In the second part of Nadya Zhexembayeva‘s series on embedded sustainability, she introduces us to the three big trends that are changing the face of sustainable business:
It was barely a couple of years ago that the term “embedded sustainability” was nowhere to be found. Indeed, when my co-author Chris Laszlo and I were working on our book in 2010, the hard-working Google would barely spit out one or two decent links on this subject. Fast-forward two years, and suddenly embedded sustainability is all around us. Or is it?
There is no question that we are becoming more familiar with the term, so familiar that some perhaps treat it with a dangerous casualness. Many have passionately questioned the sudden omnipresence of the term in informal language or formal research. And here I have to agree: when a UN Global Compact Accenture research reports that over 80% of executives have already embedded sustainability into their company strategy and operations, at best, I can see this number as accidentally delusional, at worst – as deliberately deceptive. Embedded sustainability, as the best practice suggests, is such deep integration of social and environmental performance into the company DNA that it literally transforms its business model with no compromise on price or quality. When the vast majority of businesses still see sustainability as cost, and a small minority prefers to charge a premium for it, or compromise on product quality and performance, we are years away from happy statistics. Yet the early signs of some big trends are already here – and the timid attempts at embedding sustainability are encouraging. Today, I want to speak about few of these trends.
TREND #1: From moral choice to inevitable reality
You might hate it, you might like it, or you might choose not to believe it. But the growing social and environmental challenges are no longer a thing of political debate or scientific inquiry. Whether it is climate change, poverty, biodiversity, or peace, sustainability has already entered the life of your company; interfering with your present or future ability to manage costs and generate revenues (whether you are aware of it or not).
When our crops continue to lose nutritional value, sustainability stops being a morally nice thing to do, and becomes a material issue to all companies competing on their ability to deliver nutritional value to their customers. When a single tuna sells for a whopping $736,000 in 2012 (nearly doubling the 2011 record of $396,000), biodiversity loss suddenly questions the existence of entire industries. And when the Commodity Price Index, a measure of price movements for 22 basic commodities, more than triples since 2002, with some commodities such as cotton rising almost 100 percent, sustainability suddenly becomes material to the most obscure and secure companies you can find.
You might hate it, you might like it, or you might choose not to believe it. But the growing social and environmental challenges are no longer a thing of political debate or scientific inquiry.
But declining resources are not the only driver behind embedded sustainability. Fuelled by unprecedented activism in the civil sector and enabled by rapid developments in information technology, radical transparency has become the dynamic, immediate and substantive force of modern corporate life. It enables any interested person to peer into product and service lifecycles and find those impacts on society and nature that used to be hidden from public scrutiny. The third force – rising expectations – invites companies to re-think the very essence of market demand. Investors, employees and, most importantly, consumers increasingly expect sound social and environmental performance. New parameters are becoming standard, such as quiet, healthy, socially equitable or environmentally friendly products and services in the economy. We don’t want just any household-cleaning product; we want it non-toxic and biodegradable. We drink fair trade coffee and bring reusable shopping bags to the supermarket. And we no longer accept paying more for these attributes. Welcome to the new, investable reality.
TREND #2: From green to smart
At conferences, executive education sessions and company meetings I ask people what comes to mind when they think about sustainability. “Green” is always among first answers. And if you ask what they think about a “green product” those who are honest will describe a poorly performing, ugly-looking thing that costs a fortune.
Maybe that is why, when Puma went out of its way to find a way to create a new sustainable package for its shoes, it did not call it “green”. Clever Little Bag is a different kind of packaging -which protects the shoes while doubling up for a shopping bag, takes 65% less paper to produce, reduces water, energy, and diesel consumption in manufacturing by over 60%, and cuts CO2 emissions by 10,000 tons a year. As a smart sustainable solution, it is beautiful, functional and cheap, all at once. Moreover, it is a remarkably efficient marketing device. “If the packaging is so smart,” might reason an average shopper, “imagine what’s inside…”
Solutions similar to Clever Little Bag are the new sprouts of embedded sustainability thinking. The era of green is over. It is time to put niche green products and processes to much-deserved rest, and start working on the new business-as-usual paradigm – where products and services, operations and decisions integrate environmental and social performance across the value chain without compromises and premiums – and find remarkable win-wins in the process. The market is simply no longer tolerant to anything less.
TREND #3: From department to mindset
In most organisations I know, the leaders of sustainability thinking are lone rangers, charged with nearly impossible task of influencing line managers and transforming the organisation. When a lone ranger gets a backing of an entire department, team, or project, that becomes a clear victory for sustainability effort. Yet when we talk about embedded sustainability, creation of a department is often a needed temporary step, but hardly a destination. As a professor of sustainability, I believe my job will be done when a stand-alone course on sustainability in our Executive MBA program will become unnecessary – as all issues will already be covered in “regular” courses. Similarly, sustainability is not a department, but a mindset that penetrates every fibre of organisational life, forcing managers at all level of the company to see their business anew, and in the process, innovate in a radical, often disruptive way. And such mindset takes time to build.
Sustainability is not a department, but a mindset that penetrates every fibre of organisational life…
Global retailer Wal-Mart’s Personal Sustainability Projects, launched 5 years ago, was a great example of what it takes to build new mindset – starting with every single employee. HIdria, European mobility and indoor climate company, went a high-tech route: it embedded sustainability into its mission, and runs annual innovation contests among its employees for solutions that bring the company closer to sustainable mobility and housing.
The three trends I lay before you are not meant to be a complete and comprehensive set. Rather, these are the few brushstrokes in many that define the background for the sudden rise of the concept of embedded sustainability. And while I share concerns for the abuse of this relatively new concept, I want to make sure we do not throw the baby out with the bath water. Something tells me it is here to stay.
Nadya Zhexembayeva is the Coca-Cola Chair of Sustainable Development at IEDC-Bled School of Management, the European business school based in Slovenia, where she teaches leadership, organisational design and sustainability strategy. She is the co-author of Embedded Sustainability: The Next Big Competitive Advantage.
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