A CLEAR Approach to Connect Sustainability to Competitive Strategy
This article is contributed by Eric Lowitt, the author of The Future of Value.
Last week I was interviewed for a Fox Small Business Center article. The topic was sustainability management practices for small business owners. As we got into the heart of our conversation, it struck me that the approach small business owners should use for sustainability management isn’t dissimilar to the approach larger businesses use. Indeed my research into the practices of Global Fortune 500 companies revealed a common set of activities companies use to tie sustainability to the creation of business value.
I had the privilege of interviewing over 100 sustainability, strategy, and finance managers at these companies for my forthcoming book, The Future of Value. These interviews suggest the trick to excellence in sustainability management is a commitment to continuously renew your company’s approach. After all, the assumptions companies use to plan their sustainability strategies constantly change. This needed commitment was underscored on July 10 when Australia’s Prime Minister announced carbon emissions would be taxed at about $25 USD starting next year.
The approach starts with an effort to craft a sustainability strategy and ‘ends’ with an effort to renew the company’s sustainability strategy. In between are steps to nurture a robust sustainability governance structure, execute the strategy, and analyze the results of your efforts. These five steps are the core of the CLEAR Model (see figure below).
Craft Sustainability Strategy
Regardless of a company’s size, a vision of what sustainability means to it is necessary to craft a plan to get there. My advice to companies small and large alike is to start with a clear definition of what ‘sustainability’ means and then ask two follow-up questions. First, who are the stakeholders most impacted by my company and its operations (e.g., employees, local communities, etc.). Second, what does sustainability mean to these stakeholders? Only with both sides of this puzzle can small business owners truly see the changes their operations require to become sustainable and effect positive change for their stakeholders.
Lead Strategy and Management Efforts
The best sustainability strategy left to its own devices won’t be executed unless at least one person is given responsibility for carrying out this sustainability strategy as part of his or her day job. The most effective sustainability programs engage the entire enterprise at every level, including the Board. Sustainable Market Leaders understand the importance of leadership and governance. That is why they install robust governance structures to guide their sustainability efforts. The most effective structures consist of four components:
- Central sustainability team
- Cross-department committee(s)
- Stakeholder advisory panel
- Board level sustainability oversight
Embed Sustainability into Value Chain Activities
Execution is truly where the rubber meets the road for companies’ sustainability efforts. Sustainability doesn’t always require large, disruptive change. Nor does it require significant amounts of cash. Often execution requires taking tasks and activities companies already do to a new level of efficacy. What is less known is that most companies already have the capabilities in place to bring their sustainability plans to life. New processes, expensive work-a-rounds, copious amount of cash investments aren’t always needed for successful execution. Rather what is regularly needed is a series of tweaks to processes, tasks, and activities. For example, a manufacturer of consumer packaged goods thought about whether his devices could be made from recycled materials. This question led to a series of changes to how his products are made. In the process, he both carried out a portion of his sustainability strategy and discovered cost savings within the first 6-8 months of his efforts.
Analyze and Communicate Sustainability Performance
Well thought out and designed metrics guide companies to make smart, CLEAR decisions. Some companies are going beyond analytics-as-smart-decision-making-tool to analytics-as-identifier-of-savings-and-growth. The path from point A to point B is more reliant on employee engagement than you might think. After all, business unit, function, and regional operations owners are reluctant to adopt additional metrics that might alter their ability to earn large bonuses.
Renew Sustainability Management Efforts
No company gets their sustainability efforts right the first time. Or third, fifth, or tenth time. The important thing to remember is that sustainability is both relatively new and continuously evolving. By working with many of the same stakeholders they identified in my first tip, small business owners are able to gather advice and guidance on how to improve their sustainability efforts from the folks most impacted by these efforts.
I want to invite readers of this post to use a tool I developed that will help compare your company’s CLEAR Model efforts with Global Fortune 500 industry peers’ efforts. The CLEAR Model is already helping companies reduce costs, pursue new revenue streams, and connect sustainability to competitive strategy.
Eric Lowitt is a student and teacher of strategy and sustainability – how companies grow, innovate, and become more agile by embracing sustainability. Having invested several years into the topic, Eric has authored or co-authored over 20 articles. His first book on the topic, The Future of Value, will be published by Jossey-Bass, a Wiley imprint, in September 2011. His work has been published by Forbes.com, Business Strategy Review, the Journal of Business Strategy, Inside Supply Management, and Corporate Governance, as well as news wires, industry publications and other media outlets. Sustainable Life Media and GreenBiz.com host Eric’s sustainability columns. Read more from Eric at http://www.ericlowitt.com/. Follow Eric on Twitter @EricLowitt
Source and Images Credit: Eric Lowitt