Embedded sustainability - an idea whose time has come

I have been struck recently by the possibility that business may finally be grasping the concept that corporate environmental and social responsibility needs to be embedded in the organisation and, furthermore, that it might actually bring commercial benefit. This point is made convincingly by a new book - Embedded Sustainability: The Next Big Competitive Advantage, by Chris Laszlo and Nadya Zhexembayeva (Greenleaf Publishing, 2011). There's an executive summary of its contents, and a discount code (although sadly not valid on the ebook), on the Defra Sustainable Development website.

The book argues that the companies who will succeed are those who choose to embed sustainability into their DNA, incorporating environmental, health, and social value into core business activities with no trade-offs in price or quality. But unlike the ubiquitous bolt-on approaches, embedded sustainability requires a fundamental paradigm shift across every dimension of the business. The writers believe that most organisations have yet to discover how to meet both shareholder and stakeholder requirements in the core business – without mediocrity and without compromise – creating value for the company that cannot be disentangled from the value it creates for society and the environment.
 
This point of view is taken still further by another author, Carol Sanford in her title The Responsible Business: Reimagining Sustainability and Success (Jossey-Bass, 2011). Carol argues that the most successful and profitable businesses, over time, will not be those that "practice CSR" but instead those that rethink their purpose, reorganize themselves to draw upon the creativity and passion of all, and integrate responsible behavior into the way they do everything they do. And, as she told Greenbiz.com, that goes beyond embedding sustainability into the business; taken to its logical conclusion, it could mean the end of CSR as we know it.
 
These are familiar concepts to me, after almost 20 years working for a subsidiary of Kyocera Corporation, which could be the poster child for responsible business. Kyocera's founder, Dr Kazuo Inamori, established the Kyocera Philosophy in the early 1960s, shortly after the company was founded, and at its heart is a single, simple promise: to do what is right as a human being. Almost 50 years on, and with over 60,000 employees across the World, Kyocera employees are still trained in the Kyocera Philosophy and refer to its guiding principles in their daily decisions. All well and good - but it provokes another dilemma. We simply don't have the vocabulary to describe this alternative approach to business in a way that is concise and easy to understand. As with sustainability, the lexicon for ethical and responsible business is littered with terms that fail to convey effectively the commercial and social benefits that accrue from this approach.

On Mandatory GHG Reporting

A new report by The Aldersgate Group has found that Defra has overestimated the cost and underestimated the benefit of mandatory GHG reporting for businesses. The Aldersgate Group supports option 3 in the government's consultation on this issue, mandatory GHG reporting for large businesses. But the report by Adelphi concludes that the Impact Assessment conducted by Defra overestimates the cost by £4,600m and underestimates the benefits by up to £980m. The consultation closed on 5th July, but the government's decision won't be published until the autumn.

My personal view on mandatory GHG reporting is that it makes good sense, both as a valid metric for evaluating company performance and also as a mechanism for sensitising CFOs to the issue. But it needs to be made simple to comply, and not add significantly to an organisation's costs or administrative overhead. Scope 1 and 2 emissions should not be too difficult to report on: the data is readily available from fuel bills, the financial value of which are already factored in to the financial accounts. Extrapolating the emissions data should not add significantly to the reporting burden.

However, scope 3 emissions are an entirely different matter.For the vast majority of organisations, scope 3 emissions relate to services for which the energy consumption constitutes a scope 1 or 2 emission for the supplier of the service, therefore double counting is a significant risk. And the most common origin of scope 3 emissions is public and outsourced transport. The huge amount of effort involved in collating emissions data for these journeys is entirely disproportionate to the value of the data, since the carbon efficiency of the transport operator is outside the organisation's control.

In my view there is no reason why any publicly quoted company, public sector body or organisation that submits financial accounts to Companies House should not be required to report, but only on scope 1 and 2 emissions. It may not be sophisticated, but it is sufficient - and the less burdensome we can make the reporting, the more positively businesses will look upon the insights the data delivers.

The loss of personal, unique and local

In a recent heartfelt blog post, Seth Godin bemoaned the loss of his favourite local store to the relentless expansion of the Walgreen drugstore empire. We don't have Walgreen in the UK, but you could substitute any of the big supermarket brands or clothing retailers. Seth's local store was one where the staff were engaged and committed, the transactions personal and friendly, the produce locally and lovingly sourced and the store a real part of the local community. There's nothing wrong with what the big store chains do, but on the whole there's nothing enriching about it, either. It's all about economies of scale and maximum profit per square metre, geared up to meet the needs of their shareholders rather than their customers. Their ubiquity and proliferation narrow our experience as a shopper and consumer and remove much of the humanity from the transaction.

There's a place for this in our economy, but do we really want to sleepwalk into allowing it to become the only commercially sustainable buisness model for retail? If we don't support the local independent retailers, they won't survive -  and we'll mourn their loss without acknowledging that we were the architects of it. Put simply, every shop needs shoppers and it's up to us to find time in our busy lives to visit the local butcher and discuss our dinner party menu or sample the exotic, hand-churned cheeses at the specialist delicatessen. Not every day, but often enough to give them a fighting chance against the relentless march of the mega-retailers.

Ethics in the news

I caught 5 minutes of Radio 1 Newsbeat this lunchtime. Leaving aside for a minute how Radio 1 dumbs down the news, I was struck by the fact that both items I heard centred on ethics. The first item reported the case of a professional footballer who has been put on the sex offenders register after grooming two under-age girls on the internet. Astonishingly, Hearts is backing Craig Thomson and has refused to sack him, although drinks sponsor macb has already withdrawn its support for the club as a result of his conviction. I wonder what a footballer has to do these days to get fired?

The next story concerned allegations that insurance companies are selling to personal injury lawers the contact details of customers who have made claims, so that they can be offered "no win, no fee" legal services. Since the escalation of such claims has been cited as the main reason for a 30% hike in insurance costs in the last 12 months, this is a double deceit. The reporter claimed that the insurance companies were not breaking any laws by passing on the data to a third party, so I'm off to check the small print of my insurance policy to see where they hid the clause that says I waive my rights under the Data Protection Act when I enter into a contract with them.

The thin green bottom line

A timely reminder from Lord Stern, via Businessgreen.com that businesses ignore the threat of increasing carbon legislation and increasing energy prices at their peril. It has long been my contention that one's personal view on the existence of climate change and the extent to which it is - or isn't - created by humans is irrelevant. The indisputable facts are that:

1. governments are legislating to reduce carbon emissions which makes increasing taxation on emissions as inevitable as, well, death and taxes
2. fossil fuels are no longer being made and will therefore run out, so we need to find alternative energy sources if we wish to retain all the trappings of society to which we have become accustomed
3. scarcity of said fossil fuels will drive price escalation on an epic scale
4. industrialisation and urbanisation of developing countries escalates these issues by increasing demand for energy and consumer goods
5. world population is growing at a rate which will increase competition for food and water to unsustainable levels

Any company that is not planning for these eventualities will not be fit for purpose in the commercial environment of the future. Resource-efficient operation is not an act of altruism, it's a commercial imperative.

Last competitor completes the London Marathon after 50 days

Former stunt-rider Eddie Kidd has completed the London Marathon almost two months after the event formally finished. Mr Kidd, who suffered brain damage in an accident in 1996 has walked for up to a mile every day since 17th April using a specially-designed walking frame, finally completing the course at 6.30pm today, 6th June. In the process, he has raised more than £72,000 for the charity Children with Cancer UK.

What an inspiration. If you'd like to acknowledge Eddie's achievement with a donation, you can do so here.

Rich countries to subsidise drugs for developing world

The BBC has reported that several major drugs companies have announced big cuts to the amounts they will charge for their vaccines in the developing world. For example, GlaxoSmithKline will cut the price of its vaccine for rotavirus (which kills more than half a million children per year) by 67% to $2.50 a dose in poor countries. Since GSK remains a commercial company, and nothing is ever free, this means the vaccine will be subsidised by higher prices being charged in richer countries.

I'm comfortable with this concept. As a parent, the idea that my child could die from an easily preventable bout of diahorrea is unthinkable. And I live in a country where nobody is prevented from receiving healthcare by lack of means. But since GSK has admitted that at the reduced price it will still make a profit on each dose, there has been an outcry over its "excessive profits".

The main cost in the pharmaceutical industry is not the manufacture of the drugs themselves, but the research and development that goes into developing them. And this needs to be recovered during the life of the product in order for the business to remain commercially sustainable. It seems perfectly legitimate to me that this R&D investment should be recovered from the countries which can afford to pay it, enabling those with limited means to acquite the drug for the cost of manufacture alone.