Management consultants - it's time to be proactive!

I participated in a webinar given by Verdantix this morning. It was entitled Secrets of Success for Sustainability Consulting and was focused around the current and future challenges facing sustainability consultancies and what is required for them to continue providing successful services to existing and future clients. Included in the presentation was data from their Global Sustainability Leaders Survey, which has been well publicized in recent weeks, showing that the Big Four accountancy firms - KPMG, Ernst & Young, Deloitte and PwC - "have the strongest brand preference in both the sustainability consulting and sustainability assurance markets, according to...heads of sustainability".

It's not hugely surprising that the Big Four scored so highly; they're well-known brands and have been advising businesses for a number of years - when faced with a choice, it's easy to understand why companies would opt for names that are familiar and/or that they've worked with before. There are of course other reasons but that's for another blog; what I want to explore is the potential for large management consultancy firms to use their experience, influence and brand recognition to accelerate the move towards a more sustainable way of doing business.

None of the big management consultancies are ignoring the importance of sustainability - both social and environmental - on the business world. McKinsey & Company advises clients on 'Sustainability and Resource Productivity', The Boston Consulting Group produces research and commentary around issues and challenges related to sustainable business, PwC lists sustainability as one of the key issues affecting the business community; this is all positive, except could it be more pro-active?

At the moment, it still feels as though 'sustainability' is somewhat sidelined by these firms - if a company asks for advice about sustainability, it's provided; if a company is looking for the latest research on sustainable business, they'll probably be able to find it; but how often are principles of sustainable business present in cases where the client doesn't ask for it?

Don't get me wrong, we're talking about consultants here and not activists, and, ultimately, management consultancies are there to help their clients with specific problems. But, having said that, wouldn't it be more 'helpful' for them to encourage their clients to think about the long term implications of their activities; to help them adapt their business models to withstand future challenges; and to persuade them to think beyond the next quick win? By adapting their approach in this way, the high profile management consultancy firms could play a very positive role in creating a more sustainable commercial sector.

And don't worry (just to preempt the inevitable backlash from management consultants that I know), you don't have to hug any trees! If it helps, don't even think about it as 'sustainability'; just think of it as good business. 

Completing the circle: a new vision for the economy

It's a hard life!

I recently spent 3 months travelling round South America and, whilst on a pretty tight budget, there was always just enough in the kitty for a beer at the end of the day. However, when we got to Argentina, it wasn't a lack of funds that was the problem – it was their bottle collection schemes that put a spanner in the works. We first encountered this in Cafayate, a small town just south of Salta – having found a hostel we went off in search of groceries and, of course, some beer. However, for every beer you buy, you have to bring back an empty beer bottle – slightly tricky if you've just arrived and don’t have any empties. Frustrating on the one hand but very advanced on the other…

Last Friday, the Ellen MacArthur Foundation launched its second report Towards the Circular Economy Vol.2: opportunities for the consumer goods sector, at the World Economic Forum in Davos. According to the report, “a cost reduction of 20 per cent from USD 29 to USD 24 per hectolitre of beer consumed would be possible in the U.K. by shifting from disposable to reusable glass beer bottles”. The report points out that there would be an additional cost due to the additional material required to create more durable bottles (“34% increase in the amount of glass used per bottle); however, the cost savings from reusing bottles would far outweigh this.

Reusing beer bottles is just one of a number of examples in the report of how the consumer goods sector can benefit from making the shift to a more circular business model. Through its research, the Ellen MacArthur Foundation estimates “the full potential of the circular economy to be as much as USD 700 billion in global consumer goods materials savings alone”.

Theoretically it makes perfect sense; however, the tricky bit is getting businesses to make the shift and providing the right support and incentives to help them through the transition. To support this, the Ellen MacArthur Foundation is launching the Circular Economy 100, a alliance of 100 pioneering businesses to accelerate the transition to a circular economy. But it’s going to take a lot more innovation and collaboration to make this fly.

The encouraging news is that we’re not starting from scratch. Companies have already started to embrace the principles of the circular economy. Just yesterday, CSR Wire, as part of its Noble Profit series, posted an interview with Ford’s Global Director of Sustainability, John Viera, in which he talks about how Ford is re-using waste materials – from old carpet to unwanted jeans – in the production of its cars. 

Now the challenge is to take these ideas to scale. Watch this space...

Purpose - A Unifying Force

Purpose is what everyone's talking about on both sides of the pond - and, what's great is that it's not just sustainability or corporate responsibility professionals doing the talking, it's people from all across the business world. Just today, Jock Mendoza-Wilson, Director of International and Investor Relations at System Capital Management, posted a blog called Business with a Purpose from Davos.

So what exactly is meant by the term purpose? The way I would describe it is that a company's purpose says what an organisation does beyond generating profits; it expresses the value that the company brings to the world, what the company stands for, and, essentially, why the company should continue doing what it does. A good example is Coca Cola's purpose: "to refresh the world, to inspire moments of optimism and happiness, to create value and to make a difference". This statement demonstrates Coca Cola's commitment to doing more than selling a product to make a profit - in fact, the purpose immediately establishes 'creating value' and 'making a difference' as central to the business and therefore central to generating profits.

Establishing a purpose is beneficial for motivating and inspiring employees because it makes them feel good about what they do; it encourages suppliers to build sustainable business practices into the way they do business; it builds trust and loyalty among consumers because they can see the positive impact on their lives and the world around them; and, ultimately, it helps the business chart and stick to a course that is sustainable and generates both stakeholder and shareholder value. There's some interesting discussion of this in Salterbaxter's Directions Report 2012: Profits from Purpose.

Most of all, I believe that the real power of a purpose lies in its ability to unite people at all levels of an organisation and therefore help drive change. Whilst sustainability or corporate responsibility goals have - more often than not - divided individuals or departments within a company, a purpose helps unite them behind a common cause. Everyone understands what the purpose means and how it relates to the day-to-day business operations. What's more, it can add more depth to what a company does - opening up opportunities for employees to innovate and think about how they can adapt what they do to align with the purpose - from senior management to graduate trainees.

Over the years, one of the biggest challenges has been getting sustainable or responsible business to the top of the agenda, mostly because, unless there was a key sponsor among the top decision-makers, it's often been seen as something separate from the core activities of the business. I believe that the development of corporate purposes will help to change this  - the right purpose will help drive understanding, inspire action and innovation and, ultimately, accelerate positive change. 

Don't forget about business

As we're new to Boston, we're being keen beans and doing all the tourist 'must sees'. At the end of last week we went to the Harvard Museum of Natural History, which has some amazing exhibitions and a huge collection of skeletons and fossils that will excite even the most sceptical visitor. One of the exhibits, put together in collaboration with the Harvard University Center for the Environment, is about climate change: how this has affected our planet in the past and what challenges we face in the future. The best bit of this exhibition was a video outlining the actions required to slow climate change and what this means financially for each family in the USA. At points, those watching the video are asked to vote as to whether or not they're willing to take these actions. Perhaps the most testing question is whether or not individuals in the USA are prepared for the government to invest in climate change initiatives in other less-developed areas of the world i.e. individuals in the USA pay for changes in their own country as well as funding initiatives in developing countries. Not an easy question to answer by any means, especially when the financial costs are made clear...

However, it's not just individuals and the government that need to take action. What is missing from this video is the role that business plays in tackling climate change. Whilst there are actions that individuals and governments can take, there are also ways that the business community can make a huge difference through their own initiatives and through collaboration with others. Real and lasting change will happen when all these efforts combine.

In a post on the BSR blog the other week, Solitaire Townsend, Cofounder of Futerra Sustainability Communications, talks about the critical role of brands in influencing and changing consumer behavior. As she puts it: "Brands carry promises and guide our behaviors—from doing laundry to buying a new car... As consumers struggle to balance their aspirations with reality, they will look to brands for answers. Right now they are asking, but soon they will be demanding.” Of course, the way that businesses respond to these demands will be very different - it might be through a transition to a new business model and, as Fiona Bennie describes it in her blog Same Brand, Different Business Model on the Sustainable Brands Blog, "[holding] customers' hands as they transition to and adopt new ways of consuming, of lending and borrowing, and ultimately of meeting their needs". Or through the adoption of more 'durable design' so that products change over time and continue to interest and inspire their owners. These are just some of the ways that businesses can work to make their own operations and the lives of consumers more sustainable.

What's important for consumers to understand is that they're not alone. Whilst this doesn't mean we should all sit back and do nothing; we shouldn't be daunted by the action that needs to be taken because businesses, governments and individuals are all in this together!

Coffee Cups Galore

I love my caffeine and one of the first things to do in the US was to find some good coffee spots to get my fix. Moving from an office in Soho London where you can't walk 5 minutes without finding a great coffee house serving up creamy flat whites or knock-out espressos, Boston was always going to have a tough act to follow. But, so far it's not doing too badly! However, what I have noticed is the dominance of take-away coffee cups - whether you're drinking in or taking away, the coffee comes in cardboard. Don't get me wrong, you can't beat a coffee to go, especially when there's a nip in the air, but what's wrong with a mug when you're staying in? 

Making it legal but not too legal

As of January 2013, Massachusetts will enable companies to incorporate as Benefit Corporations. The Benefit Corporation movement in the USA aims to remove any legal boundaries that prevent companies pursuing their social and environmental goals. In brief, as set out in the Benefit Corporation White Paper, the characteristics of a benefit corporation are:

1. a requirement that a benefit corporation must have a corporate purpose to create a material positive impact on society and the environment
2. an expansion of the duties of directors to require consideration of non-financial stakeholders as well as the financial interests of shareholders
3. an obligation to report on its overall social and environmental performance using a comprehensive, credible, independent and transparent third-party standard

The idea for Benefit Corporations came from B Lab, a not-for-profit organisation that has developed a set of standards against which companies (rather confusingly referred to as B Corporations) could benchmark their corporate responsibility efforts, thereby demonstrating that they're not all talk. Through the development of its standards, B Lab found that companies were coming against a number of legal issues when they tried to move towards giving equal consideration to stakeholders as they do shareholders when making company decisions - 'historically, the U.S. legal system governing corporate entities and their activities has not 

been structured or tailored to address the situation of for-profit companies who seek to use the 

power of business to solve social problems'. The result was that some companies were scared of pursuing their social mission for fear of litigation for failure to maximize shareholder value. So the Benefit Corporation movement is calling on state authorities to provide a more flexible legal framework that enables companies to pursue social and commercial goals in equal measure. 

I'm interested that legal concerns have been such a barrier for American companies as this is not something that I've come across in Europe. Of course, aligning all stakeholders behind the social purpose and objectives of the business are always crucial in order to move forward but fear of the legal backlash if shareholders changed their minds or disagreed was not something we came up against - perhaps this is simply a reflection of the differences between European and US legislation. Anything that removes boundaries and gives the companies the freedom to innovate and compete to be 'better' is a good thing and the fact that it has got lots more people talking about the importance of shared value in the corporate world is positive. Just as long as it doesn't become too legal and by that I mean, stifling creativity and slowing momentum through the development of endless hoops for companies to jump through in order to meet a minimum - and ultimately rather uninspiring - standard of best practice. 

New Year, New Label

Over the years, our industry has had more labels than I can remember: corporate social responsibility, corporate citizenship, community affairs, responsible business, corporate responsibility and, of course, the most recent addition, shared value. Just to be clear, I'm not suggesting these terms  all mean the same thing. In fact, as someone, who religiously chooses to use 'corporate responsibility' over 'corporate social responsibility', I'm very conscious that they don't. On the whole, the development of these new terms is a good thing and the number of them reflects the face pace of innovation. However, the introduction of 'social licence to operate' as the new 'shared value' for 2013 seems to me to be a step too far.

In an entry on the Forbes CSR Blog, Paul Klein, suggests that 2013 will be the year of the Social Licence to Operate (SLO). This is not a new term. It has traditionally been used by companies in the resource extraction sector to describe the importance of engaging local communities and other stakeholders whose support is required to secure government approval or raise capital for their projects. However, as Paul Klein argues, with the increasing use of social media the concept of a Social Licence to Operate should no longer be thought of solely in the context of the resource extraction sector; it's relevant to all companies. In today's world, there's no longer anywhere to hide and all companies have to recognize the importance of stakeholder support to continue doing business. 

It's not the argument I disagree with, it's the term Social Licence to Operate that feels wrong. I actually quite like the term 'shared value' as it expresses the balance required; it's about finding that sweet spot between business objectives and social and environmental objectives, balancing the concerns of shareholders and stakeholders. Social Licence to Operate loses that - it sounds like companies are at the mercy of what stakeholders want and need to justify their business actions accordingly. 

It's not just semantics, the way we talk about things and the words we use can have a real impact to how a concept is received. So I'm afraid my vote is for new year, old labels.