Linking Sustainability and Business Value – Part 1

Sustainability: it’s about the money! While this may be regarded as a rather cynical take on sustainability, it does raise a valid question: what has money got to do with it, if anything? Does reducing all that sustainability stands for, its ultimate goal of preserving the environment and our way of life, to a mere question of money oversimplify and trivialise the concept?

Not at all. Thinking about it, and admittedly cynical this time, our present way of life is all about money. At the macro level, a close eye is kept on factors related to financial performance, such as national and regional growth or lack thereof, resource control and availability, trade between developed and developing regions, and so on. At the micro level it is generally about business growth, individual jobs, debt and quality of life. All of these are even more prominent in the context of a protracted global economic crisis.

So what about the looming spectre of global warming, to name just one of the major sustainability challenges, with its much debated catastrophic effects, all threatening our current way of life. Yet again, a closer look reveals that ‘man-made’ global warming is about money as well. The known reliance on cheap fossil fuels and the prohibitive technological conversion cost across the spectrum of emission-intensive human activities is an important, if maybe overused, supportive argument.

Sustainable building products

While the cement industry has been in crisis mode in a number of regions for several years, global warming in particular is something it has actively worked to address for a much longer period, given its significant carbon emissions. On this very topic, talking about sustainable building products in the November 2013 issue of World Cement,¹ the North West Europe Divisional Sustainability Manager of DNV Business Assurance, Jon Woodhead, presented a list of innovative products and processes that have been developed across the industry while attempting to reduce greenhouse gas emissions. New clinker types, alternative raw materials and increased clinker substitution, new types of cement and concrete, a carbon footprint tool, etc., factor prominently in the list. Nonetheless, even considering WBCSD’s 2009 recommendations from the Cement Technology Roadmap, he argues, more is needed.

Not surprisingly, both the problem and the identified solution are one and the same: economies of scale. This is required for innovative products and materials to start having a positive impact on carbon emissions, and this is also the reason OPC reigns supreme and emissions remain high.

Following this line of thinking, Woodhead argues, and rightly so, that the traditional business case for sustainability – the problem – focused on cost reduction, resource efficiency, reputation and such, must evolve. The new one – the solution – must be centred on innovation and collaboration with value chain partners for mutual advantage and market domination. This is where the real challenge lies. In other words, how does one justify the financial resources to fuel innovation during a crisis, in a risk adverse market and high entry barrier environment where everyone has large amounts of capital locked in assets? Not just random innovations, but some potentially disruptive ones. Not just any risk adverse market, but a regulated one. Not just any environment, but a global environment, with the implicit restrictions, complexity and scale. While there is no easy answer to this, it seems our industry is not alone in searching for practical solutions to the dilemma of the business case for sustainability. It also seems that the rest of the business world is not much closer to finding them. If anything, the cement industry may be breaking new ground.

The business world

For some time now, every third year, the United Nations Global Compact (UNGC) and Accenture perform and publish a study at CEO level, aiming to generate a business-specific view from the top on sustainability. The latest such study and largest to date was released in September 2013.² It draws on a pool of more than 1000 CEOs from 27 industries and 103 countries. The findings, some of which are illustrated in Figure 1, are not all encouraging. It appears that there is a mismatch between the CEOs’ perception concerning their company’s performance and the rest of the business environment. Furthermore, the much sought-after link between sustainability and business value fails to materialise for a significant number of those who took part in the study.

For example, a full 76% of the participating CEOs are satisfied with the speed and effectiveness of execution of their own company’s sustainability strategy, while only 33% believe business in general is doing enough to address sustainability challenges. Also, while 76% agree that embedding sustainability into their business will drive future growth and opportunities, 37% struggle to link sustainability with business value, and 44% see competing strategic priorities as a barrier to implementing sustainability company-wide. Interestingly, the lack of sufficient financial resources is also seen as a barrier to sustainability implementation by 51% of the respondents.

The fact that 46% of CEOs think that sustainability will always rank behind price, quality and availability is confirmed by consumer data presented in parallel in the CEO study. On the one hand, consumers themselves believe that their behaviour can effectively address sustainability challenges, with 64% of the CEOs placing consumers among the three most influential stakeholder groups. On the other hand, in support of the CEOs’ view, only 15% of consumers believe good progress has been made in the last three years towards instilling sustainability as a must-have factor for them.

In essence, while the need for action and the potential opportunities and threats presented by sustainability are widely acknowledged by business leaders, the actual advancement and the elusive link between sustainability and business value are still difficult to point out. Meanwhile, there is more ‘doom and gloom’ on global warming coming our way. Also in September 2013, the Intergovernmental Panel on Climate Change (IPCC), set up by the United Nations Environmental Program (UNEP) and the World Meteorological Organisation (WMO) to provide scientific knowledge on climate change, published its Fifth Assessment Report (AR5).³ This report asserts once again that, with a probability of 95 – 100%, humankind is to blame for the observed warming of the atmosphere and oceans, and that the trend is continuing unabated.

References

1. Woodhead, J., ‘Embracing Sustainable Building Products’, World Cement (November 2013), pp. 103 – 106.
2. United Nations Global Compact – Accenture, ‘Architects of a Better World – CEOs on accelerating the journey from plateau to peak on sustainability’, September 2013. Retrieved from http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-UN-Global-Compact-Acn-CEO-Study-Sustainability-2013.PDF.
3. IPCC (2013), ‘Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change’, [Stocker, T.F., Qin, D., Plattner, G.K., Tignor, M., Allen, S.K., Boschung, J., Nauels, A., Xia, Y., Bex . V., and Midgley, P.M, (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 1535.

Part 2 of this article can be accessed here.

Written by Adrian Vaida and edited by Katie Woodward.

This is an abridged version of the full article, which appeared in the August 2014 issue of World Cement. Subscribers can view the full article by logging in.

Read the article online at: https://www.worldcement.com/special-reports/14082014/linking-sustainability-and-business-value-part-1/