four steps to sustainability as a strategic asset

Four steps to see sustainability as a

strategic asset.

This presentationThis presentation is an abstract of the thesis “A study how Hultafors Group can incorporate sustainability in their organizations”.

The report is a resolute of a master thesis written at the Business and Design program at HDK in association with the School of Business, Economics and Law at University of Gothenburg commissioned by Hultafors Group. The work covers 15 credits and was conducted during spring 2010.

The purpose of the thesis was to investigate how Hultafors Group and Snickers Workwear could incorporate sustainability within their organizations. A combination of literature studies and interviews where used to fulfill the purpose.

From the findings in this study we have concluded that several of the fundamental concepts regarding sustainability and business support each other. While working in the four areas of: cost and risk reduction, reputation, innovation and growth path we found that all four areas are important components to connect the organizations goal with their

sustainability commitment.

The rapid changeThe global economy, our environment and the political institutions are undergoing a rapid structural change. The social, political and environmental risks and opportunities that companies face today are growing in number. Many organizations are aware that the market is changing fundamentally and have in the last decade led to that sustainability has become a more central part in businesses around the world. The companies that are prepared for this change and who see sustainability as a strategic asset will be more capable of dealing with complex challenges in a changing world.

The “enlightened” organizations

Companies that has taken the sustainability issue seriously uses the approach for continuing profitability, drive innovation and development.These “enlightened” organizations have the knowhow to better and faster recover themselves after downturns than its rivals. Survival and sustainability are two concepts that more and more companies see the link between, where sustainability is the essence of survival. “No company or society will survive if it doesn’t care about all their resources, human, economic and environmental factors” (Winston 2009)

In the book Green to Gold the authors are referring to these enlighten companies as Wave Riders.

Stock Performance of WaveRiders

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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Year

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United States1 Johnson & Johnson 2 Baxter 3 DuPont 4 3M5 Hewlett-Packard 6 Interface 7 Nike 8 Dow9 Procter & Gamble 10 SC Johnson 11 Kodak 12 Ford13 IBM 14 Starbucks 15 Intel16 Xerox 17 McDonald’s 18 GM 19 Ben & Jerry’s 20 Patagonia

InternationalBP Shell Toyota Lafarge Sony Unilever BASF ABB Novo Nordisk Stora Enso Philips Bayer Holcim STMicroelectronicsAlcanElectrolux Suncor Norsk Hydro Henkel Siemens

Top 20 Wave Riders

NikeA company that has gone through a sustainability transformation in the last ten years is Nike.

The company was long the focus of negative criticism from human rights activists, but has come to be transformed into a company known for its thoughtful product design and transparent business.For Nike, sustainable development is a tool and an approach to developing new and better shoes. They use the transparency throughout the organization to get their designers to understand how it can make use of materials and manufacturing process in a more efficient manner. Nike turns out to be a company that has benefited from the transformation from a company that was focused on protecting themselves from public mudslinging to a company that has taken the lead in sustainable development and have led to great efficiencies, cost savings, strengthening of their brand identity and better products.

Many companies understand that they have to work with sustainability but the tuff challenge often emerge when they start to implement it and become unsure of how to deal with the concept of it and its meaning.

Many would like to begin by gaining a clearer picture of what to make of it and how to use it as a strategic asset for their business, not just an extra label to their packages.Several authors have pointed out when sustainable perspectives are included in corporate strategy there is a higher chance it will lead to improvements such as cost savings, improvement of reputation and an overall strengthening of brand identity. The business reasoning for implementing sustainability within an organization can and should include more factors than just earning more money or eliminate costs. It can also be considered as a strategy for survival and development through greater receptivity to new trends in society, technological development and use of alternative supplies of natural resources. Sustainability can be a strategic asset for reaching new consumers and a strategy to gain and retain, employees, customers and society. (Werbach, 2009)

This indicates that Sustainability can contribute to a company’s business by its proactive approach, analytical way of working and long-term way of thinking as a strategic asset to increase business opportunities and boost innovation.

Implementing sustainability?

What to do?For the companies that have planned to work with sustainability there can be a great challenge to know where to start and what tools to use. An organizations sustainability work is individual and have to be tailored to the organizations structure and purpose. All the different tools and methods have specific aim where some is adapted to certain situations in the sustainability work. For the organization to successfully implement sustainability organically in their business strategy, it must first secure a contextual understanding of what it means to them.

Scenario planning Design for environment

Factor 10

The Hannover Principles Green marketing

EcolabelingEcological Footprint

Factor 4

Natural Systems Behavior

Social responsibilityNatural Capitalism ABCD

ISO 14001

The Natural Step Backcasting

CSR

LEED

MET matrix

Industrial Ecology

Failure Mode of Effect Analysis

Ecological Rucksack

The CERES Principles

Environmental AnalysisEnvironmental Management and Auditing Scheme (EMAS)

Eco Strategy Wheel

The natural stepSustainable wheel

EcoefficiencyBiomimicry

cradle to cradle

Life Cycle Assessment (LCA)

GRINorth Star goal

STaR-Mapping

TEN-Cycle

Life Cycle Costing (LCC)Biomimicry Environmental Management System

Instead of taking on of starting with what to do we are suggesting that you first should develop an understanding of WHY your organization should work with it.

WHAT sustainability means to your business and HOW it is connected to your organizations goals. Company’s needs in the end tools that take them beyond good intentions and turn the sustainability focus into a competitive advantage.We have extract four exercises with specific tools that will help you getting a solid foundation in your company journey to implement sustainability.

4. Goal1. Workshop 2. Positioning 3. Discussion

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Step 1. Identify and link your business objectives to sustainability.

Step 2. Create a clearer and common understanding where the company stands regarding their sustainability efforts.

Step 3. Identify what next to do to embed sustainability within the organization.

Step 4. Create over arching sustainable goals for the organization.

The 4 steps

Aim: identify and link the business objectives to sustainability.

Participant: Key decision makers.

Time: Half a day

Task: map out internal and external initiatives, projects and goals.

Tools: Sustainable Value Matrix.

Step 1. Sustainable Value Workshop

Sustainable Value MatrixHart believes that a successful company delivers high shareholder value by working simultaneously with the four different fields. Companies can work internally and externally, in the present and future. The Sustainable Value Framework is designed to show how companies can actively work to identify new opportunities, models and technologies to secure the future of their organization.

Drivers- Disruption- Clean Tech- Footprint

Drivers- Pollution- Consumption- Waste

Drivers- Population- Poverty- Inequity

Drivers- Civil Society- Transparency- Connectivity

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Internal ExternalSustainabeValue

1 2

3 4

Strategy:Clean Technology

Develop the sustainablecompetencies of the future

Corporate Payoff:Innovation & Repositioning

Strategy:Pollution PreventionMinimize waste and emission from operations

Corporate Payoff:Cost & Risk Reduction

Strategy:Sustainability Vision

Create a shared roadmapfor meeting unmet needs

Corporate Payoff:Growth Trajectory

Strategy:Product Stewardship

Integrate stakeholder viewsinto business process

Corporate Payoff:Reputation & Legitimacy

The work within each of the fields will provide risk reduction, reputation, innovation and growth.There are also external forces that affect this particular area. The purpose of mapping these drivers is to identify the forces and incentive the company has to face. The drivers are individual to each business but Adam has taken up a couple of examples of general driving forces that can have an impact on today’s businesses.

Start to brainstorm around the Sustainable Value Matrix, begin by placing the initiatives that are important to the members of the group and there departments in the quadrangle where it seems to fit best. Some will fit naturally in some cells, while other issues will bridge over the various boxes.

1; Plot initiatives that are important for the departments.

increase stake-holder interaction





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Alternative materials

Trend Report

Increase Sales Effectiveness

Works to incorpo-rate a sustainabil-ity policy

Determine the impact of current and alternative production sys-tems

Reducing petro-leum consump-tion

Current goals, initiatives and projects

increase stakeholder interaction

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Trend Report


Works to incorporate a sustainability policy

Determine the impact of current and alternative production systems

Reducing petroleum consumption

Reflect on the post-its and the boxes they are in, use this as a tool to identify which department and key person that could be involved to take these issues further. If not internally perhaps externally. Is there external expertise in this area?

How can these breakthroughs in the way do business open up opportunities with new customers and new markets.

2; Identify department and key person

Marketing

Market research

New product development

Engineering, R&D

Sales

Use green post-it and write down the already implemented initiatives undertaken by the company.Use red post-it to write down as many initiatives as possible that have been launched by other companies in and around your market, even in new industries that could be relevant to your business in the future. This information will help you open your thinking about the future even further.

3; Plot internal and external initiatives.





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Internal External

Patagonia & Dem collectiv-Business opportu-nity

Timberland- Green Index

SAS & SJ- Dialog with their customers through social media

Scandic hotell-a towel/sheet reuse program

Outsourcing manufacturing

Recruitment

Code of Conduct

Wallenius Line- Ballast water transportation

Implementing REACE

Already implemented initiatives

Other companies initiatives

Review the balance between the different post-its and where they sit in the matrix. Compare the work undertaken by the company, competitors and the outside world. Pay particular attention to the balance between the initiatives over and under the vertical line, current initiative and future investments.

4; Reflect on the balance among the four quadrants.

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Trend Report









Recruitment


Implementing REACE

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Internal External


Already implemented initiatives

Other companies initiatives

Current goals, initiatives and projects

With all these Post-its displayed, take a step back with the team and ask the following questions:

5: Question the content.

• What is the common pattern you can see in the individual boxes, links between your goals and the market leaders?

• What can we learn from the patterns, how can we use them to take more informed decisions?

• How do we believe that the market-leading business assumptions differ from ours?

• How do they differ from us?

• What are the specific drivers that can get us to move across the line to start with future investments?

• Is there links between these drivers to the management’s private interest or ambition?

6: Further exploration of initiatives and drivers.

Your team can go further in this exploration by looking at other examples of companies thinking differently to identify further drivers in each of the quadrants.

Wallenius LinePantagoniaDem ColectiveTimerlandScandic HotellP&GNikeCostcoDuPontGeneral ElectricXeroxCoca-ColaFordHarly-DavidsonIBMBP

NestléSAABKodakCaterpillerAppelBen & Jerry´sBody ShopCitybankCloroxDellDow ChemicalDuke EnergyToyotaGEHerman MillerHonda

HiltonIKEAJohnson & JohnsonLenovoL’OréalMcDonaldsMotorolaNokiaStonfield Farm´sUnileverWalmartJohnson & Johnson Baxter DuPont 3MHewlett-Packard

Interface Nike DowProcter & Gamble SC Johnson Kodak FordIBM Starbucks IntelXerox McDonald’s GM Ben & Jerry’s Patagonia InternationalPaper

Alcoa Bristol-Myers Squibb Dell United TechnologiesBP Shell Toyota Lafarge Sony Unilever BASF ABB Novo Nordisk Stora Enso Philips Bayer

Holcim STMicroelectronicsAlcanElectrolux Suncor Norsk Hydro Henkel Siemens Swiss Re AstraZeneca Novozymes IKEARicoh

Focus on the small steps that inspires people & organisations toward changing radically over time.

Step 2. Positioning on the ladderAim: Create a clearer and common understanding where the company stands regarding their sustainability efforts.What will be required to take the next step.

Time: 2 hours.

Task: Generate a common understanding of where the company is position on the ladder and what this could mean for the company.

Tools:- Content from Step 1.- The sustainability ladder.- Questions.

The ladder

1. Non-Compliance

2. Compliance- Regulatory Demands/Enforcement- Public Pressure

4. Integrated Strategy- Business Opportunities- Risk Managment

5. Purpose/Mission- Align with Core Values

3. Beyond Compliance- Eco-Efficiencies- Regulatory Threat- PR Crisis

REACTIVE

PROACTIVE

Sustainable development can be seen as a step towards a higher value creation in the five levels. Reductions in waste and improved energy efficiency are natural starting points but not a final destination. The ladder demonstrates the different steps the organization can take to integrate sustainability into the organization.The sustainability ladder is a tool in which the company put their own work to get a clear picture of their current position, external opportunities, incentives and threats. The framework helps to create a balanced portfolio of investments in all four quadrants, an investment that is necessary to maximize value creation. (Senge, 2009)

Level 1. Non-ComplianceIn level one the organization only implements what the law requires re-garding sustainability.The first square in the matrix focused on internal issues, activities and ac-tions in the organizations daily work that can provide direct result of costs and risks reductions. Work will therefore in this quadrant be guided to reduce pollution, waste, harmful emissions and the companies’ consump-tion of materials.

Level 2. ComplianceIn level two companies respond to stakeholder pressure and is doing every-thing to meet regulatory requirements in areas such as air pollution, toxic waste and sewage.You will see the direct links in the form of cost reduction both long and short-term by meeting all the demands placed on industry.In level two the company starts to be active within the second square of the matrix, externally today. In this level the companies business interests and stakeholder pressure start to integrate. The company cares about its reputation and customer experiences. The company will thereby integrate stakeholder views and interests it to their business processes. Initially this work will mostly be driven by network, a commitment that requires the company to be open and transparent. The network is constructed to increase the contact with the company’s stakeholders, civil society and NGOs.

Level 3. Beyond Compliance.In level three the organization start to note that the initial investment in sustainability is starting to pays off.This may often be the starting point for a spiraling effect on the sustain-ability efforts and start to create legitimacy within the organization.The company’s that are actively working on step three have accepted that their attitude must change, whether it is to survive or because they see the benefits of the sustainable approach and what it has to offer, such as re-

duced costs and brand authenticity.The company that position themselves in step three have begun working on future ventures, development and internal recruitment of tomorrow’s competences.The most significant change is to take the step past step three. This means that the company voluntarily taking on an active role on influencing not only their own future but also other companies in the wider context in which they operate. They also see the links between their own survival and to prosper, for the health of the environment and the context they operate in.

Level 4. Integrated Strategy.In level four sustainability factors is integrated proactively in all dimension of the company’s business strategies, decision-making regarding invest-ments and work processes throughout the organization.The approach to sustainability has a direct effect, for example, budget allocation, supply chain, investments in new markets, and core business development.The fourth quadrant in the matrix is the company’s growth path around sustainability, a strategy for the company’s future that they share with its stakeholders. Future stakeholders could become partners in their efforts to meet the unmet needs and desires of their customers.

Level 5. Purpose/Mission.The company that position themselves at level five has seen the business opportunities with sustainability and has based its entire business around the concept.Ordinary these companies position themselves directly in step five with-out going through the previous steps. Example for this kind of company is Patagonia.

The five levels

PositioningNow when you have grasped the concept of the sustainability ladder with its five levels, its time for you and your team to look back on the material you have created from step 1 on the Sustainable Value Matrix. Ask the following questions and discuss the in the team.

• Where are we positioning today in the sustainability ladder based on the workshop (Step 1)?

• Which areas are we actively working in today?

• In which areas are the growth opportunities?

• In which areas are future and current threats?

• What steps are we striving to achieve, what will it require?

Code of Conduct



Trend Report









Recruitment


Implementing REACE

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Internal External


Sustainable Value Matrix

Sustainability ladder

4. Integrated Strategy

3. Beyond Compliance!

1. Non-Compliance

2. Compliance

4. Integrated Strategy

5. Purpose/Mission

3. Beyond Compliance

Code of Conduct

increase stakeholder interaction


Trend Report


Determine the impact of current and alternative production systems

Reducing petroleum consumption


Recruitment

Implementing REACE

Works to incorporate a sustainability policy

”Sustainability Should Mean Long Term Profits

Not Saving The Planet”Adam Werbach

Step 3. Discuss the three areasAim: Create a roadmap of what to do.

Task: Identify what next to do to embed sustainability within the organization.

Tools:- Content and insights from previous steps.- The three areas- Questions

Tracking

Culture

Development

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ToolDivide the Sustainable Value Matrix in to three areas, tracking, culture and development. Discuss in the group the following questions based on the previous steps, some of them may be more or less relevant to your specific business area.

By making use of sustainability as a strategic tool for organizing the company creates the possibility to make more informed and favorable long-term decisions and investments.

Code of Conduct



Trend Report









Recruitment


Implementing REACE

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With the right information, companies can begin to understand how much the environmental issues affecting there value chains and market competitive conditions.

Tracking focuses on the internal daily operations and help to identify opportunities to minimize costs and risks that can provide a basis for lean manufacturing.

• Do we know what our product’s or company’s environmental footprint is? (Ok, step back: do we know what an environmental footprint is?)

• Do we know how much energy and water we use, the type and quantity of toxic chemicals we produce, our contribution to air and water pollution, and our total waste production?

• Do we create environmental metrics that fit our business best?

• Do we track the environmental impact of our product after it leaves our hands (e.g., energy use by customers)?

• How about the environmental practices of our suppliers?

• Do we demand and track environmental metrics on their operations?

• Do we know what chemicals or elements are in every component from every supplier?

• Do we have an environmental management system?

• Do we have emergency procedures in place (and is everyone trained)?

• Do we know who our key stakeholders are and what they think of us?

• Have we created partnerships with outside organizations to understand our environmental issues better?

Tracking

Tracking

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Internal ExternalCulture

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Internal External

Development

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Internal External

We have seen how the power has shifted from brand to the consumer. The information age has created tools for consumers so that no brands can no longer hide behind their packaging or their position. Sustainability is a strategy for a brand to be able to reconnect to the consumer by openly share their problems and solutions.

To create a business environment where the entire company will feel engaged and inspired by the sustainability efforts transparency, dialog and ownership needs to be put in motion. Incentives, which have the ability to create and spread the environmental awareness in all levels of the organization that can, help to transform the company’s environmental challenges into opportunities and, ultimately, profits.

• Do we have goals for environmental performance? How aggressive are the targets? Do any seem impossible?

• How do we decide whether or not to invest in environmental improvements (operation changes or on new product development, for example)? Is it the same process as for other capital investments?

• How do we engage and include all levels of employees in the vision or goals?

• Is compensation or bonus affected by environmental performance?

• Do we reward environmental success or innovation in non-monetary ways?

• Do we ensure that staff with line experience and environmental knowledge interact?

• Do we produce an environmental or sustainability report? How comprehensive is it?

• Do we use our report to influence and teach employees?

• Do we train employees to look for opportunities for environmental innovation?

Tracking

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Development

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Culture

CultureOne way to find solutions for enterprises is the use of the context they op-erate in. An organization can be seen as a cell in a larger system of similar cells. Applying the idea of different businesses share the same environ-ment and networking opportunity to find solutions in accordance with this system thinking. Hatch says that you can usefully take advantage of the networking and clustering company shares with organizations in their environment. The networks argue that describe a context that extends over the industry it operates in as well as national borders. (Hatch, 2006).

“Branding is more complex at the corporate level. The organization not only has to manage its relationship with costumers – it has to take into account all the other stakeholders such as investors, media, government, suppliers’ buyers and em-ployees. Each of these will have a different expectation and understanding of the brand. “ Hatch

Network for information transmission is also concepts that are discussed in the book Design Driven Innovation. Innovation arises by putting knowl-edge in new contexts, so that clusters of actors with similar interests to benefit should create associations for information collection. (Verganti, 2009).

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Org Gen

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OrgG

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To develop in this context means the company’s efforts on future launches and organizational improvements. The work done in the “tracking” and “culture” phase produces knowledge and insights that can here be used to develop new products, services and systems.

Seizing the opportunities to reduce costs and risks and to increase revenues and intangible assets has a tendency to develop both new products and processes. It can also mean helping suppliers and customers to change course in order to reduce their impact.

• Do we have a design for the environment program in place?

• Are environmental issues considered at the design phase?

• Do our designers have the tools they need to reduce the environmental impact of our products throughout the lifecycle (such as lists of materials that are forbidden)?

• Are our offices LEED certified, or optimized for energy use and worker productivity?

• Do we audit our suppliers environmental (and social) criteria?

Have we ever ‘fired’ a supplier for being out of compliance?

http://www.eco-advantage.com/toolkit.phpTracking

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Internal External

Development

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Development

Change requires time, patience and dedication

Aim: Create over arching sustainable goals for the organization.Participant: .

Time: The work to develop a suitable NS Goal shouldn’t be rushed. The process of developing the goals is as important as implementing them.

Task: Begin working on creating a North Star Goal based on the previous steps.

Tools:- Content and insights from previous steps.- Checklist- TEN-Cycle

Step 4. Create a North Star Goal

North Star GoalNS Goal is an overarching business goal that helps guide the entire organization to execute a strategy for sustainability.NS Goal is an important tool to generate new thinking, innovation and to build sustainable advantage. According to Michael Porter of Harvard Business School, dealing with difficult environmental issues could be the first step for a company to step outside their comfort zone to find new ways to change and innovation.

Nike North Star Goal

http://www.nikebiz.com/crreport/content/environment/4-1-0-overview.php?cat=overview For more information about NS-Goal; http://www.strategyforsustainability.com/

Create your North Star GoalWhen you start working on your North Star Goal reflect on the insights and conclusions the previous steps have enriched the team with.Start by thinkering what your NS Goal could be in the three areas of tracking, culture and development.

The North Star Goal should have the following characteristics:

• They should be optimistic and engaging.

• The organization should be able to achieve theme in five to fifteen years.

• They should apply through the entire organization.

• Every employee should be able to personally take action on it.

• They should connect to the business core activities.

• They should drive excitement and passion to the organization.

• They should serve a higher purpose than the company’s profitability.

• They should solve a major human challenge.

• They use of organization’s strengths.

Network

North Star Goal

Engagement

TransparencyTracking

Culture

Development

TEN-CycleThe creation of a vision is followed by extensive efforts to implement this within the organization.Tools such as the TEN-Cycle (transparency, en-gagement and network) may be useful to begin the collaboration and gather the information needed to implement the goal to the core of the business.Transparency, engagement and network are three areas that create a continuous flow of infor-mation on sustainability vision through and out-side the organization.

1. Increase information transparency2. Engage employs3. Engage the network

“We can’t solve problems by using the same kind of thinking we used when we created them”

Einstein


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Thanks and good luckAfter going through all the steppes we hope that you have now generated a deeper and broader understanding of how sustainability can and will become a strategic asset for your organization.

If you have any questions ore thoughts about the content, don’t hesitate to take contact.

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four steps to sustainability as a strategic asset

Business

sustainability transformation

wave riders companies

hultafors group

organizations goal

rapid change

school of business

business support

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