How to Gain Value from Sustainability Reporting
Sustainability reporting offers the opportunity to give an intensive examination of a company’s environmental footprint and business strategy. This presents a unique opportunity for those with a vision to seize it. Sustainability reporting can be a galvanizing moment for creating internal alignment and igniting innovation to better serve customer requirements and grow new business. Industry leaders across manufacturing and commercial services have provided great examples of this – from Interface carpet tiles and Skanska’s sustainability agenda for construction, to 3M adhesives designed to reduce points of impact throughout the product life cycle. These forward thinking product strategies also improved competitiveness, business continuity and resilience.
So do not file away your CDP, GRI, or other sustainability report as another completed “check the box” exercise. Instead capitalize on the newly heightened awareness your sustainability reporting has brought you.
With over 2,800 company responses, an 18% increase year over year, the 2013-2014 Carbon Disclosure Project (CDP) Supply Chain Report touched more companies than in years past. In particular, many small to mid-market companies are examining their contribution to their customers’ environmental impacts for the first time, alongside the larger consumer product companies selling to b2b customers.
The CDP supply chain program currently includes over 60 member companies with extensive supply chains – from Abbott Labs to Walmart. The program collects business-critical climate change information, starting with management’s strategic roles in allocating resources and responsibility. It goes on to examine the entire enterprise risk management (ERM) process to identify and measure climate-related risks and opportunities. These risks cut two ways – how your business contributes to climate change via production of greenhouse gas emissions (GHGs) in operations and supply chain, and how your business will be potentially impacted by physical risks such as water scarcity, flooding, etc.
Another major sustainability reporting framework is the Global Reporting Initiative (GRI). This framework is structured to identify material aspects, their impact inside or outside the organization, and their indicators or quantitative metrics.
Here’s how to use sustainability reporting as a catalyst for making significant and useful changes that will return value to your company, stakeholders, and customers.
Define Current State
Your data and strategy assessment against CDP, GRI, and other sustainability reporting requirements provides a baseline measurement that shows exactly where you stand today. This baseline should serve as the foundation for focused, strategic decisions today and the company’s vision for the future. While the baseline will include a greenhouse gas (GHG) emissions inventory, it should also provide indicators for the sources of these emissions where measurable business benefits are found – energy use, water consumption, waste and recycling. For example, General Motors reported eliminating 10 million metric tons of CO2-equivalent emissions in one year through reuse and recycling, and estimates revenues of about $1 billion/year from annual byproduct recycling and reuse.
GRI reinforces this comprehensive yet focused approach. The current version, GRI G4, calls for measuring sustainability impacts that are “material” to encourage reporting only information that is critical to your business and stakeholders. This translates to identifying sustainability impacts that matter through the life cycle stages of your business. Sustainability impacts have economic, environmental and social value, so this will call for a total cost accounting approach that considers the costs and benefits of your actions.
Data collection and analysis to establish a baseline is an intensive process, and the most practical approach is to define all your major customer and stakeholder requirements and establish an ongoing performance measurement and reporting process to address the common elements. Once in place, you will have a clear vantage point, identifying areas that are high performing, lagging, or under-performing and be able to track trends over time.
Manufacturing of your product can be the source of opportunities for increased recycled material content, energy savings, emission reductions, improvement in efficiencies, and more, but you need to again think full cycle. Just as your customers have asked you to report on your carbon footprint, the source of your raw materials and impacts created across your supply chain can exceed materiality thresholds and trigger the need for disclosure. Think in terms of your supplier’s carbon footprint, waste recovery, water risk, labor issues, etc.
Now think of the product’s “end of life,” or more progressively, “next life.” Is your product and/or packaging truly recyclable or compostable? If not, (re)designing for next life will help your sustainability scorecard next time. And just because a specific type of material is deemed recyclable or compostable, does not mean everyone has access to the programs or processors to make that happen. You need to understand true recoverability.
Your sustainability reporting data should give you an idea of the types and quantities of waste generated in each area of your business. If not, a waste assessment can do this plus identify waste cost savings opportunities to divert waste from the landfill, reduce waste management costs, and create a revenue stream from the commodity sale. Once you have characterized the waste that can be recovered economically, you will need to identify specific outlets that can take that material, along with internal procedures for collection.
There are also beneficial reuse solutions for organic waste – the key is identifying not just quantity, but the processes and infrastructure to transform organic byproducts into a variety of uses – soil replenishment, livestock feed, new consumer products or energy.
A waste assessment performed for two Nestle Purina Pet Care plants in Pennsylvania identified opportunities to improve recycling and diversion of waste from landfill by 23% with savings of $302,000 annually at one plant, as well as a 34% improvement with $544,000 annual savings at the other.
Generally the heart of the organization, operations can encompass many departments including facilities management, production, purchasing, inventory, quality control, and more. Noting that there are efficiencies to be gained in almost every area of operations, this discussion highlights a selection of potential opportunities.
All purchases and contracted services, including the selection of materials, production equipment, packaging, waste and recycling vendors – will impact your sustainability scorecard. You will need to evaluate your organization’s procurement policies and contract specifications, their effectiveness, and the potential for improvement.
Identify Future State
Establish a long-term vision for your preferred future state before examining barriers that will need to be overcome. Unlike forecasting that takes historical data to predict the most likely outcome, techniques like back-casting and scenario planning allow you to plan for your desired outcome. Again it will be important to consider the interests of your customers and shareholders, and your company’s competitive strategy – whether you’re “playing to win” or “playing not to lose.”
Navigating to the Future State
Two words – barriers and risks. They can derail your plans to that future state in a big way. Now that the process of your sustainability reporting has allowed you to take stock and formulate a true, comprehensive picture of today, you need to be realistic about your approach for tomorrow.
Whether external (the artificially low cost of landfill disposal in certain regions) or internal (resistance to change), they can stop you in your tracks. The key is to work on what you can control and influence what you can’t.
Evidence-based analysis and new perspectives may be required to innovate to the next level. The carpet tile manufacturer Interface applied biomimicry principles – imitating nature to solve human problems – to design a floor system that has less manufacturing and installation waste. Their Entropy® floors have 1.5% waste, compared with 14% for broadloom carpet.
Internal communications, or a lack thereof, can cause duplication of effort or a case of the right hand not knowing what the left hand is doing. Break down internal silos and encourage a culture conducive to communicating results and best practices.
Walk the talk – make sustainability a priority by implementing a supply chain engagement program, installing solar panels on the roof, or taking personal actions applicable to your situation – whether it’s driving an electric car or contributing to a community composting center. The key is to “do,” not just “say,” and encourage others to communicate their personal sustainability plan too. As for those external barriers that you cannot control – become an influencer. Make sure your voice, and the voices of others in your industry or region are heard by those that have a key role to play. These allies can amplify your efforts and further accelerate progress.
They are inevitable, but not necessarily unavoidable. Assessing risk and addressing public perceptions of risk in planning will help you achieve your vision using the most economically, environmentally and socially beneficial path. Risk modeling, contingency planning, and key stakeholder consultations are the first step toward developing an effective enterprise risk management system. One technique that assesses risk, natural capital accounting, applies a monetary value to the use of environmental resources versus their availability, allowing for their full integration into the business. Monetarily quantifying the use of resources and helping to value decisions and risks, takes sustainability out of the wings and onto center stage.
Two core competencies – engagement and collaboration – will be key to your success.
In order for a plan to work, you will need buy-in from both those that will lead and implement – a top-down, bottom-up approach. That will require enrolling a management champion and constructing the business case. An independent sustainability assessment is often used to provide expertise and objectivity to identify an organization’s blind spots, and mid-management participation in the development of the strategy and tactics is critical.
Be open to knocking on some doors and collaborating. Captains of industry, including Caterpillar, GE and Walmart, have all led collaborations that demonstrate sustainability is a common ground business imperative. There are organizations in areas where you operate that are facing similar challenges to yours. Cost-effectively pooling resources may be the key to solving these common problems. For example, Tetra Pak, the world leader in liquid food processing and packaging solutions, established a private/public partnership with other carton manufacturers that has increased recycling access 177% in the U.S. since 2009 to recover high value materials and provide revenue streams that boost local economies (www.cartonopportunities.org).
So turn the agony of sustainability reporting into the catalyst for standing in the future with meaningful achievements. Move beyond reactionary measures to create a proactive culture that leads in sustainability and returns value to be shared with your customers, employees, and communities where you operate.
Susan Graff is principal and vice president global corporate sustainability for Resource Recycling Systems.
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