DISCUSSION Sustainability – Obvious, tricky to justify, hard to implement

by Yolanda Villafuerte _______18th October 2010
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by Neil Walmsley

Over the past decade, business leaders have been bombarded with endless encouragements to ‘go green’, minimise their carbon footprint, help tackle climate change, and generally cut down their impact upon the environment. These messages have come from academics, community groups, charities, government agencies, other businesses, and an endless procession of various environmental consultancies.

The general argument has been that companies that reduce their energy consumption, waste and overall environmental impact do better commercially. By doing this, companies can reduce their costs, sell ‘green’ products and services (and therefore giving them a competitive advantage) and generally improve their reputation. There is also a risk management element – as governments and international bodies have taken an increasingly tough approach on carbon emissions new regulations have started to appear that can have a significant impact upon corporate activities, such as the newly introduced Carbon Reduction Commitment (CRC) in the UK.

Surprisingly the recent recession actually gave the green agenda a significant boost, particularly among smaller companies. As the economy plummeted, companies found themselves forced to make significant cuts in their expenditure while also differentiating themselves from their competitors in an increasingly tough market – by cutting down on their energy and waste they reduced their costs while allowing them to rebrand themselves as a more sustainable, green company.

It does not appear, however, that the burst of enthusiasm for environmental sustainability has continued as markets have started to re-stabilise, for a number of reasons.

First, the recent economic downturn made people more concerned about their own economic security, and less concerned about the environment. As such, green goods and services became less appealing to many consumers, particularly if they were perceived to be more expensive than less environmentally friendly competitors. Recent scandals over the accuracy of climate scientists predictions have also lessened interest amongst individuals and business as to the need to cut down on carbon emissions.

Secondly, individuals and companies, while aware of the long term benefits from investing in more energy efficient goods and services, were less willing to take on further debt in the short term taking up green loans for better equipment, or go through the lengthy process to apply for green grants when they had more pressing short term issues to worry about. Nor have governments or banks been willing to continue to provide funding for green projects – many government grant schemes have been scrapped in the wake of the recession, and green loan schemes have been quietly shut down by high street banks.

There is also an enormous gap in funding available for companies. While small grants through the Carbon Trust do exist for low-cost projects (such as replacing boilers or installing more energy efficient lightbulbs), and there are numerous venture capitalists willing to invest millions in large-scale projects such as renewable energy facilities, there is a complete absence of funds available for anything in between.

Thirdly, and just as importantly, sustainability is not a quick or easy thing to achieve, for an individual or business, and the sustainability benchmarks are constantly changing – new standards and accreditation schemes are constantly appearing in a confusing and changing sustainability landscape. It takes careful planning, time, resources and a lot of hard work for an organisation to significantly reduce its wasteful practices and increase its sustainability, and there is no endpoint to the process. If a CEO is not certain their organisation might still be around in 6 months time, it is very hard to justify such a commitment, particularly if the outcomes are not guaranteed.

At this point it would be easy for many company leaders just to throw up their hands and give up, the short term pressures do seem overwhelming. However, most successful business leaders have the inability to look beyond the short term,  and in the long term sustainability is still the way to go, and it is not optional – in a recent survey by Accenture of 100 world business leaders, over 90% said that achieving sustainability was vital to their companies long term survival (before the recession, the majority of business leaders said that it was ‘important’). None of the environmental problems the planet faces are going to go away, and while in the wake of the recent recession many companies felt they could take their foot off the pedal somewhat, this will only be temporary. Governments will continue to exert increasing pressure on the private sector to do more, energy costs will continue to rise, and soon public concern over climate change will return.

So what should be done now? What is that companies could use to help them on the road to sustainability? Does the government need to provide more grants? Are further lobbying campaigns such as ‘Act on CO2’ required? Should there be more regulation? Do companies need more information? In short, the answers are yes, no, and yes.

At the end of the day, achieving a low-carbon economy will not be cheap, though it will pay off in the medium-long term. Small to medium sized companies will need to invest more in cutting down on their waste and energy, but they will need support, and with such a precarious economic situation they will need grants to reduce their costs.  This would be a far better way of spending government money on often ill-judged public information campaigns that do little to convince sceptical businesses of the need to cut down on their carbon footprint, or provide them with information as to how to do it.

While a nightmare to many companies, regulations is often necessary to force laggards in the private sector to do what they would rather not, though it can also be quite helpful in ‘levelling the field’ and setting standards that apply to all (when well designed). It is likely that much more regulation will be needed in upcoming years to achieve a sustainable economy.

What companies could really do with though is better information. There is no end to the different (and sometimes contradictory) advice that has been given out by different organisations, ranging from overly emotive and simplistic arguments that ignore business reality to incredibly complex and jargon-laden information that while incredibly useful to specialists does little to help a company leader who is time-poor and under incredible pressure. What company leaders need is clear, concise and implementable information that is rooted in business reality – case studies that share the experiences of their peers is especially valuable.

This is why websites such as energyrethinking.org, forceforgood.com and globalsustainablebusiness.org are essential for companies seeking to become more sustainable. Pulling together and condensing the vast array of information into a format that is understandable and useful for individuals and businesses is particularly essential, as is the opportunity for business leaders and experts to share their experiences. Many of these ‘hub’ websites are emerging and linking together to more seamlessly pull together and share information, and provide a platform of people to debate the various issues at a level that they are comfortable with.

Ultimately though there are no easy answers to why and how companies should become sustainable. It is likely this will become apparent very soon, though the longer companies the wait, the harder it may become.

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