BfG News Issue 21 - Editor's Column: Where to sustainability?

21 Jul 2009|Added Value

Six months into 2009 and it looks like it’s going to remain economically gloomy for at least the next six. But we’re encouraged that many brands are still motivated towards progressing their sustainable marketing strategies.

Early this year, we conducted a series of depth interviews amongst 15 of our global clients and partners in FMCG, retail and the service industry. Our results show promise with sustainability becoming less of a communications game and more of a strategic imperative. But the recession has changed the rules of the game, calling for a need for synergies between sustainability and cost reduction.

Learning 1: Sustainability is shifting its role within the organisation, moving to the heart of business strategy

Recession hasn’t stopped the evolution towards sustainable management. Managers are increasingly seeing sustainable KPIs added to their business plans. Several of our multinational clients like Danone have now also added sustainable objectives within the evaluation process for Director Level and up. And the pressure on suppliers is growing in B2B. Big businesses expect and demand that their supply partners take on a commitment to sustainability. This is showing up in bids for new business and in procurement contracts.

Learning 2: The recession has changed the rules of the game for most companies

Managers are under increasing pressure to cut budgets and we observe 3 attitudes emerging:

1. Some (minority) do not know how to justify investments linked to sustainability and therefore can’t progress on the sustainability front for fear of creating tensions with employees who are already asked to tighten their belt.

2. Most take a pragmatic view and see sustainability as a tool to help marry the goal of cost reduction with that of environmental impact reduction > sustainability is integrated into their approach to supply chain management to optimise raw material use (packaging etc.. ) and logistics (transport, energy in factories etc). Within this group, some companies have also recognised that sustainability can help them to navigate the difficult waters of recession.  Eliminating product features seen as superfluous can secure loyalty and provide an improved value proposition to their consumers.

3. A few leading edge companies see the bigger opportunity to play the sustainable card as a means to widen the gap with the competition. They are driving forward to factor social & environmental impacts into their KPI’s and to integrate sustainable practices throughout their businesses. They see this as smart management, as they know the strain on raw materials and water will only increase and that carbon emission trading will translate their efforts into concrete value for investors. They are lobbying government for stronger regulation that can help to embed what they see as a competitive advantage. The most innovative of these companies are also looking at new business models to give priority to service economies (example: Michelin Fleet Service renting and maintaining rather than selling tires) or creating unique partnerships (example: partnership between Autolib free service electric car rental and SNCF French Train service to ensure  the full chain of transport).

Learning 3: Advantage goes to leaders with convictions and smaller businesses

Progress in sustainability is radically accelerated when visionary leaders set the agenda and communicate a clear message to employees and other stakeholders about what matters. Leaders like Jeff Schwartz of Timberland, Lee Scott of Walmart, Franck Riboud of Danone and of course the pioneering Ray Anderson of Interface have made it clear that sustainability will underpin the success of their businesses in the decade to come and their employees are therefore motivated and committed to following in their footsteps.

But larger companies have more of a challenge to fight against the inertia that goes with their size, whereas as smaller companies can be more reactive and benefit from this transitional period to make the necessary changes to prepare for the future.

Learning 4: The old adage “what gets measured gets done” is truer than ever

There is a lack of consensus with regards to the tools to put in place to monitor and measure the impact of sustainability within the business. Yet without these measures, it can be quite challenging to make the business case for investment in step change technologies or processes. Once the finance director is able to quantify the positive impact of sustainability on costs, but also on consumer and employee loyalty, acquisition of new B2B contracts or partnerships and other important success factors, embedding the big S into the business will get a whole lot easier.

Sustainability and recession have brought us back to a better understanding of the ‘real cost’ of things. And we believe regulation has a key role to play in order to factor in the social and environmental costs of product in the final consumer price. But companies still have the chance to win by getting ahead of regulation by positioning themselves early in a market that will have key growth levers in the years to come.

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