In our first installment we noted that while sustainability may have fallen out of favour in the current American political and regulatory environment to the point that we had to counter the Chief Sustainability Officer graphics going around earlier this year with a Chief Sustainability Officer: USA Edition, sustainability, at its core is becoming more and more important to corporate survival. In our second installment, we described how sustainability concerns permeate every department of the organization, and failing to adhere to them is not only unsustainable in the environmental sense, but possibly in the business sense (because sustainability, done right, also sustain costs at an affordable level, and thus profits).

In this, our third instalment, we are going to dive into the stakeholder engagement that is required for sustainability success. As per our first post, stakeholder engagement is required beyond just the business departments for success. It also requires alignment across:

• investors
• the board
• suppliers / contractors
• customers

Investors

The best sustainability initiatives with the longest term potential often involves up-front investment (which often results in short-term losses), which means that the investors need to be on board for any major sustainability effort, and willing to both make the up-front investment and take the short-term hit to the profit margin (for long term gains).

The Board

The Board, who answers to the shareholders, also needs to be onboard because the minute profits drop year-over-year is the minute the board is going to throw you under the bus when the expected profits that they promised the shareholders (they answer to) do not materialize. The Board needs to see the long-term gain potential, accept the vision, and communicate that to the shareholders, of which the majority will need to see the long-term value of up-front sustainability investments, for the initiative to be supported over the necessary term.

Suppliers / Contractors

As an organization, you are not sustainable if your suppliers are not sustainable, especially if your definition of sustainability is to minimize non-renewable energy usage and reduce carbon in your supply chain. You can’t have a clean operation if all of your suppliers, carbon wise, are the dirtiest drunks.

Customers

You might think you are sustainable if your operation and your supplier operations are sustainable, but like every other business, you depend on business from your customers. Unless you are directly selling to the end consumer, if your corporate customers are not sustainable, and they end up in trouble due to consumer revolt or financial troubles from uncontrolled costs, that’s going to trickle down the supply chain to you. You want to seek out, support, and serve sustainable customers.

Your Business Counterparts

For true sustainability to materialize, the entire organization needs to be on board, not just your team or department. As with anything worth doing, sustainability is a continual journey, not an easily accomplished task as the first leg may consist of the equivalent of a thousand miles of effort. But done right, it’s always worth it.

So now that you understand who needs to be onboard, we can start outlining key projects the organization should start with, focussing on key goals that not only help with regulatory support in regions that require it, but can also be used for brand building.

In our last installment we noted that while sustainability may have fallen out of favour in the current American political and regulatory environment to the point that we had to counter the Chief Sustainability Officer graphics going around earlier this year with a Chief Sustainability Officer: USA Edition, sustainability, at its core is becoming more and more important to corporate survival.

This is because, it relates to all aspects of a business, including, but not limited to:

• Operations, Procurement, and Supply Chain
  • Facilities
  • IT Infrastructure
  • Materials
  • Manufacturing
  • Utilities
  • Distribution
  • Marketing & Sales
• Talent
• Risk Management
• Legal and Regulatory Compliance

Operations: Facilities

When it comes to your facilities, sustainability is more important than you realize. Buildings, especially those that are poorly insulated, use old style fluorescent lights, high flow toilets and urinals, and don’t recycle water for their landscaping requirements can use a lot of energy for heating and cooling and a lot of water in their daily operation. Basic sustainability is minimizing energy and water usage, as the cost for both is increasing year after year, month after month, and sometimes day after day, especially where there are shortages. Minimizing your facility energy and water utilization is key to sustainability, not just from an environmental point of view but a cost (and thus profit) point of view.

Operations: IT Infrastructure

Your organizational IT Infrastructure, especially if you are running older servers and storage requirements, is likely an energy hog running 24/7/365. Moreover, if you are careless about your purchases, you can be buying equipment that uses more rare earth minerals than necessary, and those mining operations aren’t that clean.

Operations: Materials

Materials are a cornerstone of sustainability, especially if they are not renewable. We like to think otherwise, but there is a fixed amount of any non-renewable material on this planet, and unless we learn to recycle and reuse it, we are going to run out (especially since we shoot so much debris up into space and/or let it crash into the ocean where it is irretrievable from the ocean floor). As for renewable biological materials, unless you can replenish them in a year (like food-stuffs), without proper management, they can run out too.

Operations: Manufacturing

Like facilities, production processes can be energy and water inefficient. Moreover, improper or unoptimized production processes can lead to a lot of material waste, exacerbating material sustainability problems (and costs) even further.

Operations: Distribution

Distribution requires vehicles, and most of those still require a form of combustable fuel. The further you have to transport, the more non-renewable fuel you are going to burn, the more you are going to spend, and the more carbon you are going to produce. Even if you have a hybrid local fleet, when you amortize the carbon that went into producing that vehicle and that battery, if the production operation was not sustainable, you may still contribute more carbon in your calculations than if you had burned high efficiency ethanol. (Also, don’t believe the claims that EVs are carbon neutral between 25,000 and 40,000 kms. Most of those make unrealistic assumptions about the cleanliness of the battery and manufacturing supply chains as well as the availability of renewable energy to recharge which just aren’t realistic. We did our own calculations, and, in some cases, those EVs are still dirty at 1,000,000 kms! Now, any EV created with a modern production process using a battery supply chain that is sustainability focussed should be carbon neutral within 100,000 kms, and run for up to 300,000 kms, effectively making them carbon positive over their lifetime compared to non-EVs, but this is not guaranteed. As with every other marketing claim, you have to verify!)

Operations: Marketing & Sales

Marketing and Sales may seem low-stakes in sustainability, beyond the fact that they can quickly blow their budgets and quickly put your finances in the gutter (leading to existence sustainability), but depending on how they conduct their sales and marketing campaign, they can contribute a significant negative impact to your sustainability bottom line. For example, if sales believes that every meeting and demo has to be done in person across the country, via business class flights, that’s a lot of cost and carbon. If marketing loves their high-gloss fancy print collateral, forcibly handing out over-the-top brochures to everyone who walks by the booth, that’s a lot of wasted paper and money.

Legal & Regulatory Compliance

Let’s face it, despite all of the above, most organization’s won’t put more of a focus on sustainability than they think they need to, because they still believe the path to profitability is more sales (even though at some point the cost of sale becomes too high because their core market is saturated), and failing that, cost cutting through Procurement. Typically, the focus they believe they need is whatever focus is necessary to meet the minimum legal and regulatory compliance.

In some jurisdictions, especially those that will levy big fines or penalties if a requirement is not met, this is currently the leading contributor to sustainability, even though the leading contributor should be the long term business sustainability and profitability that can result from the right sustainability focussed investments.

Risk Management

Without good risk management policies, not only is there no guarantee that the future risk of not being sustainable will never be taken into account in any decision made by any operational department, but a real risk that Legal might not be aware of and miss a (coming) regulatory (reporting) requirement and the organization will end up in hot water.

Talent

Talent is key to your operation, and it’s often the hardest to attract, develop, maintain, and sustain over time. However, you can’t sustain a sustainable operation without the right talent. You need to identify the raw skillsets required to t, hire the talent, develop the talent, mentor the talent, and then have them train and mentor the next generation of talent before they move on or retire. However, if you don’t have this talent, you will make unsustainable decisions across your entire business.

There’s quite a lot to sustainability, but there are some commonalities that, if focussed on, can make a big difference. In a future installment, we’ll review some of those.

Back in the beginning, circa 2008, Sourcing Innovation ran one of the first cross-blog series on Sustainability (with the Wrap-Up post still available) and it’s importance to Procurement, Supply Chains, and business sustainability overall.

While sustainability may have fallen out of favour in the current American political and regulatory environment (and you can see our post from earlier this year on how in the corporate world, sustainability/ESG is NOT a priority), to the point that we had to counter the Chief Sustainability Officer graphics going around earlier this year with a Chief Sustainability Officer: USA Edition article, the reality is that, regardless of the current disdain in some political landscapes, sustainability, at its core is becoming more and more important to corporate survival.

This is because sustainability, at its core, is necessary to the continued existence of the corporation, whether you go with the classic definition of maintaining at a certain rate or level over time or the new definition of avoidance of the (over) depletion of natural resources in an attempt to maintain an ecological balance over time.

Neither of these conflict with the fundamental goal of a corporation, which is to make a profit for their shareholders, as without sustainable functions, they will not be able to maintain stable operations (and thus profits) over time. Without sustainable practices, a corporation’s raw material and energy costs will skyrocket over time, making profit all but impossible.

So sustainability is important, especially since it relates to all aspects of a business, including, but not limited to:

• Operations, Procurement, and Supply Chain
  • Facilities
  • IT Infrastructure
  • Materials
  • Manufacturing
  • Utilities
  • Distribution
  • Marketing & Sales
• Talent
• Risk Management
• Legal and Regulatory Compliance

Moreover, it requires stakeholder engagement beyond just the business departments, as it requires alignment across:

• investors
• the board
• organizational departments and employees
• suppliers / contractors
• customers

In this series, we’re going to break down what the requirements really are (beyond just the regulations your organization is currently subject to), why they are important, and give you some hints on how you can be more sustainable in a way that is approved by, and benefits, the business, regardless if you are located in ESG/Carbon-Scope 3 focussed Europe, regulatory rollback USA, or somewhere else in the world.