What makes sustainability profitable?

7/31/2019 What makes sustainability profitable?

1/44

Making sustainability profitable

What business leaders do to drive real value

from sustainability initiatives?


2/442

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


3/443


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


4/444


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.


5/445


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


6/446


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%


7/447


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


8/44


9/449


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.


10/4410


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.


11/4411


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


12/4412


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


13/4413


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.


14/4414


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


15/4415


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.


16/44


17/4417


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.


18/4418


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%


19/4419


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


20/4420


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.


21/4421


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?


22/4422


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.


23/44


24/4424


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.


25/4425


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!


26/44


27/4427


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.


28/4428


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.


29/4429


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


30/4430


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.


31/4431


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.


32/44


33/4433


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


34/4434


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.


35/4435


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.


36/4436


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


37/4437


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.


38/44


39/4439


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?


40/4440


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.


41/44


42/44


43/4443


DisclaimerAll in

Date post:	05-Apr-2018
Category:	Documents
Upload:	pauldupuis
View:	218 times
Download:	0 times

What makes sustainability profitable?

Documents