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Increasing numbers of companies and organizations are demanding and incentivizing compliance with sustainability scorecard and voluntary disclosure programs such as the Carbon Disclosure Project (CDP). As a result, there is mounting pressure on suppliers to comply with the sustainability initia-tives being pushed down to them from buyers such as Unilever, PepsiCo, Procter & Gamble, and the Federal Government, to name a few.

Our recent research into sustainability scorecards suggests that more and more companies are choosing to embed reduction goals for carbon emissions, energy, waste, and water into their operations. These same companies are also increasing their commitments to customer and product safety, responsible business practices, and social and environmental performance. In an effort to reduce risks and understand the lifecycle of their products, these buyers now expect their suppliers to comply with their sustainability objectives and may even demand compliance in order to maintain the supplier relationship.

Clearly, compliance can be a major motivator for suppliers to adopt sustainable practices for them-selves. But aside from complying with the demands of buyers, what other benefits are there for suppliers to participate in sustainability initiatives? Can it be worth it for suppliers to implement their own sustainability strategy and programs outside of buyer demands?

The answer is yes. Sustainability is the intersection of strategies that take the needs of people, the planet, and corporate performance into account. This balance, often referred to as the triple bottom line, allows companies to operate transparently, attracting new customers and investors along the way. Time and again, research has demonstrated that companies that take a proactive approach to sustain-ability outperform the competition.

Still not convinced that sustainability is a business strategy you should adopt? Here are three top reasons why sustainability beyond the scorecard makes sense.

SUSTAINABLE BUSINESS PRACTICES REDUCE YOUR RISKS AND LIABILITIES

Our news media is rife with stories of companies that have run afoul of people or the environment. Take, for example, the recent accusations leveled against Apple and Foxconn Technology Group regarding the horrendous working conditions at the Chinese factories where iPads and iPhones are assembled. Or, the fatal 2011 Foxconn factory explosion that was the result of unsafe toxin buildup. And it’s unlikely that any of us will soon forget the disastrous effects of the BP oil spill in the Gulf of Mexico. This grievous event had far-reaching impact on both marine and human life, attracted inter-national attention, and virtually bankrupted BP and their related suppliers, Halliburton and Transocean, who were all found negligent by the US Congress for mismanaging both their drilling operations and the response to the Deepwater Horizon disaster.

While these crises are extreme cases of negligence, there are dozens of other examples where cutting corners and focusing on bottom line profit to exclusively drive business decisions resulted in poor brand image, bad press, loss of consumer confidence, financial set-back, human injury or loss of life, and environmental disaster.

THE BENEFITS OF SUSTAINABILITY

White Paper: The Benefits of Sustainability: Moving Beyond the Scorecard

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The Dow Jones Sustainability Index analyzes corporate economic, environ-mental, and social performance by assessing corpo-rate governance, risk management, branding, climate change mitigation, supply chain stan-dards, and labor practices.

Engaged employees are up to 43% more produc-tive, 87% less likely to leave an organization, and on average, gen-erate more than 28% higher revenue1.

The implementation of sustainable business practices, which include both environmental and social responsibility, helps to reduce these potential risks and liabilities by improving product quality, prod-uct safety, and employee health and safety, in addition to protecting communities where businesses operate and increasing consumer confidence and brand image. Companies that have sustainability embedded in their operations consistently keep pace with or outperform their peers according to the Dow Jones Sustainability Index.

SUSTAINABILITY IMPROVES EMPLOYEE ENGAGEMENT

Employee engagement describes the complex relationship between a worker’s involvement with their company and their overall job satisfaction. Employees who are engaged care about the future of their organization and are more willing to invest their personal capital in its success. Leading research-ers including the Gallup organization have found correlations between employee engagement and organizational metrics across the board including: improved productivity, increased profitability, higher employee retention, improved product quality, reduced worker absenteeism, increased ROI from employee-related initiatives, reduced rate of injury, and better overall financial performance includ-ing higher earnings per share. In fact, employee engagement is a leading predictor of a company’s financial success.

What defines employee engagement? Engaged employees have a strong emotional bond with and increased commitment to the company they work for. This emotional attachment leads employees to more fully perform, resulting in the direct business benefits mentioned above as well as indirect ben-efits such as creativity, innovation, improved commitment to organizational mission/vision, empower-ment, intellectual capital, high performing work teams, reduced workplace conflict, improved positivity, increased trust, and enjoyment.

You know an engaged employee when you see one. This is the coworker who is involved with, pas-sionate about, and committed to their work and the success of the company they work for. Engaged employees aren’t just satisfied with their jobs; they experience a more intricate social and emotional attachment that leads them to deliver top-notch work that consistently results in higher productivity and performance.

Employee engagement is the result of many drivers. Clarity of job expectations, advancement oppor-tunities, feedback and the ability to dialogue with management, high quality working relationships, rewards, and a high performance culture all increase engagement.

Sustainability is gaining momentum as another way to engage employees. A 2010 study by Hewitt and Associates found a correlation between engagement and socially and environmentally responsible companies. Companies such as CA Technologies, Octal Petrochemicals, and DuPont are integrat-ing sustainability into their corporate culture by educating, engaging, and empowering employees. Sustainability is then supported by the internal stakeholders, which leads to behavioral changes that become a powerful organizational driver for success.

People feel emotionally engaged when it comes to their fellow human beings, the environment, and even the concept of leaving behind a legacy for a new generation. The introduction of corporate sustainability initiatives taps into this emotional engagement and leverages it to increase and improve worker commitment.

White Paper: The Benefits of Sustainability: Moving Beyond the Scorecard

“If employee engage-ment is a top business priority and sustain-ability programs are a way to drive better engagement, there is a clear imperative to make sustainability a part of the work expe-rience. Engaging em-ployees in sustainability is a fast growing trend with significant business benefits.” – Cynthia Curtis, CSO, CA Technologies

1http://en.wikipedia.org/wiki/Employee_engagement

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In studies performed by Kenexa Research Institute, employees who worked for companies with clear corporate social responsibility programs were more satisfied, stayed at their jobs longer, and were more content with the decisions made by senior management than employees at companies lack-ing sustainability initiatives. These companies also enjoyed competitive advantage over their peers when attracting new talent and were able to create an elevated sense of camaraderie among their employees.

Sustainability produces new options for workers by creating advancement opportunities, developing feedback loops, and improving corporate culture. Targeted sustainability efforts focused specifically on suppliers have been shown to result in improved worker-management relations, enhanced retention, and a stronger ability to recruit.

SUSTAINABLE PRACTICES INCREASE THE BOTTOM LINE

We’ve already shared several ways that sustainability can potentially improve the bottom line, includ-ing increased consumer confidence and improved productivity, increased retention, and reduced absenteeism as a result of employee engagement. But perhaps the most substantial way sustain-ability impacts the bottom line is through the real, tangible savings available as a result of improved efficiencies.

One primary goal of supply chain sustainability programs is to reduce the consumption and waste of energy, water, natural resources, and raw materials throughout the supply chain. Not only does this benefit the environment and the communities where businesses operate, but it can also considerably impact costs. In a 2011 study, A.T. Kearney (as reported by the CDP) found that 25% of suppli-ers who engaged in climate change actions achieved cost savings by reducing their greenhouse gas (GHG) emissions.

Supply chain sustainability initiatives can also drive innovation--a nice by-product of increased employee engagement. Changes to product design, development, and manufacture, or to packaging, shipping, and distribution processes can result in major cost savings. Take PepsiCo for example, who was able to save $44M annually simply by switching from cardboard to reusable plastic shipping containers. This also allowed PepsiCo to conserve 196 million pounds of corrugated material annually.

Like their predecessors TQM and Lean Manufacturing, the efficiency initiatives driven by sustainability promote continuous improvement and increased credibility and transparence for customers and other stakeholders. Transparency is a crucial element of the sustainability picture because it provides real, tangible information for stakeholders to use to evaluate the success of a company’s responsible practices. Without having a positive, measurable effect on stakeholders and without reporting on that effect, sustainability initiatives lack real impact.

“In this competitive business environment and difficult global economy, businesses need to differ-entiate themselves in smart ways that really stand out. We believe it’s not enough to just measure and manage – disclosure is really the most important piece of the sustainability commitment.” – Mohammed Razeem, Project Engineer – Sustainability, Octal Petrochemicals

White Paper: The Benefits of Sustainability: Moving Beyond the Scorecard

92% of recent col-lege graduates would choose to work for an environmentally-friendly company over the competition2.

71% of workers value a corporate commitment to sustainability3.

2 http://www.greenbiz.com/news/2007/10/16/working-earth-green-companies-and-green-jobs-attract-employees3 http://www.sustainablebusiness.com/index.cfm/go/news.display/id/22183

25% of suppliers who engaged in climate change actions achieved cost savings by reducing their GHG emissions.

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The availability and growing popularity of independent third-party verifiers including the CDP, B-Lab, and the Global Reporting Initiative (GRI) helps companies to voluntarily report on their social and environmental performance. Investors, consumers, buyers, the media, and potential employees rely on these reports to make selections that dovetail with their values. Reporting also allows a com-pany to baseline its impact, which provides the foundation for continuous improvement cycles and innovation.

The ability to implement and improve a company’s environmental and social performance results in improved relationships with stakeholders and increased opportunities to capitalize on new markets and customers.

CLOSING THOUGHTS

Sustainability is a tangible way to improve your competitive advantage. One reason that supplier scorecards have become so prevalent is that buyers associate good sustainability performance with strong overall management. Companies with strong management tend to perform higher on indica-tors like quality and on-time deliveries. As a result, buyers are showing greater preference for compa-nies that have strong corporate social responsibility performance.

It’s time to move beyond compliance for good reasons. Environmentally and socially responsible business practices have the potential to significantly benefit companies by reducing risks, increas-ing employee engagement, and improving competitive advantage while simultaneously satisfying buyer scorecard requirements and maintaining valuable supply chain relationships.

Not sure where to begin? Check out our online library of free educa-tional resources. Our white paper 5 Steps to Sustainability Success is a great place to start.

... buyers associate good sustainabil-ity performance with strong overall management. Com-panies with strong management tend to perform higher on indicators like quality and on-time deliveries.

White Paper: The Benefits of Sustainability: Moving Beyond the Scorecard