Environmental Performance Management Drives Value
Mirroring wider global trends fueled by escalating public concern, sustainability has been recast in the last two decades as a central tenet of mainstream business discourse. The onus has been placed on companies to adapt and innovate, or risk falling by the wayside. At the same time, countless business leaders continue to treat environmental questions as a subset of corporate social responsibility – a “tick-box” operating cost divorced from, or undermining, business objectives. Rather than a potential material boost to the bottom line, sustainability is often seen as a luxury investment or public relations device. Encouragingly, however, a growing body of research is adding weight to the notion of a direct link between environmental performance and profitability. From above market returns for investors, to improved financial performance and the identification of lucrative new product lines and services, a diverse set of evidence supports the view that sustainability is good for business.
Yet being convinced of the benefits in pursuing a corporate sustainability strategy is only the first step towards realizing those benefits. Sustainability is good for business, but like any other potentially effective practice, environmental performance management requires a disciplined framework to capture latent value while avoiding inefficiencies. Indeed, it is value protection, extraction and creation that lie at the heart of environmental management plans designed to achieve compliance-led risk mitigation, efficiency-led cost reductions, innovation-led revenue generation and overall competitive advantage. Successfully designing and implementing a plan of this type not only ensures a company’s license to operate, but sets it on the path to sustainable growth. Ultimately, the challenge of delivering value through environmental performance management can be understood as a four-stage process: identifying the right environmental strategies and initiatives, quantifying their value and impact, prioritizing specific actions, and maximizing the value opportunity for the entire company.
As a science and innovation company, DuPont’s experience in environmental performance management spans both an operational context, as well as a commitment to supporting and promoting sustainability advances through the DuPont Sustainable Solutions (DSS) business. Based on a long track record of delivering bottom line value through its own sustainability strategies, as well as consultation across multiple industries, DuPont has learned that a key to success is the development of a robust business decision framework. Dubbed ‘Corporate Environmental Planning’, in DuPont’s case this represents an environmental performance management system integrated with the company’s strategic business planning process. When allied with a clearly defined leadership vision underpinned by transparent metrics and accountability mechanisms, the result is an approach that prioritizes choice, while optimizing environmental spending and financial returns. Crucially, it also bridges the gap between the goals set by upper level management and participation and engagement all the way through to the shop floor.
Corporate Environmental Planning is built around five coherent steps to ensure the right environmental performance projects are funded. Firstly, the establishment and distillation of overall environmental goals into key performance indicators fit for incorporation into business execution strategies. Secondly, the issuing of guidelines that highlight focus areas for performance improvement and provide direction for business unit environmental plans. Thirdly, leveraging best practice methodologies in the development of these plans to identify environmental initiatives that align with business requirements and strategies. Fourthly, a consolidated corporate analysis of the projected costs and benefits of proposed projects to determine those with the potential to deliver the largest environmental returns relative to company-wide sustainability investment. And finally, the implementation of projects selected, including communicating their anticipated contribution to achieving overall environmental goals. By optimizing cost and resource allocation, this model accelerates progress towards environmental objectives while identifying synergies and focusing efforts on voluntary rather than compliance-driven initiatives.
While much of the Corporate Environmental Planning framework may seem intuitive, the devil is in the execution. With large corporations typically run as discrete business units, environmental performance management is often plagued by a lack of transparency and clarity when aiming for organization-wide coordination. Without an integrated business planning approach, potentially significant opportunities can be lost because they are not immediately apparent, or buried within a business unit. While DuPont is now recognized as an innovator in sustainability performance, the early days of trying to control environmental impact were defined by the need to rally the company as a whole, rather than limit risk mitigation efforts to individual business units. In the period since, though, improved integration of sustainability and business strategies has seen major investments in new or redesigned products with quantifiable environmental benefits. This has enabled the company to exceed environmental objectives, while at the same time generate substantial new revenue streams.
Like all business models entailing cultural change, implementation of a Corporate Environmental Planning approach must begin with a strong and visible management commitment. Indeed, this reflects a key belief held by DuPont: that people and leadership are the most important factor in shaping the success of sustainability practices. Part of this involves setting specific, ambitious goals that simultaneously motivate employees, demand genuine resource allocation, and promote accountability. Even more importantly, it is the responsibility of senior leaders to thoughtfully align strategy and goals by developing a consolidated roadmap that integrates environmental and business cycle planning. With a horizontal view across a company, this planning model provides the perspective necessary to execute a process that brings business unit leaders together around the table to identify opportunities and leverage operational synergies. Similarly, this planning model provides the perspective necessary to determine the most impactful and cost effective projects to pursue as part of a unified action plan.
Ultimately, the key challenge in realizing the benefits of a sustainability strategy is not just to identify opportunities per se, but rather to identify the optimal opportunities for your business. This requires a shift in thinking from the idea of sustainability as risk management – whether reputational, regulatory or operational – to the idea of sustainability as a generator of value. Environmental performance management systems represent the key to unlocking the potential of sustainability strategies to deliver substantive bottom line returns. From new and improved products, to new markets and efficiency savings, the business case for sustainability is predicated on integrating the pursuit of environmental goals into conventional corporate planning approaches. A disciplined business decision framework enables managers to identify, quantify and prioritize the right initiatives, maximizing value for the entire company. Not only can this hasten progress towards environmental goals, but also provide a foundation for improved innovation and competitive advantage in the long run.
Samy Hotimsky is a Regional Solutions Architect for DuPont Sustainable Solutions’ Operational Excellence Practice, with expertise in designing holistic engagements for environmental and social risk strategies and management.
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