Business

This is the first of a series of weekly columns to be published on Tuesday by Tyler Elm and Jim Harris on how sustainability as strategy cuts cost, raises revenue and mitigates risk for business.

Ever since Rachel Carson’s groundbreaking Silent Spring was published in 1962, environmentalists have been trying to save the planet. While there has been progress, overall the efforts have clearly failed, because the planet is in worse shape today than 50 years ago. We need not document the litany of damage here.

Decades of experience have shown that environmental initiatives pursued in isolation of the economic benefit are largely immaterial.

But when environmental objectives are framed as business strategy and tied to business operations and measured in terms of cutting cost and increasing profitability — significant environmental benefits are generated. Sustainability then garners executive focus and corporate resources. Companies like General Electric, Interface Carpet and Canadian Tire have realized the profound bottom-line benefit that pursuing sustainability as strategy yields.

In the early 2000’s a number of environmentalists were feeling the futility of the environmental movement’s historic approach to business. In 2004, this led Adam Werbach, then president of the Sierra Club — the largest US environmental group, to proclaim that traditional environmentalism was ineffective, outdated and dead. In a grist.org interview, following his speech called the “Death of Environmentalism” Werbach noted:

“Perhaps during the many battles between environmentalists and business people we have been asking the wrong question all these years. As generally proposed, the question is: ‘How do we save the environment?’ As ridiculous as it may sound to both sides, the question may be ‘how do we save business?’ When you look at the environmental movement, at the great ecological challenges that the planet is faced with, that humanity is faced with, environmentalism has proven utterly incapable of addressing them. The reason we called for environmentalism’s death is so that we could call for a new movement… (one) that can address these challenges.”

And it wasn’t just Werbach that was feeling this — but he captured the zeitgeist of the time. As a result, environmentalists in greater number began working with businesses to prove that going green has incredible bottom-line benefits. This is a fortunate trend for environmentalism and business.

Sustainability as strategy is a rallying cry for driving out waste and inefficiency. It is a powerful tool for engaging employees and suppliers in an innovation strategy drive to both incremental and radical improvements in operations while managing risk. In the two year period of 2010 and 2011, sustainability initiatives saved Canadian Tire approximately $10.7 million in annual avoided costs; 215,000 gigajoules (GJ) of energy (enough to power more than 2,000 homes for a year); 14,000 tonnes of greenhouse gas emissions and more than 6,600 pounds of waste.(LINK)

Just how much potential savings could sustainability generate for corporations and society? Amory Lovins, the founder of the Rocky Mountain Institute, has documented how using best available existing technology we could reduce current energy use in North American by 70 per cent to 90 per cent without changing our current lifestyle!

The Challenge

Like many large, established companies, growing from a single Toronto location in 1922 to the national retailer and brand management company, Canadian Tire, required specialization of business by functions — such as strategic sourcing, merchandizing, marketing, transportation, and the operation of distribution centres and stores.

While enabling the business to scale, the unintended consequence of this organizational structure is that individual functions optimize around an increasingly narrow core purpose, leading to the erosion of a system-wide perspective of the enterprise level. As silos evolve, business decisions in one area may be undertaken without the insight into the unintentional effects on other areas.

Sustainability as strategy forces siloed departments to work cooperatively to both define opportunities and devise solutions. Businesses that are using sustainability as strategy are realizing that it is the most powerful tool for driving cooperation and innovation in the organization.

The result: rethinking business activities, redefining peoples’ roles, responsibilities, measurement and incentives. The experience at Canadian Tire of pursuing sustainability as a strategy has been organizational innovation, while generating millions of dollars cost avoidance, new sources of revenue, and thousands of tonnes of avoided waste and greenhouse gas emissions.

Why CSR is Not the Answer

Today, many companies are focused on Corporate Social Responsibility (CSR). As we often see it practiced, CSR is about reporting the company’s activities. As a reporting function, CSR has little, if any, power to transform the organization. If we were cynical, we might say that many CSR activities are nothing more than a public relations initiative.

What excites us is sustainability as strategy. By dramatically reducing energy use — electricity, natural gas and fuel — companies not only cut costs, but mitigate risk against rising energy prices, and raise revenue from new products and services

Management literature has shown that the majority of change initiatives fail. But sustainability engages the hearts, minds and motivation of employees and suppliers and can become a truly transformative driver. It can drive innovation and create new business value. And tip the balance to ensure success of the change initiative.

When looking at sustainability as strategy you ask fundamentally different questions than looking at sustainability in the framework of CSR. The former focuses business performance, organizational transformation — looking at roles, incentives, re-engineering operational processes, and creating change through the whole supply chain — while the latter focuses on reporting.

And so we believe that environmentalism can save business, as the more powerful engagement tool that business has at its disposal to drive innovation.