9. Systems, Decision Making, and Internal Alignment

After you have the employees engaged and trained, you need to prioritize your actions, build your systems, and develop your decision-making processes and policies to sustain momentum for the long term.

Prioritize Your Actions

Develop an implementation plan that targets those areas that have the greatest sustainability impact and prioritize by opportunity for improvement and business benefit.

If we all arranged and clarified our work around this principle, and cut out everything else, companies could see vastly improved social, environmental, and financial performance.

Then after you have prioritized those focus areas, put people in charge who are highly motivated with the skills to get the job done. There is nothing more frustrating than spending the time and money on a sustainability baseline, prioritizing actions, and then handing it off to a highly passionate person who lacks the skills to get the job done.

As Ben Packard says, “Put smart, trusted people on the case or buy talent and make it happen. Go after it because you’ll either win fast or fail fast.”1

Incorporate into Decision Making

The most effective way to implement sustainability is to incorporate sustainability into your corporate decision making. Although this might seem radical to some, it’s actually quite simple in execution.

The company needs to arm its management with the policies, processes, procedures, and decision-making criteria to make sure that things stick, because implementation won’t just happen on its own.

As the author, speaker, and sustainability champion Bob Willard states, “Management must tie sustainability back to business case and vision, and put in place the policies to ensure that social and environmental impacts are factored into corporate decision making,”2 whether that is through a balanced scorecard or some other method your company uses to make decisions. You don’t have to start out by making social and environmental criteria weighted equally with financial, operational, or brand considerations, but just by giving some points to these criteria, you will change the discussion and mind-set of those making the decisions.

For example, corporate America didn’t just ask its employees to be “more aware” of sexual harassment or to try to hire “more diverse” employees. They had to create policies and procedures to stamp out sexual harassment. They also had to change their decision-making criteria to support positive change by putting into place policies that would lead to a more diverse workplace.

The same is true with sustainability. But be forewarned: You can expect some pushback because people are worried that you are asking them to put social and environmental factors above the overall health of the business. For example, I often hear the following comment when we first broach the discussion around sustainability: “We aren’t going to change our entire business model just to be more green!” This attitude is common, whether it is a travel company whose employees are concerned that after they begin to think about carbon emissions they’ll be asked to stop all air travel, or an apparel provider whose employees worry that if they incorporate sustainability into their designs, they’ll be forced to create a green shoe that nobody will buy.

This is the type of misunderstanding that is out there, and you can be sure that somewhere on the management team or board, somebody has this concern.

For example, I remember sitting in a citizens’ advisory meeting in 2012 when we were discussing how a local municipal airport could improve its sustainability performance. The airport had huge costs and impacts associated with its storm-water management. However, when we began the conversation about sustainability and ways to reduce storm-water discharge, a member of the advisory committee blared out, “We have to be careful. We can’t just go about becoming some green airport that will be too cost-prohibitive that no pilot can land here!” This is the type of mind-set that you’ll be up against. This individual totally missed the fact that when the expenses associated with this storm-water runoff were reduced, the savings would actually be passed on to the pilots in the form of lower landing fees and slightly reduced leases for their hangars, while simultaneously lowering the environmental impact of the airport.

HSBC (The Hong Kong and Shanghai Banking Corporation) has successfully integrated sustainability into their decision making by explicitly adding “sustainability aspects to their balanced scorecard’s strategic management system, ensuring all senior managers worldwide monitor energy management, carbon emissions, water use, and waste reduction.”3

Figure 9.1 shows an example of a tool that my firm uses to incorporate both social and environmental criteria into decision making with clients. This is a variation on the balanced scorecard because it uses five categories instead of four. This example breaks down decisions quantitatively by objectives and targets so that you get actual measurable numbers. It also provides a space to qualitatively demonstrate the measures and initiatives you will put in place to achieve them. Feel free to copy it or make it your own.

Image
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Figure 9.1 Goals and objectives.

Incorporate into Systems

After you’ve integrated sustainability into your decision-making process, you next need systems and processes to support those efforts. Systems and policies ensure that actions are embedded in how people do their day-to-day jobs, and they move the organization to the next level so that a company isn’t reliant on a single person or leader to inspire people. Systems enable sustainability to become a norm in how the company operates.

There are various systems that companies are using to embed sustainability and I’ve listed a few different ways in the following subsections. The three most common are Kaizen, LEAN, and SMS (Sustainability Management Systems).

Kaizen

Kaizen is a Japanese concept that refers to a philosophy and process based on continuous improvement.4 W. Edward Deming, among others, started the quality movement in the United States called Total Quality Management (TQM), which is the same concept as Japanese Kaizen. It has traditionally been used in manufacturing, engineering, and business management, but the model has expanded into community engagement, governance, and anything where a critical eye, awareness, and openness to change result in efficiency and progress. Sustainability is all about continuous improvement because it is a journey with no end, so a Kaizen approach is applicable and attractive to many companies.

In the Kaizen system, if something isn’t performing, it is up to the entire team to get each member a piece to reach optimal performance. Teams are meant to stop and look at issues together, and solve problems holistically, from shop employees to executives alike. This is important because many sustainability issues require holistic, systems thinking so that a fix or solution on, say, carbon emissions, doesn’t lead to a solution that causes burdensome extra hours to staff or increases water usage.

What are the business results of Kaizen? Toyota is one of the most successful companies in history, and Kaizen has been a major component of its success. For example, while most car manufacturers would keep their lines moving during the manufacturing process to produce as many vehicles as possible, when Toyota recognizes a problem, it stops the entire line to fix the issue, even if it can cost thousands of dollars a minute. The result is that it makes fewer vehicles with defects, and the company avoids many other costs and environmental impacts associated with fixing the issues after the fact. And as I write this, know that I’m well aware that like any car company, Toyota has faults that have led to recalls, but it’s their use of the Kaizen process I want you to remember.

Sam Walton, the founder of Walmart, is also known for Kaizen. Everywhere he went, he would ask employees on the spot, “What can we do better for our customers?” He was committed to continuous improvement, and he showed that employee opinions were valued by making sure that direct action was taken to meet recommendations. Kaizen is not a new idea; it can be a valuable system and mind-set to employees when they are implementing sustainability.

LEAN

LEAN is another system that practices minimizing waste while maximizing customer value. Anytime you are reducing waste, cutting down on pollution, and improving process efficiency, you are acting in a more sustainable manner. These are the seven traditional types of waste that LEAN focuses on:5

1. Defects

2. Overproduction

3. Inventories

4. Overprocessing

5. Unnecessary motion of employees

6. Unnecessary transport and handling of goods

7. Waiting

Each company can find their own list of waste within and around their business processes and look to reduce it whenever possible. When you do this, teach your employees to look for things that do not add value to the end consumer,6 and anything you find that removes waste is positive.

LEAN is typically thought of in manufacturing, but it is also used in service-oriented businesses, when evaluating Purpose, Processes, and People. Reducing waste and waste of time in each of these areas speaks to efficiency, as well as customer and employee satisfaction, so put in place systems to enforce this ethic because by doing so you’ll likely be improving your social, environmental, and financial performance at the same time.

Sustainability Management Systems (SMS)

A Sustainability Management System is another set of processes and procedures. More comprehensive than a traditional Environmental Management System (EMS), an SMS has a broader focus on social, financial, and environmental performance. Traditionally, an SMS follows the recognized Plan, Do, Check, Act system for continuous improvement:7

PLAN: Establish the objectives and processes necessary to deliver results to meet goals/targets.

DO: Implement the plan, execute the process, make the product.

CHECK: Check and record progress.

ACT: Take preventive and corrective action, make changes to the SMS as needed.

3M uses an SMS that integrates sustainability into the design of new products all the way through the products’ entire lifecycle. The company’s Life Cycle Management process “reviews every new product for all environmental, health, safety, and energy impacts from raw material acquisition through manufacturing to customer use/disposal.”8

IBM uses a similar system. It calls it an EMS, but the implementation, goal, and desired results are the same. According to Wayne Balta, head of Corporate Environmental Affairs at IBM, “the company uses its environmental management system as the foundation for policy deployment, practice management, goal setting, decision making, and data capture. IBM uses the technology to embed environmental strategies into all areas of the business, from R & D to operations to end-of-life product disposal.”9

Sustainability Reporting

There is also a movement toward integrated reporting, which is the idea of companies creating one report for shareholders and stakeholders that combines a company’s financial, social, and environmental data in one place. This can become a valuable management tool and process for executives and the board by providing both quarterly and annual milestones to truly access sustainability and financial performance at the same time.

Currently there are more than 90 companies and organizations testing out the new integrated reporting standards from the IIRC as part of its business network, which is following the leadership of Novo Nordisk, one of the first companies to create an integrated report a few years back. SASB is also in the development process for industry-specific integrated reporting that includes SEC guidelines.

Additionally, PUMA recently created an environmental profit and loss (P & L) statement and became the first global company in the world to put an economic value on the GHG and water impacts of its supply chain through the production of its sports shoes and apparel products.10 For example, “the economic valuation of its environmental impact revealed that PUMA would have to pay 8 million Euros to nature for services rendered to its core operations such as offices, warehouses and stores, alone.”11 This helped demonstrate the potentially negative impact the business activity had on natural services. It did this to give management a tool for better understanding these impacts both financially and environmentally, and PUMA is looking to expand this to include social aspects and create a social P & L account in the near future. Both of these are other systems that companies can incorporate to better track and manage their sustainability performance over time.

Other Models and Tools

There are also software solutions that help companies understand the sustainability impacts of their product decisions while still in the design stage. Most are for the built environment, including Autodesk’s building information modeling (BIM) and Kieran Timberlake’s Real Time Environmental Impact Tool (RTEI),12 that evaluate the embodied energy, carbon, water, and other environmental impacts of the materials and products being considered.

Other Sustainability-Related Systems

Following are some other examples of companies that have developed innovative internal systems to support their companies’ overall sustainability objectives toward carbon, water, and energy reductions.

Image Microsoft’s internal carbon trading program tracks data on energy use and air travel for its 90,000 employees in 100-plus global offices and data centers and charges a fee for every ton of carbon it produces. The price is set to reflect not only the price for the consumption but also the additional cost of offsetting the carbon emissions associated with the activity. This money, traded internally, is used to fund renewable energy and offset projects.

Image The company WSP has a Personal Allowance Carbon Trading (PACT) incentive scheme.13 Designed to help employees manage their personal carbon impacts outside of the office, it gives participants a yearly personal carbon allowance and access to an online portal to track their home energy usage and travel activities. Bonuses are then given at the end of the year if emissions fall below the overall threshold set by WSP.

A few other systems to consider at later stages of your sustainability adoption curve are listed here:

Image The concept of Design for Environment (DfE) encourages companies to select safer chemicals and technologies in producing products so that they can be redesigned to be broken apart and reused or to naturally break down and not negatively impact the environment.

Image Biomimicry uses the lessons of nature to solve human and technical problems. The idea is to mimic how nature would work and use a natural solution for a chemical, mechanical, operational, or technical issue. For example, Michael Phelps made famous a swimsuit that is made up of miniature scales that mimics shark skin, and the most common example is of course Velcro, which mimics burrs. The idea is to use natural solutions to reduce your company’s environmental and social impact.14

Image Cradle-to-cradle is a design process in which products are developed in a way that allows them to return to their original state, or as close to it as possible, at the end of their usable life. Most products are currently designed from cradle to grave (i.e., landfill), and what cradle-to-cradle is espousing is an infinite loop in which the product can be put back into use as a raw material for the same product over and over. An example of this is Interface carpet tiles, which have been designed to be ground up and reused as raw material for future carpet tiles.

After considering these different methods and examples, take a moment with this systems thinking activity to consider your own company systems and how they incorporate sustainability.

Investment and Procurement Policies

Making a blanket statement that all procurement and investment decisions should incorporate sustainability sounds like an easy and attractive thing to do. The reality is that incorporating sustainability into every policy and procedure is actually a difficult task that requires intentionality. This section maps out how that can be done.

Sustainable Investment Policies

Putting your money where your mouth is often is harder than it should be. When it comes to investing your cash and short-term investments into anything other than what the company has traditionally done, a lot of convincing needs to take place. That’s why I went to such lengths in Chapter 1, “The Business Case,” to describe the returns that SRI investments have been receiving.

This is where you’ll want to be eventually, but for many companies, this requires approval by the Board’s Financial and Audit Committees. There will be great hesitation at first and people will be worried that they’ll be sacrificing a financial return or violating their fiduciary responsibility if you shift investments and deposits into an SRI fund or more sustainable bank. Therefore, try a phased approach and just move a small portion of the company’s total investments into SRI funds in the first year, say, between 1% and 5%. Then work over a three-, five-, or seven-year plan to shift to 100%. After skeptics see that the returns meet their objectives, their resistance will fade and you can shift to 100% sustainable deposits and investments. Or if you want to divest from fossil fuels, realize you aren’t talking about divesting from everywhere, but actually closer to just 40 companies worldwide. Although it seems daunting, it’s not as tough as it seems.

Sustainable Procurement Policies

“Making change around sustainability starts with your pocketbook and where you spend your money.”

Another way to put your money where your mouth is, is through your procurement policies. Embedding sustainability into all of your purchasing decisions is a way to push sustainability further through your value chain and ensure that the dollars you spend are in alignment with your vision and goals. It also begins to encourage the type of behavior in your suppliers that you are seeking to accomplish. Moreover, it will ensure that you start with the right product with the lowest environmental and societal footprint at the beginning, rather than trying to weed it out in your own processes. This does not mean paying 20% more for a product just to be green. What it does mean is adding sustainability to your selection criteria, and maybe being willing to pay a slightly higher premium to support the environment or local community providers, but, most important, informing them of your intentions so that they can partner with you to provide a product or service option that meets your financial, quality, and sustainability needs all at once. I go into great detail at the end of this chapter with an activity to help you create your own policy, but you want to set clear expectations and detail how the policy will be monitored and enforced.

Policies/Systems Provide Protection If Sponsor Leaves

One reason I spent so much time on this chapter about systems and policies is to ensure that your programs will continue if/when a key leader or supporter leaves the organization. You want executive sponsorship, but there is always the question of what to do if they leave. That is exactly why you need to work diligently to embed sustainability into not only the culture and ethic of your employees, but also the systems that support it.

I’ve witnessed firsthand a few examples where a company had relied too heavily on specific individuals, and when the executives who most supported sustainability left, the programs stalled, lost momentum, or completely stopped. In each of these cases, they had not gotten to the point where they had fully implemented systems and policies throughout the company on sustainability.

Molly Ray, former global responsibility manager at Pan Pacific Hotels, says she found that “sustainability needs stability. It needs process.”15 To add, Terra Anderson has found that “leaders will move on, so without process, skeptics and naysayers can always try and wait them out.”16

Therefore, while working to support the individuals leading the charge, be sure to focus on supporting the process and systems that are necessary to make sustainability stick for the long term. Activity 21 is a sustainable procurement activity as an example of one of the policies and systems you’ll want to put in place.

Some Lessons Learned from Implementing Sustainable Procurement Policies

Often, to get suppliers and managers to participate in sustainable procurement practices, all you have to do is ask. You’d be surprised at what you might find. Your supplier or vendor might already have a more sustainable product but just might have never been asked about it. The following is a list of examples to get an idea of what each group might already be doing:

1. You might have an internal ally at the vendor. Usually there is someone who has been arguing or trying to get the company to improve the sustainability performance of their products, but without customers’ demand, the vendor hasn’t been able to make that case to management. Just asking for the change might get the vendor on board.

2. If the vendor cannot meet your requirements, they might ask for some time (up to a year) to meet the requirements. If you have to, give that to them, but hold them to this timeline.

3. They might say they can do it for the same price, but they just might need a longer commitment. One of our financial clients asked their paper supplier if they could provide 100% recycled paper at the same cost as their current virgin paper. They said that they could, but only if our client would commit to a two-year contract instead of an annual one.

4. If they say no, unless you are in a very specialized industry where there is only one supplier or vendor in the entire industry, there will be alternatives or someone else will step up pretty quickly.

If You Still Hear No

Combining forces with others in your industry or other companies that use the same vendor is another approach that has seen success. We’ve done this for our clients; when we’ve noticed that two or more of our clients were running into resistance from the same vendor, we’ve introduced them to one another, and with their combined pressure on the vendor, the ball has gotten rolling.

Align Philanthropy and Community with Sustainability

Companies tend to miss out on a major opportunity to leverage all of their various sustainability efforts by failing to combine their sustainability program with their philanthropy, community volunteerism, and other outreach efforts. This is typically because these programs are run by different departments, with different people, with different priorities and responsibilities. Table 9.1 shows where these efforts typically get stove piped.

Image

Table 9.1 Where Sustainability Fits in Each Department

Companies are wasting thousands of dollars in fragmented efforts around sustainability, whereas if they were properly aligned, they could leverage the full assets of the company and more easily measure the impact.

The Move to Strategic Philanthropy

“Most corporate philanthropy professionals say they are under increasing pressure to align corporate philanthropy and giving with business objectives,”17 says the Council on Foundations.

Back in the 1980s and 1990s, most companies thought of sustainability as simply philanthropy and community volunteerism. Being a “good corporate citizen” meant giving money to the communities to which they belonged or using it to diffuse NGO concerns over their social and environmental practices. That has all changed due to increased pressure to align philanthropy with business objectives, a reduction in giving from the economic recession, and changing stakeholder needs. They understand the business case for sustainability and thus are switching from the mind-set of “giving away” money to community organizations to the idea of “investing” to meet the company’s social, environmental, and business goals.

Companies that strategically line up their giving efforts with the sustainability and business goals of the company are gaining benefits such as these:

Image Increased brand value and recognition

Image Higher employee engagement, attraction, and performance

Image Stronger supply chain and business with other companies

Image Improved community and stakeholder relations

Additionally, by doing so, the company is providing the following:

Image A clear, mutually reinforcing message to stakeholders

Image A better understanding as to how all the various activities add up

Image A transparent way for stakeholders to see that the company is putting its money where its mouth is—that it is walking the talk

Seven key trends have emerged:

1. Focused Giving: Aligning philanthropic efforts with business objectives, sustainability actions, and the mission of the company.

2. Workplace Giving: Connecting employee giving with company sustainability goals.

3. Customers as Co-Creators: Partnering with customers to select organizations to give to.

4. Involving Supply Chain: Investing in the communities of the suppliers to enhance their quality of life and to gain better market intelligence of the markets they are operating in.

5. Issue Targeting: Concentrating dollars and pro bono work toward one specific issue.

6. Aligning with Volunteer Efforts: Supporting the places where employees are volunteering with corporate donations.

7. Impact Giving: Rather than spreading donations around to a number of organizations, they are targeting funding toward fewer organizations, with larger grants that can have an impact.

Listed here are a few examples of the strategic philanthropic trends around sustainability.

Focused Giving

Pearson, one of the largest publishers in the world, including the Financial Times, Penguin, and Random House, realized that paper is its largest environmental impact area. Therefore, the company has focused its corporate giving, along with its purchase of carbon offsets, toward organizations working to prevent deforestation such as the Children’s Tropical Forests in the U.K., the Nature Conservancy in the U.S., and the World Wildlife Fund’s Forest and Trade Network globally. This offsets their impact and ensures a sustainable paper supply.

Involving Suppliers

Green Mountain Coffee is utilizing its philanthropic efforts to help build a more resilient supply chain. It supports nonprofit organizations working to help suppliers receive a fair price for their product, make business decisions that support their families, and build healthy, environmentally sound communities. According to Green Mountain, they do this because they are focusing on the biggest challenges in their coffee-farming communities, such as food security, access to water, education, and healthcare.18

Their belief is that while they are doing this, it is also helping to build brand awareness and equity, strengthen customer loyalty, and increase sales in key regions, all while ensuring their coffee supply.19

Customers as Co-Creators

Nau, a retailer focused on integrating economic, environmental, and social factors into their business model, has committed to giving 2% of every sale to humanitarian and environmental organizations. Customers get to choose where that money goes and they are encouraged to select from five organizations.

Crossroads Trading, a Seattle thrift shop, gives customers a token when they do not use a bag for their purchase. There are up to ten slots at the register for different charities, and the customer gets to choose where Crossroads Trading gives a dollar. This encourages people to come back in and to remember their shopping bags.

Impact Giving

I once served on a Foundation Board responsible for the corporate giving for the chemical and real estate company Reilly Industries. When I first got on the Board, the company was giving to a large number of organizations across four main issue areas.

However, the company and its employees realized that in order to make more of a difference, the philosophy needed to change; instead of giving small grants to dozens of organizations, they would give $20,000 grants to fewer, larger charities that would be more impactful to the organizations themselves. This strategy also strengthened the relationships among donors, grantees, and employees because the company’s attention was more focused and it could concentrate its time and energy on fewer organizations.

Workplace Giving

Workplace giving is where employees can choose from a long list of organizations to have donations taken directly from their paychecks.

Every company will have a different philosophy, because some don’t want to play big brother and tell their employees where they can give. But if you are a matching organization, you might want to align your workplace giving programs with your larger sustainability goals of the company so that you can magnify your collective efforts.

For example, if you are trying to leverage your environmental issues, enabling your employees to give to EarthShare makes sense, or if you are focused on food-scarcity issues, providing the Food Resource Network Federation as a potential donor federation makes sense.

Making this type of shift is probably the most controversial element of philanthropy and will definitely anger some people. One approach I’ve taken is to tell companies that maybe they could still match all donations, but maybe match up to a higher amount for the sustainability issue the company is most engaged in.

Operationalizing Your Green Team

Most companies start by forming a green team, and then as they get more sophisticated they might have multiple teams across the company and across the world.

For example, Deloitte established a Green Leadership Council (GLC) composed of senior representatives from each global region and from their Talent, Community Involvement, Field Operations, IT, and Enterprise Sustainability groups. The GLC maintains regular dialogue between national leadership and people on the ground.

We realize that many companies are beyond this initial step, but if your company is just getting started on sustainability, following are some tips that I’ve compiled from the leaders and from my consulting experience that are helpful to effectively running your green team in the first few years.

Lessons Learned

The following are key takeaways from the “Systems, Decision Making, and Internal Alignment” chapter:

Image Prioritize. Focus on what matters.

Image Embed sustainability into decision-making processes. Realize that this will take time to get fully adopted, but make sure that it at least is being brought up at first. Then move toward weighting the decisions equally.

Image Remember the old African proverb “If you want to go fast, go alone. If you want to go far, go together.” You need the systems and policies to bring other people along. But be sure to pick a sustainability process and system that work best for your company and culture.

Image When you introduce a sustainable investment policy, don’t try to get 100% in the first year; start slow with a low percentage and let the returns speak for themselves. If people push back on the sustainable investing or deposits, just ask for 5% to be switched, or a small dollar amount for a period of time, so that you can prove out that the risk and fear are unsubstantiated.

Image Educate your suppliers as to what you are trying to do, and just ask them how they can help. You’ll find that they’ve probably been thinking down the same lines, but have just needed a customer to ask.

Image If policies or systems failed to take root, go back and find out why. Was it the policy or lack of enforcement? Is it a technological or process fix or a cultural fix? You can’t fix what’s broken unless you know why it’s broken.

Image Leverage all of your sustainability efforts across departments and align with your philanthropy. Seek ways to collaborate, combine messages, and save money.

Image If you run into resistance for implementing a new system, ask the cost of not implementing the system. Show all the inefficiencies that won’t be fixed or addressed. Put dollar figures on them.

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