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7/31/2019 What makes sustainability profitable?
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Making sustainability profitable
What business leaders do to drive real value
from sustainability initiatives?
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MAKING SUSTAINABILITY PROFITABLE
Some companies position themselves more proactively than others in term o sustainability
and seek opportunities to make their activities sustainable, but there is still considerable room
or improvement. Many business leaders ask the question: How to make sustainability initiatives
profitable?
This report should help them to identiy opportunities to benefit rom their environmental initiatives.
Key findings o the survey are:
Sustainability is not an option any more!There is a gradual shit in the global mindset and most o the companies start or continue to
integrate this new element into their business transormation. With an increasing pressure rom
diferent stakeholders, ignoring the imperative or sustainability action could put your companys
business at risk in a very near uture.
Develop a strategy and integrate it ully.
Sustainability transormation must be coherent. The business strategy built on sustainability
ofers the ramework or articulated and related initiatives. Companies that have ully integrated
sustainability into their strategy execution are more likely to drive value rom their initiatives.
Commit the top executives and ully involve management and employees at each level. Free the
necessary resources and avoid the middle management squeeze or the executive vacuum!
Measure your environmental perormance.
Perormance evaluation is essential to align your actions with the execution o the companys
strategy. Metrics will support management or decision-making. To assess investments, take all
aspects o the environmental initiatives payback into account. Increase your traditional cost-benefit
analysis with impacts on risk mitigation and brand value.
Follow risk and anticipate change.
Environmental risks are real and companies have to protect themselves against them. Assessing
and ollowing threats seriously help to uncover new opportunities and anticipate uture changes.
Use sustainability as an income driver and benefit rom the change. Move ahead o issues or
stakeholders will orce you to do it!
Move first and make it visible!Be the first to move to develop the competitive advantage. Communicate about your eforts and
actions that make sense. Pairing profitability and growth with sustainability is more than doable.
Plenty o opportunities exist to do so and it is by embracing sustainability that it becomes the most
profitable.
Key findings
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Table of Contents
Introduction 4
Business and Sustainability 9
Sustainability in the business 17
Evaluating, monitoring and reporting sustainability 27
Environmental Risk mitigation 33
What makes sustainability profitable? 39
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Introduction
I. Forewords
Nowadays, most companies are aware o the increasing necessity to build a uture based on
sustainable principles. More and more executives express their convictions that, in a wide range o
areas and corporate activities, the approach towards business has to change rom the traditional
way to more sustainable activities.
Still, it is noticeable that, when proactive management decisions related to sustainability are needed,
there is generally a gap between talks and actions. However, some companies seem to positionthemselves aster than others and seek or opportunities to make their activities sustainable. Some
have succeeded in making sustainability profitable and drive real value rom each one o their
initiatives.
II. Objective of the survey
This report explores how and why companies in Belgium engage or sustainability, how they
integrate diferent sustainable concepts inside their strategy and what is the level o implementation
within their activities and their diferent unctions. It also covers how these companies assess their
eforts, which di culties they experienced while striving to engage towards sustainability and how
they manage operational risk linked to the environment. Finally, this survey aims to highlight how
companies that have succeeded in making their sustainability initiatives profitable, diferentiate
themselves.
Making sustainability profitable implies making the change towards sustainable business an
opportunity to create value or the company. In other words, it means managing sustainability
issues while ofering profitable benefits, in the short and long terms: in the short term by driving
revenues or reducing operational costs, in a longer run by reducing environmental and regulatory
risks in the supply chain and by creating and benefiting rom intangibles such as enhanced brand
value and competitive advantages.
This report aims to explore strategies and tools used by companies to identiy and benefit rom
environmental opportunities. Even i they are complementary to make business sustainable,
environmental and social issues are diferent kind o challenges. This study ocuses especially onthe environmental and economical dimensions o sustainable development.
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III. How this study is build
IV. Approach
This report is based on quantitative data collected through an online survey and on qualitative
data collected through ace to ace meetings with people in charge o sustainability within their
company.
The survey was conducted by Kurt Salmon in autumn 2010 and received complete responses rom
85 companies. They were selected rom a wide range o areas o activities and rom medium to
large companies. The panel consists o Belgian companies and multinationals operating in Belgium.Respondents are either C-level or Management in charge o sustainability and environmental
responsibilities.
Those quantitative data were complemented by 35 qualitative interviews with companies that have
demonstrated that sustainability constitutes a lever or their development.
Business and sustainability
Environmental challenges Pressures to changes Various responses
Sustainability in the business
Perception Strategy Pitalls
Measurement
Importance o measurement Di culty to measure
Risk Mitigation
What is tracked? Who is tracked? How is it tracked?
Making sustainability profitable
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V. Respondents information
Figure 1 - Sector distribution Retail
Transport, Energy & Utilities
Others
Telecom & Media
Proessional Services
Financial services
Engineering & Construction
Manuacturing, ConsumerGood and Wholesales
The sample is covering all types o activities across various sectors.
Figure 2 - Turnover distribution
0-500
500-1.000
1.000-5.000
5.000-10.000
> 10.000
Around 40% o the surveyed companies have a turnover over 500 million.
Figure 3 - Number o FTEs
0-500
500-1.000
1.000-5.000
5.000-10.000
> 10.000
About 45% o the surveyed companies employ over 500 ull time equivalents.
10%
11%
11%
12%15%
18%
21%
2%
58%
6%
16%
5%
15%
55%
11%
15%
5%
14%
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VI. Acknowledgements
Kurt Salmon is very grateul to all companies, respondents, and interviewees who have been
involved in this survey as well as the companies who accepted to meet us and provided us withvaluable inormation, in particular:
Francis Blake, Director at Derbigum
Fabio Boccalatte, Director CSR and Group Communication at AGC Glass
Magda Buelens, Public Afairs & Environment Director at Tetra Pak Benelux
Pierre Cors, Corporate Senior Sustainability Advisor - Corporate Management or Health
Saety and Environment at Solvay
Eric Coifard, Senior Property Manager at Cofinimmo
Stephan De Brouwer, Managing Director at McDonalds Belgium
Isabelle de Cambry, Associate Director Corporate HSE & CSR at UCB Olivier Dautrebande, Eco Manager at Total Belgium
Bruno Derasnes, Director Sustainable Development at Electrabel
Philippe Dembour, Head o Corporate Responsibility and Sustainable Development at ING
Veerle Demol, CSR Communications O cer at KBC
Jean-Christophe Donck, Vice President at UCB
Guy Ethier, Senior Vice-President Environment, Health & Saety at Umicore
Concetta Fagard, Vice-President Group Reputation, Vice-President Group CSR, Sponsoring, PR
& Events at Belgacom Group
Marc Flammang, Managing Director at Bank Degroo Foundation
Stphane Geerts, Director General Services at Group RTL Belgium Aurelie Gerth, Public Afairs and Media Relations Manager at Unilever Benelux
Mia Goetvinck, Director Business Excellence/CSR at Ricoh Belgium
Dr. Hildegard Deweerdt, Environmental expert at KBC Bank
Laurent Kahn, General Manager at EXKi
Catherine Kinet, Head o Corporate Social Responsibility at BNP Paribas Fortis
Rikkert Leeman, Chie Technical O cer at Befimmo
Pascal Lglise, Quality and Sustainable Development (CSR) Director at Carreour Belgium
Olivier Marquet, Managing Director at Triodos Belgium
Xavier Milcent, Global Marketing Manager at ExxonMobil
Florence Rossi, Corporate Social Responsibility & Quality Manager at Sodexo
Hannelore Schotsaert, Marketing & Communication Manager at BMA Ergonomics
Graldine Tondreau, Sustainable Development Advisor at Electrabel
Vincent Vanwijnsberghe, Government Afairs & Public Policy Manager at Baxter
Mieke Vercaeren, Advisor public afairs at Colruyt
Galle Vervack, Responsible Renewable Energy and RUE at Elia
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Business and Sustainability
Global warming is unequivocal!
Despite many quarrels between eco-partisans
and eco-sceptics, there is now one certainty:
there is no doubt about the truthulness o
global warming and its consequences such as
an biodiversity.
For years now, many scientific and public
figures show us key messages:
Global warming is unequivocal: the worldsaverage temperature is rising,
Most o this warming comes rom human
activities, in particular GHG such as CO2
due
to the burning o ossil uels,
It is translated into more negative than
positive consequences, and the severity is
likely to increase.
Furthermore, other major environmental
challenges have reached common acceptance
such as energy shortage, water stress, waste
management, ocean fish depletion and
deorestation, to name only a ew.
In the end, no matter i scientific, eco-partisans
or eco-skeptics are right, the general public is
now convinced about the necessity to limit our
impact on the planet. Clients, consumers, as
well as employees and business partners are
now expecting companies to respond to these
challenges in an appropriated way.
More and more companies acknowledge those
acts and endorse their part o responsibility
regarding the environment. Accordingly they
started to integrate sustainability principles
within their activities. This trend has been
encouraged through initiatives o diverse
institutions at international, national and even
community level.
In this context, this part o the report tends to
identiy how and why companies in Belgium
engage or sustainability. It will first assesswhat are the challenges perceived as the
most di cult or the uture. Then, it looks
into the diferent pressures pushing company
to take measures and to start initiatives.
Finally, it examines which actions are taken by
companies to respond to those challenges and
pressures.
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I. Companies are preparing to face climate challenges
Rise in energy cost 69%
Climate change and upcoming relevant regulations 59%
Rise in transportation costs 34%
Rise in commodity prices 31%
28%
28%
28%
28%
20%
20%
11%
Public opinion regarding environmental decisions
Air pollution and upcoming relevant regulations
Waste Management
Water scarcity and upcoming relevant regulations
Lack o resources needed to produce
Bio-diversity and land use related issues
Chemicals, Toxics, and heavy Metals and upcoming relevant regulations
0% 10% 20% 30% 40% 50% 60% 70% 80%
Figure 4 - What are the most di cult challenges related to sustainability that you are expecting to ace in
the near uture?
While global society is aware o the diferent
challenges, the results highlight 4 major
challenges that companies expect to ace in
the near uture.
For most o the surveyed companies, rise
in energy cost and climate change and
upcoming relevant regulations representthe 2 most di cult challenges or the near
uture. These are closely ollowed by the rise
in transportation costs as well as the rise in
commodity prices.
For a majority o companies, risein energy cost and climate changesregulations will be the 2 most chal-lenging issues to manage in the nearuture.
Worries expressed by companies reflectthe awareness that the business as usual
is currently putting too much pressure on
key natural resources. Those resources, like
oil, commodities and industrial metals, are
gradually reaching their limits. On numerous
areas, companies cannot continue to go
orward with business as usual regardless
o the environment. Since energy has taken
a central position in our society, it makes
this challenge highly visible and shows theconstraints imposed by our planet. However,
like any challenge, it can be seen as an
opportunity. It is an early warning in order to
reorient how markets and society unction and
hence how companies operate in their day to
day activities.
Challenges expressed also reflect concerns on
air pollution and in particular on climate change
as regulators worldwide are determined to put
pressure to lower this at a sustainable level.
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II. There is an increasing pressure to make companies act in a more
sustainable wayFigure 5 - What are the main sources o pressure that drive companies to pay attention to sustainability
issues?
According to respondents, 4 main drivers
pressure their company to pay attention to
sustainability issues: the necessity to strengthen
their competitive position, to meet consumers
expectations, to manage the risk o regulation as
well as to attract, motivate, and retain talented
employees.
The main source o pressure to address
sustainability issues comes rom competition. I
they want to keep one step ahead, companies
have to move to strengthen their competitive
position. Environment being more and more
important in customers minds, companies must
adapt to meet consumers expectations. Some
companies however gain rom a competitive
position by beating environmental expectations!
Didier Bellens, CEO Belgacom
CSR helps us to anticipate on societal
trends and stakeholder expectations. It
drives innovation and opens doors to
promising new business areas
Competition is the most important actor that drives companies to addresssustainability issues.
Francis Blake, Derbigum
Through our program o innovation which
started less than 10 years ago, we grew
rom a company active in roofing systems
to one that is Making building smart. A
sustainable approach and a strong R&D
program have led us to the development
o more eco-riendly solutions which
permitted to gain a significant competitive
advantage
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On the other hand, regulatory risk is constantly
pressuring companies. Some institutions, such
as the European Union, play an important role,
pushing companies with more regulations to
fight against climate change. The cap-and-
trade system or the carbon market and the
extended producer responsibility, requiring
companies to take the ownership o the
product they launch on the market, are good
examples o the numerous initiatives taken by
the authorities.
Furthermore, on the strength o employees
expectation, companies tend to act more
responsibly. Indeed, in the fierce competition
or talent, potential employees also growingly
take into consideration the sustainability
argument and actual employees want to be
proud o their work and o their employer.
Stakeholders pressures box
Competition: Through providing moresustainable products & changing
behaviours.
See Derbigum text box
Consumers: Consumer awareness and
expectations increase. They demand
inormation such as what is in the product,
where it comes rom and how it is made.
Authorities: Be it rom international
institutions (United Nations, European
Union, etc.), national or local government,
the number o environmental regulation
boomed in the last two decades. At European level, directives and regulations are directly
impacting companies activities: RoHS (restriction o
hazardous substances), WEEE (waste electrical and
electronic equipment), REACH (registration, evaluation
and authorization o chemicals)
Due to the presence o a contaminating product
(cadmium) within their Playstation cables, Sony wasnt
allowed to supply their product just beore Christmas
2001 in the Netherlands
Employees: Today employees are looking
or a meaning in their day to day work.
They need to be proud o the companythey work or!
New employees and competition or talent.
New generations are more sensitive to green concepts
Business partners: B2B customers are
increasingly asking their suppliers to reveal
what their products contain and how they
make them. Walmart is pressuring or sustainability principles
compliance concerning products, requesting its 70 000
suppliers to lower ossil uel use and waste.
Financial partners: Banks and Hedge unds
are now including environmental actors
inside their investment decisions Equator principles: new standards or decision making
about project finance loans
Carbon Principles: agreement to look hard at carbon risk
o electric power projects financing (2008, JPMorgan,
Morgan Stanley, and City group)
Investors and Stock Market: ranking system
that reers to sustainability perormances. SRI indexes: DJSI, FTSE4Good, ASPI, Ethibel Excellence
Europe,etc...
Ranking Agencies: Vigeo, SAM, Eiris, etc.
Financial market: Market uncertainty
Energy costs variation
Local Communities: Local communities are
more sel-powered and companies need to
involve them or opening or expending ope-
rations in a region. The local community o southern India succeeded to
remove Coca-colas license to operate in Kerala or its
bottling plant due to an over-exploitation o ground wa-
ter sources and the emission o toxic sludge. As a Result
many people in India have cut down or given up on Cola
consumption
NGOs & Opinion leaders: Retaining
considerable public influence Chiquita was pressured in the 1990s to change its way to
work with local armers Al Gores recent campaign on climate change has tre-
mendously attracted the attention o general public
Medias: Traditional media (TV, radio,
newspaper) but also new media (internet)
increase the awareness o consumers Ater a campaign o media harassment through
Facebook, Greenpeace urged the agribusiness giant
Nestle to abandon oil palm and engage in a policy o
zero deorestation
The movie home rom Al Gore has risen the awareness
o several million viewers
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Our Point of View
Best perormers are always one step ahead o the competition. Indeed, being one move ahead
allows you to be better prepared to deal with upcoming problems. We believe that all the signs are
present, it is time to jump!
In the last ew years, watchdogs and opinion leaders have been more urgently raising awareness on
sustainability. Media play an important role as well. Major business publications and newspapers,
have increased their ocus on sustainable development topics and are definitely on the watch or a
corporate blunder. Consequently, sustainability issues climb the general public agenda and climate
change becomes an increasing concern.
As the results show it, consumers, employees, communities as well as businesses and financial
partners now expect companies to take their responsibilities and to respond to the challenges
in an appropriated way. Those changes o behaviour pressure and afect significantly companysactivities (See Stakeholders pressures box above).
In addition, numerous examples show that in the race to sustainability, companies that move first
gain the most significant competitive advantage.
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The survey assessed several levers that can
be used as a response to environmental
issues. On one hand, one question covered
the perception on efectiveness o those
actions regarding the reduction o companies
impact on the environment. On the other hand,
another question assessed which levers where
efectively used by companies to respond to
environmental issues.
For the respondents, the actions and
opportunities perceived as the most efective
are, by order o efectiveness: the production
and use o clean energy, the use o a carbon
ootprint analysis to assess and mitigate GHG,
and waste management.
Concerning the actions already used, the
most used ones are the improvement o waste
management, the monitoring and reduction
o costs and the improvement o the fleet
selection.
There is a mismatch between the actions perceived as the most efective andthe ones efectively used.
The results show a mismatch between the
actions perceived as the most efective and the
levers currently used by companies to respond
to the environmental issues. For example,
the use o clean energy is considered as the
most efective action, yet regarding the use o
these actions, the purchase o green energy
is the fith initiative the most used and the
production o green energy locally is the 11th
initiative. Nevertheless, waste management
and costs identification & reduction are, in
both cases, in the top 4 actions.
Figure 6 - Ranking o the most efective actions to reduce a companys environmental impact
Purchase o Clean energy
Production o Clean energy
Carbon ootprint analysis
Waste management
Cost identification & reduction
Green Procurement
Products/services optimization
Fleet management optimisation
Usage o clean technologies/green IT
Smart buildings
Environmental Risk Management
Search or Subsidies
63%
41%
46%
78%
72%
54%
58%
68%
59%
46%
53%
30%
1
2
3
4
5
6
7
8
9
10
11
12
Rank o the action by ordero perceived efectivenessto reduce a companysenvironmental impact.
Percentage o respondents
already using the actionwithin their company
III. In response to these pressures, companies identified appropriateapproaches targeting the highest impact
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Our Point of View
Most mismatches between actions perceived as the most efective and those currently used by the
respondents can be explained by the perceived returns on these actions. The best way to reduce
the impact is rarely the cheapest, let alone the easiest! In this regards, governments and institutions
can have a significant impact.
In the same way, the most significant mismatch o the results is the fleet management which in
Belgium can be explained by the ederal auto premium as well as the regional incentives. For
obvious reasons, policy makers are very active in limiting road transport nuisances which are
reflected in the the various European eco-taxes on road transport and uel consumption.
Similarly, even i clean energy is perceived as the most impacting action that a company can take
to reduce its impact on the environment, it is generally costly. Indeed, producing your own greenenergy is a considerable investment or which the payback period is relatively long. Additionally,
many companies do not own the building they work in, which in case o solar panels and windmills
makes it more complex. On the other hand, purchasing clean energy is much easier but it is an
investment or which the returns are intangible and di cult to measure financially. Hopeully,
more and more companies are seeing the benefits through the costs and clean energy is definitely
becoming trendy. Again, governments can and are playing a significant role through Feed in
Tarif, green certificates, and other regulations and incentives towards clean energy production.
Likewise, the results show that a carbon ootprint analysis can be very useul to help reducing the
companys impact. In regards to GHG, it can be used as a starting point rom where you can identiy
where to act in order to have the strongest impact on your emissions. However, it is a complex
process or which companies usually do not have the internal competencies and knowledge. In
addition, the analysis needs to be done continually or on a regular basis to be the most efective.
Though, waste management is a good
match because reducing waste to a
minimum and by doing so increasing
productivity, is part o doing e cient
business which is a priority or most
companies. Nevertheless, the mindset
on waste management is evolving.
The change in perspective rom an
unbounded world with unlimited
resources to a constrained world
highlights the need or anotherapproach to waste management.
The best initiatives start ahead in
the supply chain and aim at closing
the loop through a cradle to cradle
product lie-cycle.
Cradle to cradle at BMA Ergonomics, Hannelore Schotsaert
"Most o the chairs used in an o ce environment are out o use ater 7
years on average. Undoubtedly, most o those chairs are designed to
last longer!
BMA Ergonomics AXIA chair is, through its Design or Disassembly an
alternative to the classic cradle to grave products. BMA Ergonomics
operate a withdrawal guarantee. Ater years o intensive use, BMA
Ergonomics come and pick up your old Axia chair. In exchange, you will
even receive a money coupon to use or a new chair (around 50 EUROS
in 2010/2011). The old chair returns to the actory. In the recycling shop,
especially equipped or this purpose, and is completely taken apart.
Some o the components are directly reused in the manuacturing o new
chairs. Others are sent back to their suppliers, who recycle the parts and
use them in the production o new materials. Today, BMA Ergonomics
guarantee that their products consist o at least 67% recycled materials."
This is an example o a Cradle to Cradle Design in which technical
materials are viewed as nutrients or new products. This kind o design
seeks to create systems that protect our planet by developing almostwaste ree processes.
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Sustainability in the business
Companies finally acknowledge their envi-
ronmental responsibility. Thereore, they start
increasingly to integrate sustainability prin-
ciples within their business activities. As shown
below, this act is reflected by an increased
environmental ocus in their core strategy.
In this context, this part o the report highlights
the trend to engage in sustainability through a
strategy oriented towards planet concerns. It
assesses the proportion o respondents who
ully or partially implemented sustainability
within their strategy. In the first place it looks
into the reasons why some did not develop
sustainability within their strategy. Secondly, it
explores why the others did develop it. Finally,
the report studies how companies structure
their organisation to support environmental
initiatives.
I. Environment is no longer an option, it is now taking an importantrole within corporate strategy, and this trend will strengthen in thenear future
Figure 7 - To what degree does companies strategy ocus on the diferent elements o the Triple P:
People, Planet, Profit?
Planet
24%
People29%
Profit
49%
Planet
34%
Planet
36%
Profit
37%
Profit
34%
People
29%People
30%
5 years ago Today 5 years rom now
5 years ago, profit was by ar the highestconcern o the triple P mix (People, Planet,
Profit). Nowadays, businesses strategies seem
to be more balanced between the 3 elementsand what is more, there is an increasing trend
or planet concerns.
It is maniest that companies tend to integrate
sustainability concerns within their core
strategy. This shit is visible and companies are
responding to constantly growing pressures
and try to stimulate environmentally sound
behaviours internally. Externally, companies
claim not only to be willing to reduce their
impact but more and more that they commit
themselves to protect the environment.
Results confirm that companies are increasing their ocus on environmentalconcerns.
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Our Point of View
To survive in todays changing environment, companies are required to adapt their business model.
As regards to the environment, they must find ways to stand out rom other players and to benefit
rom competitive advantages. The starting point or this is to develop a strategy oriented toward
sustainability. We firmly believe that in a near uture, companies that do not have an adapted
environmental business strategy will find di culties to stay in the market.
During our interviews and meetings we saw environmental leaders using appropriated sustainability
oriented strategies that helped them to:
Cut operational costs and expenses related to environmental issues,
Manage and reduce environmental and regulatory risks,
Drive tangible revenues rom diferentiation o products and services ofered,
Drive intangible revenues rom an improved brand image and through improving relationship withtheir customers, employees, and other influencing stakeholders.
II. Most companies formalised their engagements through theintegration of sustainability aspects within their strategy
Figure 8 - Does your company have developed a comprehensive Sustainability Strategy?
Yes, a ormal comprehensiveand documented strategy
Yes, general guidelines aboutenvironment and socialresponsibility
No, we do not have adocumented SustainabilityStrategy
Our survey reveals that more than 70%o the surveyed companies developed a
sustainability strategy, consisting, or 34%,
o a ormal comprehensive and documented
strategy or, or 41%, o general guidelines about
environment and social responsibility.
On the other hand, 25% o respondents still
dont have any documented sustainability
strategy.
The majority o companies have ormalised their engagements on theenvironmental challenge, ranging rom general guidelines to more ormaldocumented strategy
25%34%
41%
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Our Point of View
As seen previously, in our complex and interconnected world, taking the environment into
account is no more an option. On the contrary, it can be seen as an opportunity. While the world
becomes global, it is more and more di cult or companies to diferentiate themselves. To this
end, an environmental perspective can help to reduce risks, cut costs as well as to drive revenues
and enhance hard to measure but significant intangible value. Hence, the development o an
environmental strategy has become a critical point or competitive diferentiation.
Indeed, developing a strategic approach to environmental issues helps to identiy the opportunities
related to the environment a more natural part o doing business. We are confident that building
an appropriated environmental strategy will provide companies with an essential ramework or
actions. A structured and ormalised approach will translate the c-level commitment towards
environmental issues and is an essential tool to develop coherent actions aligned with the core
activities o the company.
During our visits we observed several examples o a successul sustainability strategy creating real
value or the company. Nevertheless, it is worth mentioning that or some, temptations to ool the
audience are real. Several pitalls should be avoided and could be revealed as problematic in the
uture:
Some companies are exclusively committed on trendy topics such as GHG reduction. O
course, climate change is an issue o utmost importance or the uture. However, to ensure the
viability o their business on the longer run, companies must embrace sustainability globally and
accommodate their business model accordingly. You cannot see the orest or the trees.
When reporting results, a years comparison can make a tremendous diference in the perceived
results o the eforts announced. Making bold statements should not only look good but be good
and translate real commitment!
In various cases, especially in the retail industry and ast moving consumer goods, companies are
announcing eforts and ormalising engagements without consulting the operational level on the
easibility o their commitments. This can easily lead to unreached targets.
III. Why have some companies not yet included sustainability withintheir strategy?
Figure 9 - Primary reasons why companies do not yet have a sustainability strategy?
01 02 03 04 05 06 00% 10% 20% 30% 40% 50% 60%
Lack o human resources to drive the changes
Not relevant or our sector o activity
No clear vision o what could be done
63%
42%
26%
16%
11%
11%
We are waiting or the right time
We dont see the benefit
There is no time to implement such a change
75%
25%
Does yourcompany
have a
developedsustainability
strategy or
guidelines?
Why?
No
Yes
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Among the 25% o respondents who have not
yet developed a sustainability strategy, more
than 60% claim that they do not have enough
human resources available to do so. About
40% believe that the development o such
a strategy is not relevant or their sector o
activity and 26% claim that they have no clear
vision on what could be done.
The most important reason or not integrating sustainability within theirstrategy is the lack o human ressources.
When looking at the size o the companies
who did not implement a sustainability
strategy, the human resource issue makes
sense: 78% o these companies have less than500 employees.
Moreover, 57% o the companies which believe
that the development o a sustainability
strategy is not relevant or their sector o
activity are active in the proessional servicessector (not including bank, finance and
insurance activities).
Our Point of View
We are convinced that in the todays world no company big or small, in manuacturing or services
can aford to neglect environmental issues.
It makes senses that the small companies and service companies eel less concerned about
sustainability than others because their impact is already small, the pressures on their activities is
limited and they are usually more flexible to adapt quickly without supporting unbearable costs.
Nonetheless, stakeholders expectations are rising. Even i the pressures are lower, they rise as well
or smaller companies and or the proessional service industry. Diferent reasons make us believe
that even those companies should take sustainability into account within their strategy.
Firstly, more and more large customers are putting pressure on suppliers, big or small, and encourage
them to comply with environmental standards. Indeed, as it is the case or 54% o the respondents,
many companies are developing Green Procurement practices to assess the sustainability o their
suppliers. As a result, even or small companies and the service industry, a sustainable strategy can
be used as a serious asset to diferentiate onesel rom its competitors.
Secondly, legislation applies also to smaller companies. To meet ambitious commitments made
at International level, and in particular at EU level, authorities will increase their requirementstowards companies in the coming years. Notably, a recent study on SMEs and the environment
in the European Union, conducted jointly by Planet SA and DTI, highlights that small and middle
sized companies account or 64% o the industrial pollution in Europe. Hence, some legislation will
accordingly be directed towards them. As the REACH directive demonstrated, regulation can have
a serious impact on small businesses.
Thirdly, we live the inormation age which has two major impacts on companies, taking all categories
together. On the one hand, there are now plenty o tools allowing a higher level o inormation to
track environmental impact. New sensors and inormation systems make tracking afordable or
smaller companies. On the other hand, inormation travels aster and almost at no cost, which
makes small companies more vulnerable to watchdogs and other stakeholders scrutiny than they
ever were.
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IV. When and for which motives did companies integrate sustainabi-lity within their strategy?
Figure 10 - For which motives did companies integrate sustainability within their strategy?
01 02 03 04 05 06 07 08 001 02 03 04 05 06 00% 10% 20% 30% 40% 50% 60% 70% 80%
Improve corporate and brand reputation 78%
Diferentiate the companys products 62%
Motivate and retain employees
Comply with legal and stakeholders requirements
Cost reduction
Identiy new growth opportunities
Increase e ciency
Customer retention
Improve risk management
60%
59%
52%
48%
47%
47%
43%
Does your
company
have adeveloped
sustainability
strategy or
guidelines?
Yes
75%
No
25%
Why?
The our main reasons put orward by respondents to explain why they chose to integrate
sustainability within their strategy are:
The improvement o their corporate/brand reputation: 78%,
The diferentiation o their products: 62%,
The act that it helps to motivate and retain employees: 60%,
And the act that it helps to ensure the compliance with legal regulations and other stakeholders
pressures: 59%.
0
5
10
15
20
25
30
35
0%
5%
10%
15%
20%
25%
30%
35%
34%
19%
14%
8%
22%
4%
Less
than 6months
6 - 12
months
1 - 2
years
2 - 5
years
5 - 10
years
10+
years
Figure 11 - How long ago did companies integrate sustainability within their strategy?
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Most companies implemented sustainability in their strategy to improvetheir brand reputation and diferentiate their products.
There is a recent shit in the way corporate
drive changes towards sustainability. While
companies were used to perceive sustainability
constraints as negative, many see them now as
businesses address sustainability in a way that
is directed to preserve or improve their brand
reputation. In addition, many companies know
that they could capitalise on sustainability todiferentiate their products and strengthen
their competitive advantage.
Employees motivation and retention is also
identified as an important priority or which
sustainability plays a growing role. As explained
beore, employees increasingly search or a
meaning in their day to day work and need to
be proud o the company they work or. As a
matter o act, since new generations are more
sensitive to green concepts, sustainability is
now significant in the competition or talent.
It is interesting to assess when companies
started implementing a sustainability strategy.
Most companies did it during the last hal-
decade. However, our meetings revealedthat in the past, even i sustainability was not
expressed directly into the strategy, several
actions were done already. This changes and
there is now a clear necessity or companies to
express it more ormally. The trend can also be
confirmed by the recent increasing number o
new sustainability reports which has boomed
in Europe in the last ten years.
Our Point of ViewThere are many motives or companies to develop an environmental perspective in their strategy.
We identiy three basic reasons that encompass all motives.
First o all, a sustainability strategy helps companies to yield tangible profits and reduce costs.
Companies reported to us that when they started addressing sustainability within their strategy, they
uncovered upside potentials on both the short and long run. Among other benefits, sustainability
pushes them to increase e ciency, to reduce their waste as well as to be more innovative and to
uncover new opportunities to increase sales.
Secondly, by acting towards sustainability, companies provide consumers and employees with a
proo o genuine concern to the growing global unease about the uture and about doing theright thing or the next generations. Hence, implementing sustainability into the strategy has a
tremendous impact on brand reputation and definitely helps to attract and retain customers as
well as employees. There is now a growing need or companies to be more visible regarding their
environmental behaviors.
Last but not least, sustainability helps them to manage the downside risks. Risk management and
compliance with legal constraints as well as with stakeholders expectations become crucial or
some companies to keep selling their products.
To sum up, integrating sustainability within your strategy becomes a must do because it
lowers business risks while protecting value creation! This act is strengthening over time: as the
results shows, during the last hal-decade most companies started to o cially commit towardssustainability. Beore that, it was risky to communicate on environmental matters because it oten
meant exposing yoursel to watchdogs scrutiny. Nowadays however, increasing upsides exceed
risks. What is more, not to talk about it may well reveal being even riskier!
Another question assessed the moment in time
when sustainability started to be implemented
within their strategies. More than 75% reported
having done it in the last 5 years, and more than
20% during the last year.
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To make sustainability part o their day to day
activities, most companies have put in place
a dedicated team or CSR activities (1 single
person or a team o 2 to 5 persons). During
our meetings we observed that the team is in
general composed o people who previously
worked or the same company but in other
unctions (related or not to environment and
sustainability), notably people rom the Quality
or Saety departments. However, in some
cases, companies hired new comers, generally
experts in CSR.
The persons accountable to ensure thatsustainability is taken into account in the
company are or most o respondents their
CEO and Management. The CEO can have a key
role to make sustainability initiatives efective
and a clear message rom the top ensures
leadership or sustainability and optimises
the chances or a successul implementation
throughout the organisation.
Umicore: A clear example of commitment
Due to its historical activity, mining and
smelting, Umicore, ormerly know as Union
Minire aced pollution issues.
Thanks to the commitment o its CEO, it
has gradually evolved into a responsible
company specialized in materials
technology. Its engagement is clearly
visible in its statement materials or a
better lie. During the transition period,
the communicatioon rom the CEO hasbeen strong and clear. Their sustainability
approach has also been clearly detailed
in their booklet The Umicore Way which
is distributed to all Umicore employees
worldwide.
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Our Point of ViewI the commitment is real, Green teams, as we call them, are very important to catalyse initiatives
and make environmental actions more coherent with the companys strategy. Nevertheless, having
a team assigned to deal with environmental matter is not su cient. The latter cannot do much i the
CEO, the corporate culture and the resources investment are not there to back it up! Furthermore,
relying solely and blindly on such a team can undoubtedly create problems as well. Notably, by
being isolated rom the rest o the company the team can sometimes deter other employees
involvement. To avoid such issues, it should be actively involved in the companys process and
convey and stimulate employees commitments.
There are several pitalls that managers should bear in mind concerning the structure used to
support environmental initiatives:
First, the support o top management is essential. Most o successul initiatives we learned were
backed up by c-level engagements. A clear message and vision must come rom the CEO to push
the entire company to act responsibly. This is even more the case or companies historically not
involved in environmental matters. Such support shows to the entire company that environment
is an important aspect o the strategy and that the company looks towards the uture through a
sustainability that goes beyond short-term targets.
Second, i top management is where commitment starts, middle-management is generally where
sustainability initiatives are brought to a halt. Since middle-managers are requently holding what
seems to be the weight o their agencies on their shoulders and are oten squeezed rom all
around, they are stuck between the call or more sustainability, rom top management or the green
team, and all the other day to day objectives such as boosting profit margins, increasing sales or
cost cutting targets. To respond to those pressures, middle-managers have to prioritise. Obviously,
i the environmental areas are not high enough in their priorities, they will go by the wayside.
Hence, involvement o operational management is critical.
To avoid middle-management squeezed rom all directions to overlook environmental objectives,
they must get a clear signal that sustainability and environment is a part o their job. Signals can be
given through the integration o sustainability goals within their job descriptions, bonuses, and the
definition o environmental metrics as key perormance indicators o their activities. TNT Express
or example has given CSR targets to all its managers and includes CSR and environment within
the bonus schemes. Ensuring that incentives stimulate to prioritise green initiatives is necessary to
align employees goals with environmental targets. The number o trainings given on sustainability
can also send clear messages to executives and employees in general.
Finally, aside rom the lack o involvement rom the top and operational management, another
recurrent problem or green initiatives is the lack o resource investment. To be meaningul,
sustainability strategies like any other strategies require the availability o various resources. These
can be material or immaterial, be human or financial and it can even be inormation, knowledge,
involvement or commitments. All these resources are decisive to guarantee the success o initiatives.
O course, companies could, and oten should, perorm pilot project to assess the potential o an
opportunity. Even so, while the same initiatives prove to be very successul or other companies, we
have seen pilot project being so poorly invested in that it had no chance to yield positive results. To
sum up in one sentence: the wise one does not seek to jump halway across a ditch!
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Evaluating, monitoring and reporting
sustainabilityAlong with the integration o sustainabilityprinciples within the business activities
comes the need to assess, monitor and
report on sustainability perormances.
Leading companies are now integrating
key environmental concerns into their
management, measurement and reporting
processes. Yet, a majority o companies are
only starting to evaluate, measure and report
their environmental perormances and ace
di culties to do so.
An appropriate measurement and monitoring
brings substantial benefits to the company.
Firstly, potential initiative and perormance
evaluation are essential to implement, ollow up
and align actions with the companys strategy.
The metrics will support management during
decision-making processes and post decision
analysis. Hence, measuring perormances
shows improvements and helps to identiy
areas that need attention and initiatives that
should ultimately be discontinued. Secondly, it
is essential to communicate on achievements
both internally and externally. Last but not
least, managing and measuring the companys
environmental perormances provides a
protection or the long-term share-value.
This section highlights the importance o
monitoring and reporting on environmental
perormances and underlines the act thatmost companies ace di culties to evaluate
environmental initiatives and to measure their
environmental perormances adequately.
It presents the major roadblock to adapt
assessment and measurement in order to
integrate the companys environmental
considerations.
I. Measuring sustainability performances is important but measuring
it precisely is a real challengeFigure 14 - Are you able to measure and monitor your sustainability perormances?
0
10
20
30
40
50
0%
50%
10%
20%
30%
40%
1%
10%
46%
33%
9%
Not at all No Imperectly Yes Absolutely
About 42% o the respondents reported their
company as able to wholly measure and
monitor their sustainability perormances. The
remaining 58% ace di culties and among
them, 11% are ultimately unable to do so.
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Most o respondents were imperectly able to measure and monitor theirsustainability perormances
While companies strive to reduce their
environmental impacts and take many
sustainable initiatives, most ace di culties
measuring results and tracking their
environmental perormances. Since or an
initiative to be really meaningul or the
company, progress needs to be measured, this
constitutes a major issue or decision makers.
The results show that companies investing in
sustainable initiatives are more oten than not
imperectly able to monitor environmental
perormances. Consequently, they cannot
properly estimate returns on their initiatives.
Our Point of View
Perormance evaluation is essential to implement, ollow up and align actions with the companys
sustainability strategy. Decisions should not be taken blindly. An old management adage says You
cant manage what you do not measure. We can at least say that you cannot manage what you do
not know about. Metrics support management during decision-making process and post decision
analysis. Clearly, measuring perormances does not only show improvements, but also help to
identiy areas that need attention and initiatives that should ultimately be discontinued. Without
a doubt, inormation is a basis or managing business and to ensure an alignment between results
and objectives. Finally, it is also essential to communicate on achievements.
Accordingly, many companies ace di culties to make their actions visible and miss a substantial
part o the return they could get rom environmental initiatives. Although respondents indicated
that sustainability dimension o their strategy mostly consist o improving brand reputation and
diferentiate their products, they communicate mainly through low-impacting media such as
Sustainable Development websites and CSR reports. As a result, many actions are not conspicuous
enough and ail to be noticed by general public. An appropriate measurement and reporting is
crucial to capitalise on past achievements and to gain visibility by providing essential inormation
to the outside world.
However, monitoring sustainability results is ar rom being an easy task. Environmental issues tend
to be complex and in many cases potential solutions will uncover new issues that can be even worse
than the initial one. This complexity makes measuring perormance a real challenge. The traditional
cost-benefit analyse is not appropriate to measure potential initiatives and to compute returns on
current projects related to the environment. Indeed, payofs rom environmental initiatives can take
various orms and are oten difuse, delayed and not easy to see.
Hence, to measure ully the results o environmental actions, companies need to broaden their
measurement methodology. They should take into account the various aspects that returns can take.
Those are traditionally not taken in consideration into investments calculation and perormance
measurement. For example, protecting your brand reputation and shielding the company against
upcoming regulations. To help in this process, we recommend categorising payofs as in Daniel
C. ESTY and Andrew S. WINSTON (Authors o Green To Gold, John Wiley & Sons, Inc. 2006)
ramework presented in Figure 15. In this ramework, the traditional cost-benefit point o view
is aggregated with less certain payofs that are generally hard-to-see intangibles or risk related
benefits.
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Best perormers we met had oten changed their
environmental related investments decisional
process and their perormance measurement to
take those less certain returns into consideration.
Obviously, those returns cannot be measured
precisely. However they exist and constitute a
real benefit or the company. Hence, they should
not be disregarded! To sum up once more in one
sentence: In the country o the blind, the one-
eyed man is king.
Figure 15 - D. Esty and A.Winston strategic
ramework
CapitalizeRevenues
BuildReputation
ReduceCost
MitigateRisks
High
Short Run
Low
Long RunCertainty
Manage
the
downsides
Capitalize
on the
upsides
II. Companies face difficulties when measuring and monitoringsustainability performances
Figure 16 - What are the main di culties that you experienced in measuring and monitoring your sustainability
perormances?
01 02 03 04 05 00% 50%10% 20% 30% 40%
Lack o indicators and data
Lack o knowledge and expertise
Internal level o priority
Suppy chain complexity
Consumer awareness
Lack o international regulations and standards
44%
39%
39%
37%
17%
14%
The survey questioned companies on the main di culties they experienced when measuring and
monitoring their sustainability perormances. The results show that main di culties are related to
1. The lack o indicators and data or 44% o the respondents
2. The lack o knowledge and expertise on tracking environmental perormances or 39% o the
respondents3. The internal level o priority or 39% o the respondents
4. The supply chain complexity or 37% o the respondents
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Main di culties or companies to track environmental perormances arerelated to the lack o indicators and data as well as the lack o knowledgeand expertise.
The lack o indicators and data is not
surprisingly the highest di culty o measuring
and monitoring perormances. First o all,
sustainability is usually a new dimension
or which data collection was not originally
planned in the companys reporting structure.
Secondly, as we have seen the aorementioned
perormances can take many orms that are
sometimes di cult to evaluate.
In addition, as sustainability is a recent
concern, companies oten lack o knowledge
and expertise in tracking environmentalperormances. The company has to either
train current employees in order to learn the
necessary knowledge, hire new employees with
specific skills or ultimately get the expertise
rom the outside.
We can also see that di culties are also
coming rom the internal level o priority and
the undervaluation o environmental aspects.
I environment is not perceived as a priority
then the urge to measure it is weak. This can be
partially explained by the lack o involvement
o top management and middle-management
overlooking environmental aspects, as we have
seen above in the chapter Which structure is
supporting sustainability initiatives within the
company? in page 18.
Finally, supply chain complexity is a major
di culty, especially or companies that ace
di culties to identiy the causes o their
environmental impacts and when the highestimpact occurs outside the companys walls.
However, companies can no more consider that
what occurs outside their internal activities is
not part o their business. Even i the supply
chain is very complex, not assessing suppliers
correctly can lead to serious troubles.
Our Point of ViewWhile or some companies, the collection and use o accessible data to generate appropriate
environmental indicators is already business as usual, most companies need to develop new metrics
more appropriate than previous ones with regard to sustainability. Hence, the lack o indicators
and data is perceived as a major di culty. Even so, gathering underlying environmental data
and indicators alongside with economic and social ones is critical or management and decision
making. Hence, the question is why this lack o data and indicators. We know that sustainability
is usually a new dimension or which data collection was not originally planned in the companys
reporting structure. Thereore, companies need to adapt. Various methods, numerous techniques
as well as countless solutions exist to identiy what to track and to ensure a reasonably correct level
o inormation on environmental perormances. The problem is that companies ace di culties to
implement such a change.
Those di culties are oten due to the lack o knowledge and expertise. The first step to overcome
this issue is probably to get help rom the outside. Several environmental leaders we visited were
partnering with knowledgeable actors and specialists to shape an appropriate reporting system
regarding their environmental perormances. Experts, and sometimes academics or even NGOs,
can ofer a real added value to companies seeking to make their sustainable initiatives profitable.
Another recurrent issue is the low internal level o priority o environmental challenges although the
CEO and top management commitment are a key success actor. A clear message must come rom
the executive committee, and the CEO himsel must commit the whole company to improve its
sustainability. From there and let alone the building o a coherently aligned sustainability strategy,
companies can start implementing systems to track relevant inormation and evaluate perormancetowards sustainability.
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Also, a common dream among top managers would
be to have all the inormation they need on a company
within one single indicator. Similarly, we met companies
who were trying to synthesise all inormation about
sustainability and their environmental impact into one to
three metrics. Unortunately, it is not an easy task and it
more oten than not lead to ocusing attention to a bunch
o trees regardless o the whole orest. To manage the
environmental aspects o a company correctly, using a
wide range o metrics is definitely wiser. In this regard,
Pierre Cors, member o the Corporate Sustainability
Commiittee o Solvay, came up with a comparison that
illustrates this remarkably: the dashboard o a manager is
not that diferent rom the one o an airplanes pilot. The
challenge o limiting the impact o our activities on theenvironment is inevitably multidimensional and the ocus
o managers, as well as or pilots, has to shit according
to the situation.
Another di culty lies in the choice o what and how to
monitor. Among the most relevant metrics we observed,
were those disigned to inorm about Energy consumption
(reduction and use o renewable sources), Air quality
(greenhouse gas emission and emission o particulates),
Water (reduction and pollution) and Waste management
(reduction and quantity recycled). Assessing the carbon
ootprint becomes increasingly popular amongst large
companies. With regards to GHG, it helps considerably to
realize the sources o highest impacts and to understand
which levers would be the most efective to mitigate
them.
Finally, companies find it di cult to track their business
correctly due to its complexity. However, even i the
supply chain is very complex, assessing it rigorously is
likely to pay of.
Pierre Cors, Corporate Management forHealth Safety and Environment at Solvay
Concerning indexes and tools, at Solvay
we regularly perorm evaluations o
indicators necessary to manage the risk.
This allows us to identiy what we need in
house and to answer questions rom the
diferent stakeholders. We have about 55
parameters; some measured or a very
long time, others have been modified to
better respond to changes. Their respective
importance also changed with time,
especially lately given the recent increase
o ocus on climate change and the renewal
o our strategy.
The idea is to have a large number o
parameters, but to ocus on some, given
the circumstances. The metaphor o an
airplane cockpit explains it quite well: A
pilot has countless instruments. However
he does not pay attention to all the
instruments at the same time. Some are
or the take of, other or the landing, other
or flying or assessing weather outside.
It must be the same or managers. Forme, business is still an organization that
responds to external pressures, but it may
as well anticipate uture pressures in order
to gain market shares.
Some o the companies we visited decided to
ollow specific metrics appropriated to their bu-siness activities.
- Tetra Pak is closely tracking the progress made
in recycling o its products. One o the goals o
Tetra Pak is that the cartons they manuacture are
recycled ater use and likewise in every country.
The challenge is that they do not control recycling;
they can only acilitate it by working with other
partners in every country. Nevertheless, about
20% o the cartons they manuacture were recy-
cled in 2010 worldwide.
- Cofinimmo and Befimmo are closely monitoring
indicators o progress that assess the environmen-
tal perormance related to major renovations.
-AGC Group ound an interesting way o calculating
the impact o their activities. They estimate their
environmental impact in relation to their econo-
mic contribution to the countrys GDP. Hence, to
improve the indicator value they must reduce theiremissions beyond the reduction rate achieved by
the entire world/country. They call it the AGC En-
vironment Indicator and use it to analyze their en-
vironmental impact in an objective manner by put-
ting it in relation with their economic contribution:
The indicator is calculated by comparing their sales
to the global/country GDP and the amount o subs-
tances o concern (SOC) emitted rom their activi-
ties on total global/domestic SOC.
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Environmental Risk mitigation
Environmental risk is not an issue that
companies can aford to neglect in Belgium.
Impacts on reputation, finances, consumer
trust, boycotts and other risks linked to the
environment can no longer be ignored. Still,
it seems that many companies only start to
integrate environmental risk management into
their daily management and that others do not
assess environmental risk recurrently.
Nevertheless, companies are becoming
more inclined to evolve towards greater
risk integration in the management o theiractivities. Obviously, the goals put orward
by companies do not always reflect a genuine
concern or environmental protection. Above
all, companies are araid o the potential
consequences that an environmental incident
can have on their activities.
As we will see, various methods and tools have
been developed and used to measure the risk
on their operations, but companies are still
acing some di culties in identiying all the
sources o potential environmental risks and
threats.
In this context, this part o the report tends
to identiy which risks are assessed by
companies. Then, it looks into the diferent
stakeholders that companies regularly assess
and particularly the influence those can have
on their activities. Finally, it examines thediferent tools used by companies to identiy,
assess and measure potential threats and their
likely outcomes on companies results.
I.What is under the environmental risk scrutiny?
Figure 17 - What potential long term risk does your company currently assess?
01 02 03 04 05 06 070
0%
Rise in energy cost
Climate change related risks
Rise o transportation cost
Rise o commodity prices
Public opinion regarding environmental decision
Air pollution related risks
Waste Management
Water scarcity related risks
Lack o resources needed to produce
Chemicals, Toxics, and heavy Metals related risks
Inability o uture technologies to respond to environmental challenges
Bio-diversity and land use related issues
66%
59%
50%
49%
46%
30%
26%
26%
24%
21%
20%
16%
10% 20% 30% 40% 50% 60% 70%
#1
#5
#2
#3
#5
#5
#5
#9
#4
#11
#9
#Ranking o the
most di cult
challenges
perceived or the
near uture
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The survey highlights that the primary long
term risk that companies are currently
assessing is the rise in energy cost, assessed
by more than 66% o the surveyed companies.
Subsequently, waste management and climate
change with respectively 59% and 50%,
complete the top 3 topics o environmental
risk assessment. These are closely ollowed by
the rise o transportation cost and the public
opinion regarding environmental decisions.
The first risks to be assessed are generally related to financial risks
The first risks to be assessed are generally not
the ones perceived as the most challenging
or the near uture but those that have a direct
and visible impact on the companys financial
results. Previously in this report, we hadidentified which environmental challenges,
that companies expected to ace in a near
uture, were perceived as the most di cult (see
Figure 4 in page 6). According to the results,
the most di cult challenges are, by order o
importance: Rise in energy cost, Climate
change and upcoming regulation, Rise in
transportation cost and Rise o commodity
price. It seemed reasonable then that these
should as well be the ones that are primarily
assessed through risk management.
However, the results presented in Figure
17 show some contradiction with this last
assumption. Clearly, there are discordances,
especially regarding Waste management and
Rise o commodity price. As regards wastemanagement, it can be explained by stronger
legal requirements which push companies to
pay more attention to risks relating thereto.
On the other hand, concerns regarding Rise in
energy cost and Rise o transportation costs
are positioned similarly. Those topics impact
noticeably directly on companies financial
perormances and are accordingly managed
first.
Our Point of View
The concept o risk can oten prove to be di cult to measure. Oten, when the risk contains a
subjective component such as the view o the company in the eyes o other stakeholders, companies
seem to disagree between the perception o the risks and the need to manage those risks closely.
Yet, even i they are di cult to assess, those risks can seriously impact the company in the long run.
However, when the risk in question is more objective, or example the likelihood o a direct impact
on financial perormances, it becomes easier to grasp and to track because it can be translated into
tangible impacts to the results o the company.
As we will see below, pointing out the diferent risks and assessing the expectations and influences
o the diferent stakeholders is o great importance.
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II. Who is under the environmental risk scrutiny?
Figure 18 - Assessment o the main sources o pressure that drive companies to pay attention on sustainability
issues
Responses show that the stakeholders that are
the most regularly assessed are Rule makers,
Customers and Competition. These are closely
ollowed by Employees and Business as well as
Financial partners.
Rule makers are the most rigorously scrutinised stakeholders
The results show that the main sources o
pressures identified previously (see Figure5 in page 7) are efectively the ones that are
the most closely watched by our respondents.
Despite a reversed order, the Top 3 sources o
pressure identified corresponds to the Top 3stakeholders regularly assessed.
Our Point of View
From Rule makers or regulation to NGOs or their influence on public opinion, stakeholders are
pressuring companies to ace their responsibilities towards the environment and inevitably to
manage whatever environmental risk they deem as related with their activities.
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Stakeholders influence can afect companies significantly, resulting in some cases to brand damageand strong financial consequences. Assessing them is thus essential to ensure that the company
keep its licence to operate. In other words, stakeholders possess the power to revoke a companys
right to operate. I a company crosses the line, stakeholders pressure can ultimately destroy its
business. Hence, a licence to operate illustrates stakeholders power and can be ragmented into
regulatory, economic and social licences which are monitored and enorced by a variety o actors,
which commonly seek leverage by exploiting a variety o licence terms.
Taking seriously into account stakeholders point o view as well as their influence on your business
does matter. Knowing and mapping your stakeholders play an essential part in managing todays
environmental issues.
Questions to be addressed by companies are:
Who are the key players that the company has to ace?
How can they interact or interfere with the companys activity?
What are their interests and concerns?
Which level of influence do they have on the public opinion? On companys activities?
What is the possible impact o each o them, today? In the uture? Are we putting (enough) effort to understand their key concerns?
Are we prepared to answer their requests?
Which type should then be prioritised?
Finally, which ones should be selected to initiate relation?
The last question is capital and should be based
on the answers rom the previous questions.
Partnering with appropriated stakeholders may
well be the best way to deal with external problems
and pressures. Recently, we have seen more and
more leaders which, like Delhaize with WWF,
engage partnerships with NGOs, authorities and
communities. Many companies entrusted us that
they used to ignore and to avoid conrontation
with complainers. Now they tend to be growingly
debating with big protesting groups.
Guy Ethier, Senior Vice-President
Environment, Health & Safety at Umicore
We learned rom history the added value
to work hand in hand with stakeholders:
whether with client and suppliers, through
collaboration around our sustainable
procurement charter , or with authorities
to repair soil pollution and the impact oour previous activities, as Union Minire.
We even work with outsiders, as Michael
Broungart (author o Cradle to Cradle).
III. From talk to action, what are the methods and tools used to measure potentialenvironmental risk?
Figure 19 - Methods and tools used to measure potential environmental threats and their possible
impact on uture results
0% 10% 20% 30% 40% 50%
40%
50%
50%
50%
33%
28%
15%
10%
Develop and monitor KPIs
Perorm Internal survey
Perorm Scenario analysis
Study uture trends
Follow financial indicators
Perorm external survey
Perorm pre/post analysis
Use a sotware suite to manage environmental risk
38%
Does your
companyinclude the
sustainability
dimensionin its
recurring risk
managementprocess? 62%
How?
No
Yes
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To prevent environmental risk rom impacting
their activities, more than 60% o our
respondents have included the sustainability
dimension in their recurring risk management
process. To do so, they mainly develop and
monitor environmental Key Perormance
Indicators, perorm internal survey and carry
out scenario analysis on possible environmental
developments.
More than 60% o companies have included a sustainability dimension intheir recurring risk management process
Giving serious consideration to the
environmental risk allows companies to
spot issues beore they occur. Hence, it is
surprising that only 62% o our respondents
are assessing environmental risk recurrently.
Furthermore, 33% o our respondent did not
develop any tools or methods to assess their
environmental risks. However, the need to
ollow environmental risk careully varies
rom one sector to another. Some, such as
the chemical industry, ace a wide range o
legislation that encompasses the principles o
environmental risk assessment.
Our Point of View
Although the call or assessing environmental risk depends on the activity o the company, assessing
it can help to uncover new opportunities through the anticipation o uture changes.
As business risks can come rom various and sometimes unpredicted sources, companies have
developed countless methods to identiy and protect themselves rom environmental hazard. The
methods and tools reported in Figure 19 are commonly used. Apart rom those, we encountered
during our meeting various other tools exist such as scenario planning, stress scenarios, supply
chain auditing, statistical analysis o environmental figures, etc.
In any case, even though many methods exist, environmental risk assessment usually covers the
ollowing 5 key steps:
Identification o the hazard and ormulation o the problem
Identification o the consequences this hazard could have i it occurs
Estimation o the scope and magnitude o those consequences
Estimation o the probability o those consequences
Assessment o the risk significance by taking into account the likelihood that the hazard occurs
and the seriousness o its consequences
However, assessing risk appropriately, especially selecting the risks to assess, is worth trying.
Hazard may arise rom within as well as rom upstream through the suppliers and rom downstream
through the clients. Thereore, looking or environmental risks to mitigate their impacts requiresan assessment that goes beyond the companies boundaries. Going even urther, environmental
leaders we met assess risks not only in their supply chain but through their whole value chain.
The diference between supply chain and value chain is not very easy to grasp. To put it bluntly,
environmental leaders are assessing environmental risk not only rom a product perspective but
as well as rom a value perspective. The latter depends on customers and other stakeholders
perceptions and implies broadening the analysis to potential opinions and eelings rather than
limiting it to acts. Indeed, protecting your brand reputation or instance involves taking perception
into account because what your customers believe is your companys reality. Climate changes
could be the biggest scam o the century that it would not make any diference or your company.
As long as your customers believe in it, you should investigate what it implies or your business.
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What makes sustainability profitable?We make clear that, ollowing actual trends, integrating sustainability into your business operationsis no more an option. Based on this statement, a company may as well use it as an income driver
and benefit rom the change. In other words, perceive the change towards sustainable business as
an opportunity and less as a constraint.
There is no need to argue that sustainability can be a source o value creation, be it tangible
or intangible. The previous chapters presented several examples o what environmental leaders
usually do. Those companies are the ones we identified as driving real value rom their investments
in sustainability. The approach to sustainability ollowed by those companies presents a number o
similarities.
Figure 20 - Are the initiatives taken in sustainability generating financial value?
Firstly o all, as Figure 20 shows it, the companies that have ully integrated a sustainability strategy
in their activities are more likely to drive value rom their sustainability initiatives. Note that
companies tend to ollow this example, and among our respondents who do not have a strategy
driven by sustainability principles, 83% plan on doing so in the near uture.
Secondly, environmental leaders are usually innovative and move first on sustainable initiatives
in order to develop and maintain a competitive advantage. Best initiatives we saw are aiming at
closing the loop through the development o ully reusable products at their end lie. By doing so
they mitigate their risks, ensure supply and gain tremendous visibility.
Thirdly, they set bold, clear objectives supported by the top management and involving almost
everyone at each level o the company. By doing so, they ensure commitment throughout the
organisation and stimulate employees.
Fourthly, they ree the resources necessary to complete those objectives and broaden their
investment assessment processes to take all aspects o payback environmental initiatives intoaccount. The traditional cost-benefit analysis increased with the potential impact on risk mitigation
and brand value.
0
10
20
30
40
50
60
Does your
company
have adeveloped
sustainability
strategy orguidelines?
Yes
75%
No25%
0%
10%
20%
30%
40%
50%
60%
57%
25%
13%
28%30%
47%
For a majority o initiatives Uncertain For a minority o initiatives
+32%
+15%
+17%
Company with acomprehensivesustainability strategy
Companies with generalguidelines regardingsustainability
Profitable?
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Fithly, they communicate actively on what they do in order to benefit ully rom the impact on
their brand reputation, in order to gain visibility and to attract new clients, employees and partners.
Finally, they measure their perormances and ollow environmental risks closely by taking into
account not only acts but also stakeholders perception. By doing so they can review their action,
anticipate business changes and identiy new opportunities.
Obviously, this is ar rom an easy task or companies just starting to approach sustainability as an
opportunity. We then recommend ollowing these pragmatic guidelines:
Start low by working on the obvious and derive the maximum rom it. First, ocus on e ciency,
cut unnecessary wastes and improve the logistic. This will derive returns that will help to finance
other environmental initiatives. Communicate intensively about previous and current actions related to the environment. Make it
visible!
Do not get lost in the orest. Look at the big picture, know where your impact lies and ocus on
the most meaningul actions that diferentiate your company and its products/services rom the
others.
Make sure o the C-level commitment. The CEO should be the flagship o sustainability in your
company.
Give incentives to stimulate environmentally sound behaviours and initiatives.
Develop green relationship with external partners.
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