Sustainability and Organizational Development

In order to reduce expenses and become more environmentally sustainable, a distilling company decided to reduce the glass thickness in some of its bottles and to replace it with plastic in others. “Given the volume of product sales, the changes were significant in terms of cutting costs and reducing our environmental impact. I was impressed with them for doing it,” says a woman named Diane, who held the position of project manager with the company. But it was not enough to retain her as an employee. She left to search for a company that was more receptive to her innovative ideas for improving sustainability. “I was tired of taking the initiative to suggest ways to save money and reduce our environmental impact only to have my supervisor tell me he was not interested,” she says. Like many other companies, her company had enlisted the services of a prominent consulting firm to advise them on how to become more sustainable. “Even after the consultants left, the attitude among the managers and supervisors seemed to remain unchanged.”

Diane’s experience is not unique; most employees regard corporate sustainability and social responsibility as personally important. In a global workforce study by Towers Perrin, corporate social responsibility was ranked third out of the top ten items that drive employee engagement. This followed “senior management’s sincere interest in employee well being” and “the opportunity an employee has to improve skills and capabilities.”

But employers do not seem to be getting the message. The Sixth Annual McKinsey Global Survey on corporate sustainability found that “companies are still not doing much to integrate sustainability into their internal communications or employee engagement.” Employee engagement is a key goal of organization development and if the McKinsey Survey is an accurate reflection of current practice, it does not appear to be a core element in most corporate approaches to environmental sustainability.

Verdantix published an analysis of nineteen consulting firms and fifteen US customers and the work they were doing on environmental sustainability. Their findings seem to corroborate those of the McKinsey Survey. They found most of the firms had hired consultants but the lead engagements were for strategy development and greenhouse gas (GHG) footprints. The report analyzed which firms were strongest in providing services such as cleantech advice, energy efficiency, sustainability product development, and operational analysis. Organization development was nowhere to be found among consultants or corporations.

According to Peter Nicholson, the founder of Foresight Design Initiative, a sustainability-focused innovation firm based in Chicago, “There are a lot of consulting firms advising around environmental sustainability in Chicago. I see a focus on logistics, procurement, energy, and carbon. However, I do not see any consulting firms or companies taking an organization development approach. The closest would be companies that have a cross-functional green team that reports to the CEO.”

Organization development views environmental sustainability from the perspective of the whole organization with employee engagement as a key, but not exclusive, dimension. Other facets include employee education, organizational structure, processes and culture. A premier example of a corporate leader who took this holistic approach was the late Ray Anderson, Founder/CEO of Interface, Inc., in Atlanta who transformed his $1 billion, 5,000 employee carpet tile manufacturing enterprise into a model of environmental sustainability. He understood that if sustainability was going to transform Interface, he had to address employee engagement, and corporate structures, processes, and culture.

Instead of starting with the big picture, many companies take a small first step such as an energy audit. It is a low cost, high benefit measure that is not difficult for the CFO to justify because of its cost-cutting potential. Most utility companies provide them free of charge as a way to reduce energy consumption. An energy service company (ESCO) may be hired to conduct a more detailed audit of the lighting and HVAC systems, building envelope and machinery. They identify opportunities for reducing energy costs by improving current operations and by making capital investments in new, more energy-efficient measures. With financial incentives from utilities and other sources, the simple payback period for many of the upgrades may be less than two years.

Some ESCOs offer energy performance contracting (EPC) in which proven energy-efficient technologies are installed and paid for through energy savings. One of the most common ways to structure the contract is the “guaranteed savings” contract in which all the costs of the project are paid for by the end of the contract period. The ESCO, not the customer, assumes all the risk of achieving the savings.

In the worst-case scenario, a company hires an ESCO to conduct an audit, but the report sits in a three-ring binder on the plant manager’s shelf with none of the energy- efficiency measures implemented. In other cases, a few upgrades are made, but the project dies from lack of interest and follows through. In still other cases, the recommended measures are implemented, but energy-efficiency and sustainability continue to be seen by most employees as the responsibility of the few, not the rank and file. Even when all the recommendations of an energy audit have been fully implemented, it falls far short of the potential that can be gained in transforming a company through a commitment to sustainability.

Jeff Swallow is the owner and CEO of Downers Grove-based Magnetrol International, Inc. a $100 million manufacturer of level and flow instruments used in the petroleum, water management and renewable energy industries. With an MBA from Northwestern and a Ph.D. in organization development from Benedictine University, Jeff is in a unique position to address the importance of a more holistic, all employees in, approach to environmental sustainability. “One of the primary reasons for our success is our relentless focus on employee satisfaction and training. The best way for us to stimulate and manage our growth is by tapping the personal insights and strengths of all our employees at all levels and functions in order to realize our fullest potential. With each initiative, including sustainability, we try to engage the whole organization.”

Sustainability may be good for the environment, but is it good for the bottom line? Seventy-three trillion US dollars think so. Five-hundred and fifty financial institutions who manage this amount of financial assets asked 6,000 of the world’s largest companies, including all the Global 500 companies, to report on their climate strategies, greenhouse gas emissions, and energy use in the standardized investor Carbon Disclosure Project format. Three thousand companies responded including 404 of the Global 500.

What did they find? “. . . Companies that are strategically focused on accelerating low carbon growth – i.e., those in the Carbon Performance Leadership Index (CPLI) – tend to perform better, not only in terms of greenhouse gas emissions management but also in terms of financial performance.” The total return on investment for the Global 500 companies in the Leadership Index from 2005 to 2011 was 86 percent, compared to 43 percent for those not in the Index.

Why does the Carbon Disclosure Project collect and publish this information? Because they share the conviction with the 550 financial institutions that “Low carbon growth is now widely accepted as fundamental to generating long term shareholder value . . . .”

Diane, the project manager who left the distiller for greener pastures, enrolled in the Immersion program at Foresight Design Initiative and visited 25 companies that are leading the way in sustainability. “I was amazed by the innovate environmental initiatives I saw in these companies,” she says.

Institutional inertia is not easy to overcome. Decision-makers often take a short- term view of company performance. Sustainability definitely offers short-term gains, but if a corporate leader is willing to take a mid- to long-term view, and to look for a way to not only leave a greener world for our children and grandchildren but also improve the bottom line, environmental sustainability is the smart choice.

Guy Vaccaro, Ph.D., LEED Green Associate, currently serves as the LEED Project Administrator for a major renovation and as an outside environmental sustainability consultant to Magnetrol International, Inc., Downers Grove, IL. He conducted an organizational assessment through culture, occupant and sustainability surveys and followed up with detailed analysis and reports to corporate leaders. He is currently applying the assessment by composing and conducting education and training of employees in sustainable practices. Contact information: Email: [email protected]. Phone: 630-215-5729.