communities, and suppliers);

3. An integrated strategic view of business sustainability, in which the organisation’s stakeholder integration model was leveraged at a global level. New ventures sought out fresh markets and these simultaneously remedied global problems, while making a profit in the process. Figure 3, see below, adapted from Colbert and Kurucz, highlights each of the three distinctive viewpoints.

ISO 14001 Standard for Environmental Management Systems

Joel Makower, the CEO of Greener World Media in the United States, states that the growth in Environmental Management Systems (EMS) represents an indicator of the adoption of environmental responsibility by companies worldwide. [14] The International Organization for Standardization ISO 14001 standard for EMS provides a universal methodology with which organisations can monitor their environmental performance. Compliance with ISO 14001 provides a universally understood system for addressing environmental impacts. However, at an international level, certification varies widely, with Japan and China leading the world. Figure 4, see below, adapted from Makower, depicts the top ten countries that achieved ISO14001 certification in 2006.

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Figure 4: Top Ten Countries Achieving
ISO 14001 Certification, 2006

Intent

2. Balanced Operational

2. Integrated Operational

3. Integrated Strategic

Sustainability Objective

Maximise organisational value, subject to stakeholder constraints

Simultaneous value-creation for all organisational stakeholders

Leverage integrated stakeholder view to create organisational value, and global society value

Sustainability Focus

• Current operations

• Current operations

• Organisation as economic entity

• Licence to operate

• Industry competitive advantage

• Corporate brand

• Local stakeholder relationships

• Organisation self-image

• Global human welfare

Sustainability Goal

Mitigate business risks by negotiating trade-offs

Build sustainable competitive advantage by leveraging complementary aspects

Reorient business growth by broadening contextual and capability concepts

Figure 3: Three Conceptual Positions Associated with Triple Bottom Line Reporting

Energy Efficient Buildings

According to DEFRA, new buildings that have been built to current industry standards are 40 per cent more energy efficient than those built 5 years ago. In addition, in order to spread best practices further a-field, sustainable construction strategies for both the domestic and commercial sectors are being reviewed. Bill Watts, a senior partner at British building services engineering firm Max Fordham, states that there has been a boom in eco-friendly architecture in recent years. [6] Watts believes that proposed European Union (EU) directives relating to the energy performance of buildings will have a major impact on how firms treat energy management. The directive requires all buildings in the EU to be ranked in terms of their energy efficiency. According to Watts, this will have an impact on property owners, because any stock labelled as having poor energy efficiency may lose value. It is interesting that it is already possible for organisations to become self- sufficient in energy usage. As an example, the UK-based Renewable Energy Systems has redesigned its headquarters to maximise energy efficiency, and is completely powered by wind and solar energy, which are captured and converted on site. Biofuels are also grown in the fields surrounding the Renewable Energy Systems buildings.

Sustainable Responsible Design

According to the Design Wales (UK) definition, Sustainable Responsible Design (SRD) should follow a holistic and multi-stakeholder approach, taking into account all key environmental, social, and economic impacts throughout the lifecycle of products and packages, without unduly compromising other criteria such as performance, aesthetics, function, quality, and cost. Frank O’Connor and Iain Cox of Design Wales believe that as supply chain pressures, market demands, and legislation push SRD to the top of the agenda, it will become increasingly important to organisations worldwide. [15] SRD involves far more than products, processes, and services. It encompasses all aspects of an organisation, and requires all stakeholders to carefully examine their beliefs and values. SRD includes the following aspects:

• Choice of materials;

• Employing appropriate manufacturing processes (i.e. those that have minimum adverse environmental impact and minimise energy use);

• Designing products for life, by balancing functionality, comfort, durability, style, and aesthetics;

• Supporting local economies by providing quality skilled employment;

• Making products that are a delight to own; and,

• Calculating the lifecycle costs of products. A fundamental component for the success of SRD is for governments to encourage and enable lifecycle costing, so that industry players and consumers understand the true cost of their actions.

Renewable Energy for Hospitals

As hospitals have such high energy demands, renewable energy sources often offer attractive and cost-effective options. [16] The National Health Service in the UK reportedly emits—from energy use alone—1 million tonnes of carbon per annum. A lack of disposable income for hospitals and other public sector organisations makes it difficult for them to fund renewable energy systems. However, this lack of funding can be offset by using Renewable Obligation Certificates (ROC). Legislation enacted in the UK requires electricity suppliers to provide a portion of their sales from renewable energy sources, and renewable obligation orders are issued annually that detail the level of obligation required by suppliers along with the “buy-out” price. ROCs, which are held in a register as electronic certificates, are issued for each megawatt-hour of eligible renewable output. Suppliers meet their obligations by presenting ROCs. Where suppliers do not have enough of these to cover their obligation, they must make a payment into the buy-out fund. (ROCs may be also sold entirely separately from the electricity produced.) Once on-site generation has been established, hospitals can meet some or all of their energy needs through renewables, and reinvest the money acquired from the sale of their ROCs. Moving to renewables can also assist hospitals to make carbon savings for the local community. It is expected that in addition to the exemption from the climate change levy for electricity from renewables, the funds derived from the sale of ROCs will provide £1 billion-worth of support per year by 2010. This will enable the government to provide financial support towards the development of renewable energy technologies. [17]

Healthy and Productive Working Environments

Theddi Chappell, CEO of Sustainable Values Inc. in the United States, believes that the framework for establishing value is changing to include factors that are not only economic, but also social and environmental. [18] Investors increasingly balance longer-term environmental and social costs against solely bottom-line results. They

weigh up the use of products and practices that either deplete or destroy environmental resources against savings from reduced water and energy consumption, and the potential for a healthier work environment and increased worker productivity. This leads to the need to consider complex issues such as risk assessment and the enhanced marketability of a particular building, product or company, because of its association with environmental responsibility. The following significant developments in relation to building standards have been recently created:

• Green building standards and green building councils have been created in 17 countries worldwide, including the LEED (Leadership in Energy and Environmental Design) and Green Globes rating systems in the United States and Canada;

• The United Nations Environment Programme was established as a worldwide initiative to monitor the environmental impact of the building and construction industries, as well as provide guidelines concerning environmental issues, products, and practices;

• In May 2006, the US Conference of Mayors resolved that all city buildings should be carbon- neutral by 2030;

• The provision of energy tax credits by a growing number of states for the use of energy-efficient practices and systems.

Survey and Research Data

Sustainable Development – University Students’Viewpoints

In 2006, the Universities and Colleges Admissions Service (UCAS) in the United Kingdom surveyed 54,240 people who were applying for higher education. The objective was to research the opinions of potential future leaders about the challenges of sustainable development.

• 91% believed that the effects of climate change would affect them personally, and anticipated by their early 40s to be living in a world that was undergoing environmental stress, with shortages, an increasing gap between rich and poor, and wars being fought over access to water;

• 85% thought that survival into the 22nd century was possible with changed lifestyles;

• 90% felt that governments should lead the necessary changes;

• 70% believed that individuals were the most effective agents for urgent change, and 47% believed that business was the appropriate vehicle for change. [19]

Sustainability Reporting – UK and Australian Disclosures

The UK’s Chartered Institute of Management Accountants surveyed corporate sustainability reporting in the UK and Australia. The external reports of 100 large companies from both countries were examined with performance- related disclosures being made by the following numbers of organisations:

1. Commitment to sustainability-related performance measurement or improvement:

65 Australia / 88 UK;

2. Quantified measures of performance (e.g. tonnes of carbon dioxide): 29 Australia / 77 UK;

3. Identification of specified targets:

Australia / 59 UK;

4. Performance against these targets: 12 Australia / 43 UK;

5. Future performance targets: 15 Australia / 46 UK;

6. Acknowledgment of measures used within a management system: 23 Australia / 33 UK;

7. Identification of social and environmental performance issues that influence decision making or changes in processes: 15 Australia / 32 UK. [20]

Sustainable Business and Green Issues

Two 2007 surveys concerning sustainable development, carried out by First Conference Ltd. in the UK, reported that:

• 59% of 271 supply chain executives ranked green issues as important or very important to their companies’ strategies;

• 98% of the 188 procurement professionals believed green procurement will continue to expand, despite the fact that only 51% were willing to pay a premium for eco-friendly products;

• 55% of 188 procurement professionals indicated that green products or services represented less than 10% of their current sourcing. [21]

Sustainable Business Fosters Innovation

In a 2007 survey by Siemens and McGraw-Hill Construction concerning sustainable business practices in the US, 84% of respondents at the CFO or CEO level indicated that they were very conscious of using green or sustainable practices when considering new facilities, and believed that green construction was important to their organisation’s best interests for economic reasons, market differentiation, and for competitive advantage. Rising energy costs were identified as a fundamental driver of green building activities. Government and internal management were also strong drivers of sustainable activities. Other findings included:

• 63% of CEOs recognised financial benefits from green building, and 67% recognised specific operating-cost benefits;

• 60% of CFOs recognised the market differentiation that sustainability activities and green building provided (more than half of other respondents also believed this was a benefit);

• 57% believed that sustainable methodologies fostered innovation within their organisations. [22]

Sustainable Development and Business Opportunities

In 2007, the McKinsey Quarterly conducted a survey covering sustainable development by multi-national corporations (MNC) based in the United States. The following responses were received from 198 medium/large MNCs:

• 46% of the executives indicated that corporate citizenship and sustainability were a potential major source of business opportunities;

• 66% believed that corporate citizenship and sustainability issues were of growing importance for their business;

• 92% cited “enhancing corporate reputation and brand” as extremely important;

• The three greatest challenges currently facing corporate citizenship programmes were:

measuring results (75%); coping with limited financial and staffing resources (58%); and aligning with business objectives (57%);

• The following top three activities were identified as the main focus of citizenship and sustainability initiatives: community and stakeholder

involvement (64%); corporate giving to worthy causes (55%); and environmental sustainability/ climate change (52%). [23]

Sustainable Business – Environmental Products Preferred

In a 2005 Steelcase Workplace Index Survey concerning U.S. sustainable business practices, more than half of the respondents believed that environmental and sustainability issues were a “high priority” for their organisations.

• 74% reported that their organisation “always” or “often” took steps to improve environmental standards, e.g. using less paper, recycling, and shutting off lights and other electrical devices when not in use;

• 54% said their company purchased recyclable or sustainable products and furniture;

• 77% under the age of 55 preferred employers to purchase environmental products, while 50% over the age of 55 preferred employers to purchase environmental products;

• 61% were more likely to buy an environmentally friendly product even if it cost more than another product;

• 95% would be more likely to buy a product with environmental attributes when the price remained the same. [24]

Example Cases

Valuable

organisations:

lessons

can

be

learned

from

the

following

organisations: lessons can be learned from the following Co-operative Financial Services (CFS), UK Environmental

Co-operative Financial Services (CFS), UK Environmental design brings energy savings

95% of the energy used by Co-operative Financial Services (CFS) came from renewable sources. CFS had signed a long-term contract (worth £4m) with a wind power provider to supply energy from six specially constructed wind turbines. Energy costs were 10% below market value. In addition, the façade of the CFS 400-ft service tower in Manchester was covered with 7,000 solar panels. Swiss Re demonstrated how office design and energy conservation could dovetail with the £130m construction of its London headquarters. The building’s aerodynamic

structure creates a natural ventilation system, thus reducing the need for conventional air conditioning. Other features include a double-skinned, energy-efficient façade, light- wells to maximise the penetration of natural light, and movement and light sensors to minimise the unnecessary use of artificial lighting. No parking spaces were provided for cars. However, room was provided for bicycles, and showers and changing facilities provided for riders. [6]

David Colwell Design (DCD), UK Sustainable Responsible Design Sustainable Responsible Design

Colwell, an internationally acclaimed furniture designer, passionately embraced sustainable design thinking and practice. His designs made use of fast-grown ash wood, plus steam-bending techniques that offered production efficiency, strength, and low energy use. A market was also provided for otherwise marginal forest products. Ash, particularly well suited to UK conditions, is strongest when fast-grown. It is renowned for its ability to absorb atmospheric carbons, is relatively inexpensive and self- seeding, has no sapwood, and therefore creates less waste. Colwell’s products are sustainable and responsible, having increased performance, functionality, and quality. Sustainable Responsible Design (SRD) was seen to offer an opportunity for developing new products and technologies that could potentially revive the manufacturing sector. Colwell believed that with the right commitment and true lifecycle costing, SRD would be entirely possible. [15]

Guayaki Sustainable Rainforest Products, USA Sustainable development - fair premium prices Sustainable development - fair premium prices

Guayaki plans to market a South American rainforest drink in the United States, which will create economic opportunities via a sustainable market-driven restoration project that protects the rainforest and the way of life of South American farmers. Sales in the US will help support re-forestation, upgrades to housing and schools, and improved medical care. In order to provide native people with alternatives to destructive land use practices, fair and premium prices are paid creating an incentive for focusing on organic quality and sustainable land use. The area farmed is an important biological corridor for jaguar migration. Not only does Guayaki create a strong incentive for people to leave the forest standing, but it also has several projects underway to replant native tree species in deforested areas. [25]

IKEA International Group, Sweden Sustainable development embedded into business strategy Sustainable development embedded into business strategy

IKEA went through a series of costly environmental conflicts with associated media coverage, and consequently experienced a severe drop in its market share. IKEA reported that this represented a “wake up call”, causing it to see that environmental issues needed to play a central role in its overall business strategy. IKEA then established and began to implement a sustainable purchasing policy. This policy has continued over the years, leading to more environmentally friendly materials being used in products. In addition, a code of conduct was introduced as a part of all IKEA agreements with its suppliers. IKEA has now embedded sustainability considerations into its overall business strategy and its purchasing and sourcing activities. [26]

Amcor, Australia Triple Bottom Line (TBL) – business driven Triple Bottom Line (TBL) – business driven

Since Amcor traditionally reported on environmental

and social issues in its financial reports, TBL was not an accounting-driven exercise for the company, but business- driven. Amcor believed that without TBL, it would have been less successful commercially. Amcor was an active member of the World Business Council for Sustainable Development (WBCSD) and its managers attended WBCSD conferences. They also partnered with Earthwatch, with employees having the opportunity to participate in environmental programmes worldwide. TBL was seen as

a means of attracting good people, and thereby producing

better business results. Amcor was wary of regulations being

used for TBL because it believed that one size did not fit all.

It believed rather that guidelines would be more effective in

allowing organisations to do what best suited them. [27]

organisations to do what best suited them. [ 2 7 ] Pizza Fusion, USA Sustainable business

Pizza Fusion, USA Sustainable business defines organisation

Pizza Fusion shaped their whole business around sustainable products and practices. For example:

• Buildings were LEED certified;

• 98% of the food sold was organic;

• Stores used eco-friendly packaging, employee uniforms, and paints;

• Compact fluorescent bulbs reduced energy consumption;

• Countertops were constructed from 100% recycled detergent bottles;

• Store shelves were made from recycled panels

• Reclaimed wood was used to build tables and cutting boards;

• Interior walls used 95% recycled content and were locally manufactured;

• Insulation was made from recycled blue jeans

• Ceiling baffles comprised recycled composite board, and ceiling panels used 74% recycled aluminium cans and 24% post-industrial metals;

• Bamboo veneer covered fixtures;

• Hybrid vehicles made deliveries;

• It was also planned to use recycled glass bottles to create flooring tiles. [28]

recycled glass bottles to create flooring tiles. [ 2 8 ] JCPenney Co, USA Sustainable business

JCPenney Co, USA Sustainable business

A key feature of JCPenney’s sustainability initiatives was the investment of $75 million in Energy Management System technology, lighting retrofits, and high-efficiency heating, ventilating and air-conditioning (HVAC) systems. The Energy Management System enabled third party monitoring and scheduling of equipment. Web-based tools were provided, enabling managers to analyse energy use and costs. A dashboard system was planned to enable stores to benchmark their own energy use. Eco-friendly building features introduced included the use of:

• Local construction materials, thus minimising transportation;

• Carpet made from 100% recycled materials;

• Ceiling tiles using recycled materials;

• LED lights for exterior signs;

• Occupancy sensors to control lighting;

• Low-volatile organic compound paints, adhesives and sealants; and

• Low-consumption plumbing fixtures.

In 2006, 31,000 tonnes of greenhouse gas emissions were eliminated, and total energy consumption was reduced despite increases in store operating hours and square footage. [29]

in store operating hours and square footage. [ 2 9 ] Hubbard Foods Ltd, New Zealand

Hubbard Foods Ltd, New Zealand TBL reporting seeks profit

Hubbard believed that sustainability was both a moral obligation and a financial investment. Accordingly, their TBL report included the following targets:

1.

Core Company:

i

To achieve 11% brand market share of total cereals.

2.

People:

i

To commit a minimum of $50,000 for staff training per year;

ii

To reduce absenteeism to less than 8 days per employee per year;

iii

To donate 1% of net profit before tax in cash to charitable/not-for-profit organisations.

3.

Product:

i

To improve a minimum of two existing cereals nutritionally per year, by reducing fat, saturated fat, sugar or sodium;

4.

Environment:

i

To improve the carbon dioxide profile per kilogram of production;

ii

To reduce energy usage per kilogram of production by 5%;

iii

To qualify all recycling on site and target a minimum of 5% improvement. [30]

Measure and Evaluate Sustainable Development

The following provide examples of sustainability-related measurement systems:

Carbon Neutral Assessment: The term “Carbon Neutral” is a branded standard that has been established for voluntary actions to address matters related to climate change. Carbon Neutral status can be applied to entire companies, events, products, and services, and represents the point at which greenhouse gas emissions have been assessed, reduced where possible, and the remaining non-reducible emissions offset through energy efficiency, high-quality renewable energy or forestry projects. An independent auditing process is used to assess the application of the Carbon Neutral standard by organisations. [6]

Sustainable Economic Growth: Sustainable growth is described by the following formulae: It occurs when the (change in the economy) / (resource use) is greater than the growth in the economy, and this is also greater than the (change in the economy) / (workforce numbers) or d(Y/L) < dY < d(Y/R), where: Y = the size of an economy, dY = growth in the economy, L = the number of employed persons, Y/L = per capita production, R = resource use, and Y/R is the resource productivity of the economy. This measure provides a yardstick for measuring sustainability. If the inequality formula is found to be true then growth is sustainable; if the formula is not true then current growth is not sustainable. [7]

Triple Bottom Line Reporting (TBL): TBL (or Sustainability Reporting) measures and reports on business performance by focusing on three areas: financial profitability, environmental sustainability, and social responsibility. TBL provides a framework for businesses to focus on multi-dimensional goals, and to comply with social demands for greater business accountability and sustainable development.

Product Waste Minimisation and Environmental Release Levels: Greater environmental awareness is challenging organisations to re-examine their operational processes, products, and services. For competitive reasons, organisations strive to develop and provide products with little environmental impact. They seek products that can be recycled, reused, or disposed of safely. Organisations need to be able to respond to these challenges quickly and effectively, in order to remain competitive. Current practices for minimising or eliminating waste involve a wide range of initiatives to make sure valuable materials are not squandered. In addition, organisational processes are

investigated for their potential to reduce the amount of waste sent to landfills. Leading organisations often set ambitious “zero-waste” goals, which attempt to virtually eliminate waste bins by ensuring that waste is reused or recycled.

The following are examples of specific measures that

their

sustainability endeavours:

Product Waste: i.e. the quantity of product waste disposed of as a percentage of the total quantity of product produced for a given period, or the total quantity of waste disposed of for a given period, or the total time dedicated to waste disposal per period. Product waste may include by- products that are partly redeemable.

Waste Streams: i.e. the number of waste streams. This measure is useful for the analysis of waste within an organisation. Before a policy to reduce overall waste can be effective, all waste streams need to be identified. As these streams are eventually reduced and “dammed”, the number of streams is reduced as an indicator of progress. Waste streams can be found in any process, for instance, handling losses, cleaning losses, process losses, storage, materials handling, pumping, treatment, and even management waste, associated with decision-cycle times and production delays.

organisations

may

use

to

assess

the

impact

of

Cost of Waste, or Waste Disposal, or Handling: i.e. cost of waste or total waste handling/ treatment costs per quarter or year. This measure can be used to assess waste costs. The measure could be customised to assess many different types of waste, for example the cost of disposal, the cost of rejected materials, rework, in-process scrap, and returns.

Supplier/Contractor Waste/Recycling Rate: i.e. the percentage of raw materials supplied with recycled content per year, or the amount and type of wastes generated by suppliers during the previous period, or the number of waste minimisation initiatives implemented by—or in cooperation with—suppliers per year or during the previous period. This measure tracks the progress of suppliers (or supplier-related initiatives) in reducing waste or in supplying more environmentally friendly products, materials, and services.

Utility and Fossil Fuel Consumption: i.e. the total cost of utilities used per period, or the total quantity of energy consumed from all sources within the manufacturing processes (in joules per unit of manufactured output), or the ratio of the total energy or fuel consumption to the volume of total production and per employee, or the percentage of renewable and non-renewable raw materials turned into product and scrap per quarter or year, or the level

of raw materials and energy inputs per unit of production per quarter or year. These measures provide the means for assessing overall utility and energy use.

Product Design for Re-Use and Recycling, or Product Stewardship: i.e. the volume of recyclable or re-used packaging as a percentage of total packaging content used per quarter or year during the previous period, or the number of product units taken back for recycling or re-manufacture per quarter or year during previous period, or the percentage of total product offering designed for recycling or re-use per year versus previous period, or the weight of packaging materials used per volume or weight of product output. These measures quantify the commitment of organisations to protect the environment.

Environmental Spending: i.e. the level of R&D expenditure devoted to projects, activities or processes with environmental significance during a given period, or the expenditure on “clean” production technologies and

equipment as a percentage of total equipment costs during

a previous given period, or the percentage of company

annual sales revenue devoted to community and industry- sponsored pollution prevention and environmental protection programmes or activities during a previous given period. This is a measure of the investment into, and therefore commitment made toward, protecting the environment.

Environmental Risk Level: i.e. the rating of environmental

risk (process or material). Organisations with a strong focus on waste and environmental issues often rate such risk in terms of the “worst case scenario” of environmental impact

of processes or materials. This can be used when assessing

the suitability of those under consideration for inclusion or replacement. The rating should take account of all factors, including potential clean-up costs, regulatory body fines and re-compliance costs, time, reputation, disposal costs, and re-training costs. All of these factors can be combined to classify a process, material or activity with a risk level, which can then be used in the decision-making process when considering changes.

Environmental Risk – Total Potential Liability: i.e.

a rating of total potential environmental risk in terms

of cost (processes or material, or total of all risks). This measurement can be used to track progress in reducing the environmental impacts—or potential impacts—of processes within an organisation. The rating should take account of all factors, including clean-up costs, regulatory body fines and re-compliance costs, time, reputation, and re-training costs.

Environmental Compliance Performance – Punitive Actions: i.e. the number and type of environmentally- related legal or regulatory actions brought against the company during a previous period, or the number and cost of environmentally-related penalties and judgements levied for regulatory or legislative non-compliance during a previous period. This measure provides an indication of an organisation’s environmental performance, and in particular the number of actions or penalties resulting from non-compliance

Environmental Initiatives – Success: i.e. cost savings due to improved environmental management as a percentage of total sales costs plus savings. This measure provides management with an indication of the cost effectiveness of environmental initiatives.

Self-Assessments

Self-assessments can be used to find out how effective organisations are at implementing various strategies, tools or techniques. Figure 5, see below, provides an example of one of BPIR’s sustainability self-assessment tools.

We design our products to include the following criteria:

 
       

Programme for

   

Environmental Statement

Complete

Compliance

Partial

Compliance

Compliance in

Place

Seldom

Never

 

Score

4

3

2

1

0

1

Minimum use of all materials by quantity and number of types

         

2

Minimum use of energy in manufacture

         

3

Minimum consumption of energy while in use

         

4

Minimum need for packaging

         

5

Recyclable at the end of life

         

6

Measurement and management of production waste

         

7

Suppliers checked for environmental performance

         
 

Sub-Totals

         
 

Total

Points (Maximum Score = 28)

 

Recommendation – a score of less than 14 indicates that action should be taken immediately.

Figure 5: How Eco-friendly is Your Product Design? Find out now by completing the self-assessment (the full self-assessment can be found in the Self-Assessment area of BPIR.com).

Summary

It is in our collective interests—both locally and internationally—to energetically embrace sustainable development initiatives. Individual organisations have an important role to play in creating new sustainable products, processes, and industries. Sustainable development initiatives require considerable flexibility in their implementation, since each initiative is confronted with a unique set of factors that are related to its specific location, culture, and social demands. Such sustainable development initiatives require that three key elements be held in balance: economic prosperity, social responsibility, and environmental stewardship.

Sustainable development should not be addressed in isolation, and governments have a distinct role to play in setting policies and incentives that drive appropriate behaviour, and create the conditions for stable economic growth. While some 80 per cent of the world’s energy is currently derived from non-renewable fossil fuels, the growth in biofuels production capacity offers many promises, along with some challenges, towards the future course of sustainable development.

Organisations increasingly use Triple Bottom Line (TBL) reporting to communicate with their stakeholders. TBL focuses specifically on economic, social, and environmental performance. Each organisation tends to approach TBL reporting in a manner relating specifically to its own core business objectives. For example, some organisations may take an operational viewpoint, and hold to a primary objective of remaining profitable while managing the constraints imposed by stakeholders. Others may have an integrated conception of sustainability, in which the interests of employees, customers, investors, suppliers, and the local community are absorbed into the purposes of the organisation. And still others may have a global strategic perspective of sustainable development, forming alliances and new ventures in the creation of novel opportunities, while at the same time addressing societal and human welfare needs.

Sustainable development principles have led to the design and construction of energy efficient buildings, which are up to 40 per cent more efficient than those built 5 years ago. This has led to considerable energy savings, along with other benefits. Sustainable responsible design of products attempts to take into account all key environmental, social, and economic impacts throughout the lifecycle of products, without compromising performance, aesthetics, function, quality or cost. Finally, investors increasingly balance

longer-term environmental and social costs against solely bottom-line results. They weigh up factors such as the use of products and practices that either deplete or destroy environmental resources, against savings accrued from reduced water and energy consumption, along with the potential for a healthier work environment and increased worker productivity.

References

To access and read the articles and reports below go to the HTML Reference List for the Management Brief in the BPIR.com members area.

1. Coghlan, J., (2007), It’s inevitable that CSR regulations will be enacted, so let’s be prepared

to account for sustainability, Financial Management, p 1, Chartered Institute of Management Accountants, London.

2. Anonymous, (2008), www.sustainable-development.gov.uk, What is sustainable development?,

Department for Environment, Food and Rural Affairs (DEFRA), London.

3. Placet, M., Anderson, R., Fowler, K. M., (2005), Strategies for Sustainability, Research

Technology Management, Vol. 48, Iss. 5; pp 32-41, Industrial Research Institute, Inc., Arlington.

4. Holliday, C. and Pepper, J., (2001). Sustainability through the Market: Seven Keys to Success,

World Business Council for Sustainable Development, Geneva.

5. Lovins, L. H., Weizsäcker, E. von, and Lovins, A. B., (1997), The Factor Four, Earthscan, London.

6. Berens, C., (2006), Emission Statement, Financial Management, pp 12-16, Chartered Institute of

Management Accountants, London.

7. Spangenberg, J. H., (2004), A Great Step Further but Still More to Go, Environment, Vol. 46, Iss.

8; pp 42-46, Heldref Publications, Washington.

8. Goldemberg, J., (2007), Energy Choices Toward A Sustainable Future, Environment, Vol. 49, Iss

10; pp 7-18, Heldref Publications, Washington.

9. Anonymous, (11 March 2008), www.oecdobserver.org, Energy: Finding a New Gear, OECD

Observer, OECD, Paris.

10. Stern et al., (2007), Stern Review on the Economics of Climate Change, Cambridge University

Press, Cambridge.

11. Naylor, R. L., Liska, A. J., Burke, M. B., Falcon, W. P., (2007), The Ripple Effect: Biofuels,

Food Security, and the Environment, Environment, Vol. 49, Iss. 9; pp 31-44, Heldref Publications, Washington.

12. Anonymous, (2007), Green Businesses: Building Value Over The Long Term, Business Credit,

Vol. 108, Iss. 6; pp 28-35, National Association of Credit Management, Columbia.

13. Colbert, B. A., Kurucz, E. C., (2007), Three Conceptions of Triple Bottom Line Business

Sustainability and the Role for HRM, HR. Human Resource Planning, Vol. 30, Iss. 1; pp 21-29, Human Resource Planning Society, New York.

14. Makower, J., (5 March 2008), http://greenbiz.com, State of Green Business 2008, Greener World

Media, Inc. Oakland, California.

15. O’Connor, F., Cox, I., (2005), Sustainable Responsible Design: Insights from Wales (UK),

Design Management Review, Vol. 16, Iss. 3; pp 72-80, Design Management Institute, Boston

16. Anonymous, (2008), Renewed enthusiasm, HD. Foots Cray, Vol. 37, Iss. 4; pp 26-27, Wilmington

Publishing Ltd, Kent.

17.

Anonymous, (25 February 2008), www.ofgem.gov.uk/, Renewables Obligation, OFGEM,

London.

18. Chappell, T. W., (2007), The Value of “GREEN”, Area Development Site and Facility Planning,

Vol. 42, Iss. 1, pp 18-23, Halcyon Business Publications, Inc., Westbury.

19. Macleod, M., (2007), Who takes the lead?, Director, Vol. 60, Iss. 8; pp 48-50, Institute of

Directors, London.

20. Adams, C., Frost, G., (2006), CSR Reporting, Financial Management, pp 34-36, Chartered

Institute of Management Accountants, London.

21. Gentry, C. R., (2007), Crystal-Ball Predictions, Chain Store Age, Vol. 83, Iss. 10; p 94, Lebhar-

Friedman, Inc., New York.

22. Anonymous, (2007), Study Confirms Trend to Sustainability, Chain Store Age, Vol. 83, Iss. 10l;

p 30, Lebhar-Friedman, Inc., New York.

23. Ali, A. J., (2007), Corporate Citizenship and Sustainable Development, Advances in

Competitiveness Research, Vol. 15, Iss. 1/2; pp 1-3, American Society for Competitiveness, Indiana.

24. Anonymous, (2005), Inbox, Office Solutions, Vol. 22, Iss. 2; pp 8-11, Quality Publishing, Inc., Mt.

Airy.

25. LeBel, M., (2008), Protecting Rainforest and Way of Life, In Business, Vol. 29, Iss. 5; pp 12-13,

J.G. Press Inc., Emmaus.

26. Reeve, T., Steinhausen, J., (2007), Sustainable suppliers, sustainable markets, CMA

Management, Vol. 81, Iss. 2; pp 30-33, Society of Management Accountants of Canada, Hamilton.

27. Rice, M., (2004), Bottoming Out, Australian CPA, Vol. 74, Iss. 8; pp 26-31, CPA Australia,

Melbourne.

28. Field, K., (2007), Down to Earth Pizza, Chain Store Age, Vol. 83, Iss. 13; pp 114-116, Lebhar-

Friedman, Inc., New York.

29. Wilson, M., (2007), Reaching Higher, Chain Store Age, Vol. 83, Iss. 13; pp 70-71, Lebhar-

Friedman, Inc., New York.

30. Anonymous, (2008, April, 4), www.hubbards.co.nz, Nourishing the Nation, 2007, Hubbard Foods

Ltd, Auckland.

The BPIR Management Brief is a monthly publication delivered as one of the many membership

The BPIR Management Brief is a monthly publication delivered as one of the many membership benefits of the Business Performance Improvement Resource (BPIR). To find out more about membership, email membership@bpir.com or visit the homepage at www.bpir.com.

Issues of the BPIR Management Brief

Activity Based Management

Benchmarking

Business Continuity Planning

Business Excellence

Call Centre Representatives

Change Management

Compensation Schemes

Corporate Performance Management

Customer Complaints Resolution

Customer Knowledge Management

Customer Loyalty

Customer Market Segmentation

Customer Order Management

Customer Profitability Management

Customer Satisfaction Surveys

Customer Support and Service

Diversity Planning

Emotional Intelligence

Employee Development

Employee Motivation

Employee Suggestion Schemes

Ethical Business Practices

Flexible Work Arrangements

Knowledge Creation

Leadership Development

• • Lean Techniques • • • • • • • • • • •
Lean Techniques

Managing Innovation

New Product Development - Innovation Strategy

New Product Development Tools

On the Job Training

Performance Management

Product Lifecycle Management

Recruitment and Selection

Relationship Management

Succession Planning

Total Quality Management

Work and Life Balance

Workplace Conflict

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