The latest evolution of sustainability: value
A high level timeline of the history of sustainability is emerging, which we have confirmed in discussions with many of our peers. It goes like this:
• Environment: Rachel Carson’s Silent Spring, published in 1962, kicked off the environmental movement with a strong focus on the role of man in harming the natural environment and the impacts on humans via the ecosystem.
• Ozone layer: A 1976 report by the United States National Academy of Sciences, which concluded that credible scientific evidence supported the ozone depletion hypothesis, led to substantial concern about the ozone layer. The 1980s and 1990s saw substantial actions to phase out CFCs.
• Climate Change/Greenhouse Gases: The ratification of the Kyoto Protocol in 2002 shifted substantial environmental focus to greenhouse gas emissions. This declined in importance in 2009 with the failure of the Copenhagen Conference of the Parties to agree and international solution.
• Sustainability: Immediately post Copenhagen our clients began talking about the broader topic of sustainability, looking beyond carbon to recognise a range of issues. While this broadening was useful for tackling a range of important environmental concerns, it also left many companies struggling to define the issues that they should include in their thinking.
• Value: The latest focus, which began early in 2012, is on value – economic, social and environmental. This shift seems to have been prompted by the on-going economic downturn, as well as Michael Porter and Mark Kramer’s paper in the Harvard Business Review in January/February 2011 entitled Creating Shared Value.
So what does this value focus mean?
For sustainability initiatives, it means the need for robust business cases and a focus on return on investment within commercially attractive timeframes at minimal capital expense. This is prompting the revisiting of energy efficiency, waste reduction, transport efficiency, packaging reduction, and recycling under the heading of resource efficiency. Resource efficiency enables quick wins with minimal capex and is a major focus for companies, who are no longer able to support long-term, capital-intensive investments in new technologies. (For more on resource efficiency and its potential for the manufacturing sector, see www.nextmanufacturingrevolution.org)
Simultaneously there is a broadening of thinking beyond the boundaries of individual companies and factories to collaborate with suppliers (and their suppliers) as well as customers and consumers to capture value from working with them on opportunities for mutually beneficial resource efficiency. For example, many companies are now looking to assist in the economic, social and environmental well-being of supplier communities, recognising that a thriving community can improve its productivity, reduce costs of production and reduce supply risk.
A focus on value means that sustainability practitioners need to sharpen up their business skills to be able to provide solutions with robust economic business cases, IRRs, NPVs, payback periods, and where possible revolving funds.
This is a significant era for sustainability because it is forcing the field to cross over from compliance-based and sometimes emotional thinking into hard-nosed economic rationalism. This is good for the field because it is showing the real power of sustainability to change the world while enhancing profits. Now that is a win-win.