“Sustainability? is a word that has been used within Australian government and business circles for over 20 years. However, many organisations find its business meaning, implications and benefits elusive. Organisations that ignore sustainability face increased risk and competitive disadvantage compared to businesses that realise engaging with sustainability issues and ideas can unlock profound business benefits.
Many business leaders incorrectly equate sustainability with the climate change and carbon price debate. Others perceive that sustainability is a wider topic but comprised of ?green? issues that will disrupt business, increase costs and should be avoided. Still others link sustainability with the political Greens and blatantly disregard the topic on the basis of political ideology. All these perceptions are incorrect and do a disservice to business and Australian society in general.
One need only look to the progressive business organisations within Australia and abroad to see that sustainability is taken very seriously. These organisations recognise that sustainability is an umbrella term for a range of inter-related economic, social and environmental forces that pose genuine risks and opportunities for business and society, eg the growing global population and rising affluence in emerging markets, escalating public debt and economic fragility, pressure on natural resources and raw materials, a global movement to place a dollar value on biodiversity and a changing climate.
These issues trigger corresponding business to business and regulator responses with broad impacts on business. Take, for example, the escalating preference among banks and institutional investors for sustainable projects, insurer preferences to avoid social and environmental risks, pressures to reduce ?environmental footprints? passed down through supply chains and prices and market mechanisms for carbon.
Clearly, the business landscape is more complicated, connected and competitive. Finding or designing effective ways of dealing with these issues, to survive and thrive, is the sustainability challenge. In a business sense, the challenge is to remain ?fit for the future?. Sustainability is a topic that must be central to business strategy and governance.
It is true that the multi-faceted, dynamic nature of sustainability can make it challenging for businesses to address. Even the more progressive businesses and multinational organisations that are recognised as leaders in this area struggle to translate well articulated policies into practice. It is what we call the ?policy-practice gap?.
But ignoring sustainability and this policy-practice gap is not a viable business strategy. The risks and opportunities are escalating, not dissipating. Challenging economic conditions and increasing competition for finance and customers also mean that no organisation can afford to invest in business improvement initiatives only to get a poor return on that investment. Business leaders can find this situation overwhelming.
Fortunately, the sustainability challenge can be broken down into discernible, manageable elements ? analysis, strategy, execution ? for which pragmatic, value-adding actions can be designed and executed. Importantly, if the challenge is approached with skill, the corresponding actions can lead to more than managing risks and efficiency gains. Step change in business models and performance can result.
The following case study provides an insight into a real situation of business transformation inspired by sustainability.
TRANSFORMING AN ORGANISATION
Goulburn Valley Water?s board and executive management team debated two issues: how to drive ongoing performance improvement and how to address government and staff ?sustainability? expectations.
To assist GVW, Sinclair Knight Merz (SKM) facilitated a strategic conversation involving the board and executive team that explored the issues, drivers and success factors in GVW?s development and how they might play out in future. It became a ?turning point? both for this group and the organisation.
The chief financial officer observed: ?I now realise there?s no difference between a business strategy and a sustainability strategy. Indeed, I think we?ve been approaching strategy from the wrong angle!?
GVW recognised the interdependence of its business success with that of external stakeholders in ways not previously understood.
Significant business issues and opportunities were also revealed that provided new motivation and focus for business improvement.
SKM continued to assist GVW in translating the ideas and observations from this discussion into a targeted action plan, the core of its business charter and corporate plan and then to executable actions for each business group.
GVW now employs an operating model it calls ?Sustainable Business Excellence?. Each operating group sees itself as part of a wider corporate system, more consciously recognising GVW?s suppliers, customers and stakeholders and associated performance requirements.
Furthermore, each group has developed relevant, connected improvement goals framed in terms of community, environmental and financial benefits. People know where they fit and the role they play in achieving sustainable outcomes for their business and communities. Sustainability and smart business have become one issue.
A senior operations manager commented: ?Can you believe that I now have truck drivers arguing for smarter maintenance solutions that they describe in financial, environmental and community terms? When they get out of the truck now, they?re not only thinking ?safety first? but ?sustainable solutions?.?
Through this work, GVW also saw opportunities for business model innovation, translating a liability into an asset. GVW saw that a wastewater treatment plant with odour problems could become a site of electricity co-generation, waste to resource recovery and renewable energy production. GVW partnered with local government and industry to establish an award-winning industrial-ecology precinct that now generates new sources of revenue and local jobs.
What were the benefits? GVW report them as increased revenue, increased teamwork and reduced rework, a more engaged, service and solution-centred workforce, industry awards and an enhanced brand ? outcomes far greater than just business efficiency improvements.
ENHANCING VALUE, ELIMINATING RISKS
This case study is not an isolated example. The very same approach has been taken to enhancing the value and eliminating the risks associated with major projects and all manner of organisations across the world. Sustainability must simply be addressed as a serious strategic issue that presents risks and opportunities, for which a thoughtful, integrated business response is designed.
It is then a question of effective strategy execution, which must involve translation into meaningful actions and responsibilities for staff. If done thoughtfully it can, at a minimum, create business efficiencies. Substantial business improvements are open to those that are prepared to think more critically and creatively about their business model. Profound business transformation and benefits are awaiting business leaders with a mature and open mind and a passion to drive sustained business improvement.
Dr Nick Fleming is the chief sustainability officer for Sinclair Knight Merz Pty Ltd. Email: nfleming@globalskm.com