Join Forces to Make Business Sustainable
Pragmatic collaborations can take sustainability from obligation to opportunity.
If
one were to go by the views of participants at the 31st
Sustainability Executive Roundtable held on INSEAD’s Europe campus
in September, the business of sustainability is getting ever more
attention in board rooms. Experts from academia and industry leaders
in the domain of sustainable operations shared exciting experiences.
As highlighted by keynote speaker BARBARA KUX,
an
external director who successfully established Philips and Siemens as
sustainability leaders, a sustainability mindset must be built into
operational practices and presented as an opportunity from the board
room. At Philips and Siemens, this transformation was such that,
today, the Siemens environmental portfolio contributes 42 percent of
the company’s turnover.
According
to Kux, 70 percent of the world’s carbon emissions could be avoided
by using the existing technologies of global companies, representing
a massive opportunity.
Fast wins
Kux
was keen to stress the huge growth opportunities in the green tech
market, which will represent 4 trillion euros of business until
2025. “All businesses, large and small, can find these
opportunities and indeed they need to because the consumer is
becoming more interested in products that have been manufactured,
supplied and financed in a sustainable way,” Kux said.
The
world needs role models – and we saw several examples from other
companies who came to share their vision and innovative approaches in
their current operations. Bernard
Meriaux (MBA'91D),
Projects Director Global Engineering at Essilor International, told
of how a simple process redesign had led to a huge reduction in the
amount of water used in the manufacture of ophthalmic lenses. Over
the last year, the company has reduced their water consumption from
40 litres to 32 litres per pair of lenses made. Meriaux spoke of
“generating fast wins” for people on the shop floor to see the
benefits and thus motivating people at all levels of the organisation
to drive the [sustainability] plan forward.
Olivier
Cornut,
a partner at CUBIX Partners, reinforced this approach by showing that
a process redesign to reduce waste is consistent with the lean
philosophy of his firm. By facilitating discussion among managers
who are responsible for different parts of the operating processes,
self-sustaining solutions are realised.
Another
company which has placed environmental performance at the core of
their development is FM Logistic. The company’s Central Europe
general director, Carlos
Velez Rodriguez,
believes that it is critical to get people into the right mindset.
Having successfully created the largest European pooling platform,
which involves seven food industry partners including Heinz, Sara Lee
and Kellogg’s, the company has designed a “supply chain of
tomorrow”. By pooling the deliveries of these food manufacturers
in one warehouse just outside Paris, retailers have seen a 115
percent increase on the average load per delivery to their stores.
Through this collaboration, all partners in the supply chain benefit
economically while the environment is respected with a 35 percent
decrease in CO2 emissions.
Lacking
leadership not funds
Muneef
O. Tarmoom,
Managing Partner at Abu Dhabi Equity Partners, shared his company’s
solutions to the food security issue in the Middle East where 90
percent of food for the region is imported. By designing investment
structures focused on funding agribusiness in other food-rich regions
of the world such as Brazil, it was demonstrated that there is always
funding available from around the world for managing the operating
cycle of sustainable operations that make business sense. In
this case, financing real commodities such as livestock farming and
investing in mid-sized growers that sell to the large trading
companies such as Cargill and Bunge ultimately solves the food
deficit challenge of the Middle East.
The
idea that funds are not lacking was reinforced by Velez Rodriguez who
said, “We’re lacking leadership not funds.” This view was also
shared by Rick
Ridgeway,
Vice President of Environmental Affairs at Patagonia Inc. Ridgeway
says that despite all the commitments that companies globally are
making towards sustainability, we are still falling short on the KPIs
that really matter - those that indicate the health of the planet.
Patagonia’s story is exemplary in that it approaches sustainability
from a collective supply chain perspective and not just from a
company perspective. Their approach where they use their
company as a tool for environmental protection is embodied in their
mission statement: “Build
the best product, cause no unnecessary harm, use business to inspire
and implement solutions to the environmental crisis.”
They
have inspired other companies to follow their lead in sustainable
business practices. An unlikely partnership, started in 2009 with
Wal-Mart, saw Patagonia help the retailing giant introduce 100
percent organic cotton into some of their own brand products,
particularly the children’s lines of clothing. Wal-Mart’s
eagerness to increase the scope of its sustainable practices prompted
Patagonia to suggest the formation of a broader partnership by
inviting other companies to develop a standardised way of measuring
sustainability. Five years on, this partnership is known as the
Sustainable Apparel Coalition, a trade organisation which represents
a third of global dollars of the footwear and apparel industry and
includes 350 household brands as members.
An
app for the green consumer?
The
focus of the Sustainable
Apparel Coalition is the HiGG index, a
suite of assessment tools that standardises the measurement of the
environmental and social impacts of apparel and footwear products
across the product lifecycle and throughout the value chain.
Currently a business-to-business tool, Ridgeway sees no reason why
this cannot be developed in the future into a phone app giving
customers the ability to evaluate the sustainability of a product on
the shelf.
Patagonia
Inc. also asks its consumers to fulfil their part of the deal by not
buying a product unless they need it. It gives the company the
opportunity to reduce their footprint as much as possible but
Ridgeway believes that “ultimately the answer is with the consumer
who can choose collectively to support companies who are committed to
sustainability”. This in turn will influence the boards of
directors to support these sustainability commitments.
An
Operational Eye for an Operational Strategy
Atalay
Atasu,
Associate Professor at the Georgia Institute of Technology, Scheller
College of Business, was the academic closing keynote speaker who
argued that the fields of Operations and Supply Chain Management
within academia represent a natural home for sustainability because
they focus on effective execution. “Whenever there’s legislation
or a need to operationalise a sustainability concept, it’s
necessary to think about implementation and it is beneficial to have
an operational glance in order to predict what is going to be the
‘trouble maker’ in this area,” Atasu said. He explained
that smart companies understand what’s happening on the ground and
went on to say that this operational eye is key in devising an
operational strategy. Using the example of the EU Waste Electrical
and Electronic Equipment (WEEE) Directive, Atasu described how
Philips drove the legislation in their favour. Before the EU
Directive came into force in 2004, Philips understood that recycling
was a scale business and that it benefited the company if it were to
be a collective system of recycling based on their past and current
market share of products sold.
Speaking
more generally, he agreed with other participants that it is crucial
to correctly characterise the cost and the benefits of sustainability
initiatives to trigger a healthy debate and argued that if all
business goals are aligned it is much easier to “sell”
sustainability.
Collectively
join forces
The
overriding conclusion of the roundtable was that collectively we need
to join hands to determine how the new economy will look going
forward. At a national and international level, governments can
introduce policy and make sustainability measurements transparent; at
an industry level, companies need to collaborate across their supply
chains and share ideas and initiatives; and at the individual level,
the consumer has a choice to make over the products he or she
purchases. As Kux pointed out in her opening presentation, in
these evolving times, “We need to shape the transformation, not be
shaped by the transformation.”
Enver
Yücesan,
INSEAD Professor of Technology & Operations Management
http://knowledge.insead.edu/blog/insead-blog/join-forces-to-make-business-sustainable-3668
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