The Seven Steps to Business Sustainability

It’s tough explaining sustainability to executives. When it comes to knowledge, and acceptance of responsibility, they are all over the map. Surprisingly, those in the most polluting industries are often more advanced in their thinking than those in ‘service’ industries. The way to get attention for the subject, and the way to approach the issue, depends on who your audience is.

My French teacher likens it to the challenge of getting a very obese man to adopt a diet. If he thinks he’s just ‘big-boned’, or thinks it’s someone else’s fault, or thinks the risks to him are non-existent or overblown, or thinks nothing will work, you have a challenge. If he’s doing his best, but it isn’t good enough, you have a challenge. If he thinks it’s just ‘his problem’, and no one else is being hurt by it, you’ve got a challenge. And let’s face it, diets are tough — hard work, lifelong change, high failure rate, and no fun. And the worst thing you can do is point out how hard it’s going to be, and how far away the goal is.

I’ve spoken to a lot of business execs about this subject in recent months — delightfully, it’s part of my job. And I’ve learned that there’s a way to ‘get to’ everyone, if you listen enough first to know what approach to take. And I’ve learned that positive approaches that stress benefits and opportunities generally work better than approbation, though executives are naturally attuned to matters of business risk, if those risks can credibly be portrayed as big enough or imminent enough (a big ‘if’).

So I’ve developed a Seven Steps to Business Sustainability model, which I outline below. The trick with this model is not to overwhelm or discourage businesspeople who are still at the early steps by showing them all seven. My approach is to take them through a ‘script’ to discover what step they’re currently at. If they’re like the majority, still at step 1 or 2 (or not even there), I will only talk about steps 1-3. If they’re at step 3 (about 1/3 of business execs are) they’re ready to be congratulated and introduced to steps 4-5. If they’re at step 5 (very few are) they’re ready to be nominated as sustainability leaders, and ready to look at the whole enchilada.

What I like about the model is that it follows the process we all follow in dealing with threats, like forest fires or hurricanes or computer viruses. It starts with acknowledgement, and then moves on to short term and then long-term actions to cope with it.

Here’s the model and the ‘script’:

1. Awareness: Do you know the facts about climate change — what it means to your business and to our whole planet, and what the regulations are that affect your business and the businesses of those you deal with, and how important an issue it is to your customers, to your employees, to your competitors (and what they’re doing about it) — and to your children and grandchildren? This is the most difficult step, and it’s rare I get an unqualified yes. If I don’t:
• I take the exec through the effects of climate change on crop yields, forest and ocean resource productivity, the spread of hot-weather plant, animal and human diseases (like the mountain pine beetle threatening the entire Canadian boreal forest) and pandemics, on water availability, on demand for air conditioning, on ecosystem crashes and biodiversity losses, on weather patterns, drought, flooding, severe storms and desertification, on glacial melt, permafrost stability, ocean currents and global sea levels, and on
  stability of infrastructure and transportation
• I talk about the business risks associated with climate change: insurance cost spikes, risk of shortages of natural resource production inputs (and cost increases as they become scarce), disaster preparedness, recovery and contingency costs, business interruption risks, supply chain disruption risks, transportation interruption risks and cost increases, business relocation costs, and dirty-tech retooling costs
• I explain the reputation risks of companies perceived to be behind the curve, and the competitive advantages that clean-tech innovators and early-adopters can achieve
• I tell them what long-term investment fund managers and bankers are looking at in determining investment and credit worthiness of companies, and how securities authorities are responding to these investors’ demands for more disclosure of what companies are doing about climate change
• I walk them through the current myriad of regulations in effect around the globe, and how they are quickly becoming more stringent and requiring more information collection and disclosure
• I provide current emission information for Canada and its provinces, along with reduction targets

So much for Kyoto: Greenhouse Gas (GHG) Emissions 2006 and 2020 projections for Canada, MT CO₂ equivalents, data per Government of Canada, map by Tory’s LLP

2. Acceptance: Once I have the exec briefed on the facts, I ask: What do you think is the responsibility of your company to tackle the challenges of climate change and environmental sustainability? What is the responsibility of governments? What is your personal responsibility as a business leader, and as a citizen of Canada? How does that responsibility extend to other jurisdictions in which you do business? How do you trade off your short term responsibility to shareholders against your long-term responsibility to future generations? When I first started asking these questions, it was to surface global warming deniers, who even a year ago were fairly common. Now I’m astonished to discover this is quickly becoming one of the issues keeping executives (especially those with children) awake at night. When there’s no microphone or camera on them, they will tell you they care about this issue. Most still think government needs to take the lead, to create a ‘level playing field’ they’ll gladly comply with. But increasingly they’ll admit that there is no level playing field, that cheats will always cheat, that greenwashing can work, that it’s one thing to make complicated environmental laws and another thing to enforce them, that ‘free’ trade agreements can render environmental laws null and void, and that this troubles them. They’re accepting responsibility, and now asking, not what do they have to do, but what can they do?
3. Compliance: Once they are aware of the issues, and accept responsibility for dealing with them, I ask them: Are you in compliance with climate change and other environmental laws in force at each level of government in each of the jurisdictions in which you operate? This is a fairly straight-forward discussion that depends, of course, where they do business. They need to learn about caps, emissions levels (absolute and ‘intensity-based’), reduction targets, fines and penalties, credits and ‘carbon’ taxes. The frustration with the myriad of different regulations, and different types of regulations, is palpable. Most executives I speak with would prefer more stringent, but simpler, more consistent rules to the current situation.

Maps of Vancouver and Montreal showing flooding of Richmond/Ladner, lower mainland, Montreal East and South Shore if Greenland ice cap and West Antarctic ice sheet melt, via http://flood.firetree.net

4. Mitigation Strategy: I’m now finding that most businesspeople, even those in small businesses and those that do not directly emit pollutants or use large amounts of raw materials, water or energy, are ready to tackle steps 4 and 5. To explain mitigation, I say: To the extent a company is responsible for significant GHG emissions, or depends on suppliers that are, it will be essential to find alternative ways to produce goods and services that do not have such a negative impact on our environment. What programs do you have in place to measure and voluntarily reduce your carbon footprint, including that which originates from your suppliers’ production and is incurred in foreign jurisdictions. There are some really novel programs out there, as well as some really poor ones. There are even some incentives available, aside from the reputation and innovation and first-mover advantages of bold mitigation strategies.
5. Adaptation Preparedness Strategy: Where mitigation is about reducing the company’s negative impact on the environment, adaptation is about reducing the impact of environmental crisis and climate change events on the company. These impacts depend on the nature and location(s) of the business and include the matters described in step 1 above such as disease and pandemic outbreaks, chronic shortages of (and price surges for) water, energy and natural resources used by the company and by its suppliers, extreme weather events, flooding and water shortages of cities in which the company operates or sells products, chronic blackouts, brownouts and telecom and other infrastructure failures, loss of insurance coverage, market and rate instabilities, and threats and attacks from desperate individuals, groups and nations (the poor will suffer the worst consequences of climate change, and have the weakest social safety nets). No one can be prepared for all such eventualities, but simulations and other applications of complexity modeling, and disaster and contingency planning, can help companies be as ready and as resilient as possible. I’ve seen a fascinating simulation of how a global pandemic outbreak of influenza or a once-isolated tropical disease can cripple the global economy, not because of the number of deaths, but because of human panic bringing economic activity to a standstill.
6. Holistic Sustainability Strategy: The discussion of steps 4 and 5 above is usually all most businesspeople can handle at this point in our understanding of sustainability. But there are a few companies that have seen where this is all leading to, and I’m ready for them. The chart at the top of this article shows the Cradle-to-Cradle model that Interface Carpets uses. This is the ultimate resilience strategy: reuse and cycle everything, and produce more energy and cleaner water than what you use. This approach acknowledges that we are all part of a complex and interconnected economy, and that the environmental impacts of our suppliers and customers are as important as the ones we are directly responsible for. If you need no new materials or resources to operate, and if you take everything back from your customers and reuse or recycle it, then you have made your entire cycle of production endlessly renewable. Not only does this mitigate your environmental impact, it makes you relatively immune to the impacts of environmental crises and climate change on your suppliers and even your customers.
7. Zero-Growth Economy Strategy: Climate change is making us aware that there truly are limits to growth, and that no company or economy can keep ‘growing’ forever. Our current economy is completely dependent on consumers buying more and more ‘stuff’ every year, and it is truly unsustainable. Likewise, our capital markets, and shareholder expectations, are based on large annual increases in profits. So how can a company make the transition to a steady-state economy, and thrive with the same profit each year? Economists like Richard Douthwaite, Herman Daly and Peter Brown have suggested what would be needed to make such a transition at the macro (country) level. Businesses need to start thinking about how such a transition will affect individual businesses, industries and markets, and make the structural and strategy changes necessary to make that transition too.

I think there will be a huge market for business advisors who will be able to take companies one step at a time from step 1 to step 7. I know there are a few people (like Gil Friend) who do this. We’ll soon need a lot more.